CEOs Should Focus On Their People In Face Of Stock Plunge

There are two worrisome aspects of the recent stock market plunge for chief executives. The first and more important is the frightening impact on their employees’ state of mind.

As people in the trenches follow the ups and downs of their 401Ks, they may be inclined to think this hasn’t been a such a good bet. If that’s the case, tell them to listen to the wisest investor in history, Warren Buffett, who says about his stock market forecasting: “I’ve been investing for 77 years since age 11 and I still don’t know what the market is going to do the next day. That’s not my game. My game is to decide if I’m in the right economy, and America has been the answer throughout my entire lifetime.”

“Take the time to have a frank conversation with the most important assets – your people.”

In suggesting how a chief executive should react to this short-term loss of value, other than buying his or her own shares back, I would take the time to have a frank conversation with the most important assets – your people. Explain how ups and downs are unrelated to genuine value. If you looked at the price of your home or your car every day, you would and live in a tent and walk to work.

The other matter that is problematic is the collateral damage to deals, often based on stock market values in equity transactions and subject to forfeiture due to MAC (material adverse change) clauses.

In this case, call a moratorium on the deal or on shopping it around, until this period passes. Agree with your counterpart that if the deal made sense before it makes sense now only the optics demand forbearance and patience. This episode will pass. When it does, the deal will make sense again.

We have come a long way by ignoring noise and learning to wait for the real signals.