Friday, January 23, 2009

Classic IR tactic not working for banks

Insider buying by CEOs and other top executives is a classic tactic to signal that the market has the wrong perception about a company.  The problem is that it is simply not working for banking CEOs these days.  Confidence is just too low in the financial sector and would-be investors simply don't trust banking CEOs.  Trust in CEOs overall might be at an all time low and companies need to understand that and adapt to a new communications environment where new efforts are required to earn trust. 

Earlier this week Ken Lewis and other chiefs at Bank of America purchased more than 513,000 shares.  It won't make a difference.  The Wall Street Journal writes "credibility is a series of small, successful gestures [and] bank executives must see that their gestures are being read by the market as empty ones."  In fact, research by and other analysts suggest that buying by insiders should be a strong sell signal for everyone else.  Turns out that execs, of late, have been wrong more often than they have been right.

Unfortunately for bank CEOs, the market is not doing as they say nor, when it comes to insider buying, is it doing as they do.  The herd is going the other way.

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