Boards - What do capital markets think of them? The unfiltered perspective of a credit analyst

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In an era marked by rapid change, technological disruption, geopolitical uncertainty, and economic volatility, understanding how analysts perceive boards is more important than ever. We turned to an analyst who operates independently of major financial institutions for a truly candid perspective.

In this episode of the Better Boards Podcast Series, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, speaks with Anke Richter, a seasoned credit analyst and strategist with nearly 30 years of experience in the bond markets. Based in London, Anke has held positions at JP Morgan, Deutsche Bank, and Moody’s, and brings a unique vantage point shaped by her work on both the buy-side and sell-side, as well as in a rating agency. She holds both the CFA Charter and CIMA accountancy qualification.

A Two-Step Approach to Company Analysis

According to Anke, the fundamentals of analysing a company haven’t changed:
 “What you do when analysing a company is always the same.”

Step one involves scrutinising the company’s fundamentals—numbers, valuations, and performance indicators. Step two involves examining red flags in leadership or governance. Common issues include overly dominant founders in small firms or boards where everyone shares the same surname, particularly in family-run conglomerates in emerging markets.

Anke notes that although she doesn’t always request formal board evaluations, she views them as a missed opportunity for many firms. Proper board assessments and clear investor communication allow companies to spotlight their governance strengths and strategic priorities.

Bridging the Knowledge Gap Between Boards and Investors

Anke frequently observes significant knowledge gaps in how boards interact with capital markets. “We always find that people are sometimes not aware of how certain things are done or how things are perceived.”

Lack of familiarity with investor expectations can seriously handicap a company’s position. To mitigate this, Anke advocates for including individuals with capital markets expertise on the board. This experience ensures the board understands key market dynamics and investor sentiment.

Fixing Investor Relations: Easier Than You Think

Investor relations, Anke believes, is an area where companies can quickly improve.
 “This is something you can, as a company, very easily fix.”

Improvements don’t require massive budgets. What’s often lacking is not money but human resources and awareness. Clear communication, a well-maintained website, an accessible IR team, and informative roadshows are foundational but frequently overlooked.

Anke also points out two critical missteps:

1. Inconsistent messaging between equity and debt stakeholders—this discrepancy doesn’t go unnoticed.

2. Combative attitudes from executives during investor meetings can irreparably harm trust.

Beyond the Numbers: The Human Element

Anke acknowledges that while financial metrics are clear-cut, evaluating leadership is far more nuanced. “If I have an opportunity, I always want to meet management, but one also has to be realistic about whether you can assess whether they are good at running the company.”

Good marketing c

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Episode Transcript

SPEAKER_00 (00:02):
What do analysts think of boards?
An unfiltered perspective of anindependent.
Welcome to the Better Boardspodcast series.
the podcast for chairs, CEOs,non-executive directors, company
secretaries, and their advisors.
Every episode is filled withpractical insights and learnings
from those inside boardrooms.

(00:23):
We discuss what really mattersand highlight actionable steps
you can take to enhance theperformance of your board.
Well, how do boards deal withcapital markets and the investor
community?
What are the pitfalls?
What do analysts really think?
How do they go about their work.
How do they look at boards?

(00:44):
We cover it in this episode.
I'm delighted to talk with AnkeRichter.
Anke has been working as acredit analyst and strategist in
the bond market based in Londonfor almost 30 years.
She started her career at JPMorgan, worked for a number of
institutions, including DeutscheBank and Moody's.
And now she reflects on hercareer, is in a different

(01:07):
position, can dare to be a bitmore independent.
And that is what we areinterested in.
Anke, thank you so, so much forcontributing to the Better
Boards podcast series.
Thank you very much for havinginvited me.
Anke, you were invited becauseof your career span.
You have been with leadingfinancial organizations.
You have been with Moody's.

(01:27):
And it's a time to reflect onyour career a bit.
I classify you as an independentbecause you have seen the
capital markets from varioussides.
So I thought you're perfect.
for having a conversation aboutwhat are you looking for in
boards and executive committeeswhen interviewing them and

(01:48):
analyzing a company?

SPEAKER_01 (01:50):
Yeah, thank you.
Good question.
I mean, I work on the buy side,the sell side, rating agencies,
but essentially what you do whenyou analyze a company is always
the same.
There's two steps.
On one hand, you look at it froma fundamental point of view, try
to assess the company, And thenyou look at the valuations.
And when you look at thefundamentals, obviously you look

(02:12):
at numbers, but you try also toassess management teams, sports,
et cetera.
One thing we look for when welook at management and boards is
actually the red flags.
When I look at a board, what isa red flag?
I think the classical examplewould be if everybody has the
same last name, where you say,okay, there is a corporate

(02:33):
governance issue.
When we look at emergingmarkets, often we have
family-owned conglomerates, orwhen you look at smaller
companies, you can have often avery dominant shareholder, which
is often the founder.
So my focus is, when I look atthis side, often for the red
flags.
When I look at management,obviously one of the biggest

(02:55):
things we look for is the trackrecord.
Has that management or the CEO,the new CEOs coming in, have
they done this before?

SPEAKER_00 (03:03):
Of course, given what we do, I'm particularly
interested to hear yourperspective on board
evaluations.
They do become increasinglyimportant.
Do you ask if a board evaluationwas conducted?
Usually, I

SPEAKER_01 (03:17):
don't.
I mean, as I said before, I lookfor red flags.
And if I don't see any obviousred flags, I kind of focus on
other things like profitability,balance sheets, etc.
I think it's also a little bitup to companies maybe to guide
the investor community moretowards this.

(03:39):
I think a good example is whenwe look, for example, at
environmental data.
Ten years ago, hardly anybodytalked about their CO2
footprint.
Nowadays, you open up aninvestor presentation, most
companies talk about it andtheir goals.
And I think when we look atboard evaluation, I think it's
also up to companies tobasically show what work they're

(04:00):
doing there, showing that theyhave a self-awareness, they
reflect, and also trying to bebest in class.
So I would not expect a companymaybe talk half an hour about
it, but I think to put morefocus on it, it's up partially
also now to companies to showthe good work they're doing in

(04:20):
that area.

SPEAKER_00 (04:22):
Thank you.
What advice do you really havefor boards when it comes to
dealing with the investment Iknow when we prepped for this
recording you said that you werea little bit surprised how
little they know about howcapital markets work really.

SPEAKER_01 (04:41):
Yeah, I think that's something sometimes I'm
surprised.
You know, I've been working inthis field for 30 years.
It's not rocket science.
There's a certain way how thingsare done.
And when you work in an area fora very long time, you assume
that everybody knows how itworks.
But I think what we always findthat people are you know,

(05:03):
sometimes not really aware howcertain things are done or how
things are perceived.
I think when you look at theinvestor community, if I say one
thing to boards is perception isreality.
I mean, you can come up withgreat strategies, execution, et
cetera, but ultimately, is itrecognized by the investors?

(05:26):
Is it really, do people seethis?
So I think one thing I wouldadvise boards is when you look
at your board composition andyou try to find a good mix of
skills to have somebody whoactually has capital market
experience.
I mean, that's assuming you're abig listed company, et cetera.
Because I think as much as youcan read about things also,

(05:50):
certain things are very hard topick up very quickly.
Not because it's complicated,it's a bit experience.
So I would say it helps to havesomebody who's familiar with how
the capital market works to havesomebody on board.
Obviously, people can look atthe share price.
I mean, that's often considereda barrel as a temperature.

(06:11):
how the market thinks about acompany.
But I think it's a little bitmore complex.
So I think boards need to alsolook at how is the investor
relations strategy executed.
And is the message actuallyreaching its audience?

SPEAKER_00 (06:28):
I mean, I find this interesting.
You know, some weeks ago, I wasat the Capital Markets
Conference in Zurich.
And What you are saying isabsolutely aligned with what I
heard at the conference, wherepeople are really surprised that
boards do not have more capitalmarket expertise, lack the

(06:50):
knowledge, lack the awarenessvery often.
Well,

SPEAKER_01 (06:53):
it's very interesting.
I mean, obviously, I was on thedebt side.
I'm on the debt side, not on theequity side.
But there's a very recentexample of a super, super big
company Actually, it's a Germancompany, very large German
company, which is undergoing alittle bit of difficult times.
They brought in a new CEO.

(07:14):
The CEO is doing a lot ofrestructuring.
And the company basically hasway too much debt.
But in its industrialpresentation, the new CEO just
talked about equity and to theequity community.
And the company has more debtthan the market capitalization

(07:34):
of that company.
And the forefront of the issueof this company is basically
debt reduction.
However, the CEO, And he wasbefore at a company which has no
issues about that.
So he probably never met a debtinvestor in its entire life.
But he basically talked onlyabout equity to the equity

(07:55):
community.
And this is a super largecompany, you know, kind of you
would think they would knowbetter.
And we're talking about the CEO.
And these are blunders, mistakesyou see at super high levels
still.
So in that respect, I think nothaving somebody on board of a

(08:16):
board who is in tune withcapital markets is not
necessarily a good idea.

SPEAKER_00 (08:22):
Interesting.
Our listeners are alwaysinterested in practical
insights.
Do you have a kind of a list oris there a list in your
community of the do's and don'tsfor companies when it comes to
investor relations that boardsshould be aware of?

SPEAKER_01 (08:38):
Yeah, I think the do's, I think it's often very
simple.
I mean, help investors tounderstand the company and have
the information available.
So that means they have a clearmessage, a good website, an
investor relation team, which isactually available where you not
have to call 10 times and nobodyis available or ever get back to

(09:02):
you, have presentationroadshows, which actually have
information, which is useful.
This sounds very basic, but youwill see when you look even big
listed companies, and we'retalking some of the largest
companies in the world, there'sstill quite a big gap what
people do.
So I think this is somethingwhich you can very, as a

(09:25):
company, very easily fix.
I mean, of course, it takes abit of time.
I mean, you need to look at whatis best practice, how you
implement this.
It's a project.
It doesn't cost a lot of money.
It's more human resources youhave to put on it.
And once you set it up, you'redone.
So I think this is somethingwhere I'm still sometimes
surprised how people are nothaving optimized that while it's

(09:50):
super simple in my way.
And that comes in where you say,okay, you should have people
around who have the experiencefrom the capital market side and
who can say, okay, this is bestpractice.
This is useful.
This is not useful.
I think on the not do behavior.
I have two things through mycareer which I think are

(10:11):
relevant.
The first one is don't have adifferent message for the equity
side and for the debt side.
I think you still see that.
You used to see it more often.
We still see it sometimes thesedays where the message is to the
equity community, yes, we wantgrowth, M&A, increase the
dividend, share by max, and thenthey meet debt investors or a

(10:34):
rating agency and where thewhole thing is toned down.
Yeah, we're cautious andleverage and, you know, the
message is different.
Obviously, the idea that thesetwo communities don't talk to
each other or there's no flow ofinformation is wrong.
So the first People really needto have one message which works

(10:56):
for both communities.
And the second one, which when Ithink back, my experiences with
management teams is competitivebehavior.
I think there are a couple ofmeetings throughout my career,
either on the investor side orthe sales side, or when I was at
a rating agency, where you metsome super aggressive management

(11:18):
teams.
And usually nothing is achievedby that.
When you see management teamslike that you say okay how do
they deal with their employeeshow do they deal with their
clients and the ultimatequestion is do you trust them
with your money because as aninvestor whether you're on the
debt side or on the equity sideyou give them your your money

(11:39):
and if people kind of comeacross like they want to hit you
over the head do you want togive them your money You know,
it's not like there's only onecompany.
There are other companies andit's a competition.
So I don't think that's usuallya very good idea.
I mean, it's not that long ago.
I was at an industry conference.

(11:59):
There were debt investors,equity investors.
The industry was a bit introuble.
The company, the specificcompany particularly.
So the investor said, OK, sowhat's next?
What do you plan on doing.
And, you know, obviously at onepoint it was a board member.
He was a bit unnerved by thequestioning and said to the

(12:21):
audience, well, why don't youcome up with some ideas and tell
us what to do?
That's obviously not the way togo about it.
And if you are the company,everybody talks at lunch over
how horrific the meeting was,that you better wouldn't have
had the meeting.
I think that's also one of thebig takeaways.
I mean, this was a board member.

(12:43):
I'm sure that person has manyqualifications.
Dealing with investors is notone of them.
And I think there must be alsothe recognition that some people
are not particularly good atthese sort of things don't have
the temperament for it theyeither need to get training or
you're just They do somethingelse.

(13:03):
But the damage you can do withthese sort of meetings is real.
And, you know, as I said, thereare some management teams.
I mean, I remember another onewhen I was at Moody's where
literally you had to be in a zenstate before you walked into the
meeting because it was coming toa war zone and they were

(13:23):
personally insulting you.
I mean, this is rare.
But it's really about marketing.
You have to look at it throughmarketing.
And that means the messagingmust be right, but also who does
it, the personalities to goabout this.

SPEAKER_00 (13:42):
So what do you find the hardest when you have to
evaluate a board or managementteams?

SPEAKER_01 (13:48):
Well, I think the hard it is, it's very
subjective.
I mean, when I look at balancesheet, you know, I can calculate
the leverage and then I can takea view whether that's good or
bad or good profitability orbad.
But I think when we meetmanagement teams, although I
always like to do it, I find itinteresting, I'm very much aware
that my impressions might becompletely wrong.

(14:11):
And I think there are some verygood examples.
I think the most famous onewhere people thought the
management was fabulous andpeople are still telling you
what an amazing presentationsthey had was Enron.
I mean, we all know how Enronended up.
They were super in presentingand they were terrible in the

(14:31):
end of delivering.
I have an exact opposite.
I covered a company, it's 20years ago, government-owned
companies, so there was noequity.
They made a huge acquisition,needed to take on a lot of debt,
and management was alreadybefore not exactly helpful.
So there was this meeting wherepeople said, okay, so where's

(14:53):
leverage going to be?
How are you going to deleverage?
And the CFO said, well, you'rean analyst.
Why don't you figure it outyourself?
So that was not very good, butin the end of the day, they were
very good at managing thatacquisition.
So they came across terrible,People were very doubtful
whether this would work out.

(15:14):
They did a very good job.
So what I'm saying is, you know,I want to see management, but
I'm also very humble from theexperience that you can get it
wrong.
And it's very hard to put yourfinger on whether a management,
you know, when you meetsomebody, whether they're good
at it or not.
I mean, look at George Clooney.

(15:36):
He played a doctor on TV inChicago, an ER doctor.
He did fabulous.
We all know he's not a doctor.
So you will find people who comeacross really amazing, but they
just can't run a companyamazingly.
So I think it's something whichI want to do.
If I have an opportunity, Ialways want to meet management.

(15:56):
But one has to be also realisticabout whether you can really...
assess whether they're good atrunning the company.

SPEAKER_00 (16:05):
I think our listeners will keep particularly
this example in mind.
So sadly, we have to come to anend of our conversation.
And we always have the mainquestion at the end.
What are the three keytakeaways?
What should listeners shouldtake away from this
conversation?

SPEAKER_01 (16:22):
Well, I think when you look at boards and capital
markets, I think the sort ofthree takeaways I would think
about is, first of all, havesomebody on your board with
capital market experience.
I think if you look at yourboard, you want to have
different skill sets.
That, I think, is the skill setwhich is important.

(16:42):
Obviously, often it's alsopeople who have experience in
finance, accounting, financialmarkets.
Secondly, I would say, have aunified message for equity in
debt investors, and alsosomething which is in sync with
the company goals.
I mean, it needs to beconsistent.
You can't say, okay, we tellthat community this and the

(17:04):
other one, something slightlydifferent.
And I think the last one isperception is reality.
You need to basically understandbe in touch, whether what you're
planning in the board, what yourvision is, how you want to
position the company, where itshould be.
Is this really also seen byinvestors?

(17:26):
And that's not always a given.
Just because you plan it, itdoesn't mean that the investor
community sees you like that.
And then you have to look intoyour toolbox, the investor
relation function, how youconvey the messages.
And if If it doesn't work, howyou can change it?
I mean, that is an area which Ithink you shouldn't take as a
given that the message isreceived at the investor

(17:50):
community.
I think that's the sort of threethings I would say to people.
And, you know, if you don't knowa lot about capital markets,
that's okay.
But go and look for somebody whohas the knowledge and get
advice.

SPEAKER_00 (18:05):
Fantastic.
Anke, thank you so, so much forcontributing to the Better
Boards podcast series.

SPEAKER_01 (18:10):
It was a pleasure.
Thank you very much, Salina.

SPEAKER_00 (18:13):
This episode is part of the Better Boards podcast
series brought to you by BetterBoards.
We are a provider of boardevaluation solutions and are
currently in the process ofbuilding a really strong and
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If you would like to become partof that community, if you are an
organization or if you are aprofessional service firm

(18:35):
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