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Sounds of the CEO

Executives say a lot on corporate earnings calls. But how they say it can reveal much more
Jordan Whitehouse
Sounds of the CEO

A few years ago, Blake Steenhoven was preparing for a presentation at a company that was, as he puts it, “pretty straightlaced.” He still remembers the words of wisdom he was given by his superiors before stepping into the spotlight: “Don’t be so expressive,” “tone it down,” “be professional.”

Steenhoven’s interpretation: “boring.” He knew this was the standard advice across the corporate world, but it didn’t seem right for the message he had to deliver. “I felt intuitively that this was bad advice, or at least not universally applicable. But I was also thinking about why: Why was this bad advice? Is there actual evidence?”

It turns out there is, and now Steenhoven is helping provide it. The assistant professor of accounting at Smith is part of a new wave of researchers looking not just at what is said in financial communications, but how it’s said. Using sophisticated acoustic analysis software and machine-learning tools, these researchers are finding that the voice features of executives, like pitch and volume, can signal a lot—including a company’s actual financial health.

One of the more fascinating types of communications Steenhoven looks at is the corporate earnings call. Anyone who has listened in on one of these quarterly disclosures of a company’s performance knows just how tightly scripted they can be. On one end are the executives, carefully watching every word, discreetly dabbing every bead of sweat. On the other end are investors looking for any sign of the real truth, anything that will give them an edge.

They won’t get that edge by trading on standard information like revenue growth anymore, says Steenhoven. “So now you see almost an arms race to find the new source of data that only you have access to. And that’s where you see a lot of analysts trying to extract what they’ve determined to be a very useful signal—these non-verbal behaviours, and specifically vocal cues.”

Listen carefully

Some of the evidence those analysts rely on comes from the work of researchers like Steenhoven, who have shown in recent years just how impactful vocal cues can be. One study, for instance, found that when managers sounded excited on earnings calls, the stock market responded favourably. Another found that stock prices increased when managers lowered their pitch during the Q&A portion of earnings calls.

In one of Steenhoven’s early experiments, he showed that vocal cues can change depending on the CEO’s goals. Recruiting MBA students to act as CEOs of a beer company, he had them use scripts to either persuade prospective investors to invest in the company or current investors to hold their position. Steenhoven found that the CEOs increased their vocal pitch, pitch variation, volume, volume variation and speech rate when trying to get investments. They lowered their pitch and pitch variation when trying to hold on to investments.

Steenhoven says one of the big takeaways from this study is for investors to listen carefully for the true goals of executives. For executives, the big lesson is to know what your voice can reveal about your goals.

He is quick to point out, however, that whether you are an investor or an executive, you have to be careful about interpreting what, exactly, a particular vocal cue means. “Our voices are such a mix of all sorts of different motives, and so trying to find a particular measure that means this thing—and only this thing—is really, really fraught.”

Coaching a voice

Steenhoven also says that companies have to be careful about vocal coaching. As he experienced before his own presentation, as well as with surveys he conducted with investor relations officers, companies now teach executives how to precisely present their messages. But some may not realize there can be unintended consequences.

In a 2021 study Steenhoven did with Kristina Rennekamp and Brian White (both at Cornell University), participants were asked to listen in to the mock earnings calls of more MBA-students-turned-fake-CEOs. Not surprisingly, the researchers found that the CEOs who were coached to sound less emotional were indeed judged as sounding less emotional than the uncoached. But the coached CEOs also sounded less natural to listeners, which in turn made them think the CEOs were less competent and trustworthy.

“This really is a lesson to think about communication a lot more holistically,” says Steenhoven. “You have to be cognizant that by achieving one goal—reducing the emotion in your voice, for example—you might have the unintended consequence of being less effective at another goal, like just communicating effectively.”

Next, Steenhoven will likely study empathy, particularly how it gets communicated during presentations like earnings calls. In interviews with investor relations officers, he discovered that many try to get their CEOs to express empathy in certain situations. No doubt part of this is in response to the perception that executives need to sound empathetic during these uncertain economic times. But can it be done effectively? And are there conditions where it isn’t advisable to sound empathetic? These are the questions Steenhoven may target soon.

Yet whether he looks at empathy or some other communication goal, Steenhoven says they all broadly point back to the fact that non-verbal communication matters. “It’s just one of the realities of communicating with investors in this day and age. It’s no longer just about the numbers or the words. It’s the non-verbals that colour all of it.”