676  Investor Communications
Communicating with Intrinsic Investors
Intrinsic investors are sophisticated and have spent considerable effort to un-
derstand your business. They want transparency about results, management’s 
candid assessment of the company’s performance, and insightful guidance 
about the company’s targets and strategies. Their role in determining stock 
prices makes it worth management’s time to address intrinsic investors’ desire 
for clear, well-informed communication.
What Investors Want
In 2015, McKinsey and the Aspen Institute Business and Society Program sur-
veyed and interviewed intrinsic investors to find out what was important to 
them.6 One highlight from the survey was intrinsic investors’ overwhelming 
support of companies’ efforts to pursue long-term value, even at the expense 
of short-term earnings. A second highlight was that intrinsic investors ex-
pressed a desire for managers to provide what the investors called education 
about companies’ strategies and the dynamics of their industries.
Intrinsic investors overwhelmingly favor decisions that lead to long-
term value creation even at the expense of short-term earnings shortfalls. 
The McKinsey–Aspen survey presented an investment scenario in which a 
U.S.-based company that earns 70 percent of its revenues and profits abroad 
experienced a major decline in short-term profits because of a large shift in 
foreign-exchange rates. Respondents answered questions about their support 
for a range of potential management decisions. Out of 24 intrinsic investors, 
19 said they would be neutral if the company took no action and simply re-
ported lower profits, while nearly two-thirds said they would take a nega-
tive view of an order for across-the-board cost reductions. Intrinsic investors 
realize that companies can’t control or predict exchange rates, and they don’t 
want companies to cut costs arbitrarily to meet current earnings expectations 
if it might hurt the business later. Twenty-one out of 23 intrinsic investors 
negatively viewed accelerating cost cutting in the following year to keep earn-
ings rising (assuming exchange rates stayed the same), if long-term revenues 
could be negatively affected. In subsequent interviews, some investors noted 
that this could lead to a downward spiral of shrinking investments and rev-
enue growth. In another scenario, a new CEO decides to continue operating 
a legacy unit even though it is a money loser with no expectation of turning 
profitable. Seventeen out of 24 investors had a negative view of sustaining the 
unit to avoid recognizing the shutdown costs, while 20 were neutral or posi-
tive about the company shutting it down despite the one-time hit to earnings. 
Most favored an attempt to divest the unit in the CEO’s first year on the job; 
the only dissenter worried that year 1 might be too soon.
6 This section is from R. Darr and T. Koller, “How to Build an Alliance against Corporate Short-
Termism,” McKinsey on Finance, no. 61 (2017): 2–9.