RESEARCH · DATA · ANALYTICS

Measuring
CEO candor.

Aurium builds the lens through which executive communication is read, classified, and measured.

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Free cash flow rose 14% to $2.1B.

We remain focused on synergies.

Our biggest mistake: late price cuts.

We met four of our five goals.

Headwinds made it a challenging year.

We’re exiting retail to fund cloud.

Free cash flow rose 14% to $2.1B.CS-01 · Cash Flow · +9Without a lens, every letter reads the same.

“[S]trong leadership revealed in candid communications will build employee trust, which furthers the effective execution of strategy and, in turn, leads to superior results and superior market performance. The bottom line: executives’ words matter.”

L.J. RittenhouseInvesting Between the Lines2013, p. 257

The record

Every year, management writes to its owners in its own words.

The financial statements are required, audited, and standardized. The shareholder letter is none of these: it is one of the few places a CEO chooses what to tell owners, in their own words. Aurium has collected 24,039 of them, from 3,516 companies.

Required

Income statement

Balance sheet

Cash flow

Audited. Standardized. Mandatory.

Chosen

To our shareholders,

Unaudited. In the CEO’s own words. Voluntary.

The blind spot

Five other methods read this sentence favorably.

“In our view, while the earnings performance was underwhelming, we managed through the headwinds well and achieved a lot, positioning us well for the long-term.”
AAON, FY2021

Method and verdict
Loughran–McDonald dictionary	Positive (maximum)
Harvard IV-4 dictionary	Positive (maximum)
Zero-shot sentiment	Positive 0.83
Zero-shot “good or bad news”	Good news 0.90
Aurium informativeness score	Informative 0.555
Aurium Lens	CN-08 · Mixed Message · toxic · −5

It admits an underwhelming year, then talks the reader past it. Only Lens separates admission from evasion.

The stakes

Candor has been linked to returns.

10-year compound annual return, 2006–2016

Most candid companies (top quartile)

18.1% a year

S&P 500

7.1% a year

It has never been tested at the scale of the market. That is the first question Aurium’s research will answer.

Source: Rittenhouse Rankings, 2015 CEO Candor Survey. Roughly 100 companies; returns not adjusted for risk, size, or sector.

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The Aurium Stack.

Three layers, each built on the last: the corpus, Lens, and the scores built on them. Open any layer.

THE AURIUM STACK · 3 LAYERS

RESEARCH INFRASTRUCTURE · 01–03

The Aurium Stack

Our framework for analyzing CEO communication

Measuring
CEO candor.

Every year, management writes to its owners in its own words.

Five other methods read this sentence favorably.

Candor has been linked to returns.

The Aurium Stack.

The Aurium Stack

The corpus

Lens

Scores and profiles

Research