Being empathetic as a leader pays off, as shown by a study from the University of Zurich. Researchers looked at how CEOs expressed empathy during conference calls with financial analysts amidst the COVID-19 crisis.

During the early days of the pandemic, many CEOs went beyond business talk in these calls, showing concern for people. The study examined 510 such calls involving 448 major U.S. companies. Surprisingly, only about half of the CEOs (51.8%) made statements expressing care for people during these calls. Even more surprising, most of these statements were vague and lacked concrete actions.

However, companies whose CEOs acknowledged the human side of the pandemic fared better in the stock market than those whose CEOs didn’t. This suggests that showing compassion can positively influence stock performance, even if the expressions of empathy aren’t deeply substantive.

Valuable insight

Conference calls are crucial for investors to hear directly from CEOs, especially during crises like COVID-19. What CEOs say in these calls can greatly affect the stock market.

While it’s good that CEOs addressed the human side of the crisis, their statements lacked concrete actions to protect people. Surprisingly, the study found that even these vague expressions of care had a positive effect on company stock prices during the market crash.

Each additional human care statement by a CEO was linked to a 2.49 percentage point increase in cumulative returns. This means that, for the average-sized company in the study, about $78.9 million of financial value was preserved due to these statements.

Reducing volatility

Interestingly, these statements also reduced stock volatility during the crisis, meaning investors saw these stocks as less risky. However, they didn’t affect analysts’ predictions of future earnings.

Despite being generic and lacking specific plans, these statements mattered because they showed CEOs cared about people. This highlights the importance of CEOs demonstrating humanity in their communication, which can affect how investors see their company and its performance. CEOs who only talk about numbers miss an opportunity to connect with people, which is an essential part of their role.

“Leadership is about both performance and people,” the researchers explain. “Our study provides evidence that care for people pays off—even in conference calls with analysts and investors who are expected to focus squarely on performance.”