Praise for Investing Between the Lines Investing Between the Lines captures the essence of successful execu- tives: Communicate strong values that ALL employees understand and emulate, put safety and customers at the top of the corporate agenda, and maintain the agility to change. L.J. Rittenhouse reminds leaders that yes, their words matter. —JAMES P. TORGERSON, President and CEO, UIL Holdings Company Rittenhouse has done it again! Wise investors, executives, directors, and employees will empower themselves with the knowledge and techniques recommended by L.J. Rittenhouse. If you are searching for leaders who build sustainable businesses, IBTL offers the impor- tant clues needed to find these long-term value creators. I highly recommend Investing Between the Lines. —JAMES A. SEYERS, Portfolio Manager, Personal Investment Management Group, ScotiaMcLeod The ability to inspire confidence lies at the heart of creating value. It is also difficult to measure. L.J. Rittenhouse’s insightful book pres- ents a creative approach to developing metrics that identify confi- dence-building executives. Investors looking to find and back such leaders are advised to read this book! —DR. VINAY NAIR, Founding and Managing Principal, Ada Investments That a man is as good as his word is a truism that underlines L.J. Rittenhouse’s Investing Between the Lines, a guide to ferreting out a company’s “business morality.” She makes a compelling argument that executive letters are the best barometers of leadership qualities. This book is required reading for the long-suffering investing pub- lic, as well as for officers and board members looking to see how well their CEO fares in informing others about the company’s progress. —IRENE NATIVIDAD, Chair, Corporate Women Directors International Confirming the deep insight of every faith tradition, Rittenhouse offers convincing proof that integrity matters. Words are sacred and CEOs who honor this truth are more likely to be trustworthy stew- ards of capital. —DR. RON PATTERSON, Sr. Minister, Naples United Church of Christ, Naples, Florida L.J. Rittenhouse explains in this well-written manual why it is nec- essary to pay close attention to CEOs’ words. By espousing the principles and practices used by Warren Buffett and other straight- talking leaders, Rittenhouse shows how to make sound judgments in separating companies that build long-term relationships from those preferring one-night stands. Executives and communication teams will gain important lessons in how to make wealth-creating communications. —MARK O’HARE, Senior Partner, Grant Thornton, Australia Rittenhouse’s ideas are critical for individual investors like me. Unlike portfolio managers running mutual funds who limit their viewpoint to the next quarter, we can be more patient. That demands having someone in charge who knows what he’s doing, and can effec- tively communicate. If a business can’t be made understandable to the shareholders, how can we assume the CEO understands it? And if he can’t communicate it to us, how does he communicate it to the people who work for him?” —TOM ROBBINS-MILNE, Individual Investor, New York City InvestIng Between the LInes How to Make S Marter DeciSionS by DecoDing ceo coMMUnicationS L.J. rittenHoUSe New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2013 by L.J. Rittenhouse. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. ISBN: 978-0-07-174324-2 MHID: 0-07-174324-3 The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-171407-5, MHID: 0-07-171407-3. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefi t of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps. McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. To contact a representative please e-mail us at [email protected]. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, securities trading, or other professional services. 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Your right to use the work may be terminated if you fail to comply with these terms. THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise. My word is my bond Since 1801 the motto of the London Stock Exchange (in Latin, “dictum meum pactum”), where bargains are made with no exchange of documents and no written pledges being given. —Urban Dictionary I should be very surprised if the story I have to tell is anywhere near the whole truth. We are all, as Huxley says someplace, Great Abbreviators, meaning that none of us has the wit to know the whole truth, the time to tell it if we believed we did, or an audience so gullible as to accept it. —Neil Postman, Amusing Ourselves to Death Acknowledgments Investing Between the Lines represents the contributions of many people. Special thanks go to Stephen Dandrow and Rahel Abebe, who reviewed chapters, checked facts, and analyzed data, while continuing to conduct “business as usual.” John Taylor’s insights on corporate finance and foren- sic intelligence sharpened ideas, led to new discoveries, and spurred us onward. Bob Emmott offered his wisdom and experience on leadership, while Gary Zahokos, Roger Marvinney, Erich Korngold, Tom Robbins- Milne, John Freund, Caren Byrd, and Rick Kool helped to clarify impor- tant concepts. Greg Icenhower challenged and guided our Candor and strategy reporting throughout as he has done over the decade. Thanks go to Lisa Norton, Laura Berman, John Finck, and Justine Hoechst for reviewing chapters and to Michelle Sauvage for her graphic representation and data development expertise. Without Warren Buffett’s permission to quote generously from his shareholder letters, there would have been no first book,Do Business with People You Can Tru$t and no present book. My gratitude to him and to Debbie Bosanek, his assistant, is immeasurable. Thanks go to McGraw-Hill editors Zachary Gajweski, Mary Glenn, and also to Patricia Wallenburg, who composed IBTL. Jill Totenberg and the team at Monaco Associates, Carolyn Monaco and Alicia Simons, guided the transition from book production to book release and set us on a firm course. No ambitious project like this is possible without the support of friends and family. This group of stalwarts includes, but is not limited to, David Dowd, Sahil Ghandi, as well as Neel, Sarita, and Ashima, Betty Robbins and Moses Silverman, Gordon and Carole Hyatt, Eve Burton, Barbara Cooperman, Enid and Nan Elliot, Jesse Guardina, Sam Murkatovic, and my daughter, Lianne. Finally, and not least of all, is the debt I owe my clients who have worked with us over the years and used Rittenhouse Rankings Candor metrics to build and rebuild trustworthy cultures that produce excellent results. Your dedication has launched this essential approach to twenty- first-century business. This book is dedicated to you and all that you have done and are doing to usher in a new era of corporate Candor.