Sid Cato -- July 2002 Quiz Answers

(Answers for July 2002)

1. You've lost me when you say you and the SEC aren't "on the same page." That must mean you're reading a different document than the government guys. True or false?
Answer: False. We're not talking about documents per se. What's meant when I say we're "not on the same page" is that when the SEC, for example, refers to the annual report, it's talking about the legalistic Form 10-K. When we "civilians" refer to the annual report, we're talking about a document running, this year, upwards of 50 pages, replete with full color photographs, attractive layout and design, and a meaningful letter to shareholders. Along with complete biographical data on officers and directors, a mission statement, glossary of terms and ideally a special, in-depth section—none of which the 10-K contains. Oh, yes—and a grid, showing customers and competitors, broken down by operation.

2. The No. 1 background of annual report producers is finance. True or false?
Answer: False. In my annual Producer Poll, public relations is the credential cited by more than one in three. Finance? One in five had that in his or her background, one in four, investor relations.

3. Despite all your moaning and groaning, this has turned out to be one of the very best years ever for annual reports. True or false?
Answer: Decidedly false. The Cato Positive Index for this year's crop, indicative of the presence or absence of three dozen elements I consider essential to a good report, has sunk to a low: 8.7 percent, versus 10.6 percent a year earlier alone. Most annuals have regressed to the 1994 level. So far this year (2001 reports), only 27 have scaled the heights successfully. That stood at 33 a year earlier, twice so many a few years back.

4. You take lots of pot-shots at CEOs, but I say most are scrupulously honest—at least, in their annual reports. True or false?
Answer: False, sadly. Honesty is at a record low. (Surprise, surprise.) Only 81.8 percent this year did I find sufficiently forthright— meaning, 18.2 percent either falsified the numbers or held off addressing them until the reader's interest had waned. Or, even worse, made up numbers to suit a massive ego. (Show me a CEO and I'll show you a massive ego...)

5. You talk big, but when it comes to the Securities and Exchange Commission, you bow and scrape. True or false?
Answer: Try telling that to the SEC's Harvey Pitt, chairman. I say publicly the SEC "walks loudly and carries a tiny stick," contrary to Teddy Roosevelt—who of course walked softly and carried a big stick. The SEC is a paper tiger—that's the term those of us in the know use to describe it. Much ado—followed, usually, by nothing. What's more, I publicly (in Newsday) called Harvey "silly."

6. Not all annual reports are destined for greatness. But you seldom if ever have time for the also-ran. True or false?
Answer: Not true. I savor the occasional gem, whose producers didn't care about, or weren't aware of, my 36 copyrighted criteria on what makes a good annual report. Check out Pg. 3 of the July 2002 issue of my newsletter, where I celebrate the Amgen report with its haunting cover. That proves my point.

7. One final question: You talk big to producers of annuals—in your newsletter and in speeches and at your annual conference. But when it comes to outsiders—those not within your small industry—it's a different story. True or false?
Answer: False. To do otherwise would make me the consummate phony. I tell groups of CEOs the very same thing I say to members of the Financial Executives Institute, which is the very same thing I say at my annual International Annual Report Conference. You're right: To do otherwise would make me a phony. CEOs may be able to live with that, but not I.

Return to July 2002 quiz page

Test your knowledge by taking previous monthly quizzes


	1.	You've lost me when you say you and the SEC aren't "on the same page." That must mean you're reading a different document than the government guys. True or false? *Answer:* False. We're not talking about documents per se. What's meant when I say we're "not on the same page" is that when the SEC, for example, refers to the annual report, it's talking about the legalistic Form 10-K. When we "civilians" refer to the annual report, we're talking about a document running, this year, upwards of 50 pages, replete with full color photographs, attractive layout and design, and a meaningful letter to shareholders. Along with complete biographical data on officers and directors, a mission statement, glossary of terms and ideally a special, in-depth section—none of which the 10-K contains. Oh, yes—and a grid, showing customers and competitors, broken down by operation.

	2.	The No. 1 background of annual report producers is finance. True or false? *Answer:* False. In my annual Producer Poll, public relations is the credential cited by more than one in three. Finance? One in five had that in his or her background, one in four, investor relations.

	3.	Despite all your moaning and groaning, this has turned out to be one of the very best years ever for annual reports. True or false? *Answer:* Decidedly false. The Cato Positive Index for this year's crop, indicative of the presence or absence of three dozen elements I consider essential to a good report, has sunk to a low: 8.7 percent, versus 10.6 percent a year earlier alone. Most annuals have regressed to the 1994 level. So far this year (2001 reports), only 27 have scaled the heights successfully. That stood at 33 a year earlier, twice so many a few years back.

	4.	You take lots of pot-shots at CEOs, but I say most are scrupulously honest—at least, in their annual reports. True or false? *Answer:* False, sadly. Honesty is at a record low. (Surprise, surprise.) Only 81.8 percent this year did I find sufficiently forthright— meaning, 18.2 percent either falsified the numbers or held off addressing them until the reader's interest had waned. Or, even worse, made up numbers to suit a massive ego. (Show me a CEO and I'll show you a massive ego...)

	5.	You talk big, but when it comes to the Securities and Exchange Commission, you bow and scrape. True or false? *Answer:* Try telling that to the SEC's Harvey Pitt, chairman. I say publicly the SEC "walks loudly and carries a tiny stick," contrary to Teddy Roosevelt—who of course walked softly and carried a big stick. The SEC is a paper tiger—that's the term those of us in the know use to describe it. Much ado—followed, usually, by nothing. What's more, I publicly (in Newsday) called Harvey "silly."

	6.	Not all annual reports are destined for greatness. But you seldom if ever have time for the also-ran. True or false? *Answer:* Not true. I savor the occasional gem, whose producers didn't care about, or weren't aware of, my 36 copyrighted criteria on what makes a good annual report. Check out Pg. 3 of the July 2002 issue of my newsletter, where I celebrate the Amgen report with its haunting cover. That proves my point.

	7.	One final question: You talk big to producers of annuals—in your newsletter and in speeches and at your annual conference. But when it comes to outsiders—those not within your small industry—it's a different story. True or false? *Answer:* False. To do otherwise would make me the consummate phony. I tell groups of CEOs the very same thing I say to members of the Financial Executives Institute, which is the very same thing I say at my annual International Annual Report Conference. You're right: To do otherwise would make me a phony. CEOs may be able to live with that, but not I.