Sid Cato -- October 2002 Quiz Answers

(Answers for October 2002)

1. The New York Times alternates use of the words "graphs" and "graphics." That says to me they're actually one and the same. True or false?
Answer: False. An annual report is comprised of graphics. That's why companies employ graphic design agencies, which likely design, among other elements—graphs. In a recent Sunday feature concerning misleading graphs in annuals, the newspaper appeared to view graphs and graphics as interchangeable. They're not. Four of five reports contain graphs, only one in five of which is fully captioned—for the scanners among us (that is, their meaning spelled out). But virtually 100% of reports contain graphics. Get the difference?

2. Despite all the moaning and groaning from some quarters, annual reports actually have reached new heights of excellence. True or false?
Answer: Decidedly false. Only half so many annuals worldwide—27—achieved "world-class" status this year, scoring at least 100 of a potential 135 points, versus 54 eight years earlier...among 1993 reports.

3. Criticism aside, honesty in annual reports isn't a rarity; that is, most CEOs get credit for forthrightness among 2001 reports. True or false?
Answer: False. The worst showing since 1983 annuals, 80.7% were perceived as sufficiently forthright. Peak year for honesty? Among 1995s, when more than nine in 10 letters to shareholders (91%) were assessed as honest.

4. Of the measly 27 reports to achieve "world-class" status, scoring at least 100 of a possible 135 points, all were from the U.S. True or false?
Answer: False. One from Mexico made the list, as well as one from Canada. Three from Illinois did well. Two from Michigan—Ford and DTE Energy—were among the world's five best.

5. Thank goodness for the Securities and Exchange Commission. True or false?
Answer: False, in my seldom-humble opinion. Not only is it the proverbial "paper tiger," talking tough but doing little substantial to improve annual reports, its chairman to my way of thinking leaves a great deal to be desired. Take his citing, in two speeches, the letter from a 1937 annual report, a lifetime ago and most definitely a different era. Besides, said 1937 CEO led a company that was found guilty of antitrust violations. Worse, in its way, is that the SEC uses terminology annual report producers tend to find confusing: It refers to a company's annual report, when what it actually means is the legalistic, one-color-on-flimsy paper stock Form 10-K. What folks within the annual report community mean by the term "annual report" is a full-disclosure, colorful document (annuals average 3.9 colors on the cover, if a lesser 3.6 on inside pages) meant to appeal to the investing public, as well as to the general public and a host of other audiences. A document, in short, that communicates a company's personality, which is absent entirely from the 10-K—which, I maintain, never was intended for public consumption; it's a legalistic document intended for filing with the toothless SEC.

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	1.	The New York Times alternates use of the words "graphs" and "graphics." That says to me they're actually one and the same. True or false? *Answer:* False. An annual report is comprised of graphics. That's why companies employ graphic design agencies, which likely design, among other elements—graphs. In a recent Sunday feature concerning misleading graphs in annuals, the newspaper appeared to view graphs and graphics as interchangeable. They're not. Four of five reports contain graphs, only one in five of which is fully captioned—for the scanners among us (that is, their meaning spelled out). But virtually 100% of reports contain graphics. Get the difference?

	2.	Despite all the moaning and groaning from some quarters, annual reports actually have reached new heights of excellence. True or false? *Answer:* Decidedly false. Only half so many annuals worldwide—27—achieved "world-class" status this year, scoring at least 100 of a potential 135 points, versus 54 eight years earlier...among 1993 reports.

	3.	Criticism aside, honesty in annual reports isn't a rarity; that is, most CEOs get credit for forthrightness among 2001 reports. True or false? *Answer:* False. The worst showing since 1983 annuals, 80.7% were perceived as sufficiently forthright. Peak year for honesty? Among 1995s, when more than nine in 10 letters to shareholders (91%) were assessed as honest.

	4.	Of the measly 27 reports to achieve "world-class" status, scoring at least 100 of a possible 135 points, all were from the U.S. True or false? *Answer:* False. One from Mexico made the list, as well as one from Canada. Three from Illinois did well. Two from Michigan—Ford and DTE Energy—were among the world's five best.

	5.	Thank goodness for the Securities and Exchange Commission. True or false? *Answer:* False, in my seldom-humble opinion. Not only is it the proverbial "paper tiger," talking tough but doing little substantial to improve annual reports, its chairman to my way of thinking leaves a great deal to be desired. Take his citing, in two speeches, the letter from a 1937 annual report, a lifetime ago and most definitely a different era. Besides, said 1937 CEO led a company that was found guilty of antitrust violations. Worse, in its way, is that the SEC uses terminology annual report producers tend to find confusing: It refers to a company's annual report, when what it actually means is the legalistic, one-color-on-flimsy paper stock Form 10-K. What folks within the annual report community mean by the term "annual report" is a full-disclosure, colorful document (annuals average 3.9 colors on the cover, if a lesser 3.6 on inside pages) meant to appeal to the investing public, as well as to the general public and a host of other audiences. A document, in short, that communicates a company's personality, which is absent entirely from the 10-K—which, I maintain, never was intended for public consumption; it's a legalistic document intended for filing with the toothless SEC.