Sid Cato -- November 2002 Quiz Answers

(Answers for November 2002)

1. Finally, women annual report producers have achieved parity with pay of their male counterparts. True or false?
Answer: Not true. Men producers averaged salaries between $77,500 and $92,500 (a $15,000 range), women producers $28,000 less—this, according to my exclusive 17th annual Producer Poll.

2. If women are indeed paid less than men for comparable work, it's because no women were at the helm of 2001 top 10 reports. True or false?
Answer: False. Three of the year's 10 best were shepherded by women.

3. The casual look may have invaded the nation, if not the world, but companies will never compromise the formal appearance so essential in the corporate suite. True or false?
Answer: Untrue. Among 2001 annuals, more than one in four CEOs—27.1%—pictured were shown either jacketless or without tie, or both. First year I monitored this trend, among 1998 reports, but 11.5% (one in nine) opted for a casual appearance. So the casual look in annuals is up two and half times in just three years. But I have a feeling it has leveled off. I'll be surprised if incidence of casually attired CEOs rises much more, but I've been wrong before.

4. EBITDA may not appeal to everyone, but its use in an annual report isn't inherently evil. True or false?
Answer: False, to my way of thinking. I agree with the managing partner of Value Act Capital, who complains that companies that fall back on EBITDA—earnings before interest, taxes, depreciation and amortization—often have poor balance sheets, because they tend to borrow heavily or undertake costly acquisitions, and ignore interest or debt payments or amortization of certain balance-sheet items and the like. As you'd know if you read the print version of my monthly Newsletter on Annual Reports. Starting with 2002s, use of EBITDA anywhere in an annual report will result in an automatic five-point deduction. Two companies have retained Cato Communications, Inc., to critique their reports in depth. Both—Bell Canada and Mexico's FEMSA—were told that henceforth they faced five-point deductions in their bottom-line scores.

5. It's pretty well agreed the annual report—the print version, that is—is on its last legs. True or false?
Answer: I concede the heyday of the print report to stockholders is perhaps past. But I'm hopeful that truly upstanding companies will continue to devote sufficient time, energy and money to the print piece. Certainly, it's unlikely to regain the stature of a decade ago. But that, of course, was pre-Internet, prior to the live-in-the-present reality of today's corporate life. Internet Time, despite observations to the contrary, is a reality. There'll continue to be live-wires who will view print pieces as passé, convinced the electronic era is where it's at.

6. Criticism aside, there's nothing inherently wrong with a company relying, in whole or in part, on the Form 10-K as its annual report to shareholders. True or false?
Answer: False, very much so. The legalistic Form 10-K never was intended for widespread distribution. In fact, its audience is limited to the Securities and Exchange Commission, whose idea the 10-K was in the first place. What's more, the SEC gets everyone confused when it talks about tightening standards for the "annual report," causing many to assume the SEC is talking about the print piece; in reality it refers to the 10-K. Even an SEC staff attorney I debated a decade or so ago in New York City—even she was caught unawares, assumed graphic designers wanted her opinion on the 10-K when, obviously, their interest was in the printed annual in all its glory. Not a one-color dull recitation of SEC-mandated and proscribed facts and figures. One is produced by internal staff, such as accountants, bean-counters, the other by externally oriented professional communicators.

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	1.	Finally, women annual report producers have achieved parity with pay of their male counterparts. True or false? *Answer:* Not true. Men producers averaged salaries between $77,500 and $92,500 (a $15,000 range), women producers $28,000 less—this, according to my exclusive 17th annual Producer Poll.

	2.	If women are indeed paid less than men for comparable work, it's because no women were at the helm of 2001 top 10 reports. True or false? *Answer:* False. Three of the year's 10 best were shepherded by women.

	3.	The casual look may have invaded the nation, if not the world, but companies will never compromise the formal appearance so essential in the corporate suite. True or false? *Answer:* Untrue. Among 2001 annuals, more than one in four CEOs—27.1%—pictured were shown either jacketless or without tie, or both. First year I monitored this trend, among 1998 reports, but 11.5% (one in nine) opted for a casual appearance. So the casual look in annuals is up two and half times in just three years. But I have a feeling it has leveled off. I'll be surprised if incidence of casually attired CEOs rises much more, but I've been wrong before.

	4.	EBITDA may not appeal to everyone, but its use in an annual report isn't inherently evil. True or false? *Answer:* False, to my way of thinking. I agree with the managing partner of Value Act Capital, who complains that companies that fall back on EBITDA—earnings before interest, taxes, depreciation and amortization—often have poor balance sheets, because they tend to borrow heavily or undertake costly acquisitions, and ignore interest or debt payments or amortization of certain balance-sheet items and the like. As you'd know if you read the print version of my monthly Newsletter on Annual Reports. Starting with 2002s, use of EBITDA anywhere in an annual report will result in an automatic five-point deduction. Two companies have retained Cato Communications, Inc., to critique their reports in depth. Both—Bell Canada and Mexico's FEMSA—were told that henceforth they faced five-point deductions in their bottom-line scores.

	5.	It's pretty well agreed the annual report—the print version, that is—is on its last legs. True or false? *Answer:* I concede the heyday of the print report to stockholders is perhaps past. But I'm hopeful that truly upstanding companies will continue to devote sufficient time, energy and money to the print piece. Certainly, it's unlikely to regain the stature of a decade ago. But that, of course, was pre-Internet, prior to the live-in-the-present reality of today's corporate life. Internet Time, despite observations to the contrary, is a reality. There'll continue to be live-wires who will view print pieces as passé, convinced the electronic era is where it's at.

	6.	Criticism aside, there's nothing inherently wrong with a company relying, in whole or in part, on the Form 10-K as its annual report to shareholders. True or false? *Answer:* False, very much so. The legalistic Form 10-K never was intended for widespread distribution. In fact, its audience is limited to the Securities and Exchange Commission, whose idea the 10-K was in the first place. What's more, the SEC gets everyone confused when it talks about tightening standards for the "annual report," causing many to assume the SEC is talking about the print piece; in reality it refers to the 10-K. Even an SEC staff attorney I debated a decade or so ago in New York City—even she was caught unawares, assumed graphic designers wanted her opinion on the 10-K when, obviously, their interest was in the printed annual in all its glory. Not a one-color dull recitation of SEC-mandated and proscribed facts and figures. One is produced by internal staff, such as accountants, bean-counters, the other by externally oriented professional communicators.