Sid Cato -- April 2003 Quiz Answers

(Answers for April 2003)

1. If the early-arriving 2002 reports are any indication, their length is definitely out of control. True or false?
Answer: False. True, the Wells Fargo report, at 112, is but one of four to exceed 100 pages (others: IBM and Akzo Nobel at 108, F.Hoffmann-LaRoche AG, 142), but the overall average remains 48 pages. That compares with 49 pages average a year prior—among 2001s. Among 2000s, the average was 53—10% longer than presently.

2. You see no annuals whatsoever from outside the U.S., except maybe Mexico or Canada—yet you continue to speak of "the world's annuals." True or false?
Answer: True that I "continue to talk about the world's annuals," false that I see no "foreign" reports. Here are some of the countries (other than Canada and Mexico) whose reports I see: The Netherlands, Bahrain, Russia, the United Kingdom, Germany, the Czech Republic, Japan, the Philippines, Australia, New Zealand, Finland, Sweden.

3. You tend to see annuals in black or white terms. True or false?
Answer: False. True that I'm disappointed no end by companies that ought to know better than turn out a wanting (or, worse) document. But even the turkeys often have some redeeming qualities, which I cite. The Wells Fargo report, which failed to scale the heights this year (that is, score at least 100 of a possible 135 points), did many things right. Among them: strong support of its annual report theme. Plus, a book that communicates superbly the company's identity. And a letter to shareholders that believably was authored by the CEO himself, a most-admirable corporate chieftain.

4. About the government-mandated full disclosure, its emphasis on corporate governance—it's having an effect. True or false?
Answer: Not to my way of thinking. One indication is the low ebb of management's assumption of responsibility for the financials, increasingly signed by the chief financial officer if not the CEO as well. It has appeared in but 45.8% of 2002 reports, occasionally with the big guy's signature, but not always. True, that compares with 41.6% a year ago, but it's off from 46.4% among 2000s. Some companies play corporate governance big—Atlanta-based BellSouth, for instance, with a graphic occupying a spread. But most pay lip service, at best. Despite all the palaver to the contrary, it's pretty much a ho-hum issue.

5. It's pretty much acknowledged that you play favorites—that your "pets" are virtually assured of doing well in your competition. True or false?
Answer: It may indeed be said, but the reality is those whose work I admire have to meet the same goals as someone I don't think well of. Years back, a woman abrasively complained of my use of "big words that I have to look up in the dictionary." I felt that if she wasn't into words (that is, wasn't a wordsmith), she probably was in the wrong business. But her reports did relatively well. To no surprise, she has faded—far into the darkness, never (one hopes) to be heard from again. Unless…unless she turns out an annual report that scores well against my copyrighted standards, in which case she'll be praised for her work. Whether I like her or not is immaterial. One of the techniques I use to obviate favoritism is to review an annual over several sittings. That's where I rule on any iffiness, pro or con, I might be experiencing.

6. When you praise an annual report, you neglect to disclose any potential conflicts of interest. Isn't that true?
Answer: On the contrary, when a report is listed among the year's world's best, it's disclosed—alongside the posted name—if the producer subscribes to my newsletter and/or has attended previous Cato conferences, or is registered for the current one. The reader ought to have that knowledge available to interpret whether the citation should be taken with the proverbial grain of salt. And when a company has retained Cato Communications to critique its annual report, that assignment as well is disclosed as part of a review, either online or in print. I'm an advocate of full disclosure, I believe those in the business will tell you. One of our policies precludes accepting assignment to perform a full-bodied critique if a report has made my world's-worst list. One company couldn't believe it, demanded I send it my written policy on the matter. I never heard from it again. (Hint: Said company was the subject of a book concerning its shocking corporate skullduggery.)

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	1.	If the early-arriving 2002 reports are any indication, their length is definitely out of control. True or false? *Answer:* False. True, the Wells Fargo report, at 112, is but one of four to exceed 100 pages (others: IBM and Akzo Nobel at 108, F.Hoffmann-LaRoche AG, 142), but the overall average remains 48 pages. That compares with 49 pages average a year prior—among 2001s. Among 2000s, the average was 53—10% longer than presently.

	2.	You see no annuals whatsoever from outside the U.S., except maybe Mexico or Canada—yet you continue to speak of "the world's annuals." True or false? *Answer:* True that I "continue to talk about the world's annuals," false that I see no "foreign" reports. Here are some of the countries (other than Canada and Mexico) whose reports I see: The Netherlands, Bahrain, Russia, the United Kingdom, Germany, the Czech Republic, Japan, the Philippines, Australia, New Zealand, Finland, Sweden.

	3.	You tend to see annuals in black or white terms. True or false? *Answer:* False. True that I'm disappointed no end by companies that ought to know better than turn out a wanting (or, worse) document. But even the turkeys often have some redeeming qualities, which I cite. The Wells Fargo report, which failed to scale the heights this year (that is, score at least 100 of a possible 135 points), did many things right. Among them: strong support of its annual report theme. Plus, a book that communicates superbly the company's identity. And a letter to shareholders that believably was authored by the CEO himself, a most-admirable corporate chieftain.

	4.	About the government-mandated full disclosure, its emphasis on corporate governance—it's having an effect. True or false? *Answer:* Not to my way of thinking. One indication is the low ebb of management's assumption of responsibility for the financials, increasingly signed by the chief financial officer if not the CEO as well. It has appeared in but 45.8% of 2002 reports, occasionally with the big guy's signature, but not always. True, that compares with 41.6% a year ago, but it's off from 46.4% among 2000s. Some companies play corporate governance big—Atlanta-based BellSouth, for instance, with a graphic occupying a spread. But most pay lip service, at best. Despite all the palaver to the contrary, it's pretty much a ho-hum issue.

	5.	It's pretty much acknowledged that you play favorites—that your "pets" are virtually assured of doing well in your competition. True or false? *Answer:* It may indeed be said, but the reality is those whose work I admire have to meet the same goals as someone I don't think well of. Years back, a woman abrasively complained of my use of "big words that I have to look up in the dictionary." I felt that if she wasn't into words (that is, wasn't a wordsmith), she probably was in the wrong business. But her reports did relatively well. To no surprise, she has faded—far into the darkness, never (one hopes) to be heard from again. Unless…unless she turns out an annual report that scores well against my copyrighted standards, in which case she'll be praised for her work. Whether I like her or not is immaterial. One of the techniques I use to obviate favoritism is to review an annual over several sittings. That's where I rule on any iffiness, pro or con, I might be experiencing.

	6.	When you praise an annual report, you neglect to disclose any potential conflicts of interest. Isn't that true? *Answer:* On the contrary, when a report is listed among the year's world's best, it's disclosed—alongside the posted name—if the producer subscribes to my newsletter and/or has attended previous Cato conferences, or is registered for the current one. The reader ought to have that knowledge available to interpret whether the citation should be taken with the proverbial grain of salt. And when a company has retained Cato Communications to critique its annual report, that assignment as well is disclosed as part of a review, either online or in print. I'm an advocate of full disclosure, I believe those in the business will tell you. One of our policies precludes accepting assignment to perform a full-bodied critique if a report has made my world's-worst list. One company couldn't believe it, demanded I send it my written policy on the matter. I never heard from it again. (Hint: Said company was the subject of a book concerning its shocking corporate skullduggery.)