 |  Periodic editorials concerning everything from the very worst industry—from an annual report standpoint, that is—to what's wrong with the Fourth Estate. Reporters who can't hit an accuracy with a cannon. |
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| Periodic editorials concerning everything from the very worst industry—from an annual report standpoint, that is—to what's wrong with the Fourth Estate. Reporters who can't hit an accuracy with a cannon. |
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Negative! Negative! Negative!
My 18th year at this stand is shaping up as bad news. Certainly, for those of us who truly care about this key corporate communiqué. Including, most definitely, yours truly. The first four dozen reports in and analyzed, using computer programs I invented, ranged from bad to worse to simply awful. To date, they’ve averaged a woeful 2% positive/negative rating vs. 10.4% at year’s end among 1999 annual reports. (A completely positive report—one containing all three dozen elements I advocate—obviously, would warrant a 100% rating.) It’s not only the venal, whose goal in life is to shortchange the stockholder into believing all the hype those surrounding chief executives tend to disseminate; it’s even the presumably well-intentioned. One clown, the communications vice president with a Florida bank, submitted (along with a warm cover letter) a simply disgraceful document (a multi-part piece we long have expressed antagonism toward) with the giddiness of a schoolboy in the presence of his first true love. What would possess folks like him, who surely ought to know better? Let alone those for whom producing a revelatory annual report is, as I wrote in my February newsletter, "akin to walking barefoot on hot coals." More reports are relying on the legalistic Form 10-K—at least, those early arrivals for 2000, produced (obviously) by companies on a fiscal year basis. Increasing numbers are going the multi-part route, which I maintain is a prelude to a truncated report, either a 10-K essentially, or a summary. And, sometimes, both. Though...believe it or not...often not even so indicated on the report cover. It’s one thing to be sleazy, to try to put something over on the stockholder. But many fail to confess up front this isn’t a real, complete report. Instead, it’s a document that, because it’s incomplete, management gets to pick and choose what to include and what to leave out. A summary means it’s no longer a level playing field. If it’s an abbreviated document, which is what a summary is, the wise investor ought to run the opposite direction lickety-split, I say. Cato’s working hypothesis: When a company engages in these forms of skullduggery, when it doesn’t give you a complete annual report, especially the numbers jibing front and back of the book, the wise stockholder ought to hop to and sell his or her holdings, I maintain. Granted, reports by firms on a fiscal year tend to be worse than those produced by the big boys. But in this skittish economy, with a President whose poor-mouthing can’t help but hurt ("We have nothing to fear but fear itself!" Remember?), companies understandably tend to regress, to emulate the turtle’s protective nature. Couple that with the mother of "outs"—the Internet—and you’ve got a disgrace aborning: Quite possibly the worst year since we began at this stand, with the 1983 crop of reports. P.S. Barely a month into 2000s, and already the year’s first SCRAMMS nominee has surfaced: Magellen Health Systems' chief operating officer looks like a sure winner—make that, loser. Pictured a decidedly unlucky 13 times. SCRAMMS is an acronym for Sid Cato Rails Against the Mirror, Mirror Syndrome – "Who's fairest of us all?" "You are, boss! You are!" Signified by an overabundance of CEO photographs in the annual report. We'll make an exception in this instance with Magellan's chief operating officer, its COO, his ego out of control, giving new meaning to the phrase "running rampant." * SCRAMMS is an annual citation suggested by long-time advisor Robert Goldsborough. |
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