Far too many listed companies resort to corporate balderdash

By Peter V O'Brien

Friday 15th February 2002

It is time company directors and executives of listed companies looked critically at the verbal rubbish they sign off after examining draft from their internal or external "corporate communications" specialists.

The Stock Exchange daily memo included notable examples of the genre in recent weeks. They usually, but not always, came from companies in trouble which tried to put positive spins on their negatives.

It is difficult to classify the best (worst) cases of corporate, so the following extracts from recent announcements speeches are in no particular order of demerit.

CommSoft Group announced on January 31 a 1:1 rights issue at 5c for every share held. It would raise $6.2 million if shareholders took up all rights.

Hardly a great deal, given the company's head shares sold at 5.5c on February 4, four days before the shareholders' record date.

Nothing wrong with that but the accompanying comments attributed in quotes to chairman Greg Gardiner were examples of corporate verbiage. Mr Gardiner was reported as saying, "The directors believe that, with shareholder support, CommSoft Group can complete its restructuring and deliver the improvements in performance and value our shareholders require.

"We believe the issue offers all shareholders the opportunity to invest in the company at attractive price levels."

Hold on, the directors and executives should be completing a company's restructuring and delivering performance improvement and value, without outside support from shareholders.

The company's announcement went further: managing director Mark Lunt was quoted as saying the company had "breathed new life into channels in New Zealand and South Africa." His metaphors were mixed as the company's fortunes.

CommSoft produced a classic piece of impersonality when it said, "Costs have been dramatically reduced with headcount now at approximately 40 down from 150 in April 2001." The company seemed to count heads, as opposed to the rest of the bodies and their personalities.

Strathmore Group's executive chairman Phil Norman did even better in the language stakes with his address to the January 30 annual meeting.

His company lost $3.89 million for the year ended July 31, including a $5.51 million provision for writedown of assets.

Mr Norman's address included the statement: "The key operational cost in a venture capital firm is, of course, people and the operational burn reduction programme [emphasis added] will include the termination of all executive management."

Mr Norman was a victim of that decision, but "operational burn reduction programme?" Come on.

Overseas-based investment companies and trusts are notorious for reporting their results in the best light, as noted in The National Business Review (Feb 1) but local and Australian-based companies can outdo them when it comes to favourable presentation of the unfavourable.

The PR technique goes further than reporting results and commenting on them.

Failed takeover bids produce similar nonsense. US energy group Edison Mission Energy abandoned its bid for the shares in Contact Energy it did not already own but left open the possibility it might come again. Edison's $4.14 a share offer for Contact shares missed its unconditional percentage figure.

Failure drew the standard comments from any US-based company operating in New Zealand. Edison said it was a long-term holder in Contact with its now unchanged 51.2% but we heard that before from US companies with stakes in our utilities.

Situations change. There is no guarantee any overseas-based shareholder would maintain a holding in a New Zealand company if global strategies dictated otherwise. We saw that with other utilities.

US activity affects the world, including areas that influence financial markets, although not necessarily related to them.

The extraordinary fallout from the Enron collapse and its ramifications for accountancy firms after the pressure on big-five group Andersen were examples.

Corruption and highmindedness is the peculiar dichotomy of US society, from the nation's leaders to villages.

Investors throughout the world seem powerless to do anything about the planet's self-appointed policeman, which seems equally powerless to deal with its corporate excesses.

Only the naive could expect any overseas-based company to maintain its investments in New Zealand on a long-term basis.

We are the dispensable goods in the world's investment supermarket. That situation will never change.

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