Strange Choices

The Chairman of a great European corporation recently gave an interview in which he tried to justify his company’s refusal to offer financial reports at the quarterly intervals customary in most developed markets. His company—a household name worldwide—reports just twice a year. The Chairman sought to explain this longer reporting cycle by suggesting that it promoted management’s freedom to think about corporate strategy in the longer term. Because it was not subject to the reactions of investors and analysts every three months, he said, the company had given itself freedom to lay stronger foundations for its strategy.

Thinking long term is, of course, desirable, and there’s little question that a focus on short-term financial results has done damage to many companies. But the simple fact of a longer reporting cycle leaves open to debate the question of whether the Chairman was actually seeking more freedom to think long-term, or whether a reduced burden of accountability was the real goal. He was, of course, free to make his case, and offering examples of how he and his management team have used their freedom to benefit the company and its shareholders would seem to be a solid communication strategy.

Instead of offering examples that make the business case, however, the Chairman chose to set forth a cultural argument. He began by making the distinction between his own, supposedly continental, way of doing business and what he called the “Anglo-Saxon” one (meaning British and American) which he said focuses on short-term results. “Anglo-Saxon” is not a business style unless you choose to make it one. What the term refers to is a cultural history going back a millennium or two. In using this culturally-loaded language, the Chairman could only have implied that whether your are short- or far-sighted in business depends to some extent on where you come from. Whether the factors determining one’s business style include religion, education, or familiarity with Impressionist art, he did not say.

The solid example the Chairman gave was nearly 40 years old and came from a country—Chile—which could not have represented more than one or two percent of the company’s revenues. He said that a focus on the long term had enabled his company to remain in Chile even though its Marxist president, Salvador Allende, elected in 1970, showed a clear anti-business bias. No one doubts that he did. And, in raising the Allende story to defend an extended disclosure cycle, the Chairman demonstrated how his company’s long-term vision helped it hold on until the business climate improved. Though he skipped this part of the story, that improvement began to occur the day after the now-famous General Pinochet engineered a CIA-backed coup d’etat. Among its results was the disappearance of thousands of people whose mass graves Chileans have still been discovering in the last few years. To bring the story up to date, the Chairman went on to point out in explicit fashion that his company could be facing an Allende-esque situation today as it confronts Venezuela’s Hugo Chavez—another bad guy against whom less-frequent reporting may help the company defend itself.

Well, you can’t dispute it. If stock analysts at Barclays or Morgan Stanley tell the company to get out of Venezuela, management should at least listen. And if it were the case that seeing the company’s statements only every six months might make those analysts less itchy. . . that, too, is hard to argue for or against.

It’s also hard to argue that ghosts from the cultural and historical closet can make an ingenuous business case where an opportunity to tell real, constructive stories is, for some inexplicable reason, declined.