Until now the former Deutsche hedge man, who now runs the Monitor110 intelligent search business, has been strangely quiet on The Crunch. Now, in a truly Ehrenberg-esque outburst, we find out why:
I am beyond sick of reading about the sub-prime mortgage mess, “hidden” losses emerging from Wall Street balance sheets and CEOs being ousted for poor risk management. We find ourselves with a market environment that is very uncertain, so much so that every day seems to bring a new revelation about losses to be realized or firms on the brink of a liquidity crisis. And we can talk for days about the factors that got us to this point. But the bottom line, IMHO: it’s about bad governance.
Everything, it seems, that we’ve been writing about has been tangential to this basic fact. And if we want to zoom in on the two governance related items that have failed investors it is weak accounting practices and poor investor relations practices.
Investors, Ehrenberg says, often get bad information. And it has got to stop.
So who’s to blame? Wimpy accounting rule-makers? Congress, who also can weigh in on such issues? Game-playing corporate managements who want to protect their own bonuses? Corporate Boards who should be watching this stuff but are likely long on other commitments and short on meaningful domain expertise? How about investors themselves for not being more critical and demanding answers to opaque financial disclosures before buying the shares?
The fact is most information presented to investors is either intentionally vague or intentionally misleading.
The way I see it, most of the stuff coming out of corporate investor relations departments is pure drivel. Puffed-up press releases. Milquetoast, vacuous commentary by the CEO and/or CFO as it relates to the Company’s prospects. Many companies’ emphasis on earnings guidance, and the associated warnings and alerts that go with it. Quite frankly, it insults a thinking investor’s intelligence and wastes a ton of corporate resources keeping up this charade.
While he’s not talking about companies giving away the equivalent of the formula for Coke, Ehrenberg would like to see management that can address strategy, risks and the accompanying mitigants in a clear and articulate way. He’d like the sort of straight communication that the owners of a company deserve.
But come on Rog, who’s to blame?
Everybody. Boards who favor “stealth” (yeah, like so much is really out of view today) over clarity. Managements who would rather sidestep the hard questions and tap dance when necessary. Investors who put money in companies that don’t communicate well and serve to perpetuate the bad behaviors that have gone on for decades. No more! Get clear. Get substantial. Get real. Few words. Fewer releases. Greater substance. This isn’t rocket science. It’s just good leadership.