CEO Transparency Worse Despite SOX
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Despite the fall of Enron and WorldCom and the passing of the Sarbanes-Oxley Act, CEO transparency in shareholder letters has substantially declined. The findings come from an annual survey of investor communications by Rittenhouse Candor. Prime symptons are more jargon, more spin and more confusing statements. Rittenhouse claim that the letters are an indicator of CEO integrity. L.J. Rittenhouse, President of andBEYOND Communications said, "The passage of Sarbanes-Oxley legislation in 2002 was intended to promote clear and transparent disclosure, but only 24 percent of the companies in our 2005 survey were awarded top marks in candor down from 57 percent in the 2002 survey. While many executives are certifying their results to comply with Sarbanes-Oxley, they are also publishing virtually unintelligible shareholder letters. If they cannot candidly articulate their goals and results, then how can they credibly walk their talk?" The survey also found a link between candor in the letters and stock price performance. The top 25 companies for candor have outperformed the bottom 25. Wells Fargo, Alcoa and JetBlue Airways came top in the survey for transparency.
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