Ode on a Business Cliché
When 18th century English poet John Keats gazed upon his now-famous Grecian urn, he wondered what stories the figures depicted on the artifact might tell. Today’s investors may well feel the same way as they peruse the latest quarterly earnings reports, hoping to find some clear meaning behind the numbers and jargon.
But many find in the tangled prose of corporate media releases what Keats called “a flowery tale more sweetly than our rhyme.”
In fact, “flowery” may be too kind by half. Corporate earnings reports are marked by a truckload of statistical categories, with a heavy dollop of explanatory text, all designed to make the investor feel comfortable and confident about the future of the stock price and the status of their money.
What is most remarkable about corporate earnings statements is the ease with which companies use language to minimize problems and maximize potential profits. Take for example Disney CEO Robert Iger’s bold announcement the company is “embarking on a significant transformation” intended to “maximize the potential of our world-class creative teams and our unparalleled brands and franchises.”
That should make Disney investors happy – or at least confident – but what does it really say? Who determines if the impending transformation will be significant? Exactly how is the potential of Disney’s creative teams going to be maximized?
The real message in Iger’s comments is less about any concrete policies and programs, and more about telling that flowery tale of Keats and reassuring investors that the company will be able to “weather future disruptions and global economic challenges and deliver value for our shareholders.”
Likewise, Meta founder and CEO Mark Zuckerberg offered reassurance to shareholders that despite whatever happened in 2022, this year will be better and company operations will be smoother.
“Our management theme for 2023 is the ‘Year of Efficiency,’” Zuckerberg said in the earnings release. “And we’re focused on becoming a stronger and more nimble organization.”
Again, this is surely something all companies strive to become, and efficiency is high on the list of corporate priorities in every boardroom across the globe. But not the lack of specifics. The vague pronouncements are even more prominent when the company addresses the layoffs of 11,000 employees it announced in the fourth quarter of 2022.
“We took several steps to pursue greater efficiency and to realign our business and strategic priorities,” which included getting out of leases for office space no longer needed due to the layoffs.
While opacity is the earnings report writer’s friend, some companies opt for a grandiloquence that conveniently skirts objective reality. The best example of this comes from the energy industry, specifically Shell.
While the company recorded its highest annual profit ever in 2022, the company chose to toot its own horn rather than address the inflationary elephant in the room.
“Our results in Q4 and across the full year demonstrate the strength of Shell’s differentiated portfolio, as well as our capacity to deliver vital energy to our customers in a volatile world,” according to the company release.
From that perspective, it was the company’s efficiency and global reach that created the increase in profits, not higher prices at the pump, which was the more significant truth.
These business cliches do paint a flowery tale like Keats’ urn, and perhaps the poet was right about truth when he wrote “Beauty is truth, truth beauty – that is all ye know on Earth and all ye need to know.”
He would get no argument from corporate boardrooms at earnings reporting time.