Art & Commerce

A Forum For Opinion On Creativity, Management And Finance Full Disclosure In its annual report, a company can run but it can't hide Over the years, we've become inured to the weirdness that occasionally seeps out of even the sanest of ad agencies. It's easy to excuse ads that you don't quite get. "I'm not the target demo," you can always say. While the message may be strange and the audience in doubt for some advertising, agency annual reports are aimed squarely at the "investor" demographic--the folks who, as shareholders, actually own the publicly traded companies. It's pretty hard for a financial analyst to not "get" an annual report. This year's reports, covering the results for calendar 1998, offers a range of styles and approaches, and there's no discernible relationship between the style or even substance of the annual reports and how well each company did on behalf of its owners. Some highlights. The Interpublic Group had the best-performing stock among the majors in 1998, with its share price rising 60 percent. This gain was fueled by a 49 percent increase in earnings per share, also the pick of the pack. An outstanding company but a conventional report: It forces itself into a theme, "partnership," as in "partnerships are the building blocks that create success." And to illustrate the merits of partnerships, the report's crafters cite, among others, the Wright brothers (although da Vinci had the idea first), the New York Yankees (let's allow that one) and Shah and Mrs. Jahan of 17th century India (he built the Taj Mahal as a symbol of their partnership). Partnership, the antithesis of vision, is an odd theme for a company that owes its existence to the efforts of a visionary. Marion Harper saw merit in creating a holding company that contained several, often-competing operating units. This is the industry standard. Has Interpublic lost its vision? The worst-performing stock of last year was Cordiant Communications, whose annual report was pretty good, setting out its business objectives in a clear and cold-blooded way. There's not much double-talk, and no room to go back and say we didn't really mean it. Some analysts hold Omnicom to be the industry's gold standard. Well, the annual report's cover is gold, but its guts are basically a three-page letter from the CEO, plus a copy of the 10-K SEC filing. No illustrations. The most interesting report, this as in the past several years, is from WPP Group. The meat of it is a sort of B-school thesis written by the CEO. It's worth reading even by civilians--those not involved in advertising or media. Hot topics in this year's essay are what's right and wrong in the business, as well as the challenges wrought by new media, the concentration of media ownership and the key role Procter & Gamble continues to play in the industry's evolution. An important partnership not cited by Interpublic, Abbott and Costello, might have helped write Saatchi & Saatchi's opus for the year. While 1997's report opened to a recording of the CEO's voice, 1998's features pop-up figures, literally paper dolls, that jump out at an unsuspecting reader. The company posted the second-best rate of growth in earnings per share in 1998, and the stock has done well this year. So maybe investors, who ought to be used to it by now, will tolerate yet another blast of managerial self-indulgence.

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