CEO candor sinks to all-time low ~ Brand Mix

Wednesday, May 7, 2008

CEO candor sinks to all-time low

In this new age of transparency, CEOs at Fortune 500 companies are apparently notable holdouts. In 2007, they increased their output of unclear statements by 21% over 2006 and 85% from five years ago for a new record low, according to The 2007 Rittenhouse Rankings survey.

Rittenhouse evaluates candor in annual shareholder letters and the clarity expressed in the discussion of topics such as strategy and accountability. An example (from Coca-Cola, one of the least candid companies): "We remain fresh, relevant and original by knowing what to change without changing what we know."

Does this kind of gobbledygook matter? Apparently yes. Rittenhouse has shown that the average stock prices of the most candid companies consistently outperform the least candid companies the following year. And probably the reason that this is a record year for unclear statements is that, with tough economic times, the temptation to obfuscate has been hard to resist. Only when the economy improves will the fog start to clear.

Leading the list of most candid companies in 2007: Eaton, Entergy and Wells Fargo. The least candid company was Humana, a health plan provider whose stock has already fallen 25% in the past year.

The 2007 Rittenhouse Rankings survey press release

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