One of the companies that I've been following closely for the past few years, the Internet retailer Overstock.com (OSTK - Get Report), the other day came out with financial results for the third quarter of 2010. The numbers weren't very good, with the loss much worse than expected, and the stock fell 16%. But anyone familiar with this company had a pretty good idea that the company wasn't coming out with good news by simply looking for the earnings release.
There wasn't any.
In contrast to previous quarters when the company had something positive to say, Overstock's usually hyperactive corporate PR machinery, ranging from Twitter feeds to a Facebook page to a PR website personally financed by the CEO -- all were silent.
Overstock's no-release earnings announcement was the latest example of how companies nowadays manage the bad news that has been showering over corporate America in abundance. Overstock's approach was perhaps more extreme than most, but it was an example of one of the common ways company's handle bad news. They ignore it.People who study these things -- yes, there are such people -- have pointed out over the years the techniques that companies use to mask unsightly blemishes. Issuing earnings releases after the close of trading, for instance, is one widely known method public companies use to hide negative news, or at least delay its impact, by dropping it into the ether when the market isn't open. That's not just common knowledge, but was scientifically proven by academic researchers thirty years ago.. It will be interesting to see what kind of studies come out concerning the latest methods the corporate spinmeisters use to mask, shred or otherwise massage the release (or nonrelease) of bad news. Thus, for the guidance of the next generation of researchers, I humbly submit these examples of corporate bad news management, which fall under three broad categories: