So simple and almost so good.The Business Press Maven was reading Investor's Business Daily by the light of a beach bonfire recently when he stumbled across a titillating line in a report on Google's ( GOOG) earnings: "Google's financial results have only disappointed Wall Street once -- in the fourth quarter of 2005 -- since the company went public two years ago." In an unprecedented move that journalism and business school students may study for generations to come, The Business Press Maven is going to hand out both his coveted "Nod of Approval" award and his "Back of the Hand" boobie prize to this one line. I'll give you a moment to catch your breath. Now that you have, here's why I turned Business Press Maven convention on its head. This line gets the "Nod of Approval" for a simple but important reason. Stories on earnings releases tend to be pretty boilerplate. Shake a business journalist awake at night, tell him who reported what and they'll be able to type up five hundred words in deep REM sleep. As you probably know, however, The Business Press Maven is constantly whining about how this paint-by-the-numbers reporting leaves investors unenlightened about historical perspective. And if historical perspective is not in a story about a quarterly earnings reports, the savvy investor should realize he or she is getting an incomplete look at what the numbers mean. Here, Investor's Business Daily went halfway. It told us that Google had only disappointed once, and even let us know when that was. Good work. Now ... why, if the publication did that, are the members of its news desk currently crying into their keyboards over the "Back of the Hand" that I gave them? Easy: The reporter did not give us what, in the end, qualifies a legitimate better-than-expected. To wit: did the company tweak numbers in the days and weeks leading up to the announcement? Yes or no? Are they managing expectations like a deranged stage parent (or, in my case, softball dad) so that they can appear to surpass them? Yes or no? Answer, plebe, answer!
No, sir! While the article dutifully tells us everything we need to know about Google, it doesn't tell us that. And the answer is so simple. Google essentially offers little in the way of short-term guidance. It isn't one of the ones out there massaging numbers before unveiling them to the public. Google's lack of openness for a public company (think George W. Bush or Hillary Clinton with a stock symbol) is a different and regrettable subject altogether. But in this case, it makes its good numbers look even better. When, in the sub-headline, IBD mentioned that the company shattered expectations, those expectations were indeed legitimate. So congratulations, Investor's Business Daily. And do better next time. While the General Motors ( GM) saga grinds on -- highlighted this week by positive reaction to its second-quarter results -- let's look at the good and bad when it comes to journalism's portrayal of shareholder activism. Business Week, bless its heart, ran a worthwhile primer on how, thanks in large part to hedge fund activists, executives and dealmakers can't rely on Wall Street's version of the kindness of strangers -- the passivity of shareholders. In other words, as in the case of Novartis ( NVS)- Chiron earlier this year, mergers at any old price cannot be stuffed down the gullet of shareholders as easily anymore. Big investors will voice their displeasure. The upshot? Small investors have a chance of benefiting. Bad deals like AOL- Time Warner ( TWX) have influenced the activism level in big shareholders, as have corporate scandals and suspicions of the validity of Wall Street research. Hedge funds, big and powerful constituencies, voice their power and hopefully produce some good action. That's not to say what they push for always works, but the alternative of letting management run amuck is no good. And when management is pushed for the better, all shareholders can benefit.
Business Week labels this the new "power to the shareholders" zeitgeist. I hate the word "zeitgeist," but this trend toward activism is more positive than not. And that's why a piece of populist nonsense from The Washington Post makes so little sense. While Kirk Kerkorian, the colorful, large and embittered General Motors' shareholder might not save the company, he'll at least go down swinging, getting management out of its comfort zone. In the end, he's doing it for his own good. But along the way, he might help all the other shareholders who have been so victimized by a slow-moving management that has made insufferably bad decisions for years. And what did The Washington Post say about all this recently? It was like a flashback to the dime-store populism in political races of the past. The paper essentially said that firms that try to make money and foreigners (see: Kirk Kirkorian, Carlos Ghosn, etc.) are conspiring to weaken what is great about America. Of course, if misreading the American car consumer so completely for so long is American -- well, we're in trouble, dudes. Anyhow, here's a sour taste: Kerkorian and Jerome York, who represents Tracinda on GM's board of directors, "have a myopic, unemotional view of the American corporation: They see it only as an instrument of stockholder wealth. Workers, customers, a company's values, the community in which the company operates -- considering any of them has the potential to negatively influence the value of the share. Pride of product? History? Irrelevant." In just being a money guy -- "Tracinda, named after Kerkorian's daughters, Tracy and Linda, makes nothing except money" -- The Post argued Kerkorian has no business doing what he's doing -- as if the people running the business don't occasionally need a kick in the pants. The Post totally ignored the fact that shareholders have the right to push for change and that change can help the little guy -- in this case, everyone from the shareholder to the GM worker. Enough. Let's just hope -- for the sake of all those regular old folk with GM stock in their pensions -- that Kerkorian succeeds in maximizing value.