The Bottom Line: You Gotta Have A Gimmick

Has Francis Fukuyama been moonlighting?

You would almost think so: Many of this year's annual reports read more like The End of History than the end of fiscal 1991. In a year marked by the gulf war and the dissolution of the Soviet empire, corporate chieftains couldn't resist tackling the Big Issues. In one example, which mixes Fukuyama's themes with George Bush's speech patterns, Allan E. Murray, CEO of Mobil Corp., says in his letter to shareholders: "It was a topsy-turvy year. Mideast war. The Soviet Union cracking open. Europe coalescing. U.S. recession lingering. World economies slowing." Oh, and Mobil's earnings flat at $1.9 billion.

Perhaps it's Corporate America's way of looking on the bright side: Profits were off, dividends too, but, hey, at least we haven't been reduced to a Commonwealth of Independent States. On second thought, scratch that: IBM Chairman John F. Akers spends part of his shareholder letter explaining how his company will soon be a collection of more freestanding units. Does this mean IBM will need separate annual reports?

BICEPS AWAY. What a thought. Companies already print 1.8 reports per shareholder, according to Sid Cato, publisher of Sid Cato's Newsletter on Annual Reports. And he says most show few signs of cutting back, despite the poor economy and a wrenching slide in profits. Indeed, to a casual reader of these yearly missives, the apocalyptic tone of 1991 seems to have emboldened rather than inhibited companies.

PepsiCo Inc., for example, put bunnies on the cover of its report. The theme: rapid growth. Marvel Entertainment Group Inc. is celebrating its first year as a public company with a report in the form of a comic book. The company, which was closely held by investor Ronald O. Perelman, has enlisted superheroes such as Spider-Man and the Incredible Hulk to present Marvel's earnings and outlook. Perelman is making plans to sell stock in Revlon Inc., the cosmetics giant whose ads feature supermodels Cindy Crawford and Claudia Schiffer. So does this mean that next year . . . ? Nah, forget it.

For sheer audacity, look no further than McDonald's Corp., which has chucked the standard format altogether in favor of an elaborate imitation of The Wall Street Journal. Goldome bank got into trouble when it took the same tack three years ago with a USA Today knockoff. A Journal spokesman says no one will confuse the report with the paper. Still, it mimics Journal style right down to the drawings of its top execs.

McDonald's says the format is more accessible to shareholders. Next time, though, it might consider hiring some real Journal editors to unravel such artery-hardening passages as this one from an interview with Chairman Michael R. Quinlan: "The potential for global growth is unlimited. There, the available customer base is vastly underpenetrated."

McDonald's may want its report to look hot off the presses. But Cracker Barrel Old Country Store Inc. is aiming for something more sepia in tone. Based in Lebanon, Tenn., this chain of restaurants and general stores devotes eight pages of its report to the reminiscences of an unnamed man who grew up in the South. He describes his family as "a joining of the souls, hand in hand, heart in heart, sharing and caring for one another." The company should take a hint from its memoirist: In December, it fired more than 10 gay employees, claiming that homosexuality clashed with its values. Nary a mention of that in the report, which even has a bag of tomato seeds fixed to the cover.

What annual reports omit often is as revealing as what they say. Take Caterpillar Inc. The heavy-equipment manufacturer reports a $404 million loss in its 1991 annual. The loss includes a $262 million write-down, which the report attributes to plant closings and consolidations. It singles out a plant in York, Pa., which Cat says it will close unless it becomes "cost competitive." Rather a strange thing to do with a factory Cat had spent $90 million to modernize.

Cat's report leaves out a vital point. Analysts and union leaders say the company was locked in labor negotiations and wanted a separate agreement for the York plant. They say Cat was using the write-down as a lever to get the deal it wanted. Cat denies the charge, though it says until its deal with the union is final, it won't decide whether to keep the plant open.

CEO GRILLING. Happily, at least one company seems moved to candor--and on the sticky issue of executive compensation, no less. Cypress Semiconductor Corp. prominently lists the paychecks of CEO T.J. Rodgers and his seven top lieutenants in its annual. A table also notes how much Rodgers & Co. made from sales of their Cypress stock. For the record, Rodgers was paid $241,825 in 1991 and made an additional $977,270 by selling 60,000 shares. Cato says he has never seen a U.S. annual report like it.

While such candor may be unique, the troubled economy has prompted more companies to give at least the appearance of openness. One popular method is a Q&A in which the CEO answers questions about the company's profits and prospects. Reading the annual put out by The Limited Inc., you have to admire Chairman Leslie H. Wexner's willingness to submit to an inquisition. The whole report is a barrage of questions from employees to the company's top management. The Limited says it solicited 10,000 queries and chose the toughest ones. One staffer asks Wexner: "I keep reading about layoffs everywhere. Is my job safe?" His answer: "In a word, yes. But your future depends on you."

O.K., so maybe it was too much to hope all the annual report double-talk would wither away in 1991. We'll save that struggle for the rest of history.

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