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Another Dry Season (of Earnings Calls)

Most quarterly earnings calls still follow the same old format. Here–s one way they could be improved.
Vincent Ryan, | US
July 27, 2012

I look forward to earnings season, anticipating a good grilling of executives or, more fun, some CEO going on a political rant, dropping an f-bomb, or chewing out an analyst. But these things rarely happen. So I would even be content with juicy nuggets of news or hearing something interesting out of the mouths of the CFOs who abstain from talking to the media. But even on those counts I'm very often disappointed. So most of the time now I skip the live event and just scan the transcript a few hours after the call. (Knowing that f-bombs will probably be edited out.)

I think most analysts and investors are disappointed in earnings calls too - for other reasons: they may not be one of the "anointed" who get to ask a question; executives habitually evade the tough questions; and the rote reading of financial results consumes a large chunk of the hour.

But investor relations experts say companies could improve this quarterly ritual for investors and analysts by making it more interactive. That means increasing the time spent on Q&A. According to Chris Taylor, managing director of global investor relations for Ipreo, a provider of corporate IR services, some companies have started to cut out the regurgitation of the financials. Instead they either post a letter containing the same info on their web site prior to the call or a video of the CFO reading the results.

"That allows investors a lot more quality time to interact with the company's executives instead of just listening to them," says Taylor. Of course, for this to happen the CFO and CEO have to be comfortable with longer Q&A sessions. Would you be willing to spend the better part of an hour fielding questions? Not all executives will embrace this change.

n fact, there is evidence that some companies are moving in the direction of putting up more barriers for analysts and investors. More companies are having the CFO handle the call solo, without the CEO present. Google, Apple, and AT&T have all done it;Amazon's call yesterday featured CFO Thomas J. Szkutak sans a supporting cast.

That may be a positive for CFOs - being more involved in strategy, they are seen as capable of handling more than just the interrogation about nitty-gritty financials. But I would think investors want to hear some things directly out of the mouth of the chief executive. Not having the CEO on sends a signal to investors that the CEO has better things to do than talk to the company's owners. Not a good message to send.

One promising development this quarter was that Goldman Sachs allowed its treasurer, Elizabeth Robinson, to appear on the bank's fixed income investor call (admittedly, a call less important than the one with shareholders). She spoke extensively about Goldman's credit profile and capital position, and even fielded some questions.

Supposedly, Robinson is being groomed for the CFO spot, so it makes sense. If there is going to be a scripted reading of financials, after all, why does the CFO have to do it? Heck, the administrative assistant of the investor relations department could take over. In fact, the female voice on my GPS would be just as good. (Digression: that famous GPS voice is a woman named Karen Jacobsen.)

Back to conference calls: Goldman's treasurer try-out gives me hope: if less-senior executives start participating in Q&A, maybe we will hear some indiscreet remarks, verbal blunders, and slips into coarse language. For that I'd tune in again.