Taking stock of it

Sunday, December 1, 2002

Managing Editor, Security Systems News

Over the years, the section in our newspaper that tracks the publicly traded companies in our industry has grown significantly, as we have become aware of new companies in the industry, as new companies have entered the industry and as companies have offered themselves to the public investor community.

One of the stories that appears on our front page this month is Allied Security's plans to take that company public, an attempt to raise enough money to reduce its debt load by at least $80 million, among other things. Yes, that's a lot of money, and a lot of debt, too, but it seems that it might not be worth it to be running a public company these days. [See story]

We've all heard a lot about Enron, WorldCom, and certainly Tyco, and in these days of investor mistrust (for the most part because of the high-profile disasters at those companies) and in these generally stagnant economic times, opening up your finances to the investor community at large must be a daunting task. Especially in these times, when even industry bellwethers are trading at levels far below what those stocks have seen in a number of years.

Add to that the problems at the Securities and Exchange Commission, attempted reform between the accounting and investment banking communities and Congressional oversight of the process. Is this really the same stock market? What will it look like in a year when a new SEC chairman is (hopefully) named and whatever reforms that have a glimmer of hope of being implemented are underway?

As a business reporter, in the past few months we have covered the fall of a giant (guess who), restatements of financial reports and a general loss in stock value of the company's listed in our Stock Watch. As a CEO or CFO, how does this change your marketing strategy? How do you as a corporate executive communicate with your employees when they, along with their next door neighbor, are able to read the balance sheet and see the loss in value of their retirement fund?

Then throw the Sarbanes-Oxley Act into the midst. Now corporate executives must personally certify that their companies' financial results tell the whole truth and nothing but the truth or risk penalties. Does this make me as an investor believe that there will be transparency in company financials? Not really. It's not that I have a dim view of corporate executives, but I didn't believe before that corporate executives would be concocting elaborate schemes to hide funds in non-existent off-shore partnerships or that a company would turn a blind eye to an executive's spending spree that ultimately cost shareholders (and company employees) billions of dollars. But, unfortunately, now I do.

Of course I know that companies that have had these high profile collapses are the exception rather than the rule. And, as a reporter, it's in my nature to be a skeptic. But how is corporate America going to regain my personal trust? Is it through reform, regulation and restitution? I doubt it. Will it take CEOs or CFOs of every company in America to swear to me that what they are about to file with the SEC is true? I don't know.

One thing I am sure of is that when it's four straight quarters of profits, it will all be a little easier to believe.