For those of you not blessed with what passed for a multicultural education in the 50s and early 60s, “That you Charlie?” is the tag line from the old Kingston Trio song, Charlie of the MTA. (Three clean cut white guys singing folk songs was about as multicultural as we got back then.) Charlie was the poor chump who boarded the Boston subway system, the MTA, by paying his ten-cent fare, but when they raised the fare by five cents, Charlie couldn’t get off of the train. He was condemned to forever ride the MTA, as sort of an urban Flying Dutchman.
The song begins: “These are the times that try men’s souls. In the course of our nation's history, the people of Boston have rallied bravely whenever the rights of men have been threatened. Today, a new crisis has arisen.”
Recently a new crisis has arisen regarding earnings conference calls. The Wall Street Journal reported on Saturday that a mystery man has emerged on conference calls at least seven different times in the last few weeks. Calling himself Joe Herrick of Gutterman Research, he initially poses as a well-known analyst so that he gets into the question queue, then reveals himself as Joe Herrick (a fictional name) and generally asks plausible sounding, highly detailed questions about supply chain management and lean manufacturing. Company executives, not wanting to look dumbfounded by the questions, have generally attempted to answer the questions, not realizing that they were the victims of a prank.
Some of you may view this as harmless fun, and if I were 15 again, I might too. Fortunately, I am no longer 15 and I work in a profession that depends on convincing executives that it is in their best interest to speak openly with Wall Street. It doesn’t help to have some idiot out there posing false questions designed to make fun of the system and make executives look foolish. If this process continues the result will be that companies will make it harder to participate in conference calls or perhaps even eliminate the question and answer sessions. No investor relations officer wants their CEO to be the next victim. Companies will think of more ways to control the process and the information imparted during the calls. They may start to give passwords to only a few select analysts so that they are the only ones that are allowed to ask questions, as Coke did on a recent conference call. Any way you look at it, the amount of information imparted on the calls will be reduced, and especially reduced in the area of conference calls that offer the best opportunity to gain incremental information – the Q & A session. The end result is bad for all investors.
So Joe Herrick, if you are out there, please ride off on the MTA into the sunset and, like Charlie, stay there. You’ve had your fun, but you’re not helping investors, large or small.