Caxton gets credit for improved disclosure

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You should know that when Caxton’s annual report can be considered as one of the best to be produced by a JSE-listed company that something has gone horribly wrong with the whole concept of corporate disclosure.

Caxton is not widely thought of in terms of outstanding corporate disclosure; I suspect that some of the very senior guys there would feel uncomfortable with such an accolade. Indeed, as far as I know I may be the only person to think that the Caxton annual report is right on the money.

Of course it might not be on the money at all and there may be a whole load of important details that have been carefully kept out of the annual report. But the truly wonderful thing is that you have to trip through only 64 pages to get the misleading impression that you know something about Caxton.

Other companies will force you to wade through as many as 600 pages before leaving you with the same misleading impression that you know what’s going on.

One of the particularly attractive features of Caxton’s report is that it assumes most interested parties will access it online, so it does not spread critical tables of figures across two pages. Often such data relates to the increasingly hard-to-understand information about executive pay.

Two pages of data, which are face to face and easy to read in print, become incomprehensible when read online and one page follows the other. Presumably, for those who have the time and the skills, re-formatting the online report is relatively easy but what about the other 95 percent of users?

An additional very attractive and useful aspect of Caxton’s disclosure is its “corporate governance register”. This is not part of the annual report but there is a link, beside the annual report, that provides easy access to it.

It’s difficult to decide whether this is a sublime piece of sabotage by Caxton’s mercurial boss, Terry Moolman, who is not known to be a slave to corporate governance fashions, or if it is a very useful guide to the unwieldy and increasingly pointless King 3 code.

On five screen pages, some earnest Caxton employee or director has painstakingly itemised and described all 75 of the King code principles. Most critically, the application of these principles is explained by Caxton in what some might deem to be a subtly subversive manner. In the surprisingly few instances that Caxton does not apply the principles, it provides an explanation. According to Caxton’s analysis of the 75 principles, it failed to apply only one and partially applied a second.

What Caxton has, perhaps inadvertently, highlighted is that the people behind corporate disclosure have lost the plot. Whether it’s with malevolent intent or not, people who run listed entities appear to have decided that the best way to deal with the need for improved disclosure is to provide vast amounts of information – rather like drowning someone who is dying of thirst. So we have increased disclosure but not improved disclosure.

Some of this information is provided in the integrated report, some in the annual financial statements, and huge amounts are rather randomly spread across the company’s website. With the necessary time and skills, an interested party could probably get an exceptionally good idea of what a company is all about, although I’m told by highly qualified accountants that even they struggle.

A huge amount of this information is generated in response to regulatory demands. In the case of financial institutions, it is possible that a 600-page integrated report equates to one page per regulation. This reflects the dangerous level of complexity and size to which these institutions have been allowed to grow.

The frustrating fact is that the real beneficial owners of listed companies – employees, pensioners, small investors – often don’t have either the time or the skills needed to wade through all the information and work out what is significant and what isn’t. So what happens is that the corporate sector reverts to being in the tight control of the professional class. This class comprises corporate executives, auditors, lawyers, fund managers, investment advisers and analysts.

We certainly don’t need any new regulations or codes, but the members of this professional class need to be persuaded to give up some of their control and to encourage improved disclosure rather than increased disclosure.


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