Killer T-shirts
What’s my daughter’s black T-shirt got to do with public companies continuously disclosing material information to the Australian Securities Exchange (ASX)? Oddly, it has quite a bit to do with it.
Alison was checking in for a Virgin Blue flight to Hobart when the wary attendant said: “Can you wait over there, please?”
My daughter did as she was asked but when the plane started boarding she stepped forward to check what was happening.
“So, you killed Richard Branson?,” the attendant said, her eyes scanning widely for security.
“Ah, no...,” said Alison, feeling this was getting a little weird. She didn’t know for sure but was fairly confident the celebrity businessman was still alive and absolutely certain she’d not killed him, though perhaps she’d start considering it if they caused her to miss her flight.
It got more bizarre. “Step aside,” said the security guy who had now arrived. “You can’t make threats like that in an airport.”
Alison was dumbfounded.
“Your shirt,” he pointed. “It says: ‘I killed Richard Branson’.”
But her T-shirt said no such thing. Its caption was “I killed Richard Dawson”, not Richard Branson. She explained that she hadn’t killed Richard Dawson either, but how the T-shirt was a nod to a new crime novel. She even pulled the book out of her bag to show them. Eventually they laughed, a little uncomfortably, and let her through but she kept getting stares and quizzical looks from Virgin staff, even on the plane.
Here’s the thing. Eagle-eyed, highly trained security people and friendly, alert attendants completely mistook a Richard Dawson for a Richard Branson, and my daughter almost missed her flight, or worse.
When we designed the T-shirt as a promo for the book, Richard Branson was nowhere on our minds. But the Virgin staff saw what they expected to see, not what we intended. Clearly to them, there’s only one Richard.
This is where we get to continuous disclosure. As publisher, my daughter had obviously thought deeply about this T-shirt, but still got a totally unexpected and scary response.
But how much riskier is it when you are forced to make hasty, ill-considered decisions? This, regrettably, is precisely what the regulators expect of listed company boards.
When they require us to make market disclosures “immediately” after we learn something that might be material, they are pressing boards to make half-baked yet potentially critical decisions on the run. These are not T-shirt decisions. They can cost shareholders dearly, far more than their shirts, if we get it wrong, and it’s much easier to get it wrong under the extraordinary pressure of truly “immediate” disclosure.
I have for decades been, and remain, a fan of continuous disclosure.
But it is ludicrous when the regulator interprets “immediately” so strictly with no regard to the real world — directors scattered all around the globe, or just not reachable, more information being needed so as not to go off ill-informed, and so on.
It is plain wrong to expect boards, especially of large and complex companies, to make billion-dollar announcements in minutes or even hours, without giving them an opportunity for careful contemplation, more information, advice and so on.
It’s not as if non-executive directors (NEDs) are sitting around twiddling their thumbs just waiting for the next bit of material information to pop up so they can contemplate a speedy announcement before lunch.
Most NEDs worth their position are busy people and may just not be around the micro-second the regulators demand them to be.
Justice Ian Gzell’s decision on James Hardie, currently on appeal, suggests that for any major announcements, all directors must sign off. On this, he makes some sense, but how practical is that, especially if the regulator insists the company makes its announcement “immediately”? It isn’t. Instead, companies are expected to shoot first and aim later.
The only sensible way to resolve the conflict is to view the requirement “immediately” less strictly — that is, “as soon as practicable”. That would give boards a reasonable leeway to do what they are paid to do, namely to give careful — not knee-jerk — consideration to the company’s circumstances. But try to find yourself a lawyer who will advise you that doing this would keep you out of the clink.
But there is some hope. Just move your company’s listing to Hong Kong, where they are considering a new continuous disclosure regime. They are not proposing to use the breathless “immediacy” of the Australian regulatory requirements. No, their proposed requirement is for companies to disclose price-sensitive information “as soon as reasonably practicable”. Gosh... the Chinese are trusting boards to take time to give deep thought to important issues. Hmm... why don’t we do that?
We can learn from Hong Kong. I will ask my daughter to fly there and find out more, but I’ll tell her to wear a different T-shirt this time.
John M Green FAICD is a company director, a writer and co-founder of a publisher, Pantera Press, and was formerly an investment banker and a lawyer