The FD Effect

The SEC's new corporate disclosure rule has CFOs saying more and talking less.

Others that have gone in the same direction include San Francisco­ based Chevron Corp., which in December released interim performance data on oil and gas production for the first two months of the fourth quarter. Similarly, Xilinx Inc., a San Jose, California, semiconductor firm, now posts a monthly business update on the first two months of the quarter that indicates which projections may or may not be on track.

But certainly the most unusual approach to expanding disclosures is that of Expeditors International of Washington Inc., a global logistics firm based in Seattle. Since FD took effect, any questions about the company must be submitted in writing; the written responses to inquiries about the quarterly results are available on the company’s Web site within 48 hours, while answers to other business questions are posted on the first business day after the 15th of the month.

“Rather than give ad hoc responses in a conference call, we are able to do research and put out substantive answers to everybody at the same time,” says Expeditors CFO Jordan Gates. Comments posted in January cover such topics as derivatives accounting, competitive pressures, and the impact on the business of normalized trade relations with China. “Our goal is not to be more talkative, but to provide more meaningful information.”

Volatility. None of the CFOs or IR directors we contacted attributed any volatility in their stocks to Reg FD. But critics insist that it has been a factor in recent market swings. “It’s creating considerably more volatility in share prices, because management cannot give guidance on earnings estimates as it did in the past,” says James D. Parker, a growth-airline analyst at Raymond James & Associates, in Atlanta. “We don’t have less access, but executives are much more cautious with the information they provide.”

Parker notes that this past December, some of the airlines he follows experienced weather-related disruptions. Concerned about the impact, another analyst lowered his earnings estimate on Atlantic Coast Airlines Holdings Inc., and the stock fell. As it turned out, earnings came in within the company’s previously established range, just one cent below the Street consensus, and the shares have since rebounded. But Parker sees a painful lesson. “Volatility is caused by uncertainty,” he argues. “In the past, they might have talked to us about their assumptions and I could have said that [the lower number] was incorrect. They’re one cent off the consensus, but the stock gets clobbered in the interim.”

The Imperative to Communicate. For the most part, CFOs find it hard to dispute the notion of fairness that’s at the heart of the new SEC rule. “Talking the Street up or down was always unethical,” says Ken Goldman, CFO of Siebel Systems Inc. “All FD does is clarify that these selective disclosures are not allowed.”

But for many, it also puts an enhanced premium on communications. “It’s in our best interest to be visible–to visit with analysts and investors and to put out as much information as possible,” says Thomas Ryan, CFO of Scottsdale, Arizona-based Allied Waste Industries Inc., which in November expanded the disclosures on its Web site, and in December Web-cast a conference call to discuss its 2001 outlook.

“We’re driven by the premise that our securities will trade better if people have more information,” adds Ryan. “FD makes for a fairer marketplace, and I would endorse the notion that communications takes uncertainty out of your stock. It’s a good thing to keep investors informed in good times and bad. If that happens, then FD will have a positive effect.”

Stephen Barr is senior contributing editor at CFO.


In January, Thomson Financial/Carson Global Consulting surveyed its corporate clients about what policy changes or other adjustments they have made to comply with Reg FD. Below is a sampling of the results:


  • Instituted formal disclosure policy 23.2%
  • Provide more information in earnings release 21.1%
  • No longer give earnings guidance 21.1%
  • Web-cast conference calls 15.8%
  • Provide more information in conference calls 7.4%
  • Post more information on Web site 6.3%
  • Issue more press releases 5.3%


  • Limited flow of information 32.5%
  • More cautious in discussing models 22.5%
  • More focus on public documents 8.8%
  • No more one-on-one discussions 8.8%
  • More structured analyst meetings 7.5%
  • IR monitors all discussions with analysts 2.5%


  • Yes 53.4%
  • No 46.4%


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