Monday, November 13, 2006

Dear Jon

When last we left Jonathan Schwartz, CEO of Sun Microsystems, Inc. (SUNW), he’d chosen an unusual method – blogging – to deliver a message to SEC Chairman Chris Cox. I guess he figured his usual modus operandi, transmitting brain waves through his ponytail, wouldn’t work on a short-haired Republican who achieved a 98% lifetime rating from the American Conservative Union while in Congress.

Schwartz complains that Sun can't use the Internet to release material information to the public, thanks to the SEC’s "anachronistic" interpretation of Regulation FD, or Fair Disclosure. (This 2000 rule makes it not only rude, but illegal, for companies to whisper secrets to analysts without telling the rest of us.) Companies must get news out to everyone at the same time, but the SEC has blessed only conference calls and press releases as acceptable methods for doing this. Schwartz would much prefer, however, just to post news and numbers on the Sun website. Or maybe on his blog, which would be a great if somewhat unfair way to get his personal traffic stats up.

Cox received the message, sent Schwartz a letter and posted its content as a comment on the CEO’s blog. Here's the meat of what he said:

"The Commission encourages the use of websites as a source of information to the market and investors, and we welcome your offer to further discuss with us your views in this area. Assuming that the Commission were to embrace your suggestion that the "widespread dissemination" requirement of Regulation FD can be satisfied through web disclosure, among the questions that would need to be addressed is whether there exist effective means to guarantee that a corporation uses its website in ways that assure broad non-exclusionary access, and the extent to which a determination that particular methods are effective in that regard depends on the particular facts."

I'm surprised Cox isn't more enthusiastic. He loves technology and has seemed genuinely open-minded about using it to improve disclosure. At a recent conference he happily played Ginzu knife salesman, demonstrating vendor software that slices and dices information to make reading an SEC filing so easy, anyone can do it! The letter's formality is also weird. If you know anything about this guy, you know that since Day 1 he’s been on a crusade – a worthy one - to stamp out "legalese" and replace it with "plain English." He not only proselytizes for plain English in speech after folksy speech, but has ruined lawyers’ fun by requiring them to use it, as in the new executive compensation disclosure rules.

So why such a stiff and legalistic response? I'm not sure, but let me take a crack at a plain English version:


Sweet idea! Yeah – that Internet stuff is all that and a bag a chips. Look man, if you wanna chill wit me in D.C. it’s all good, but could you, like, do me a favor? Cut the hair, man, and wear a suit. I don’t hang with no hippie freaks. Ya feel me? OK. Cool.