Gone With the Wind

My patience reached a breaking point with yesterday’s news that “headwinds” have helped 4th-quarter profits at Yahoo! (YHOO) drop by 23%.

I've been tracking the Headwinds Cliché Index for the past few months, after tripping over the H word again and again on my regular strolls through Proxyland. A search for “headwinds” in SEC filings this month yielded 161 hits, nearly triple the number of times it appeared in January of 2007.

Not being a CEO, I don't know whether "headwinds" refers to boating or to flying and frankly, my dear, I don’t give a damn which one it is. Whatever its origin, this overblown metaphor seems to serve as an all-purpose excuse for pretty much anything that’s going wrong anywhere, financially speaking. The filings speak of “macroeconomic headwinds,” “credit headwinds,” “market headwinds,” and even “delinquency headwinds.” Fund managers seem especially fond of the word, often bragging about how they've "prevailed" in the face of these fierce countercurrents.

I’m not saying there’s anything wrong with a company using this word to capture the state of economic pushback that looks to be the real state of our union right now. I am saying, however, that I’m sick to death of it. Come on, people, there are 10,000 writers on strike - grab a few, buy them some beers and see if they can't come up with something better. Failing that, crack open a thesaurus and get your maelstrom on.

Half-Baked

Recently I lamented the passing of the old staid and reliable SEC. Once the rosy-cheeked avuncular Kris Kringle of federal agencies, it’s morphing into just another regulatory Bad Santa. Take the agency's announcement last Friday of last-minute “interim final rules” changing how stock options get reported under the new compensation disclosure regime.

The Commission now wants companies to put an executive’s options in the proxy compensation table as they vest rather than showing the whole slew in the year of grant. I guess you can argue for doing it either way. Me, I like the report-it-now approach better, and not just because the Chamber of Commerce really hates it. The SEC says it prefers the report-as-they-vest method because it conforms to financial reporting, but I kinda think that if you’re awarded something now you should report it now, and also that just because your accountant is doing something doesn’t mean you should too.

Asked to explain the agency’s late-day, pre-holiday change to rules everyone thought were finalized last summer, SEC Chairman Cox declared that really he’d always wanted the rules to work this way, but “it came out differently from that when we adopted it.”

As a less than skillful cook, I have a soft spot for the “it came out differently than it was supposed to” excuse, especially when applied to pecan pie. So I regret having to point out that when the SEC adopted the rules earlier this year, it rejected lots of requests to treat options exactly as it’s now treating them, and specifically pooh-poohed the notion of kowtowing to the financial reporting rules. It was “more consistent with the purpose of executive compensation disclosure,” said the agency then, to disclose the options to investors all at once than to dribble the news out like molasses.

We'll have to see how the molasses approach pans out in next year's proxy statements. The only thing I know is that adding that stuff to pecan pie can make it very gooey.

A Recount

As you may or may not have noticed, today is Election Day. Yesterday, Diebold Incorporated (DBD) bragged in the notes to its third quarter 10-Q that it's finally fixed some problems at its famed voting machine subsidiary, Diebold Election Systems, Inc. - or DESI, as they call it. No, not those problems.

Diebold was referring to a flaw in its internal controls that, as noted in last year’s annual report, caused it to botch - materially - the reporting of DESI’s revenues. The company's excuse, repeated yesterday, was that it "did not have personnel with sufficient technical knowledge to analyze complex revenue contracts to ensure that such transactions were accounted for in accordance with generally accepted accounting principles."

I consider myself a connoisseur of apologies and excuses, but this one confuses my palate. What they're saying is: "We didn’t know what we were doing and we didn’t bother to hire anyone who did." On the one hand, this is utterly lame and contains not a shred of legitimate justification. On the other hand, it's disarmingly honest and I find myself beguiled by its offbeat charm.

Sadly, when the next Presidential contest rolls around we may not have Diebold to kick around anymore. As Fortune Magazine reported last week, the firm may soon declare defeat at the polls and exit the voting biz. So before it's too late, check out the inspiringly patriotic ad on the DESI page of the Diebold website, which has it all: flags, Mount Rushmore, New York City firefighters, multiethnic children. Too bad they had to ruin the good mood with a picture of the Capitol dome.

All Apologies

Yesterday Steve Jobs graciously apologized to Apple’s workers and stockholders for options backdating. Such goings on, he added, are "completely out of character for Apple."

Thank you, Steve, for adopting one of my favorite apology styles, subject of a post at my old blog. I apologize, of course, for linking to myself.