Leaping from just disclosure to real communication

Singapore

MANY a time, companies believe that their disclosure is sufficient communication. Mere compliance with the Listing Rules and Companies Act to fulfil their disclosure duties does not always mean that they have communicated their disclosures to the expectation of their audience.

The dictionary meaning of "disclosure" is to make a fact known, whereas "communication" refers to the successful conveying or sharing of ideas. Often, company's disclosures are in legal jargon, in complex documents and, even at times, in footnotes. How then can shareholders be expected to understand the business of the company and its financial position, and make informed decisions effectively?

I recall a company that was the target of a short-seller a few years ago, China Mingzhong. Glaucus Research, the short-seller, alleged in a report that the company had mislead investors over its sales and expenditures, which sent the share price plunging to almost half its value. While the company responded later in a 19-page statement, refuting the allegations and offering documents with photographs of assets comprising capital expenditures, the damage had a…