Only this time around, only true and enduring cost reforms count. The Street and The City are today wise to bureaucrat shell games such as (1) double-counting expenses previously taken, (2) cutting allocated but presently unfilled phantom positions and (3) contraction by attrition, and the company that tolerates such deliberate deceit merely shoots itself in the foot, value wise.

In all three instances, ‘the number´ is already in the marketplace—that is, already included in the financial community´s perceptions set of future discounted cashflows. Thus by committing one of the three sins above, management accomplishes absolutely nothing in terms of the data upon which market valuations are formed (And you wondered why the announcement of phantom position cuts failed to budge the company´s stock price at all).

Correction. Flailing out with shell game cuts ISN´T entirely without impact. At best, such a ruse means that management´s reputation for straightforward communication is damaged, and future similar announcements are simply ignored. At worst, the financial community ascribes both deception intent and incompetence to incumbent (for now) management.

It is one thing to be caught for double-counting or pretend efficiencies. Something else again to raise suspicions that management doesn´t know the difference between actually dismissing a deadwood manager suppressing company value by 7-9x his total compensation and erasing a hollow box on an organizational chart.

Time to roll in the investor relations pro if management gets caught at the shell game? Not a chance. Mr. Oily´s late arrival on the scene merely confirms that someone, somewhere is trying to ‘manage perceptions´ (read: damage control after management has been caught at cost & value improvement numbers fiction). Old Oily´s hasty appearance merely confirms suspicions among those who help influence the company´s market capitalization, a reflection of value, that something´s up. Where there´s smoke there´s fire, after all.
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