Very true Mosman but I’m sure you are aware that there is...

Very true Mosman but I’m sure you are aware that there is another side of the same coin. I know plenty of company directors who owe their jobs to the fact that people don not read company reports. In fact it could be argued that such documents hide a multitude of sins. In theory such documents as company reports and stock market announcements are an invaluable resource providing accountability and transparency - a level playing field if you will - so that the canny investor can invest in their future in the full confidence that the financial markets operate in the true spirit of free enterprise and laissez-faire economic principles unconcerned by the twin specters of bribery and corruption (let me emphasize here that I am talking about the structure of the financial markets as a whole).

However, they can be a double edged sword in that people assume that everything is as it should be because it’s there in black and white. The truth is that company reports can be dry, complicated and frankly intimidating. Stock holders will not read them to the degree to which the previous statement holds true and an annual report is an excellent place to bury something.

Let me make a case in point by referring to Mosman’s thoroughly researched post:

Mosman: “… in the "Related Party Transactions" in the 2011 Annual Report. pg 37. It clearly states that Mr Stroud owns 50% of the vineyard. Again pg.48, in the 2012 Annual Report "Related Party Transactions" clearly states he owns 50% of the vineyard.”

I must admit that when I asked about the ownership of the vineyard it was by way of a rhetorical device. Although I was fairly certain from whom Wavenet bought the vineyard I couldn’t remember quite where I read it. And this is my point, I did not quite remember that on page 37 under ‘Related Party Transaction’ in the 2011 Annual Report it was clearly stated, I was rather naively looking at the company announcement from Wavenet made to the ASX at the time of the purchase.

Speaking personally and this is therefore purely a reflection on my own integrity - to use a current buzz word in this forum – If I were looking to be completely transparent I would have announced this information in the company announcement at the time. On the other hand if I were trying to bury something then page 37 of the company report is exactly where I would put it.

Mosman: “ There are discussion about the offices being a house, so I rang the Wavenet office. It was a doctor's surgery , four offices at the front a Board Room at the back and two spare rooms on the second floor. If they have to sell it then it would seem like an easy property to sell.”

This was not a rhetorical question; I was not trying to make a particular point at the time. But that is the beauty of these forums, I asked a genuine question and rather than me having to sift through company reports Mosman has kindly answered my question for me. The only question I now have is again subjective and perhaps reflects more upon me than the share holders or customers (current or potential).
Let’s take the premises as a microcosm of the company itself. As an asset it represents too much of a diversification. As part of the corporate image it does not send out the right signals. It seems a minor issue and I hate that the world revolves on spin and marketing wizardry but the fact remains that it does. Let’s all look at the company report again and just look at the pictures rather than the numbers this time to remind ourselves of the image Wavenet has paid a lot of money t o project (Let’s get the bloke in the hard hat back on the cover shall we?) Now with that image in mind the wine, the house, the dam … it all just seems a bit, well, … messy.

Mosman: “I note that a comment has been made about being "Un-Australian" for telling shareholders that they should sell if they are not happy. Vote, if you are still not happy then sell or stay in, that makes clear common sense to me, but to be fair, try reading the Annual Reports and ASX releases before throwing stones. “

At no time did Mr Stroud say vote if you are not happy and then go, he just said to go.

And furthermore for ‘un-Australian’ read ‘un-democratic’ it was a partial allusion to the prime ministerial simile I employed in the same paragraph. Let’s imagine a financial model in which dissatisfied shareholders would sell their shares (at a fraction of their material worth I might add) when they had disagreed with the company directors. The board gets rid of dissenting stock holders and the process is repeated in the next financial year, slowly and surely the board is surrounded by yes men, you know the sort of people who don’t read company reports. What would this do to directors pay awards and bonuses alone? Do maverick boards (in this particular fictional model) ultimately attract serious investors after the short term gain of presenting a happy ship to the market? Why not do away with auditors? PwC, Deloitte, Ernst and Young, KPMG watch this space

Now I’m not saying that Mr Stroud’s remuneration package shouldn’t have risen from $142,808 in 2010 to $215,067 in 2011 and I’m not arguing that it shouldn’t have risen to $643,273 (with 127,873 in options) in 2012 because over half of this was in bonuses and he’s a very industrious individual and the company is doing so well. I’m just saying that companies should be run in the interests of the share holders and not the directors. By the way if If anyone’s worried about the share price I have close to zero influence.