Corporate Clams

Though the U.S. Securities and Exchange Commission wants some American firms to disclose more than they do about themselves, U.S. business is an open book by European standards. In Europe corporate secrecy is not only a way of life but a game of wits aimed at confounding competitors, confusing authorities and keeping the public uninformed. With few exceptions, European companies report neither their total sales nor their true profits, and go to lengths to conceal their actual assets and holdings in subsidiaries.

Six Lines. Most European businesses began in family secrecy, and as they grew bigger still kept a family attitude toward such outsiders as shareholders and the public. Especially in France and Italy, fear of the tax collector is so obsessive that businessmen avoid even being photographed lest they come to the collector's notice. There is also a belief that dis closure of profits only encourages unions to ask for more money. Officers of European firms make themselves and their plants as inaccessible as possible. France's tiremaking Michelin, perhaps the world's most secretive company, boasts that it has never allowed a journalist or a press photographer into its plant. Luxembourg's huge Arbed firm, within whose chateaulike headquarters few outsiders have ever ventured, will hardly do more than admit that it makes steel.

Often, companies seem to vie with one another in revealing as few facts as possible. They produce almost uniformly uninformative annual reports; the annual report of the Artois brewery, Belgium's biggest, consists of just six lines, which do not even tell what products the company handles. The huge Solvay chemicals trust refuses to give the exact number of its plants, and Munich's Loewenbraeu holds back from publishing its annual output (24 million gal.). Others delay what figures they do publish: Switzerland's Frisia oil company has just got around to publishing its 1961 report--showing a loss that amounts to nearly half its share capital.

Docile Shareholders. Many companies, of course, hold annual meetings--but with a difference. French companies go out of their way to keep shareholders away, often hold meetings in awkward places or pick a time when nobody wants to come, such as the day before Bastille Day. Britain's carmaking Jaguar recently whizzed through an annual meeting in just nine minutes. Docile shareholders often do not bother to attend meetings, and proxy fights are rare indeed.

When they have to publish figures, companies have numerous devices for juggling or obscuring them. One Brussels bank lists the value of its 24-story headquarters at 2-c-. And though Germany's automaking Daimler-Benz reported a $10 million net profit for 1961, German financial experts reckon, on the basis of its taxes, that its actual earnings were nearer to $50 million. This lack of reliable information scares small European investors away from investing in European stocks and is a chief reason why Europe has failed to develop a capital market. As a result, instead of turning to the public for funds, European companies must turn to the banks, which often demand a voice in the company's management.

There are a few faint signs of change. Both France and Germany have enacted fuller-disclosure laws, and the increasing number of European firms listing their shares in the U.S. requires them to produce a few more details. But the corporate clam is still Europe's most familiar business product.

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