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Al Behrman/AP
Watch what you say.
CATCH 22

We criticize executives for being bland, then we punish them for being revealing

By Oliver Staley

There’s no getting around the fact Macy’s had a bad first quarter—its worst since 2009. Yesterday (May 11), the retailer reported a 5.6% decline in same-store sales and lowered its 2016 earnings guidance.

Not surprisingly, shares plunged 15%. But the Wall Street Journal attributed at last some of the selloff  to “downbeat comments” made by executives on the company’s conference calls with analysts, investors and reporters. One quote the paper highlighted was from chief financial officer Karen Hoguet, who, when asked why sales were slow despite favorable economic trends, said “we’re frankly scratching our heads.”

That alone was enough for one observer to bail:

Earnings conference calls are notoriously dull and unhelpful rituals. Just last month, Quantified Communications, a firm that uses software to analyze the speech of executives, reported that CEOs and CFOs are far more trustworthy when they speak informally in the question -and-answer sessions with analysts, compared to the canned remarks they use to open the sessions.

But the reaction to Hoguet’s comments suggests that candor comes with a price, and that executives are damned if they do and damned if they don’t. If you’re bland and anodyne, research shows you’re viewed as untrustworthy. But if you speak your mind and reveal uncomfortable truths, your company can get hammered.

It’s hard to tease apart how much of a share’s fall can be blamed on a CEO or CFO’s comments when there are so many other sound reasons for selling the stock. But the fallout at Macy’s certainly won’t encourage other executives to speak their mind in the future.