Do Business with People You Can Trust.

• Author: Natividad, Irene
• Position: Director Library

By Laura J. Rittenhouse

Published by andBEYOND Communications Inc., New York, 142 pages, $22.95

THAT "a man is as good as his word" is a truism that underlies Laura Rittenhouse's clearly written and succinct guide to finding a trustworthy company through the words of the CEO in the annual report. Rittenhouse aims for nothing less than a guide for ferreting out a company's "business morality" through what its CEO conveys in his or her yearly report card to shareholders. If few of us paid attention to any CEO's words during the 15-year bull market, responsible investors can ill afford to ignore them henceforth, according to Rittenhouse.

This may come as a shock to many shareholders like me who have skipped over these CEO letters in the past, assuming that they were mere fluff rather than an accurate index of the company's performance. Well, ignore these letters at your peril, Rittenhouse tells us. Using examples from letters at extreme ends of the corporate spectrum in terms of "business morality" - Berkshire Hathaway and Enron - she makes a compelling argument that these letters are the best barometers of the qualities of the manager who writes them.

Warren Buffett's letters permeate this book, and they are used as the touchstone against which all others are measured. For Rittenhouse, what comes through in Buffett's "candid and lengthy letters" is "his common sense, his decency and his business principles and practices." When communicating with his shareholders, he views them as partners, according them the respect they deserve by being as informative as possible of the details that underpin the decisions he has made on their behalf. Just note the tone in this opening statement to shareholders excerpted by Rittenhouse from one of Buffett's letters:

"Charlie [Munger] and I hope that you do not think of yourself as merely owning a piece of paper whose price wiggles around daily and that is a candidate for sale when some economic or political event makes you nervous. We hope that you visualize yourself as part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership with members of your family."

Letters like Buffett's, however, constitute only a third of those reviewed by Rittenhouse. The majority she found to be cautious and slick, full of cliches and jargon incomprehensible to shareholders, and driven by a need to sell rather than to inform.

Rittenhouse saw red...