The Most Important Shareholder Initiative in a Decade

Guess who's working on the single most important shareholder initiative in a decade? Berkshire Hathaway? Nope. Apple? Wrong. The do-gooders at Google? Wrong again.

The company doing more for shareholders than any other right now is Microsoft (Nasdaq: MSFT  ) ! See for yourself. (Microsoft's Silverlight software required to view.) Go ahead. I'll wait.

Those at-a-glance performance indicators are made possible by a developing standard called XBRL, which I first wrote about back in September.

Oh, EDGAR, how you've grown
To review, XBRL, short for eXtensible Business Reporting Language, is a way to code financial data -- "tagging," as it's known -- so that it can be easily organized.

Yes, it is as powerful as it sounds. Witness the Microsoft investor site. By tagging and then aggregating data available in various public sources, Mr. Softy has made it possible, with a few simple mouse clicks, to know everything there is to know about its business -- and, even better, to get that data into a historical record by way of a spreadsheet. (A button for exporting data to Excel is at the bottom of each of Microsoft's data pages.)

Notice, too, that Microsoft included supplementary metrics that are essential points of discussion in analyst presentations, conference calls, and quarterly reports. Microsoft Chief Financial Officer Chris Liddell asked his team to organize this mostly ad-hoc information and post it for easy access. Never before has the bar for transparency been set so high.

Need I count the ways this is good for shareholders? Here are just a few:

  • Barriers to understanding are removed. Pick a 10-K annual filing. Any 10-K filing. Read it. Now, is it really so hard to understand why there aren't more people who successfully invest in individual stocks? Only the terminally addicted enjoy reading these documents and picking them apart for the critical data that exists within.
  • Disclosure becomes simpler and more powerful. If there's a lesson to be had from the current financial crisis and the ones that preceded it, it's that, in our nation of Enrons, disclosure will always be an issue when it rests in the hands of executives who don't share the dreams of shareholders. XBRL rightly flips the equation. When data distribution is democratic, insider and provincial advantages become (mostly) meaningless, as Fool co-founder David Gardner points out.
  • Analysis, not access, becomes paramount. I can't stress this last point enough. Successful investing should never, ever hinge on how much data you're able to access. You should always be able to synthesize the available information into a logical and defensible thesis. That was the rationale for Regulation FD. It's the rationale here as well, and it's still a good one. Begone, yon wicked ivory tower!

Yet with all of these obvious benefits, a problem remains: Few people know about XBRL, or about Microsoft's push for greater disclosure, or -- worst of all -- about the little-publicized resistance to XBRL adoption that a number of companies have expressed to the SEC working group tackling the technology, known as the Advisory Committee for Improving Financial Reporting.

I know about it only because Fool analyst Bill Mann, a member of that working group, told me. Well, that, and because I looked at the active roster for the XBRL consortium. Exactly none of the companies I listed at the open -- all thought to be paragons of investing virtue, to some degree -- is a member.

Dumb. Really freaking dumb, guys.

Here's why. American companies, already under fire for lagging in ethics, R&D, and growth, lag in XBRL, too. Adobe (Nasdaq: ADBE  ) , Accenture (NYSE: ACN  ) , and CBS (NYSE: CBS  ) are three of the notable American names backing XBRL. But many other supporters are big foreign financials, such as South Korea's Kookmin Bank (NYSE: KB  ) , Puerto Rico's Popular (Nasdaq: BPOP  ) , and Germany's Deutsche Bank (NYSE: DB  ) .

What you can do
If you agree that XBRL will improve disclosure, let your voice be heard. There are three ways to do so. First, tell Microsoft what you think of its XBRL pages. Second, find out more about XBRL and the public comment process.

And third? Contact the investor-relations departments for each of the companies you invest in. Ask them what their plans are for XBRL, and if they're not implementing it or planning to do so, demand to know why.

It's far better to be a nation of Fools than a nation of Enrons.


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