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We argue here that being negative can, in certain contexts, make strategic sense. Making extensive reference to context, we analyze a single annual executive letter written by the director of a small New Zealand business. The letter appears to focus on problems. These problems are, however, relatively minor ones that had either already been solved or were in the process of resolution when the letter was written. These problems appear to serve three functions: to distract attention from more serious issues, to undermine the credibility of potential challengers, and to provide a context in which the writer can present himself and the other company directors positively as problem solvers. The writer's immediate objective appears to have been achieved: The business of the annual general meeting was conducted in eleven minutes, and each resolution was carried without amendment. The status quo was maintained. Focusing on negatives may, however, have proved to be a high-risk strategy in the longer term. Recent communications from the director to stockholders reveal that he is having difficulty in sustaining at least one of the positions he adopted in his executive letter.

Negative Messages as Strategic Communication: A Case Study of a New Zeaiand Company's ^ i n u a i Executive Letter

Winifred Crombie and Helen Samujh University of Waikato, Hamilton, New Zealand

It is generally agreed that the greatest strategic advantage in businesscommunication is gained from positive emphasis. We argue here that this is not always true. In some contexts, being negative makes strategic sense.

One such case is the annual executive letter of a small New Zealand business. This letter was brought to our attention by a stockholder who felt uneasy about it but was unable to say precisely why. He did, however, make two observations that turned out to be significant. He said that he understood the content of the letter, but not why the writer had chosen to focus on particular topics. He also said that he felt that the writer might be concealing something. An analysis of the letter in terms of its surface linguistic features revealed little more than the stockholder had already observed, except for the fact that there was a marked lack of ori- entation towards the reader. A further, more detailed, analysis that took account of the context in which the letter was written, and tha.t looked at both explicit and implicit messages, was more revealing. We found that although the letter refers to a number of problems, these are relatively minor ones. Most of them had either already been solved when the letter was written or were in tke process of being resolved. However, their inclu- sion in the letter appeared to serve strategic functions: to distract atten- tion from more serious issues; to undermine the credibility of potential challengers; and to present the directors positively as problem solvers. In focusing on negatives, the writer adopted a high-risk strategy. Even so,

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his short-term objective seems to have heen achieved: The annual general meeting was over within eleven minutes, and no major issues were raised. As a longer-term strategy, however, the focus on negatives may have hack- fired, as more recent communications to stockholders appear to reveal.

The contejftualized approach to the analysis of a single executive letter that we have adopted here has revealed what appears to he the strategic use of had news. We helieve that further analyses of this type, applied to hoth oral and written business messages, are likely to reveal additional instances of similar communication strategies. The more widespread such strategies prove to he, the more reason there is for making space for them in husiness education programmes.

Contextualized Survey of Relevant Literature Lee and Tweedie (1975) and Courtis (1982) have hoth shown that the

executive letter is the most widely read section of the annual report. Per- haps partly for this reason, there is an increasing interest in the rhetoric of persuasion in accounting literature. Fogarty (1994), for example, argues that rhetoric should he included in a new agenda for accounting research. This is a particularly significant argument in view of the fact that Cross (1990) found that the projection of a successful image in the executive letter can take priority over the readers' need for accurate and useful information.

Hyland (1998) analyzed 137 annual executive letters, using the metadis- course taxonomy developed hy Crismore (1993). He focused on textual fea- tures which, he argued, created a positive corporate image. We helieve that examining context is also useful in examining either oral or written husiness messages (see Smeltzer & Thomas, 1994; Suchan & Dulek, 1998; Shelhy, 1986; and Faris, 1997). In reviewing a niunher of texthooks and research papers dealing with had news, Limaye (1997) called for investi- gations of explanations, investigations that must, in his opinion, take con- text into account. As early as 1992, Kohut and Segars, who examined 50 executive letters for the relationship hetween thematic concerns and husi- ness success, ohserved that future research on strategic communication should investigate communication in the context of surrounding events. In our view, the examination of surrounding events should, where appro- priate, he accompanied hy an examination of contextually significant doc- umentation. The annual executive letter and the accompanying financial accounts are likely to he of particular significance. As Eprile (1991) and NoU (1997) hoth observe, stockholders use these documents to make important decisions. They "lack the authority to prescribe the information they want and must rely on the information that management communi- cates to them" (Larsen, 1994, p. 52). A careful examination of precisely what information is provided is, therefore, important, particularly in view of the fact that most investors consider the annual report to be a docu-

Negative Messages as Strategic Communication / Crombie, Samujb 231

meat that presents management favorably and underplays bad news (HDl & Knowlton, 1984).

As Thomas discovered, a close look at the language of specific annual letters to stockholders offers a view of "not only what the company wanted its audience to know but also what the company may not have wished to reveal," involving "positioning . . . according to the priorities of those who are in control" (1997, pp. 50-51). In her study of annual letters over a period when the financial fortunes of the company concerned dete- riorated markedly, Thomas found that the writers presented themselves personally in a favorable light, taking credit for successes but distancing themselves in increasingly objective language from problems by attribut- ing problems to external, non-human agents. The letter we examine lists several problems even though the company appears to have done com- paratively well from a financial point of view in the previous year. Some of these problems are attributed to non-human agents, others to humein agents. These human agents do not include the company directors. The directors are presented as experts who resolve problems and who there- fore deserve support. In seeking compliance, the writer of this letter calls on a number of the power bases outlined by French and Raven (1959) and examined in written discourse by David and Baker (1994).

Hildebrandt and Snyder (1081) argue that the language of annual let- ters to stockholders is iikeiy to be predominantly positive. In the letter that is the focus of attention here, the emphasis on threats and problems necessarily creates a high percentage of negative words and phrases. Flow- ever, this negative emphasis is offset by the positive language that occurs in those sections of the letter that offer possible solutions and make pos- itive predictions.

la the annual executive letters they examined, Dorrell and Darsey (1991) observed a failure to orient the teict towards the reader. These let- ters lacked what Locker refers to as a "you" orientation, "a style of writ- ing which looks at things from the reader's point of view, emphasizing what the reader wants to know, respecting the reader's intelligence, and protecting the reader's ego" (1995, p. 32). The executive letter examined here is almost exclusively focused on the writer, on his problems, his actions, his opinions, and his frustrations. The fact that he had been chal- lenged repeatedly by some stockholders may account, in part, for his fail- ure to orient Ms writing towards his readers. However, the stylistic focus of tlie letter seems also to relate to its strategic communicative objectives. He presents himself as a man beset by problems, someone who, never- theless, sets out to resolve these problems on behalf of others, someone who, therefore, deserves the support of those stockholders whose best interests he protects.

Suferamanian, Insley, and Blackwell (1993) note that the annual letters of successful companies appear to be characterized by a higher readabil-

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ity rating than those of companies that are experiencing financial diffi- culties. The executive letter that is the focus of attention here is charac- terized hy simple, uncomplicated structures and vocahulary. Its readahility rating is, therefore, high. However, readahility studies characteristically fail to taJse full account of contextually-hased inferencing. Such inferenc- ing is, as Paris and Smeltzer (1997) have pointed out, an important factor in overall comprehension. In this case, different readers may draw very different inferences depending on the contextual information availahle to them. What this demonstrates is that readability need not necessarily cor- relate directly with comprehensihility. AVhere management communications are characterized hy a lack of fit hetween readahility and comprehensi- hility, as is the case in the letter examined here, recipients would he well advised to give careful consideration to the possihUity of a hidden agenda.

Ethical questions are increasingly heing raised in the literature on husi- ness communication. For example, Paul and Strbiak (1997) have discussed strategic ambiguity in business communication in terms of ethical con- siderations, and Botan (1997) has argued for a new approach to puhlic relations, an approach that accommodates ethical considerations. Although ethical issues could be raised in connection with various aspects of the particular case under review here, we have not addressed these issues directly. We believe that ethical questions relating to communica- tion strategies can he addressed adequately only where these strategies are themselves fully contextualized, where the ohjectives of the commu- nication strategies are themselves considered in the context of more gen- eral business ohjectives. From this perspective, specific ethical investiga- tion is heyond the scope of the our study. We have, however, considered the strategies adopted in the letter examined here in relation to risk. Steele (1975) suggests that one dimension of risk is the sender's percep- tions of the receiver. In this case, the writer's apparent decision to attempt to discredit some of his detractors involved considerable risk in the longer term. As Botan observes, "better educated publics process information more thoroughly . . . than in the past" (1997, p. 193).

Research Questions and Methods The focus of our case study is a single executive letter written by the

Chairperson of the Board of Directors of a small New Zealand company (see Figure 1).

We are not concerned only with the letter's surface linguistic features or with its immediately recoverable meanings. We are also interested in those meanings that can he recovered only by inferencing on the hasis of context. It is only, we helieve, when these deeper meanings are teiken into account that the letter can be examined in terms of probable overall com- municative intent and, thus, in relation to its effectiveness.

We began by examining the letter in terms of some of the immediately

Negative Messages as Strategic Communication / Crombie, Samujh 233

Figure 1 The Annual Letter

Your directors have pleasure in presenting this 1997 Annual Report.

Principal Activities The Company's principal activities during the year were the collection, processing and

marketing of... supplied to it by its supplying shareholders. The nature of the Company's business has not changed during the year under review.

Chairman's Review of Operations We seem to have spent a lot of time last year working with solicitors and this is reflected

in legal costs in the accounts. The severing of ties w i t h . . . turned out to be a very drawn out exercise but hopefully this is now behind us.

Finalizing a closer relationship with our Taiwanese partner also seemed to go on for- ever, but now that everything is in place we are more than satisfied and feel that we made the right decision to run with them.

Thankfully we do not need to' write a new constitution every year because I firmly beleve that no matter how much time is spent on it, it is impossible to produce a perfect document. If it was possible to do so you would not need solicitors. However, we are fortu- Hate in having... as our legal adviser and I thank him for Ms advice and for steering us through a difficult period.

The animal census we did is of some concern to us as it shows a possible production increase of 35% this year. We are able to control the entry of new suppliers but as yet we caHBOt control the internal growth. Maybe we will have to look at some means of doing so as fluctuations of this proportion present a cash flow problem in the flush. The only means of countering this is to reduce the advance payment and this would put an unfair burden on the smaller suppliers.

This scenario shows the importance of an accurate animal census and we thank those suppliers who supplied us with these figures when requested.

As with all things that are successful, copycat products appear in the market place. It is our job to keep one step ahead of the opposition and to this e n d . . . has been added to tlie staff to push ahead with Product Development. We welcome... and thank her for her input this year.

A special thank you t o . . . who does a marvellous job in the office. Along with the growth of industry goes the growth of challenges but I guess that is what

makes life interesting, and in spite of everything I have written, the future looks very good and I am confident the company will continue to prosper in the years ahead.

My appreciation t o . . . and the Directors for another successful season and a warm wel- come to new suppliers.

Directors who held office during the year were:

Bemtmeration Paid to Directors: Directors' remuneration is as per that approved by shareholders following the recom-

mendation of the Directors' Remuneration Committee established at the 1996 Annual Gen- eral Meeting. No other remnneration was paid.

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Remuneration of Employees: $110,001-$120,000 1

Entries in the Interest Re^ster: There were no transactions in which the Director has held an interest other than as a

transacting shareholder.

Share Dealings: Any Director who holds shares does so on the basis of being a supplying shareholder of

the Company and has shares issued or resumed in accordance with the Company's Consti- tution.

Directors' Insurance The Company has arranged policies of Directors' liability insurance with an indemnity

level that generally ensures that directors and officers of the Company will incur no mon- etary loss as a result of actions taken by them. Certain actions are excluded including penalties and fines imposed in respect of breaches of the law.

For and on behalf of the Board: [signed]

recoverable meanings. What emerged was an overall emphasis on the presentation of issues in terms of threats and problems. Some of the problems were attributed to non-human agents, others to human agents. The first-person pronoun (J, we) appeared as the subject or implied sub- ject of approximately one-third of the clauses. In most cases, these clauses presented actual or possible solutions to the problems outlined in the remainder of the text.

We then examined aspects of the context in which the letter was written. We b ^ a n by looking at the immediate context: the papers that were sent out with the executive letter. These included the agenda for the annual gen- eral meeting, the financial statements, and the auditor's report. We then examined records of company meetings that had taken place during the financial year preceding the annual general meeting, as well as the minutes of the annual general meeting itself. Our next task was to reconsider all of these docimients in a wider context provided by the compan^s constitution. New Zealand corporate law, and New Zealand financial reporting standards.

In terms of contextual considerations, our final task was to learn more about the stockholders themselves. A number of issues that seemed to us to be important in terms of company business had been raised at stock- holder meetings over the previous year. We needed to know whether a particular stockholder, or a particular group of stockholders, had raised these issues and, if so, whether they were satisfied with the responses they had received. We £dso needed to know what had taken place at the annual general meeting and how long that meeting had lasted.

Negative Messages as Strategic Communication / Crombie, Samujh 2 3 5

All of these contextual considerations were taken into account in re- examining the executive letter. Our specific aims at this point were to determine why the writer had focused in his letter on certain issues rather than others; determine why he had presented these issues in a problem-resolution framework; and determine what he might have hoped to achieve in doing so.

In the % h t of our re-examination of the executive letter, we looked again at the outcomes of the annual general meeting. We also examined some more recent correspondence from the company director.

Backgit>uncl for the Case Study The company we are concerned with here is a small New Zealand co-

operative that processes a perishable raw product and sells it in a range of domestic and overseas markets.

Company and Stockholder issues Tlie relatively small number of stockholders (approximately 60) are all

involved in the day-to-day work of supplying the raw product which is at the centre of the company's activities. The majority of the stockholders have no source of income other than that received from the co-operative, and most can increase that income only by supplying more raw product to the company. They cannot supply any other organization: the condi- tions of their supply contract prohibit them from doing so.

The directors of the co-operative are elected for three-year terms from among the stockholders. They receive, in addition to supply payments, payment for their directoral responsibilities.

For the year preceding the release of the executive letter under con- sideration here, distributed revenue rose 20%, a good performance in rela- tion to other comparable companies in New Zealand. General industry growth projections were also good. However, some of the major stock- holders had been uneasy about various aspects of the company's business. They had expressed concerns about the new constitutic>n, believing it to be, in several respects, inconsistent with New Zealand Company Law. For example, the constitution gives the Board the right, without providing rea- sons, to prevent a stockholder from transferring stocks to another party. Under New Zealand law, however, there must be fuU disclosure of reasons (Companies Act of 1993, section 84).

Some stockholders had heard rumors that their company had become involved with an overseas company. Before receiving the executive letter, however, they had been given no information supporting or denying these rumors.

A Directors' Remuneration Committee had been established to make reeommendations about payments to the directors. Some stockholders believed that all interested parties should be involved in making such rec-

236 Ttie Joumai of Business Communication 36:3 July 1999

ommendations and that they shovdd be made only after the previous year's accounts had been received.

Above all, some stockholders were concerned that, at a time of con- siderable growth potential in the industry overall, the directors of their co-operative appeared to wish to prevent some individual stockholders from increasing the amount of the raw product they supplied. They felt that this made little commercial sense. In addition, it represented a threat to their future income.

Those who had expressed concerns about some of the company's pro- cedures and practices were in the minority. They were, however, a vocal and knowledgeable minority. They included a qualified accountant, a spe- cialist in small business management who also had a professional inter- est in New Zealand Company Law. Even so, it appeared that the smaller stockholders preferred not to become involved. After all, they paid direc- tors to concern themselves with such matters.

Each of theses general areas of concern is referred to in some way in the executive letter. However, the letter does not focus on the issues them- selves; instead, some peripheral aspect of these issues is given attention and presented as a problem. In several cases, these peripheral matters are presented in a way that seems calculated to undermine the credibility of those stockholders who had raised concerns.

Relevant New Zealand Legislation A director's role in presenting the annual report of a New Zealand

company is to ensure that stockholders have all of the information required to make informed decisions and that aU legal requirements are met. The legal requirements are relatively straightforward.

The New Zealand Companies Act of 1993 (section 211 (f)), requires that unless all stockholders unanimously agree otherwise, annual reports should disclose the remuneration of all company directors and of auditors. This requirement is reinforced in New Zealand Accounting Standard FRS- 9 (ICANZ, 1995, para. 6.13 (f)). None of the information referred to here is disclosed in the company's financial statements.

This company's constitution specifies that directors' fees cannot be paid without the prior approval of the stockholders by Ordinary Resolu- tion. In this case, the stockholders are asked to approve the remuneration of their directors in the annual general meeting. At the same time, they are advised in the executive letter that the remuneration of the directors has already been approved.

The New Zealand Companies Act of 1993 (section 211) requires disclo- sure of all assets in company accounts. Assets include stockholdings in other companies. In this case, stockholders are advised that their com- pany has a 50% interest in an overseas company. That interest is not, how- ever, listed as an asset in the accounts as it should have been unless the

Negative Messages as Strategic Communication / Crombie, Samujh 2 3 7

accounts were described as having been "consolidated." In this case there is no such description.

The New Zealand Financial Reportiag Act of 1993 includes, as a pro- tection for stockholders, solvency test provisions. These move away from the vague "true and fair reporting" standard in the earlier New Zealand Companies Act of 1955. In this case, the auditor gives a "true and fair" judgement of the company's accounts, while making no reference to the omission of some critical financial information.

The Financial Statements, the Auditors Report, and the Agenda The executive letter was accompanied by financial statements for the

preceding financial year, an auditor's report, and an agenda for the forth- coming annual general meeting.

The "Notes To and Forming Part of the Financial Accounts" acknowledge that the company has secured "a 50% stockholding in an overseas company," a company that "holds certain rights in respect of product manufactured by the Company." Nowhere are these rights detailed. The overseas company had "no operating activities during the finsincial year under reviev?." Nowhere is there an explanation for the lack of operational activity.

Stockholders are advised in the auditor's report that the auditor's com- pany has provided management and taxation advisory services to the co- operative. This raises questions relating to the possibility of vested inter- ests. The auditor might, for example, have been involved in auditing aspects of his own company's work. There is no way to determine whether this is the case. Nor is there any way to determine what payments have been made for any of these activities. The auditor records a "true and fair" judgement in relation to the financial statement and accounts. How- ever, as Nobes and Parker (1991) observe, "the true and fair concept has never received authoritative definition from a judge or accountancy body" (p. 359).

The agenda for the annual general meeting includes four items, each under the heading of Ordinary Business. No section for new business exists.

AGENDA

Ordinary business:

(a) to receive and consider the financial statements and the reports of the Directors and the auditor;

(b) confirmation of the election of Directors in accordance with sched- ule 2 and clause 42.5 of the Company's constitution;

(d) to approve the remuneration of the Directors in accordance with clause 24.8.

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Sigband and Bell (1994) observe that a meeting agenda should include topics for discussion with approximate times allotted. They pro- vide an example in which the meeting announcement clearly identifies the problem and related topics. Such detail presupposes that the objective of the meeting is problem resolution. This may not, however, always be the primary objective, even where genuine problems exist. Although the exec- utive letter that accompanied this agenda focuses on problems, none of them is included as an agenda item. Neither does the agenda include any reference to other potentially problematic areas.

Stockholders are invited here to authorize the Board to fix the remu- neration of the auditor (agenda item (c)). However, the auditor's fees for the previous financial year have not been disclosed by the Board.

There is an invitation (agenda item (b)) to confirm the election of direc- tors. The actual election took place earlier by postal vote. At that time, there could have been no way of maidng a fully informed judgement about the performance of the existing directors over the previous year: The financial statements were not then available.

The final agenda item (item (d)), refers to the remuneration of the directors and to "clause 24.8." Some stockholders may not even have known in what docxunent clause 24.8 was contained. In fact, the reference is to clause 24.8 of the company's constitution which, in accordance with New Zealand law, specifies that Directors' fees cannot be paid without the prior approval of the stockholders by Ordinary Resolution. The stock- holders are invited here to approve the remuneration of the directors. However, they are advised in the executive letter that "directors' remu- neration is as per that approved by stockholders following the recom- mendation of the Directors' Remuneration Committee." Why, then, was further approval considered necessary? Several possibilities exist. It may be, for example, that the approval referred to in the letter relates to the previous year, vnth approval now being sought for the forthcoming year. If this is the case, this may be an example of what Botan (1997) refers to as "strategic ambiguity" (p. 192). Equally, it may be simply that a vote taken at the annual general meeting gives the appearance of openness in decision making, something that is generally regarded as being of con- siderable importance (Rogers, 1987). Another possibility is that the direc- tors feared that some aspect of an earlier vote (a low level of voting paper rettirns, for example) invalidated it. If that were the case, the executive letter should certainly not have claimed that approval had been given. Whatever the circumstances, stockholders are being required to vote on the remuneration of the directors without having immediate access to aU of the relevant information. The financial statements for the previous year do not identify directors' remuneration, and nowhere in the papers for the annual general meeting is there a remuneration recommendation list for the forthcoming year. Additionally, some stockholders may not

Negative Messages as Strategic Communicatton / Crombie. Samujh 2 3 9

have understood that an invitation to approve something (agenda item (d)) presupposes the right to withhold approval.

Stockholders are invited to consider the financial statements and reports (agenda item (a)). The right to consider something generally car- ries with it the right to act in some way on the basis of that considera- tion. As there are here no agenda items relating to specific issues raised in the report and none that relate to decisions about the future direction of the company, it is unclear what stockholders could have hoped to achieve in considering the report. It is very difficult to formulate accept- able proposals during & meeting, and stockholders rarely have a real opportunity prior to an annual general meeting to circulate any propos- als they might wish to make. One would expect, therefore, that company directors, particularly in the case of a small co-operative, would feel duty- bound to attempt to anticipate the issues stockholders might wish to dis- cuss and to formtilate proposals relating to these issues as part of the agenda for the annual general meeting. They have not done so here. Nor have they included the category generally labelled "any other business." An agenda such as this seems likely to inhibit discussion.

Contextual Analysis of the Executive Letter The context of this case study suggests that the focus on problems

serves three functions: to distract attention from more serious issues, to undermine the credibility of potential challengers, and to provide a con- text in. which the writer can present himself and the other company direc- tors positively as problem solvers.

Bad News as a Olstracter: A Focys on Problems in the Executive Letter

The letter begins with a positive statement: "Your directors have pleas- ure in presenting this 1997 Annual Report." This is followed by nine para- graphs under the heading Chairman's Review of Operations. Two of these paragraphs simply record thanks and appreciation to particular staff members. AH of the remaining seven paragraphs refer to past or ongoing difficulties:

1. The time spent with solicitors and on severing ties with a particular company;

2. The time spent on finalizing a relationship with overseas partners; 3. The problems involved in writing a new constitution; 4. The problems associated with controlling the entry of new suppliers,

controlling production, and dealing with "cash flow in the flush"; 5. The problems associated with an animal census; 6. The problems associated with "copycat" products; and 7. The overall growth in problems accompanjdng growth in the industry.

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In dealing with problems, the writer makes use of initial or final mitigation, or, in one case, introduces the problem obliquely. There is one notable exception. In this case, there is no attempt to reduce the impact of the problems. The text reads:

The animal census we did is of some concern to us as it shows a possible production increase of 35% next year. We are able to control the entry of new suppliers but as yet we cannot control the internal growth. Maybe we will have to look at some means of doing so as fluctuations of this propor- tion present a cash flow problem in the flush. The only means of counter- ing this is to reduce the advance payment (installment) and this would put an unfair burden on the smaller suppliers.

It is difficult to determine the exact nature of the supposed problem here. A "cash flow problem in the flush" is a cash flow problem that accompanies temporary periods of increased supply. The writer relates this supposed problem to a predicted possible overall production increase of 35% in the coming year. The predicted problem is, therefore, presumably not one that will be experienced only during temporary peri- ods in the coming year, but one that wiU characterize the year as a whole. His suggested solution is to seek a way of controlling production increases. In other words, he recommends a measure that will limit the potential income of some of the supplying stockholders. Any such rec- ommendation needs to be carefully examined for possible flaws in the argument.

If increased supply led to processing delays, that could, in turn, lead to delayed sales of the processed product, and, hence, to delayed payments to suppliers of the raw product. One way of dealing with this delay might be to guarantee that aU suppliers would receive immediate payment for a cer- tain supply volume and delayed payments for additional supplies. In this way, the interests of smaller suppliers could be protected. However, there appears to have been no such problem. The company was, according to some stockholders, able to process significantly more of the raw product than it then did, and it was able to do so without production delays.

There is another possible scenario. If increased production meant that the market became flooded with the processed product, that could lead to price reductions, and, hence, to difficulties in finding sufficient outlets. However, according to the stockholders we consulted, such a scenario is unlikely. Demand is considerably greater than supply. It is for this reason that other suppliers are moving into the market (the "copycat' issue that the director refers to elsewhere as a problem). In fact, eighteen months after writing his executive letter, the director wrote another letter to stockholders stating that ten new suppliers had agreed to commence pro- duction in the spring and that "this increase in supply is to ensure that we have sufficient product to satisfy the . . . market, as well as provide product to attempt entry into new markets."

Negative Messages as Strategic Communication / Crombie. Samujh 2 4 1

The problem in the executive letter appears to be more apparent than Feal. Why, then, does the director suggest a solution that would seriously undermine the income-earning capacity of some of the stockholders? The answer may be that the stockholders who had increased production sig- nificantly and anticipated farther production increases were precisely those who had been most vocal in their questioning of company proce- dures and practices. We have argued that their increased production need not have represented any threat to smaller suppliers. Nevertheless, the director ends this section of Ms letter as follows:

The only means of countering this is to reduce the advance payment and this would put an unfair burden on the smaller suppliers.

This comment is potentially divisive. The smaller suppliers (the major- ity) are being invited to join with the director in protecting themselves against a supposed threat posed by the larger suppliers. Under such cir- cumstances, they might, if they believed that the threat was a genuine one, be less likely to heed any objections raised by the larger suppliers at the annual general meeting.

Looking again at the other problems raised by the director, we can now ŝftp ibp jwxsxp ̂ jafegnfl? st fKvk Ms^ avis' js& piKsMsaas' jassfwiate^ .•wiitb Jthi?

writing of the new constitution:

Tliaiikfully we do not need to write a new constitution every year because I firmly believe that no matter how much time is spent on it, it is impos- sible to produce a perfect document. If it was possible to do so you would not need solicitors. However, we are fortunate in having . . . as our legal advisor and I thank him for steering us through a difficult period.

Those stockholders who objected to aspects of the new constitution are likely to be seen as being responsible for creating a difficult time for the directors and the other stocHiolders. However, the other stockholders are, no doubt, expected to be reassured by the reference to the company's legal adviser in spite of the fact that the legal adviser had himself endorsed some of the criticisms of the constitution.

Not all of the stockholders were aware before they received the execu- tive letter that their company had entered a new partnership arrangement with an overseas company. The presupposition is that this is not new information. However, it is not the new partnership that is given focus here. Rather, it is the time and frustration involved in breaking free of one partnership and entering another that is recorded (emphasis added): The severing of ties with X tiirned out to be a very drawn out exercise but hopefully this is now behind us.

Finalizing a closer relationship with our Taiwanese partner also seemed to go on forever, but now that everything is in place we are more than satis- fied and feel that we made the right decision to run with them.

2 4 2 The Journal of Busir)ess Communication 36:3 July 1999

Once again, it was the same stockholders who had raised questions about other matters who had also raised questions about the overseas partnership. In doing so, they may have created legal problems for the director and have held up the finalization of the contract of agreement.

Most of the problems listed in the executive letter seem to have little, if any, ongoing s:^ificance. There may, however, be some real problems facing the company, problems associated, for example, with the failure of the new partner to record any operational activities in the year prior to the annual general meeting. Certainly experienced investors woidd be likely to interpret some aspects of company business as problems: the fail- ure to record a 50% holding in another company under the heading of assets in the company accounts, the failure to specify the exact nature of the rights that have been ceded to the new overseas partner, and the fail- ure to provide a list of that partner's directors. Under such circumstances, it seems that the problems listed in the executive letter may have been intended to distract attention from other matters. Whether they were intended to do so or not, it appears that they did. Some of the stockhold- ers felt that the executive letter cast doubt and suspicion on them. One reported to us that at the time of the annual general meeting, his concern about this aspect of the letter overshadowed his other concerns about aspects of the company's operations, concerns that he did not raise at the annual general meeting, feeling that he would lack support if he did so.

It appears, then, that using distracters in business communication can sometimes be strategically useful. Under some circumstances, it might be thought preferable to use positive distracters, distracters that focus exclu- sively on good news. However, where distracters are presented as prob- lems, they allow for a combination of bad news (the problems themselves) and good news (the resolution of these problems). In some contexts, this sort of presentation may even provide an opportunity to reinforce a pos- itive image of managers as problem solvers. This is, we believe, what the writer of this executive letter does here. In doing so, he engages, in what appears to be a bid for support, a range of power bases. In analyzing this aspect of the letter more folly, it is useful to make reference to compli- ance^aining theory.

Problems as Distracters in the Context of Compliance-Gaining Compliance-gaining theory is concerned with the relationship between

power and persuasion and has been applied by David and Baker (1994) to written commimication. French and Raven (1959) identified five primary power bases: legitimate power (derived from holding recognized positions of authority); reward power (derived from the capacity, for example, to increase remuneration); coercive power (derived from the capacity to punish); expert power (derived from having special knowledge or ability) and referent power (derived from appearing to share values).

Negative Messages as Strategic Communication / Crombie, Samujh 2 4 3

The writer of the executive letter examined here has legitimate power in terms of his status in the co-operative. He also has referent power by virtue of the fact that he is not only a director but, in common with other stockholders, a supplier of the product in which the co-operative deals. Hî i access to reweird power relates to the prospects held out by the new part- nership to which he refers and to the strategies he has put in place in relation to product development. He signals that he and his fellow direc- tors may also have access to coercive power when he notes that there may be a need to look at curtailing internal growth. His claim to expert power is made in his repeated references to Ms involvement in dealing success- fidly with threats and to Ms ability to call on the expertise of others (such as the company's legal adviser) as required.

The letter is almost exclusively focused on the writer. He presents him- self as a man beset by problems, someone who nevertheless sets out to resolve these problems on behalf of others and therefore deserves their support. This may be a significant factor in what appear to be attempts to counter some of the potentially negative effects of the letter's problem focus. Although he fails almost entirely to accommodate the real needs of his readers in terms of information, the writer does provide reassurance. la particular, he refers to "another successM season." In view of this, and in view also of the fact that the auditor's "unqualified opinion" is that "the financisd statements . . . give a true and fair view of the fimanciai position of the company," some stockholders may have felt that there was no point in raising questions at the annual general meeting. The company was in good hands.

Conclusion The writer of this executive letter focuses not on good news but on prob-

lems. However, the problems he discusses are not the compai'atively major ones that we have identified as likely to be of particular concern to stock- holders but rather in most cases, problems of a relatively minor nature, problems that have either already been solved or are in the process of res- olution. We have suggested that these problems serve to distract attention from issues that might otherwise occupy some of the stockholders. We have aiso observed that they provide the writer with an opportunity to imdermine his opponents. Presenting had news in the form of minor prob- lems also provides him with an opportunity to present himself, and the other directors, in a good light, as expert problem solvers who have access to a wide range of power bases. In the short term, the writer's overall objective appears to have been to alienate potential opponents from possi- ble supporters and, thus, to prevent them from raising issues at the annual general meeting in a way that m%ht have threatened the smooth conduct of that meeting, and the passing of resolutions supportive of the status quo. In that, he appears to have been successful. The business of the meet-

2 4 4 The Joumai of Business Communication 36:3 July 1999

ing was conducted in eleven minutes, and each resolution was carried Avithout amendment. None of the issues that we have identified as being of potentially major concern to stockholders was raised.

Viewed in the longer term, the strategies adopted in the executive letter appear to have been high-risk ones. The writer took a position in that letter which has subsequently proved difficult to sustain. He observed that possible internal growth might have to be contained to protect the interests of smaller stockholders. Eighteen months later, he informed stockholders that ten new suppliers had agreed to begin supply the fol- lowing spring, something that, he said, was necessary in order to meet the existing market, and in order to have sufficient product to attempt entry into new markets. The response has been predictable. Some of the smaller suppliers believe that the director, in allowing the entry of new suppliers, is failing to protect their interests. Some of the larger suppli- ers believe that he may be actively seeking to undermine them. In this context, it is worth observing that the executive letter examined here ends with a reference to liability insurance, noting that the indemnity level is such as to ensure "that directors and officers of the Company will incur no monetary loss as a result of actions taken by them."

On the basis of this case study we conclude that communicating nega- tive messages can in certain contexts make strategic sense. The fact that we have identified a specific longer-term credibility problem in this instance need not mean that such problems are inevitable. The diffictilty here appears to relate to the specific content of this particular letter, rather than to the overall strategy employed. Further contextualized stud- ies of annual executive letters and of other business messages might reveal whether strategies such as the one used in this particular letter are widespread and, if so, whether they are generally accompanied by high risk. If the strategy identified here (or similar strategies) proves to be widespread in business communication, there may be good reason for considering it in business education programmes.

NOTES

Winifred Crombie is Associate Professor in Language and Language Education at the University of Waikato. She specializes in stylistics and language teaching and learning. Send correspondence to her at the School of Maori and Pacific Development, the University of Waikato, Private Bag 3105, Hamilton, New Zealand <[email protected]>.

Helen Samujh is a senior lecturer in the department of accounting at the University of Waikato. She specializes in small business education and financial reporting. Send corre- spondence to her at the Department of Accounting, the Universiiy of Waikato, Private Bag 3105, Hamilton, New Zealand <[email protected]>.

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