If in doubt, cut it out

23 Sep 2023 | A statement is not fact

We all know the trick of selectively quoting from a passage, so that you can twist it to support whatever you want. As theologian Don Carson pointed out, “A text without a context is a pretext.” Websites such as Quote Investigator check whether a quote was actually said, and give you the context behind it.

But you’d be at your wits’ end if you had to check every quote you see. Surely some sources can be trusted to quote accurately — the government, perhaps? And even though it’s easy to quote words selectively, it’s harder to do this with pictures. You can miss out a word, but it’s trickier to doctor graphics, so maybe they don’t need to be checked.

Sadly, neither suggestion is correct. In 2016, the UK government released its green paper on corporate governance reform. A green paper highlights problems that need to be fixed, proposes potential solutions, and invites the public to comment. Since a green paper might eventually change law, you’d hope that it’s the bastion of accuracy.

Figure 1 was on the biggest controversy of the day, CEO pay. The vertical bars measure CEO pay, and the red line captures the FTSE 100 — the value of the UK’s 100 largest companies.

The contrast between the bars and the line is stark. Over the past 18 years, pay skyrocketed but company values went sideways. Such a chart incites anger. We don’t begrudge a CEO high pay for a job well done, but pocketing £4 million for treading water is offensive and unfair.

When I saw the graph, something immediately seemed off to me. 1998 was the first year I invested in the stock market, and I’d seen my funds rise in value since then despite being a distinctly average investor — so the claim that the market hadn’t moved sounded fishy. The title of the graph mentions that it was from the Manifest Pay & Performance Survey 2015. I dug up that report, and found this:

This graph contains an extra dotted line, representing the ‘FTSE Total Return’. The red line in the green paper measures the change in the stock prices of the FTSE 100. But as Finance 101 teaches you, the ‘total return’ from owning shares also includes dividends. Shareholders had nearly doubled their money, rather than standing still.

It’s crazy the lengths the authors went to. They could have simply copy-pasted the Manifest graph. But they didn’t like the dotted line, so they went through the effort of recreating it from scratch so that it could miss out this inconvenient truth. That’s like hiding evidence that exonerates your prime suspect.

The removal is not only disingenuous but unnecessary. Even with the dotted line, the chart shows that CEO pay more than quadrupled, while shareholder returns only doubled. Thus, the green paper could still have made the case that CEOs are overpaid and suggested that regulation is necessary. But in today’s black-and-white world, people have little time for shades of grey. Presenting as one-sided a case as possible would help convince the public of the need for new laws.

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