Are Annual Reports Dead?

A marketing professor writes… “No one reads that stuff… I view annual reports as completely irrelevant.” Another says… “I have found annual reports less relevant for companies, as we live in a constant content age.” And another writes: “Annual Reports are getting too long and too complicated. As a result, they are losing the importance they once enjoyed.”

Are annual reports really dying? As Mark Twain famously stated: “The reports of my death are greatly exaggerated.” Actually, the need for well written, carefully crafted annual reports has never been greater.

All successful companies succeed as a function of their marketing effectiveness, followed with their financial and compliance discipline. It is interesting that most executives will completely acknowledge this in respect to their products and technology. Apple has become the world’s most valuable company not primarily because it has the best products, technology or manufacturing... It has succeeded by out-marketing all its competitors.

Some finance executives seem to feel that a company does not require the same marketing effort as its products, that the corporate website and its 10K are all that is required to promote it to its investors. Somehow it’s investors are immune to the marketing process and that marketing rules only apply to product promotion and not to the capital markets. They feel that…                 

“The numbers will speak for themselves.”  “The analysts don’t need an annual report.”   “Investors don’t read the annual report.” “The effort and cost are not worth it.”

Most of the world’s banks, financial institutions and brokerage houses would very much beg to differ…

An annual report created solely as a compliance document costs a company an enormous opportunity. Yes, compliance is the role of a 10-K – a historical financial record. But the primary concern of a savvy investor is the FUTURE, not simply the past. The 10-K does nothing to market and promote a company’s vision, strategy or culture. These are key indicators of value.

The reality is that annual reports have never been more important to the market value of a public company. An annual report is a unique opportunity to engage investor audiences, build trust and set your company apart—clarifying why people should invest in the stock, work at or with the company and believe in the brand. It can create a deeper understanding of what you do, why you do it and how well you do it. It is not a spreadsheet.

It is usually the only communication, other than the corporate website, that positions the company to a wide audience, bringing together different businesses and brands. It is a print or online corporate brochure, a marketing and recruiting tool that presents your company’s scope and depth. Consider the value of having an accessible record of the company’s accomplishments, milestones and goals all in one place in one point in time, every year in the life of the company.

In a marketing sense, the annual report is your only brand building and reputation enhancing tool. Where else can you speak to the dream and vision that is your company? Yes, your road show has much of that, but every investor (and any other interested party) cannot conveniently listen to you present it. And your website, while having a part of that, has to serve too many other purposes. 

Your annual report is your only carefully crafted, deliberate mouthpiece. It serves as your CEO’s calling card for high-level discussions with customers, partners and government, uniting the company’s strategies into a cohesive whole. It is stake in the ground making the company accountable to its shareholders. Stakeholders and consumers rely on transparent accountability to develop trust. And trust builds enduring market value and long-lived institutions.

In the list of the top best run companies compiled by 24/7wallst.com, most saw the need to communicate aggressively with their investors with comprehensive, transparent annual reports. What do they know you don’t?

Listening to investor pundits and executives around the world, we find the following comments (…cherry picked for this blog):

An equity manager:           “If I were to invest in company X (big or small), for example, then reading the annual report is my first priority.”

Canadian CEO:                   “Reporting is not just about complying.”

Swedish IR Executive:        “An annual report is the most important single piece of information – externally but also internally.”

Large Ohio company VP:     “The annual report remains a powerful tool to communicate a company’s strengths and strategies to key stakeholders, even in today’s world of instant information.”

British IR Supervisor:          "With a copy of an annual report in their hands investors can weigh investment decisions with the benefit of the full picture, rather than just racing through quarterly (or daily) figures."

Managing Director:                “The Annual Report is still a pivotal communication piece in the investor communications calendar. It is an opportunity to communicate the company message, convey achievements and set outlook expectations.

Dutch Financial Researcher:    “In my view, the annual report is still the most coherent picture of a company. It presents a solid basis of the financial situation.”

Russian Communications Company: “The Annual Report remains at the core of stakeholder communications for many companies.”

Dutch Investor Relations Executive: “The Annual Report remains - assuming it is well-structured and informative - key in getting to know a company better.”

A buy-side analyst:               “The annual report still plays a big role because, first, it gives a significantly more descriptive information about the company. You get a significantly better understanding of the business risk and trends…”

CEO/Publisher:                     “Annual reports for publicly traded companies can help explain strategic positioning and financial results,  along with providing a glimpse of the vision of the executive team while outlining their credentials. Done right, this kind of organizational marketing can help attract investors, which bolsters the organization’s stock price and cash stores.”

No, annual reports are very much alive.