Corporate reporting might not seem like the most innovative subject. After all, regulators want their filings, while investors and analysts are just looking for the numbers, right? Wrong. As documents have moved online, a wave of new corporate reporting trends is allowing companies to show off much more than their profit margins or net debt to EBITDA. Instead, investors can now get a view of the company through videos of the CEO in the field, embedded into a streamlined annual report that can be viewed offline in a dedicated app.
Spring cleaning the annual report
As new regulatory requirements and disclosure policies have come into effect over the years, many annual reports have ballooned in size. Certain industries – particularly the financial sector – have been under added pressure to reveal all since 2008’s financial crisis, with some banks offering up reams of reporting at the end of the fiscal year. HSBC’s mammoth 2013 annual report stretched to 596 pages, for example.
Now, however, some companies are battling the bulge. During research for this year’s Investor Perception Study – Europe 2014, a number of IR professionals told IR Magazine they had been working on cutting down the length of their annual reports.
One such company is German insurer Allianz. ‘We have made the annual report shorter – but not less significant, of course,’ says Oliver Schmidt, head of investor relations at what Forbes estimates to be the world’s 25th-largest company. ‘We have significantly cut it without losing any information value, and this was really appreciated because it is now far less cumbersome to go through, and you still get the same information but better structured, more focused.’
Allianz is not alone. Catherine James, investor relations head at UK beverage giant Diageo, notes that her company is in the process of slimming down its annual report by at least 20 percent, with plans to continue cutting for the following year.
‘I think a lot of people are reducing [page volume],’ explains Richard Carpenter, managing partner at MerchantCantos. ‘Companies are realizing that over the years annual reports generally tend to grow in size, accreting baggage from various departments, so every now and then you really need to cut them back.’
While larger companies and those in more complex industries can clearly only go so far in slimming down their annual reports, others can get creative and put it all on a broadsheet or a single infographic, or even post their report on Instagram.
Talking heads
‘One of the things we’ve seen with our clients is that when they’ve scaled back the printed version – when they’ve departed from a traditional annual report – they’ve done more in their online version,’ says Nina Eisenman, president of Eisenman Associates. And the big trend in online reports? Video.
Citing member-owned agricultural co-operative Land O’Lakes as an example, Eisenman explains how the printed version of the company’s 2013 annual report included the usual letter from the chairman and CEO and accompanying photo, while the online version ‘had the text of the letter but then also a video of the CEO presenting to all of the stakeholders at a big conference. So [the video] wasn’t redundant: it wasn’t just him reading out the letter. It was additional, supplementary content that would be of interest to those stakeholders.’
And while you might expect consumer brands or tech firms to lead the way when it comes to spicing up annual reports with video, Eisenman says the medium appeals to companies across the board. ‘We posted a list of the 24 Fortune 100 companies that do , and you can see that it’s such a mix,’ she notes. ‘Coca-Cola: a consumer brand; FedEx: sort of a consumer brand. But then you’ve got Goldman Sachs, Liberty Mutual, Etna, Citigroup – a lot of financial services firms, in fact – and also GE, Ford, General Motors, certain oil and gas companies, technology firms and companies like Caterpillar.’
In fact, the almost 25 percent of Fortune 100 companies that use videos in their 2013 annual reports represent a 15 percent year-on-year increase, Eisenman continues. ‘Most companies start by dipping a toe in’, often repurposing existing assets, she explains; after that, ‘it seems that once a company has tried [video-enabled annual reports], it will expand on them the following year.’
So as a growing number of companies seek to enhance their annual reports, what’s the future for video-enabled annuals? ‘I think it’s going to be about the quality of the video itself,’ says Eisenman, ‘going from a very homespun, DIY, ‘shoot the chairman in the conference room with a blue screen and a teleprompter’ style – one that’s not very engaging – to videos with higher production quality.’
And don’t forget the story, she adds. Companies should aim to produce ‘video that captures more of the essence of what the company is about, such as shots from factories around the world if the company is expanding globally, for example, and that really communicate the company well.’
Get the picture
Another growing trend is the use of infographics, says Carpenter. ‘One approach to [reducing the length of the annual report] is replacing lots of text with infographics, [which] I think are really coming into their own,’ he states, explaining that while the use of infographics is already big in the US, it’s now taking hold in Europe.
Jeff Sindone, director at MerchantCantos and Carpenter’s stateside colleague, agrees. ‘Companies are recognizing the power of data visualization,’ he says. ‘Stakeholders are inundated with information, and companies recognize that there must be a better way to present and digest information – infographics make complex business information more accessible.’
Creating what he calls a ‘visual dashboard’ allows investors to see data in a different format, explains Sindone, and while they won’t necessarily replace the charts in the annual, infographics do allow investors to see ‘the story in a new and visually compelling manner’.
Sindone also offers some advice that echoes Eisenman’s video tips. ‘Don’t just think about translating data into visual icons,’ he suggests. ‘Instead, think strategically about the story you want to tell and how the visuals can support your messages. It is also important to consider the application for the infographic and how it will be used across different channels, including social media and both digital and printed materials.’
Improving the proxy
It’s not just annual reports and quarterlies that are getting a makeover. ‘Companies are starting to include a little more design in their proxies,’ says Eisenman, especially as annual reports are being scaled back. ‘Now you’re seeing more branding on the covers [as well as] QR codes that link back to online reports.’
One company that’s been spearheading the proxy revolution is Coca-Cola. Gloria Bowden, the firm’s associate general counsel and corporate secretary, says it all began around 2011. ‘We thought there was an opportunity for [the proxy statement] to be more than just a legal document and to be more of a communications document,’ she recalls.
‘It’s the only time every year that we really get to talk to all of our shareholders – and we now have about 2 mn of them – so we thought we should take the opportunity to really communicate with them in a clear way about some of the things we’re proud of around governance, to clearly communicate our compensation and to really highlight some other things that are not necessarily legally required.’ As part of this, Coca-Cola used QR codes on the back of its proxy statement last year and also linked back to its snazzy Coca-Cola Journey website.
‘On the topic of branding, you’ll notice in our proxy that we use a lot of bubbles, we use a lot of red, we use the Coca-Cola bottle in different ways – we’ve got the bottle caps on the page numbers, for example,’ Bowden adds.
As well as seeking to improve brand recognition in the proxy, Bowden says the idea was to simplify the document for the company’s shareholders. In talking to our investors, we know that they are very busy around proxy season,’ she continues. ‘They have to vote a lot of shares. We also know that they take voting very seriously, and they want to vote on the basis of all the information available. So one of our objectives was to make it easier for our investors to find the information they need. They may or may not agree with us, but they can find [that information] and they can understand it.’
Coca-Cola’s most recent proxy statement saw the mega-cap company replace the traditional chairman’s letter with one signed by the entire board as well as a Q&A with chairman and CEO Muhtar Kent, ‘based on a lot of questions we had heard routinely throughout the year,’ says Bowden.
While largely seen as a response to shareholder opposition to the company’s compensation policy (a response that worked), this was also a first for US disclosure, said Iain Poole, a disclosure consultant with SEC filing specialist Labrador, in an interview in the Summer 2014 issue of Corporate Secretary, IR Magazine’s sister publication.
The director nominee summary and back cover from Coca-Cola’s 2014 proxy statement, showing the company’s use of branding, infographics and QR codes. Click for a larger image
All in one
There is some debate around the use of IR apps, but an increasing number of big-name companies – including Unilever, Marathon Oil and Kingfisher – have decided to offer investors and analysts this touch-of-a-button access to everything from stock prices to a library of annual reports. Indeed, when it comes to corporate reporting, an app offers some unique advantages while also combining all the emerging trends in one place.
‘Our view is that corporate apps should be used to provide access to multiple years of corporate reporting,’ explains Darrell Heaps, founder and CEO of Q4 Web Systems. ‘These types of apps should provide the ability to read any of the reports inside the app, as well as the ability to download them as PDFs. Other key features we recommend include offline viewing of documents, a built-in document reader with page thumbnails and bookmarks, keyword search, emailing and sharing.
‘Push notifications are another very useful aspect of mobile apps – more so on apps designed for phones, as you always have your phone ‘open’ compared with a tablet that is normally ‘closed’ unless you are currently using it.’
But you don’t need a dedicated download from the App Store or Google Play to make an app work for you, explains Heaps. Of the 200 or so mobile apps his company has created – up from just a handful two years ago – ‘the majority are deployed through the browser, and don’t require downloads’. This option has turned out to be ‘much more popular,’ he says.
In a blog post earlier this year, Heaps stated that according to Q4 Web Systems’ research, ‘25 percent of investor traffic on IR websites is coming from mobile devices. The commonly held opinion of Q4 and others in our industry is that this growth is well on [the way] to more than 50 percent in the next 12 months.’
So with or without an app – whether downloadable or web-based – Heaps says mobile use is permanently changing the way the investment community interacts, and that ‘corporate reporting will never be the same.’
