Regain Credibility with an Annual Report That Shoots Straight

It's Annual Report season for most public companies as they begin the months-long process of preparing a report on CY 2002 for completion sometime in the spring. Most internal PR departments play some role in collaborating with the CEO, CFO and IR professionals on their organization's most invaluable tool for communicating with shareholders. We turned to Greg Powell, SVP and GM at CTA Public Relations in Louisville, Colo., for some sound advice on how PR should counsel senior executives and other members of the annual report team. Powell's firm has written more than 100 Annual Reports, and Powell shares his counsel on how to help create a report that will grab shareholders' attention and regain their trust. As Corporate America heads into the home stretch of 2002, communications professionals working for public companies will probably be facing the following highly sensitive question coming down from senior management: "With the spotlight of public scrutiny glaring down on CEOs, coupled with our less-than-stellar financial performance this past year, not to mention our stock price, how should we approach our 2002 Annual Report?" Despite some misconceptions, the Annual Report remains the most important communications tool between a company and its shareholders. It is true that the financials are old news by the time the Annual Report is printed. But the Annual Report provides shareholders with a tone and "feel" from the company that an earnings release cannot accomplish as effectively. And yes, studies indicate most shareholders spend only three to four minutes reviewing the Annual Report that took hundreds of hours to prepare over many months. For this reason, we hear more and more from CEOs, "Why should we spend money on an Annual Report when nobody reads it anyway?" The answer is: "True, most don't read it, but they do skim it, and they form their perceptions from it. You have three to four minutes to get your message across, so get to work." And this year, rebuilding your company's credibility and trust with your shareholders should be a top priority. Honesty is the Best Policy Let's face it, as a public company, credibility is your most important asset. This asset won't be found on the balance sheet. If shareholders don't believe what you say, they will simply stay away from your stock. So use the platform of the Annual Report to shoot straight. Be honest. Tell shareholders it was a disappointing year and why. Then tell them what your strategic plan is going forward. Talk candidly about the challenges in your market and your industry. But don't just hide behind the poor economy. Own up to where your company made mistakes or could have done better. Investors don't expect you to be perfect, just honest. The Annual Report is not the place for marketing language, full of hyperbole and glowing adjectives. Rather, it should be a fair, balanced assessment of where you have been, where you are going and how you plan on getting there. One technique to accomplish this is to have in the letter to shareholders a subhead entitled "Challenges" and another dubbed "Opportunities." Under these headings, you can honestly address your positives and negatives with a credible tone. It provides a framework for communications. Cutting Costs Your 2002 Annual Report also is an opportunity to communicate with shareholders that your company is cost-conscious during these challenging economic times. Over our 17 years in business, CTA Public Relations has seen many a CEO grilled by a shareholder holding up the latest Annual Report at the annual meeting and asking, "This looks like it cost us a bundle to much did you spend on it compared to last year?" Work with your printer to find printing techniques that can streamline costs. We've seen Annual Report costs reduced by as much as 20 percent by changing the way the report is printed. Other ways to save money include cutting back on the number of photos, the amount of text and the number of pages. Less is more. Most shareholders can't absorb it all anyway, so keep it simple, brief and honest. For more information, see or contact Powell at 303/665-4200,

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