Corporate communicators who view the annual report as a necessary burden had better think again. Today, the annual report is evolving as more than a lofty, ubiquitous document required by the U.S. Securities and Exchange Commission. Instead, it provides an opportunity for those in PR to flex their muscles while helping structure the annual report as a new corporate buttress.
Although the cost of producing an annual report varies substantially, industry sources say that most Fortune 500 companies are likely spending several million dollars a year when all costs are factored in. Those costs include PR staff hours (including time spent by those in corporate communications and investor relations); legal guidance; editorial and financial input; outside consultants' fees; photography, creation and production costs; and mailing.
"An annual report, if done well, is one of the most dynamic documents a company has," said Jerry S. Buckley, group director, corporate communications for the Campbell Soup Co., Camden, N.J.
Campbell, which is 128 years old, has been putting out an annual report since the company went public in 1954 and relies on this report to shareholders as one of its most strategic ways of underscoring the company's brands, according to Buckley. Its glossy 1996 report, which is 36 pages, exists as a prototype of what annual reports have become through the decades: a salient financial probe that's connected to an editorial theme.
"In the past decade annual reports have evolved in several ways," said Al Bellenchia, senior VP at Edelman Financial, New York. "Primarily, that's because of the rise of institutional investing and the expanded role of investor relations. In short, many companies are putting their financial reputations in the hands of professional communicators."
Or, in other words, it's the corporate communicators and PR specialists who are helping give the much-needed perspective to the raw data that's reported by companies. Although the target audience for annual reports, specifically those in the investment community, has remained the same during the past few decades, what's also become a more likely scenario is that many more people (the press, individual customers) are also looking at annual reports to gauge the future success of a company and, most importantly, its image.
"Annual reports are no longer just about communicating financial information to meet SEC requirements," said John Metzger, president of Metzger Associates, http://www.metzger.com, a Boulder-based business which provides online PR services as well as puts together annual reports for small technology companies.
Your Annual Report Must Include:
Source: SEC |
That's because the annual report also stands as a marketing piece. And the long-revered chairman's statement - which had been regarded in some circles as fluff generated by those in the upper echelons of corporations - includes, in the 1990s, a far more honest appraisal.
"Shareholders are going to be looking for inconsistencies between the financial statements and what the chairman is saying," said Louis Thompson, president and CEO of the National Investor Relations Institute, Vienna, Va. "And there has to be some perspective on what's driving the value of the company."
What's In An Annual Report?
From a legal perspective, the annual report may be one of the most daunting tasks a company has to take on yearly since SEC requirements continue to be revamped and are about as grueling as they are exacting. If you're not convinced that annual reports are a pretty serious business, consider some of the specifics SEC regulations mandate.
According to documents given to PR NEWS by John Heine, deputy director of the SEC's Office of Public Affairs, annual report laws even delineate what size type should be used.
Other reporting requirements - in addition to the expected revelation of net sales, gross profit and income loss - also call for a management discussion and analysis of financial conditions; information about the company's industry segments; a description of the nature and scope of business as well as subsidiary dealings; and even any disputes it has had with accountants over figures and issues.
"SEC standards are always being developed," said Heine. "And businesses are always changing as well - so at any given time, the universe of companies that we're dealing with is very diverse and there truly isn't any general or broad description of what an annual report should look like."
Because of that, Heine said it's imperative for companies to look to corporate communicators, industry organizations, lawyers and outside consultants to put together an annual report that meets both SEC requirements and fulfills investors' and analysts' desires for company information. That can include touching on everything from a narrative view to data that's also found in the 10k, an in-depth document which can run about 300 pages in length.
Generally, however, an annual report will include the elements mentioned above and these other components: earnings; a balance sheet of assets and liabilities; operating expenses; shareholders equities; cash flow; and an auditor's report.
And for communicators, it's wise to see what companies that have been given awards have done with their annual reports or to defer to organizations that regularly act as an informal checks-and-balances system.
For instance, the Association for Investment Management and Research, Charlottesville, Va., has a lengthy list of criteria -including a look at acquisitions and divestments and a probe of employment costs and labor relations - it considers when evaluating annual reports.
(Campbell Soup Co., Jerry S. Buckley, 609/342-3738; Edelman Financial, Al Bellenchia, 212/768-0550; NIRI, Louis Thompson, 703/506-3570; Metzger Associates, John Metzger, 303/786-7000; SEC, John Heine, 202/942-0022; AIMR, 212/840-1661)
Resources
National Investor Relations Institute: 703/506-3570
Securities and Exchange Commission: 202/942-2900
Assoc. for Investment Management and Research: 804/977-6600
Financial Accounting Standards Board: 203/847-0700;
Metzger Associates: http://www.metzger.com;
Carl Thompson Associates: http://www.ctaonline.com