“Twenty pages on remuneration? That makes me sick”

Transparency, said Erik van der Merwe, has never destroyed a company. “But lack of transparency has.”

Van der Merwe (photo left), jury member for the Netherlands’ coveted Sijthoff annual report prize, was one of three expert speakers at Stampa’s Annual Report Event last week. Sharing the podium – and some lively repartee – with him were corporate governance guru Paul Frentrop (right) and Paul Koster, new head of the Dutch shareholders’ association VEB (centre).

The theme was Annual reports: yearly headache or company calling card? and the speakers shared illuminating insights into the why, how, what and ‘for whom’ of annual reports as well as a mass of practical advice.

Comparing a 60-page report from 1973 with a recent 400-page tome, Paul Frentrop said annual reports had become illegible, unintelligible and primarily served internal control purposes.

“The closing of the book year is the most dangerous time for a company,” he noted, citing several accounting scandals that broke just before companies’ annual reports came out.

Firms should use annual reports as external communication tools to explain clearly to the outside world “what’s really keeping the company busy,” he advised the audience of corporate communications and investor relations professionals at Amsterdam’s Muziekgebouw aan ‘t IJ concert hall.

Beyond box-ticking

That plea for shorter, clearer, more readable reports was echoed by Van der Merwe. Rather than a necessary evil or box-ticking exercise, Van der Merwe said annual reports were a golden opportunity to give insights into a company’s strategy, decision-making, performance, dilemmas and much, much more.

Offering the guests a series of practical tips, Van der Merwe said annual reports should be more concrete, meaningful and succinct. Much could be deleted, shortened (“Twenty pages on remuneration? That makes me sick”) or placed instead on the company’s website.

The most important word, he said, was transparency. “For years, the Sijthoff jury has been advocating greater transparency in annual reports. We’ve partly succeeded – but we’re not there yet.”

“Why the secrecy?”

VEB chief Paul Koster also urged companies to open up more. He argued that annual reports are useful snapshots in time yet are often too little, too late in today’s dynamic digital world.

“You can’t wait for the annual report. The world is moving too fast,” said Koster. “I’d like companies to communicate more regularly about how things are going – maybe even issuing trading updates every month. Why the secrecy? Investors want to know.”

The talks triggered a lively discussion among the audience and speakers on areas including integrated reporting and the relative virtues of different annual report formats. Opinions varied widely and everyone came away with substantial food for thought rather than (thank goodness) cookie-cutter solutions.

One thing’s for sure: we at Stampa endorse the call for clear, compelling, concise annual reports as part of a consistent regular communications process. Whether you see your annual report (wrongly) as a headache or (rightly) as a calling card, good communication is a year-round necessity.

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