Last month the normally sedate world of financial reporting was rocked by its very own revolution. There is no reason to suppose that accountancy is any less prone to e-fever than any other business sector, and with the whole world of commerce busily embracing e-business, it is perhaps not surprising that proposals by Martin Scicluna, the chairman of Deloitte and Touche and chairman of the Working Group on Financial Reporting, for using e-mail to disseminate company results caused such a frisson. What seems beyond all doubt, however, is that this latest proposal signifies the death knell for the annual report, as we currently know it.
For a long time,
the lot of the private investor has not been a happy one. Most
regulators have privately admitted for years that the system of
financial news dissemination and reporting has been biased against the
retail investor. The small shareholder has, for the most part, received
market-sensitive information well after it is sent to city
institutions. Historically, the private investor had to wait for up to
two months until the arrival of the annual report for information that
was given to buy/sell side analysts at the preliminary announcement.
With information being the lifeblood of any financial market, this
timing was deemed unfair and flew in the face of developing best
The Internet has changed all this, levelling the playing field for all investors; Scicluna is determined to embrace it. His idea, which is not terribly revolutionary, is that the preliminary announcement from a company becomes the statutory document for shareholders, and that it is released simultaneously to everyone by e-mail.
The idea seems to make perfect sense. According to research by the International Accounting Standards Committee, shareholders "increasingly use the Internet not only for trading, but also for research." And there is no reason why companies should not make information more accessible, transparent and understandable through Internet form.
The Committee's proposal follows from a discussion paper released by the Accounting Standards Board called Year-end Financial Reporting: Improving Communications. This paper identifies the Internet as a way forward and, in particular, highlights the way its technology can be used to such great effect to link information. Hyperlinks, for instance, can be used to allow users to jump automatically between connected issues and topics allowing the reader far easier access to a much greater depth of information. Accountants have long acknowledged that the real meat of any annual report lies in the notes to the accounts, though, for the most part, these have been impenetrable for the retail investor. The Internet, however, makes them more readily navigable and easier to understand by linking explanation, related numbers and topics in a seamless way.
But where then does this leave the dear old annual report? Well, if the proposals become law, pretty much high and dry. With the emphasis shifting to the preliminary results, the full story will still be told in the annual report, but it will not be the annual report as we know it. This will become a filing document, required within 90 days after the year-end. The only printed document shareholders may elect to have is a simplified glossy version of the financial information, not unlike the current summary financial statements, which will be sent to them at a later date.
We at Addison have been predicting this change to annual reporting
for a long time now. Last year our two published thought pieces:
"Naturist or Veiled? Corporate behaviour for the next millennium" and
"I Relations - investor relations on-line" reflected upon both the
drivers of this change and suggested practical ways for companies to
The whole way in which traditional design agencies add value to their clients has been evolving for many years. To a client it is now important that the company producing their annual report knows as much about their investor relations programme as about kerning type. No longer can you sit across the table, as was once related to me by the corporate communications director of FT-SE 100 company, and reveal your na vety by talking about FRs3 (an accounting standard) as if it was some new form of Pantone reference.
Many of the disciplines employed by advertising agencies: research, planning and analysis, have now been imported into the traditional design company model, by employing people with new skills. This has allowed them to branch out into the wider world of corporate branding; equipping them to respond effectively to the increasing needs and demands of clients.
But all this requires considerable investment and is obviously easier with the backing of a large group. Over the last few years, many of the independent design companies have sought partners to ensure the funding for growth, (e.g. Addison acquired by WPP, Pauffley by Omnicom, Lloyd Northover Citygate now part of Incepta). Major competitors in the annual report market like CGI and Bamber Forsyth have established corporate identity offers, and Merchant, part of the public relations giant Brunswick, even went as far as dropping "design" from their name. For those that have adapted to build a broader corporate marketing offer, the forthcoming changes to the annual report pose little threat; they are merely another part of the long developing trend of stakeholder power.
The stakeholders - now a more diverse and powerful community -
expect greater transparency from companies. They want communications
that are clear, convenient and ongoing. They want brands and businesses
they can trust. This puts an even greater onus on companies to
establish a more effective dialogue, whether through on-line
communication or through more traditional media.
The much-heralded information superhighway has arrived and McCluhan's "global village" has become a reality. All this means that corporations are exploring new ways of tailoring their communications to suit different stakeholder needs. This has become more demanding than their existing communications programmes and has created numerous opportunities for creative consultants. In the last two months alone we have been employed to carry out a positioning programme for a major Internet bank, create an IT-based business re-engineering programme, launch a new product into continental Europe, create a corporate advertising campaign for a North American insurance company and build corporate web platforms for three mid-cap companies. And we are still perceived by some as an annual report specialist.
There is little doubt that the corporate information that stakeholders have received within the traditional annual report has become stale and does not take account of real worth or what is important to the broader stakeholder base. The mode of dissemination is out-dated. In the last two years, the playing field has levelled, the goal posts have moved and a new set of rules has been introduced. Time will tell who the new winners will be, both in the corporate marketplace we serve, and amongst the creative agencies themselves. For some, scary times; for others though, an opportunity to test whether Charles Handy's advice, that "the way you make sense of the future is by taking charge of it," pays off or not.
About this article
The above article by Quentin Anderson originally appeared in the June issue of Creative Review (Volume 20, No. 6) and appears here with permission. For more information about Creative Review e-mail the editor at . 2000 Creative Review.
About Quentin Anderson
Quentin Anderson is managing director of the London design consultancy, Addison.
About Creative Review
Creative Review is the leading international monthly magazine for the communication arts. Each month it covers the best new work, analyses the latest trends and profiles the hottest names in graphic design, advertising and the related craft industries. Annual subscriptions (12 issues) cost 46.97 (UK), US $130 (US, Canada), $95 (elsewhere). In addition to the magazine, subscribers receive a DVD twice a year and a free subscription to Creative Review's website. For more details e-mail .