Annual Reports | Street Talk | Dix & Eaton

The Power of the Letter

Brothers and sisters... we have gathered here today to talk about the power of the letter!

When handled properly, this power can galvanize people, shape perceptions and manage expectations. This power knows no geographic boundaries. This power knows no technological limitations.

This power comes from inclusion, not exclusion... from looking ahead, not looking down... from aspiration, not recollection... the power of the letter comes from building, not from justifying.

Do you have this power?

If you have to think about it for more than a few seconds then you probably don't. And that's a shame because the power of the letter is within your grasp... shoot, for many of you, it's within your control.

Click here to learn how you can capture the power of the letter. Remember, more investors will read this piece than will meet with the CEO in a given year. Therefore, it is critical that this section of the annual report be crafted carefully to maximize its potential impact.

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The Do’s and Don’ts of the Annual Shareholder Letter

Last week, I had the opportunity to participate in NIRI's webinar on the annual shareholder letter. Given that it's generally the season for ramping up this "annual" project (pun intended), I thought I'd pass along my slide deck, which delineates some do's and don'ts - among other things - that might be helpful. Anything you'd add to either list?

(If you get a chance, try to find the replay of the panel as my fellow panelist - Moriah Shilton and Karen Fisher - were REALLY good.)

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The Best Annual Reports of 2011

There are few things in life you can truly count on:

• Death
• Taxes
• "Next year" being "the year" for any professional sports franchise from Cleveland to finally win a championship
• "This year" being "the year" that the annual report is put down like a badly injured racehorse

We'll leave the first three for another day... talk to me about the annual report... why is this communications tool a perennial on the "death watch" list of so many in/around investor relations? And, if it is so damaged, then why do reports such as these continue to be produced?

(My thanks to the folks at ReportWatch for allowing me to serve as the North American judge again this year... truly a labour of love)

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Upcoming FINEO Webinar

On July 6 at 12p (ET), I will be participating in a FINEO Investor Relations Advisors' webinar on the topic of "Combining Tangibles and Intangibles to Convey Value." Among other things, we will look to discuss: 

• The benefits of a multi-tiered investor relations strategy 
   
• How to effectively incorporate sustainability indicators in your investor presentations 
   
• The value of integrated reporting from the perspective of the financial analysts 
   
• When sustainability indicators support your growth strategy 

Also on the panel - and the real draw - will be Nikki Catrakilis-Wagner (Investor Relations) and Sven Lunsche (Corporate Affairs Manager) at Gold Fields Limited, the world's fourth largest gold mining company, as well as Niamh Whooley, Senior SRI Analyst, Equity Research at Société Générale.

I'm really looking forward to this discussion, as I continue to believe this is a topic that doesn't get paid close enough attention. Any aspects of this topic you'd want to be sure this panel addresses? 

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The time has come for one report

Hear me now and believe me later - the time has come for one report. 

Go ahead... get it off your chest... "CSR is just PR," you say. "Nobody reads annual reports anymore," you claim. "Plus, we don't really have much we can point to on this front," you mutter while looking at your shoes. 

My response to these tired retorts? Wrong. Wrong. Really?

Investors are increasingly looking for forward-thinking companies that are utilizing appropriate CSR initatives as another avenue to drive results and cultivate customer loyalty, as well as to attract and retain a strong workforce. Therefore, creating a unified report that clearly delineates the tangible and intangible contributions of CSR on the company's financial performance and, equally important, financial outlook just makes sense. Right? Eaton Corporation certainly sees it this way - take a look at this article that Eaton's Don McGrath wrote with my colleague Gregg LaBar.

I see you smirking... what am I missing?

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A world of bad annual reports themes

Based on all the notes and feedback I've received since we published our latest Report on Annuals, I have come to realize that there are A LOT of really bad annual reports out there that feebly attempt to capture the attention of investors with trite, overused themes and content that is largely - if not exclusively - backwards facing (i.e., information that's already been well covered in previous disclosures).

While we can revisit the reasons for this some other time, what I find so interesting is just how wide spread this pandemic has become. Clearly, it knows no industry sector or geographical boundaries. For example, take a look at the list that the wickedly creative folks at Collier & Associates in Australia sent me:

• Built to last
• A new era begins
• A sound track record
• A world of difference
• Building a platform for growth
• Building for the future
• + any theme that used such subjective words as "success," "focus," "value" or "commitment"

Seriously people... what's up with this?!!? Tell me how any of those themes are going to help you answer the "Why is now the right time to take/grow a position in this stock?" in a differentiated manner. Honestly - these themes say nothing and could generically apply to any company anywhere in the world - from Melbourne VIC Australia or Melbourne, FLA. C'mon, there's got to be higher ground for which we can strive.

Can we - as a global IR Community - make this year the year we put an end to the needless slaughtering of innocent annual reports?!!?

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A Few of My Favorite Things

Okay boys and girls... here's a pop quiz for you this Monday morning: What's the last thing the investor relations community needs? RIGHT, another (meaningless) awards competition.

Seriously, how many competitions does one industry need? RIGHT, one more!

So, without further ado, I'd like to share with you a few of my favorite things and hand out this first annual "ROBBIE" awards for random acts of investor relations...

BEST INDUSTRY BLOG: Corporate Governance Leaders is a must read.  A tremendous resource for insight and opinions on the ever-changing governance landscape from some of the sharpest minds around. 

BEST IR WEBSITE (non-client division): I honestly can say I've seen a marked improvement in IR websites over the past year. That's not to say a healthy percentage have a long way to go (and you know who you are), but it's been nice to see folks view their websites as more than just an online repository for news releases. If I were to pick a favorite IR site from the past year, I'd have to go with Cisco. Great and intuitive template. Rich with meaningful content. Great incorporation of social media tools (if you're into that sort of thing). Nice to see the shoemaker's children not going barefoot!

BEST IRO (non-client division): pound-for-pound, you'd have to look long and hard to find an IRO that brings more to the table than Evergreen Solar's Mike McCarthy. Much like Peyton Hillis is to the Browns' running game, Mike brings the same intensity and versatility to his position day in and day out. An army of one, he is thorough and thoughtful in his work and equal parts advocate and defender for his company. Not one to self-promote and serving on behalf of a small-cap company, it is understandable if you don't immediately recognize his name. Believe me when I say his investors know the name and hear from him constantly (if you get a chance, you should ask him to send you a sample of the email he sends out with his earnings e-blast - brilliant customer service). And trust me when I say this profession could stand a few more practitioners like Mike McCarthy in its ranks. 

BEST INDUSTRY CONTROVERSY: Web disclosure - by a landslide. And how perfect a topic for a mid-term election year as Web disclosure allowed the IR community to call each other names and stretch the truth like real political candidates. What drama! What fun! What the... ?!?

BEST NEW BEST PRACTICE: Selfishly, I'd like to say the best new IR "best practice" is to realize that there isn't such a thing as a best practice in IR for the simple fact that, if it doesn't serve your unique investor base effectively or efficiently, then why in the world would you bother? Since I suspect I'm alone in that thinking, then I'd have to give the ROBBIE to reconnecting with the retail community via new technology (e.g., virtual investor conferences, social media). Among other things, an engaged retail base can be a tremendous asset to a company during a heated proxy contest. Technology affords companies the opportunity to reach its retail investors in ways it could never before, thus creating a real "win-win" situation. At the very least, technology puts an end to the argument that there just isn't enough time (or budget) to serve this audience.

BEST PRESENTER @ INDUSTRY EVENTS: Does anyone present more - or presents better information - than Darrell Heaps of Q4 Websystems?!? I highly doubt it. Darrell always brings a fresh perspective to the somewhat cluttered debate on "IR on the Web" and does so in an easy-to-understand and easy-to-apply manner. If you are one of the four people in North America who has never heard/seen Darrell present, make that a New Year's resolution for yourself in 2011.

BEST IR TWEETER: I thought about this one a lot on my walk this morning... honestly, there is a lot of good information being shared on #IR and #corpgov on Twitter.  And, seriously, what else would you be doing at 11a (ET) on Thursdays than participating in #irchat (thank you for this gift that keeps giving, @meetthestreet).  But - at the end of the day - no one quite gets the IR folks on Twitter all a'twitter like the undisputed champ of the "virtual bar fight" Dominic Jones. He's relentless... he's passionate... he's judgmental... he's inflexible... he's coarse... he's volatile... he's wrong as much as he's right... and, like the Energizer bunny, he keeps going and going and going... in other words, he's a great read. Also, he's the one person on Twitter that causes folks to send me notes saying, "Did you just see what Dominic said about (usually about a wire service)?" For that reason alone, this ROBBIE goes to Dominic.

BEST ANNUAL REPORT (non-client division): As some of you know, I'm a bit of an annual report junkie. I try to read as many each year as I can - I simply love the balancing act between the creative and compliance. There were a lot of great reports this year but the most recent report by Daiwa House Group continues to rise above the rest for me. Well-conceived creative approach that amplifies the company's core messaging to investors. More than merely a compliance piece with redundant historical data, Daiwa put together a vital educational piece for investors that also brings the company's overarching brand to life. LOVE IT!

Now, before I announce the winners of the "Best NIRI Chapter" award and the "Best Earnings Release" award, let's take a break and get a word from our sponsors. In the meantime, I'd love to hear what categories you'd like see covered and/or last-minute nominees for categories already covered

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If Todd Combs reads them…

Time will tell if people will follow Todd Combs as intently as they reportedly did E.F. Hutton but this piece from The Wall Street Journal (27-10-10) certainly made me sit up straight in my chair. Very interesting look at the heir to Warren Buffett, including this morsel (bold added for emphasis): "A photograph of his family is prominent on his desk, along with tall piles of research materials and annual reports." 

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Why Report On Annuals?

Last week, my firm issued its 2010 Report on Annuals. Among other things, the piece is intended to help companies get more out of this “annual” project - from themes to avoid (e.g., “Well-Positioned for Future Growth”) to the potential of online and more.

I might be old school, but I don’t understand why so many yearn to kill the annual report as a communication tool. Yes, investors can access financial data more quickly through other channels… but they can’t access management’s view of the near-term competitive landscape, long-range growth opportunities and performance against plan more quickly than through a well-crafted annual report. Yes, it’s less expensive to simply update website content… but what’s the opportunity cost of limiting the growth potential of management’s credibility that can be nurtured through a consistently clear and candid annual report content. Remember: when you update a web page, the old content disappears - unless you’re Angela Bennett - while annual reports can be compared and contrasted year-over-year by investors to gauge strategic focus and progress… huh… maybe that’s why folks are trying to kill the annual report!

If you are a non-believer of annual reports, I’d love to hear your rationale.

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Best Annual Reports of 2010

The good folks at Report Watch by e.com have just issued their 2010 Best Annual Reports piece. Interesting view of the world of annual reports from this London-based “organisation” - definitely worth clicking through when you have a moment.

This was my first year serving as a judge for this report and I can honestly say I was completely blown away by the quality of annuals I saw - from content to creativity. These were true investor education pieces… these companies were using their annual report to assert their distinct value proposition… these reports were strong and proactive pitches to the investment community… these reports were built to make an impact, not meet a compliance… these reports also contain rich CSR content that global investors seek… take a look at the report and see for yourself.

I will tell you this - after reviewing the books I reviewed - I find it hard to believe the talk of the printed annual report going the way of the Betamax is anything more than just that - talk. Be interested to hear your thoughts on this report and annuals in general.

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