Shareholder value vs stakeholder value

We’ve posted a couple of blogs recently about the purpose and content of annual reports.

The first reflected on the report produced by the Financial Reporting Council (FRC) and the Accounting Standards Board (ASB) about why so much stuff goes into annual reports and what companies can do about it:

http://www.wearezephyr.com/blog/2011/04/14/cutting-the-clutter/

The second was a reading between the lines of the IR Society’s letter to the FRC about their consultation ‘Effective Company Stewardship – Enhancing Corporate Reporting and Audit’. The letter seemed to imply a diminished role for annual reports when it comes to shareholders.

http://www.wearezephyr.com/blog/2011/05/04/what%E2%80%99s-the-purpose-of-annual-reports/

Since writing, the debate has continued at Zephyr as we delve further into who the audiences really are for annual reports today and what exactly they want from these publications.

Over the last five years or so more and more content has been introduced to annual reports some driven by regulation, much by so-called best practice, and a great deal as a consequence of just following suit. But for many companies the intent has also been to satisfy the needs of a broader set of stakeholders other than shareholders.

This has perhaps been to the detriment of producing an annual report that effectively answers the question, why invest?

Of course, investors should be interested in enhanced content on risk management, sustainability, corporate governance, strategy and marketplace. But are they really interested in ALL of this content and aren’t they already getting this information elsewhere? (A point the IR Society’s letter makes.)

Shareholders are subject to fairly involved on-going communication and investor relations programmes, giving them access to similar if not better content/detail than an annual report provides. They also have opportunities to meet with senior management and board members. So it’s not surprising the IR Society doesn’t think an annual report should contain any surprises. Shareholders should already have heard it all before.

So why pack out the annual report? Why not put it all on the corporate website? Particularly when, whether we like to admit it or not, content from one annual report to the following one is quite often being repeated, if tweaked.

But where does this leave annual reports if the corporate site takes over?

They could go back to communicating again, perhaps even contain a few surprises, become a publication that’s anticipated because they provide an insightful, succinct view of the business that is supplemented by all the gritty (regularly updated) detail available on the corporate website.

We could then produce annual reports properly built for a broader audience. Now that really would change the communication approach.

We’re interested to see one of the headline debates at the upcoming IR Society conference is ‘Shareholder value vs stakeholder value’. Therein they’ve captured the dilemma of IRs and corporate communicators today about where audience priorities lie, overlap and conflict. A dilemma we think is readily overlaid onto annual reports.