The Annual Report -- too often a branding opportunity lost

Investors, regardless of their experience, place higher value on public companies with attractive annual reports than on those with reports judged less attractive. This is the finding of recent University of Miami study into investor behaviour.

The study found companies with annual reports that featured more colour are perceived to have higher annual revenues than those with more pedestrian designs. To ensure that the actual financial statements didn’t sway perceptions, respondents were shown the first few pages of two annual reports with the same financial information.

Students priced the shares of a firm with the more attractive annual report 70 percent higher than the shares of the company with the less attractive report. Among the general population the more attractive report solicited a guesstimated valuation of +7 percent. The study suggests that even experienced investors linked the use of colour in an annual report to an improvement in the company financial picture from the previous year. I hope that there are some CFOs taking notice.

Over the last decade there has been a general “slimming down” of annual reports. Electronic communications and the internet have broadened access to information. So, saving dollars on the planning and production of a glossy annual report is now conventional wisdom. One CFO to whom we spoke rationalizes the practice with this comment, “Much of the information is known by the time the annual report is published.” In my view, this is an extremely narrow view of the role of the annual report and represents an opportunity lost for brand building.

The annual report is the one opportunity each year from a CEO to tell the company story the way he or she wishes it to be told, unfiltered by commentators, investment advisors or social media spin from disgruntled stockholders. Rather than shrinking its role, enlightened CEOs should be looking toward the annual report as an opportunity to win hearts and minds. Not only should they be telling their story and spelling out their vision in print, in both words and pictures (colour pictures), they should embrace social media platforms such as YouTube, LinkedIn and Facebook to help them. When adding colour to the printed page alone increases the positive perceptions of a public company, imagine what could be accomplished for the company’s brand with a creative approach to integrating the CEO’s message into the corporate website — beyond a downloadable PDF — and using social media.

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