IR Guide - Sept 2009
- 1. GUIDE September 2009 The annual report in the age of social media Embracing online communications Why annual reports still matter Changes in retail voting The wider use of e-comms Paper still packs a punch
- 2. Contents Social revolution Social Making the most of the digital age page 2 revolution W Still valued hether it’s rapid obsessions; they are here to stay. The appeal of the advances in social The advance of social media annual report page 4 media, changes to does not, however, mean that tried disclosure regulations – including and trusted methods of communi- Disclosure notice and access and the new cation need to be thrown out of the rule changes ban on broker discretionary voting window. Instead, the right objective The impact on – or the impact of the current should be to coordinate historically retail voting page 6 worldwide recession, the world of important modes of communica- IR is undergoing intense change. tion, like the annual report, with the New ways to share But there’s one thing that power of the internet, and the reality Beyond Facebook hasn’t changed: the need to clearly that the web is both the world’s and Twitter page 8 communicate a public company’s fastest and its longest-lasting mode value proposition with investors, of communication. Print still vital potential investors and the financial The power of paper community at large. Now, perhaps New opportunities page 10 more than ever, the print and online While many of us marvel at Sponsor’s statement annual report can play an essential the web’s power to provide nearly page 12 role in achieving this goal. instantaneous two-way communi- The social media revolution is cations, the stark reality is that the behind us, and the revolutionaries web’s massive digital databanks have won. For investor relations mean any communications posted professionals and corporate com- – whether a press release, blog com- municators alike, it’s high time to ment, tweet or annual report – will accept and adjust by identifying the remain there, possibly even forever. best ways to mix social media into It’s this dynamic more than traditional corporate IR programs. anything else that mandates that Social media can no longer be ruled everything posted on the web out as simply fads or kids-only must consistently communicate a 2 IR GUIDE The annual report in the age of social media
- 3. company’s accomplishments, invest- As the cover of Pulte ment thesis and vision for the firm’s Homes’ annual report makes future in the best and brightest light. clear, the company wants to Moreover, opportunity now emphasize a CSR message. On the exists to spread a company’s investor front page, one of the company’s communications, including the homes is shown surrounded by trees, annual report, further than ever with a tagline reading: ‘Delivering on a before. Investors who find a report responsible strategy’. they like can quickly and easily share it with thousands of like-minded ence of the individual social media by sharing your materials with his people. Of course, that speed of outlets, from Facebook, LinkedIn, or her friends and followers. In transmission is a double-edged blogs and Twitter to content-sharing other words, social media are not sword: weak reports can spread just platforms like YouTube, SlideShare just about how the IRO tells as quickly and easily as strong ones. and Docstoc. For the first time, the company’s story; they are also Amplifying the power of the the individual has the true power to concerned with how non-affiliated web is the enhanced user experi- become your company’s evangelist third parties spread the story. Over the last three years, the Sustainable printing evolution of the web has clearly With so many stakeholders connected through social networks, accelerated. Facebook opened to corporate reputations have become more and more fragile. the public in September 2006, the One way to boost your credentials is to print your annual same year Twitter was created. A report using environmentally friendly paper and printers. March 2009 report from Nielsen The Forest Stewardship Council (FSC), an independent, Online shows 67 percent of the not-for-profit organization, certifies that your paper has come global online population uses social from a sustainable source. Safeway, Medtronic and Regency are networks and blogs, up from 58 per- all companies that have printed their annual reports on paper cent in March 2008. When it comes certified by the FSC. to spreading your message online, social media cannot be ignored. ● The annual report in the age of social media IR GUIDE 3
- 4. Still valued I n a fast-moving online world, investors with an investment the annual report may seem horizon of three years or greater, Print redundant, and it’s certainly the proportion who find the annual true that print runs are down. report useful for tracking their runs may be NIRI’s 2008 annual report survey portfolio rises to 80 percent. This down but investor finds the greatest proportion of demonstrates that, as the investment interest in the respondents – 35 percent – printed horizon of investors increases, so annual report fewer than 10,000 copies of their does the value of the annual report. remains high most recent annual reports, up from 20 percent in the 2006 survey. An opportunity to The value of the annual report address volatility to investors remains high, however. The annual report can help compa- Rivel Research Group monitors the nies attract and retain long-term habits of investors in its annual study, investors at a time when global ‘Perspectives on the US buy side’. equity markets continue to be This year’s study, which questioned volatile. Market commentators are 232 buy-side professionals by still arguing over how long the telephone, reveals that 70 percent economy and stock markets will of respondents think the annual take to truly get back on track. report is helpful when making In the meantime, the annual the decision to buy a stock. report offers a way to sideline Furthermore, 69 percent of short-term volatility in share prices respondents say the annual report and reach out to longer-term is helpful for keeping track of stocks investors with a compelling strategy once they have been purchased. for the future. And social media Notably, long-term investors technology gives IR practitioners value the annual report even more a great new tool to achieve this, as highly. When Rivel separates out it hands companies the opportunity 4 IR GUIDE The annual report in the age of social media
- 5. Perspectives on website is a significant influence on bolsters stock performance when the US buy side their decision to buy or sell. the hedge funds are dumping, the Proportion of investors The web is also key to attracting activists are shorting or Wall Street who say the annual report another type of long-term investor: analysts are downgrading the stock. is useful for: the retail shareholder.The popularity It is the long-term investor that 70% 69% of shareholder forums on Yahoo! – perhaps most loudly – the print Finance shows how important the and online annual report speaks to. internet is for private investors when The truth is, most savvy IROs are picking stocks. In addition, an SEC well aware of the annual report’s 38% survey released last year finds more value in this regard. ● Monitoring a portfolio Making a buy decision than 50 percent of retail investors Print run trends Noticing a stock use the internet to help them make investment decisions. Proportion of annual reports with a print run Loyal supporters of less than 10,000 Just as the internet age spawned Reason 36% the catchphrase ‘sticky eyeballs’, in Source: Rivel Research Group reference to the desire of content providers to build relationships with to spread the annual report – and its users who spend a long time on 22% investment story – to many more a website and repeatedly return, 20% current and future stakeholders. public companies must engage their Previously, you may not have equivalent: the long-term investor. considered buy-side investment It is the long-term investor that professionals to be the main audi- doesn’t get scared off by short-term 2008 2006 2004 ence for your corporate website. volatility – which continues to In fact, 76 percent of respondents increase with the spread of so-called Source: NIRI to Rivel’s research say the corporate high-frequency trading – and who The annual report in the age of social media IR GUIDE 5
- 6. Disclosure rule changes F or the past few years, notice Issuers with smaller numbers of and access has been a hot shareholders have less reason to sign New topic as investor relations up, as incremental costs associated regulations professionals sought to identify the with the adoption of notice and are increasing best communications mix to achieve access often negate the savings on the need for firms their company’s goals. smaller print runs. to communicate Under the new rule, while issuers In addition, there is evidence effectively must now post proxy materials that notice and access lowers retail with the including the annual report online, voter participation in shareholder retail base companies have the option of resolutions. As retail shareholders initially mailing shareholders only generally vote with management, a notice about how to access this would hand more power to materials, instead of a full hard copy. institutional investors, including The economic situation has activist shareholders. made this decision even tougher as companies struggled to find cost Ban on broker savings across the board at the exact discretionary voting moment when communications and This year’s big regulatory change outreach were perhaps most impor- may be even more important to tant to keeping investors in the fold. IROs, particularly with respect to As of May 21, 2009, only 12 the impact on retail shareholders. percent of issuers had chosen to In July the SEC voted to block adopt the new system, according brokers from voting uninstructed to data from Broadridge. Most shares during director elections. The adopters are companies with large change will make it harder for listed numbers of shareholders that companies to elect their directors, achieved significant cost savings from because uninstructed votes – which the subsequently lower print runs. are usually retail votes – have 6 IR GUIDE The annual report in the age of social media
- 7. Kellogg’s gave shareholders different options with an online annual, a print annual and a notice and access brochure. traditionally been voted in favor of management’s rec- ommendations. While not institutional votes per se, these votes were handled by register. Some shareholders will institutions on behalf of individual react to new channels of com- shareholders. Following this change, munication, such as interactive quorums will be harder to achieve websites and social content net- and directors harder to elect. works; others will prefer traditional Last year almost 19 percent of annual reports delivered in the post. shares voted were through broker Kellogg’s this year produced an votes, according to Broadridge.With online annual, a print annual and a the loss of that block, companies notice and access brochure. The will need to do a better job of breakfast cereal company decided to communicating with stakeholders have well-designed online and print that have a true economic interest. editions so different audiences could notice and access brochure Costs may be higher for some access information in the way that’s is a great way to remind retail issuers, but improvements in corpo- easiest for them. shareholders about their voting rate governance and shareholder The Kellogg’s notice and access rights and the annual report. relations should result. brochure helps to explain the notice Before, companies could rely card – a nice touch for any company on their brokers to pass director Covering all bases given that many investors still resolutions. Now, they may need the The challenge for companies is to do not understand what notice and active participation of the retail base. improve voting participation, and access means to them. Good investor communications will the way to do that is to communi- It also highlights another way not only keep retail shareholders on cate the investment story in a companies can bring in the retail management’s side, but may also compelling fashion that reaches out vote: through education about inspire them to get up and vote for to all types of shareholders on the the proxy process. A well-designed the company’s annual resolutions. ● The annual report in the age of social media IR GUIDE 7
- 8. New ways to share B logs and Twitter are already are benefits for companies that widely used for IR. In the take control of the distribution of Annual next phase of technolo- their corporate materials. These gical development, companies are include improving awareness of reports are beginning to put communications your company and managing what among the thousands materials on social content networks content is made available by third of documents being like SlideShare – basically YouTube parties. Publishing your own material shared on social for presentations and webinars – also gives it authority in an online content network and Docstoc, where people share world replete with anonymous and sites professional documents. little-known commentators. Docstoc contains an annual report section with around 2,500 Online options entries. Visitors to the site can click abound on various tabs to find interesting Other types of social media can information like the most-viewed be used to drive traffic to your or most-downloaded reports. At time annual report. One option is to of writing, the top-viewed annual set up a Twitter account and report was Chesapeake Energy tweet when important corporate Corporation’s 2006 effort, which has documents are released, including been viewed about 10,000 times. a link to your website. Both Dell SlideShare is also proving and Sun Microsystems are already popular: Yahoo!’s second-quarter doing this in the technology sector. earnings presentation clocked up This sort of activity demon- more than 1,000 views in less strates that annual reports are now than 24 hours after it was posted. being shared and discussed more Much of the content on these than ever, so the rewards for a good social networks has been uploaded report are magnified. by individual web users. But there The web offers many different 8 IR GUIDE The annual report in the age of social media
- 9. American Campus Communi- ties’ executives line up to answer your questions in the company’s interactive review. ways to present the annual report. ent firms choose different Of the two main options – PDF or forms of communication HTML – each has its own pros and at different times to fit cons. For a start, a PDF is cheaper changing investment needs to produce than an HTML report; and business conditions. it is usually just an electronic version of the printed annual report. PDFs Two-pronged are relatively simple to read on a approach computer screen but can also be American Campus Communities printed out as hard copy. this year produced an interactive HTML reports cost more but annual review alongside a traditional potentially come with many more 10K wrap. In the review, readers To save bells and whistles, such as animation can click on different members of on cost and extend and embedded audio and video the executive team to see them step the use of the piece, elements. They are also much easier forward and give a presentation. Diamond Foods printed a to navigate online. More traditional annual report separate summary annual It is important to remember that readers can still print out a PDF report and typeset 10K. there is no single right answer: differ- version if they wish. ● The annual report in the age of social media IR GUIDE 9
- 10. Print still vital W hether it’s a tradi- have powerful narrative sections, tional annual report, like those you would find in a The vast a 10K wrap or a traditional annual report. Another summary annual report, most low-cost option is to place the 10K majority of companies still produce some kind in a promotional folder that doubles companies still of hard copy annual report. up as a stand-alone marketing piece. produce some They recognize that this form Over a third of respondents kind of printed of communication is a vital tool for to NIRI’s survey produced a tradi- annual report getting your investment story across tional annual report, up slightly from to existing and potential investors. 32 percent in the previous survey NIRI’s 2008 annual report survey two years ago, while 12 percent finds 91 percent of respondents produced a summary annual report. produce an annual report in one As we can see, the annual of these formats. report has retained its importance in today’s online world. It cuts through Different document, the noise created by 24-hour news similar content and online networks to deliver There is always going to be an audi- management’s long-term vision for ence for the print annual, particularly the company and its shareholders. among more traditional investors who are used to reading corporate Value for money literature mailed to their home. This is why savvy companies still The largest proportion of design, produce and mail an annual companies – 53 percent – used a report to shareholders, updating its 10K wrap. It is important to remem- message through media and web ber there is often not that much strategies that refine the story as the difference between an annual report year progresses. and the 10K wrap. Some 10K wraps Remember to keep the internet 10 IR GUIDE The annual report in the age of social media
- 11. Annual report tips Regardless of which method of delivery you choose, there are some basic pointers that can always be applied. ● Leave plenty of time. Starting early does not cost any more money and gives management a chance to think hard about what it wants to say and how it wants to say it. To save on cost and extend ● Transparency is key. With the internet, investors can find use, medical equipment information on your company from many sources other firm Hill-Rom took a than the corporate website. Don’t get caught fudging the different approach with truth or leaving out embarrassing details. a promotional section ● Think sustainability. Regulators in the US and elsewhere are featuring a pocket folder keen to move forward on legislation concerning climate for the 10K that can be change. Make sure you address environmental, social and used as a stand-alone governance issues in a strategic way. marketing piece. ● Keep it simple. Research suggests analysts spend an average of three minutes reading each annual report so don’t bombard tions provided by the annual report, your reader with too many messages: stick to the basic the project would produce a 500 investment story from the beginning. percent total return to shareholders. That sounds like money well spent. version in your head from day one; to Curran & Connors. Consider a One annual report design the best results occur when the print hypothetical client with an annual company that was quoted in NIRI’s and online reports are developed in report budget of $100,000 and 50 annual survey puts it this way: tandem, creating a coherent message mn shares outstanding. In this case, ‘By the time the annual report across both channels. the annual report costs the company comes out, it is often yesterday’s A simple cost-benefit analysis less than $0.002 per share. news, but it is the only place where makes the case for maintaining In other words, if the company’s management can talk about what investment in an annual report stock price increases by just one matters to the business. It tells the project for your company, according penny as a result of the communica- story in a broad and deep way.’ ● The annual report in the age of social media IR GUIDE 11
- 12. Sponsor’s statement O Offices ver the past four decades, Curran & Connors has Atlanta, GA evolved beyond its core capability – annual report Boston, MA design and production – to meet the challenges of a Brentwood, CA continually changing corporate environment. Our ongoing evolution translates into greater creative Charlotte, NC capacity, enhanced design solutions, cutting-edge web services Chicago, IL and better results for you. With design studios in New York, Cleveland, OH Chicago, Florida and California, and account executives across Dallas, TX the country, we continue to offer an unparalleled range of Denver, CO talent, coupled with knowledgeable local representation, to Fort Lauderdale, FL create enduring connections for our clients. Hauppauge, NY Houston, TX Los Angeles, CA New York, NY Princeton, NJ San Francisco, CA Washington, DC For more information: Noah Butensky Phone: +1 631 435 0400 Fax: +1 631 435 0422 nbutensky@curran-connors.com www.curran-connors.com 12 IR GUIDE The annual report in the age of social media