I Rmag Guide Sept09
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The document discusses how annual reports and corporate communications are evolving in the age of social media. It notes that while print runs of annual reports may be decreasing, investors still highly value the annual report. It also discusses new disclosure regulations around notice and access that are increasing the need for companies to effectively communicate with retail investors. Additionally, it outlines how companies can leverage social media platforms and new technologies to share annual reports and other materials more widely online.
I Rmag Guide Sept09
- 1. GUIDE Embracing online communications Why annual reports still matter Changes in retail voting The wider use of e-comms Paper still packs a punch of social media The annual report September 2009 in the age Guide Sept 09.indd 1 14/8/09 12:01:20
- 2. Social revolution W hether it’s rapid advances in social media, changes to disclosure regulations – including notice and access and the new ban on broker discretionary voting – or the impact of the current worldwide recession, the world of IR is undergoing intense change. But there’s one thing that hasn’t changed: the need to clearly communicate a public company’s value proposition with investors, potential investors and the financial community at large. Now, perhaps more than ever, the print and online annual report can play an essential role in achieving this goal. The social media revolution is behind us, and the revolutionaries have won. For investor relations professionals and corporate com- municators alike, it’s high time to accept and adjust by identifying the best ways to mix social media into traditional corporate IR programs. Social media can no longer be ruled out as simply fads or kids-only obsessions; they are here to stay. The advance of social media does not, however, mean that tried and trusted methods of communi- cation need to be thrown out of the window. Instead, the right objective should be to coordinate historically important modes of communica- tion, like the annual report, with the power of the internet,and the reality that the web is both the world’s fastest and its longest-lasting mode of communication. New opportunities While many of us marvel at the web’s power to provide nearly instantaneous two-way communi- cations, the stark reality is that the web’s massive digital databanks mean any communications posted – whether a press release, blog com- ment, tweet or annual report – will remain there, possibly even forever. It’s this dynamic more than anything else that mandates that everything posted on the web must consistently communicate a Social revolution Making the most of the digital age page 2 Still valued The appeal of the annual report page 4 Disclosure rule changes The impact on retail voting page 6 New ways to share Beyond Facebook and Twitter page 8 Print still vital The power of paper page 10 Sponsor’s statement page 12 Contents 2 IR GUIDE The annual report in the age of social media Guide Sept 09.indd 2 14/8/09 12:01:20
- 3. The annual report in the age of social media IR GUIDE 3 As the cover of Pulte Homes’ annual report makes clear, the company wants to emphasize a CSR message. On the front page, one of the company’s homes is shown surrounded by trees, with a tagline reading: ‘Delivering on a responsible strategy’. ence of the individual social media outlets, from Facebook, LinkedIn, blogs andTwitter to content-sharing platforms like YouTube, SlideShare and Docstoc. For the first time, the individual has the true power to become your company’s evangelist company’s accomplishments, invest- ment thesis and vision for the firm’s future in the best and brightest light. Moreover, opportunity now exists to spread a company’s investor communications, including the annual report, further than ever before. Investors who find a report they like can quickly and easily share it with thousands of like-minded people. Of course, that speed of transmission is a double-edged sword: weak reports can spread just as quickly and easily as strong ones. Amplifying the power of the web is the enhanced user experi- by sharing your materials with his or her friends and followers. In other words, social media are not just about how the IRO tells the company’s story; they are also concerned with how non-affiliated third parties spread the story. Over the last three years, the evolution of the web has clearly accelerated. Facebook opened to the public in September 2006, the same year Twitter was created. A March 2009 report from Nielsen Online shows 67 percent of the global online population uses social networks and blogs,up from 58 per- cent in March 2008.When it comes to spreading your message online, social media cannot be ignored. ● With so many stakeholders connected through social networks, corporate reputations have become more and more fragile. One way to boost your credentials is to print your annual report using environmentally friendly paper and printers. The Forest Stewardship Council (FSC), an independent, not-for-profit organization, certifies that your paper has come from a sustainable source. Safeway, Medtronic and Regency are all companies that have printed their annual reports on paper certified by the FSC. Sustainable printing Guide Sept 09.indd 3 14/8/09 12:01:23
- 4. 4 IR GUIDE The annual report in the age of social media Still valued I n a fast-moving online world, the annual report may seem redundant, and it’s certainly true that print runs are down. NIRI’s 2008 annual report survey finds the greatest proportion of respondents – 35 percent – printed fewer than 10,000 copies of their most recent annual reports, up from 20 percent in the 2006 survey. The value of the annual report to investors remains high, however. Rivel Research Group monitors the habits of investors in its annual study, ‘Perspectives on the US buy side’. This year’s study, which questioned 232 buy-side professionals by telephone, reveals that 70 percent of respondents think the annual report is helpful when making the decision to buy a stock. Furthermore, 69 percent of respondents say the annual report is helpful for keeping track of stocks once they have been purchased. Notably, long-term investors value the annual report even more highly. When Rivel separates out investors with an investment horizon of three years or greater, the proportion who find the annual report useful for tracking their portfolio rises to 80 percent. This demonstrates that, as the investment horizon of investors increases, so does the value of the annual report. An opportunity to address volatility The annual report can help compa- nies attract and retain long-term investors at a time when global equity markets continue to be volatile. Market commentators are still arguing over how long the economy and stock markets will take to truly get back on track. In the meantime, the annual report offers a way to sideline short-term volatility in share prices and reach out to longer-term investors with a compelling strategy for the future. And social media technology gives IR practitioners a great new tool to achieve this, as it hands companies the opportunity Print runs may be down but investor interest in the annual report remains high Guide Sept 09.indd 4 14/8/09 12:01:23
- 5. The annual report in the age of social media IR GUIDE 5 Proportion of investors who say the annual report is useful for: to spread the annual report – and its investment story – to many more current and future stakeholders. Previously, you may not have considered buy-side investment professionals to be the main audi- ence for your corporate website. In fact, 76 percent of respondents to Rivel’s research say the corporate website is a significant influence on their decision to buy or sell. The web is also key to attracting another type of long-term investor: the retail shareholder.The popularity of shareholder forums on Yahoo! Finance shows how important the internet is for private investors when picking stocks. In addition, an SEC survey released last year finds more than 50 percent of retail investors use the internet to help them make investment decisions. Loyal supporters Just as the internet age spawned the catchphrase ‘sticky eyeballs’, in reference to the desire of content providers to build relationships with users who spend a long time on a website and repeatedly return, public companies must engage their equivalent: the long-term investor. It is the long-term investor that doesn’t get scared off by short-term volatility – which continues to increase with the spread of so-called high-frequency trading – and who bolsters stock performance when the hedge funds are dumping, the activists are shorting or Wall Street analysts are downgrading the stock. It is the long-term investor that – perhaps most loudly – the print and online annual report speaks to. The truth is, most savvy IROs are well aware of the annual report’s value in this regard. ● Perspectives on the US buy side 70% 69% 38% Noticingastock Makingabuydecision Monitoringaportfolio Reason Source: Rivel Research Group Proportion of annual reports with a print run of less than 10,000 Print run trends 36% 20% 22% 2008 2006 2004 Source: NIRI Guide Sept 09.indd 5 14/8/09 12:01:26
- 6. 6 IR GUIDE The annual report in the age of social media Disclosure rule changes F or the past few years, notice and access has been a hot topic as investor relations professionals sought to identify the best communications mix to achieve their company’s goals. Under the new rule,while issuers must now post proxy materials including the annual report online, companies have the option of initially mailing shareholders only a notice about how to access materials, instead of a full hard copy. The economic situation has made this decision even tougher as companies struggled to find cost savings across the board at the exact moment when communications and outreach were perhaps most impor- tant to keeping investors in the fold. As of May 21, 2009, only 12 percent of issuers had chosen to adopt the new system, according to data from Broadridge. Most adopters are companies with large numbers of shareholders that achieved significant cost savings from the subsequently lower print runs. Issuers with smaller numbers of shareholders have less reason to sign up, as incremental costs associated with the adoption of notice and access often negate the savings on smaller print runs. In addition, there is evidence that notice and access lowers retail voter participation in shareholder resolutions. As retail shareholders generally vote with management, this would hand more power to institutional investors, including activist shareholders. Ban on broker discretionary voting This year’s big regulatory change may be even more important to IROs, particularly with respect to the impact on retail shareholders. In July the SEC voted to block brokers from voting uninstructed shares during director elections.The change will make it harder for listed companies to elect their directors, because uninstructed votes – which are usually retail votes – have New regulations are increasing the need for firms to communicate effectively with the retail base Guide Sept 09.indd 6 14/8/09 12:01:26
- 7. The annual report in the age of social media IR GUIDE 7 traditionally been voted in favor of management’s rec- ommendations. While not institutional votes per se, these votes were handled by institutions on behalf of individual shareholders. Following this change, quorums will be harder to achieve and directors harder to elect. Last year almost 19 percent of shares voted were through broker votes,according to Broadridge.With the loss of that block, companies will need to do a better job of communicating with stakeholders that have a true economic interest. Costs may be higher for some issuers, but improvements in corpo- rate governance and shareholder relations should result. Covering all bases The challenge for companies is to improve voting participation, and the way to do that is to communi- cate the investment story in a compelling fashion that reaches out to all types of shareholders on the register.Some shareholders will react to new channels of com- munication, such as interactive websites and social content net- works;others will prefer traditional annual reports delivered in the post. Kellogg’s this year produced an online annual, a print annual and a notice and access brochure. The breakfast cereal company decided to have well-designed online and print editions so different audiences could access information in the way that’s easiest for them. The Kellogg’s notice and access brochure helps to explain the notice card – a nice touch for any company given that many investors still do not understand what notice and access means to them. It also highlights another way companies can bring in the retail vote: through education about the proxy process. A well-designed notice and access brochure is a great way to remind retail shareholders about their voting rights and the annual report. Before, companies could rely on their brokers to pass director resolutions.Now,they may need the active participation of the retail base. Good investor communications will not only keep retail shareholders on management’s side, but may also inspire them to get up and vote for the company’s annual resolutions. ● websites and social content net- works;others will prefer traditional annual reports delivered in the post. Kellogg’s this year produced an online annual, a print annual and a notice and access brochure. The breakfast cereal company decided to have well-designed online and print editions so different audiences could notice and access brochure Kellogg’s gave shareholders different options with an online annual, a print annual and a notice and access brochure. register.Some shareholders will Guide Sept 09.indd 7 14/8/09 12:01:36
- 8. 8 IR GUIDE The annual report in the age of social media New ways to share B logs andTwitter are already widely used for IR. In the next phase of technolo- gical development, companies are beginning to put communications materials on social content networks like SlideShare – basically YouTube for presentations and webinars – and Docstoc, where people share professional documents. Docstoc contains an annual report section with around 2,500 entries.Visitors to the site can click on various tabs to find interesting information like the most-viewed or most-downloaded reports.At time of writing, the top-viewed annual report was Chesapeake Energy Corporation’s 2006 effort,which has been viewed about 10,000 times. SlideShare is also proving popular: Yahoo!’s second-quarter earnings presentation clocked up more than 1,000 views in less than 24 hours after it was posted. Much of the content on these social networks has been uploaded by individual web users. But there are benefits for companies that take control of the distribution of their corporate materials. These include improving awareness of your company and managing what content is made available by third parties.Publishing your own material also gives it authority in an online world replete with anonymous and little-known commentators. Online options abound Other types of social media can be used to drive traffic to your annual report. One option is to set up a Twitter account and tweet when important corporate documents are released, including a link to your website. Both Dell and Sun Microsystems are already doing this in the technology sector. This sort of activity demon- strates that annual reports are now being shared and discussed more than ever, so the rewards for a good report are magnified. The web offers many different Annual reports are among the thousands of documents being shared on social content network sites Guide Sept 09.indd 8 14/8/09 12:01:37
- 9. The annual report in the age of social media IR GUIDE 9 ways to present the annual report. Of the two main options – PDF or HTML – each has its own pros and cons. For a start, a PDF is cheaper to produce than an HTML report; it is usually just an electronic version of the printed annual report. PDFs are relatively simple to read on a computer screen but can also be printed out as hard copy. HTML reports cost more but potentially come with many more bells and whistles, such as animation and embedded audio and video elements.They are also much easier to navigate online. It is important to remember that there is no single right answer:differ- ent firms choose different forms of communication at different times to fit changing investment needs and business conditions. Two-pronged approach American Campus Communities this year produced an interactive annual review alongside a traditional 10K wrap. In the review, readers can click on different members of the executive team to see them step forward and give a presentation. More traditional annual report readers can still print out a PDF version if they wish. ● To save on cost and extend the use of the piece, Diamond Foods printed a separate summary annual report and typeset 10K. American Campus Communi- ties’ executives line up to answer your questions in the company’s interactive review. Guide Sept 09.indd 9 14/8/09 12:01:41
- 10. 10 IR GUIDE The annual report in the age of social media Print still vital W hether it’s a tradi- tional annual report, a 10K wrap or a summary annual report, most companies still produce some kind of hard copy annual report. They recognize that this form of communication is a vital tool for getting your investment story across to existing and potential investors. NIRI’s 2008 annual report survey finds 91 percent of respondents produce an annual report in one of these formats. Different document, similar content There is always going to be an audi- ence for the print annual,particularly among more traditional investors who are used to reading corporate literature mailed to their home. The largest proportion of companies – 53 percent – used a 10K wrap.It is important to remem- ber there is often not that much difference between an annual report and the 10K wrap. Some 10K wraps have powerful narrative sections, like those you would find in a traditional annual report. Another low-cost option is to place the 10K in a promotional folder that doubles up as a stand-alone marketing piece. Over a third of respondents to NIRI’s survey produced a tradi- tional annual report,up slightly from 32 percent in the previous survey two years ago, while 12 percent produced a summary annual report. As we can see, the annual report has retained its importance in today’s online world. It cuts through the noise created by 24-hour news and online networks to deliver management’s long-term vision for the company and its shareholders. Value for money This is why savvy companies still design, produce and mail an annual report to shareholders, updating its message through media and web strategies that refine the story as the year progresses. Remember to keep the internet The vast majority of companies still produce some kind of printed annual report Guide Sept 09.indd 10 14/8/09 12:01:41
- 11. The annual report in the age of social media IR GUIDE 11 version in your head from day one; the best results occur when the print and online reports are developed in tandem,creating a coherent message across both channels. A simple cost-benefit analysis makes the case for maintaining investment in an annual report project for your company, according to Curran & Connors. Consider a hypothetical client with an annual report budget of $100,000 and 50 mn shares outstanding. In this case, the annual report costs the company less than $0.002 per share. In other words, if the company’s stock price increases by just one penny as a result of the communica- 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. ● Transparency is key. With the internet, investors can find information on your company from many sources other than the corporate website. Don’t get caught fudging the truth or leaving out embarrassing details. ● Think sustainability. Regulators in the US and elsewhere are keen to move forward on legislation concerning climate change. Make sure you address environmental, social and governance issues in a strategic way. ● Keep it simple. Research suggests analysts spend an average of three minutes reading each annual report so don’t bombard your reader with too many messages: stick to the basic investment story from the beginning. Annual report tips To save on cost and extend use, medical equipment firm Hill-Rom took a different approach with a promotional section featuring a pocket folder for the 10K that can be used as a stand-alone marketing piece. tions provided by the annual report, the project would produce a 500 percent total return to shareholders. That sounds like money well spent. One annual report design company that was quoted in NIRI’s annual survey puts it this way: ‘By the time the annual report comes out, it is often yesterday’s news, but it is the only place where management can talk about what matters to the business. It tells the story in a broad and deep way.’ ● Guide Sept 09.indd 11 14/8/09 12:01:45
- 12. Sponsor’s statement O ver the past four decades, Curran & Connors has evolved beyond its core capability – annual report design and production – to meet the challenges of a continually changing corporate environment. Our ongoing evolution translates into greater creative capacity, enhanced design solutions, cutting-edge web services and better results for you. With design studios in New York, Chicago, Florida and California, and account executives across the country, we continue to offer an unparalleled range of talent, coupled with knowledgeable local representation, to create enduring connections for our clients. 12 IR GUIDE The annual report in the age of social media Offices Atlanta, GA Boston, MA Brentwood, CA Charlotte, NC Chicago, IL Cleveland, OH Dallas, TX Denver, CO Fort Lauderdale, FL 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 Guide Sept 09.indd 12 14/8/09 12:01:46