Elizabeth Judd, Writer
IROs have always resembled university students in at least one regard: most are required to close the year with a lengthy, well-researched and flawlessly executed project. While IROs are not sweating over term papers, they generally do the corporate equivalent by summing up their public company’s accomplishments and setting future expectations in an attention-getting annual report.
Mostly gone are the days of the splashy print annual with its lavish production values, but IROs are still committed to communicating with investors on a regular schedule and in a way that suits their particular audiences. Whether it’s an online annual with a video message from the chief executive or an integrated report that links environmental and social factors to financial ones, IROs are now doing some real soul-searching before they design their annual shareholder messages.
Over the past year, Courtney Craib, President of Craib Design & Communications in Toronto, noticed a distinct uptick in the number of public companies – even those that had previously been quite apprehensive about online annuals – taking the plunge. “Online annuals give companies a global reach. You can get your report out anywhere now,” she says.
More importantly, IROs experimenting with social media are embracing the online annual because they now possess a quiver of intriguing new tools for broadcasting their stories. “For the past few years, people would ask: ‘Oh, is the annual report dieing?’ But now we see it’s definitely not,” says Craib.
Making Your Move Online
An IRO has truly crossed the digital divide when he or she designs the online annual first. Craib describes the tangible benefits of this approach as “smaller snippets of copy and more layered information.”
For its 2012 annual, Capstone Infrastructure, Inc., devoted the lion’s share of effort to the online annual rather than simply slapping a PDF version on the website. “First and foremost, I was thinking about how we could be more responsive to the way that investors appear to prefer to receive information,” says Sarah Borg-Olivier, Senior Vice President, Communications. “We’ve realized that the number of shareholders requesting the printed copy of our annual report is going way down every year.”
Capstone borrowed certain design features from its other communications to give the online annual its look and feel. “It’s quite stylish and modern-looking,” says Borg-Olivier. “Our corporate colour is a very energetic, very vibrant orange and that certainly punctuates black-and-white imagery.”
Navigation was another priority for Capstone, says Borg-Olivier, explaining, “you can scroll through the whole site from a single entry point.” On the initial page, users can click on a variety of tools from a pen icon for taking notes to a button for sharing content on social media sites like Facebook and Twitter.
“This past year, we skinnied down the print report. It still contained all the required elements and a message from our CEO and Chairman, but we really shifted more of the editorial content and the storytelling to the online annual,” Borg-Olivier explains. Next year, Capstone is considering adopting notice and access.
Royal Bank of Canada (RBC) is another company that has slimmed down the front section of its print annual; the banking giant now gives just four pages of highlights with a focus on strategy and a simplified overview, in addition to the CEO and Chairman’s messages, before going into the financials.
Tanis Feasby, Director of Financial Communications, says that the online annual makes sense for RBC because “you can tell the story with more creative delivery in a much easier format.” She appreciates that the company saves money and yet users can easily customize information. What’s more, Feasby likes the message conveyed by moving the company’s annual investor communications online: “It fits with being a leader in using technology to deliver what people are looking for.”
RBC’s online annual distinguishes itself by being scalable on all devices from a PC to an iPhone or tablet. Craib, who worked on the RBC report, recommends making responsive online reports that adjust automatically to any device. “If you’re making the investment to go online, most of us go onto our iPhones first and so this is a good idea,” she says.
Although Feasby believes that the online annual suits RBC’s stakeholders, she was candid about its drawbacks. “The biggest challenge,” she says, “is the timeline.” As soon as the traditional annual was ready for the printer, she and her team began putting together the online annual. “We did as much as we could in advance, but it’s a tremendous amount of work,” she says.
Experimenting with Video
RBC’s annual derives its personal feel from nine brief videos, all featuring members of the senior management team.
When RBC first decided to highlight management videos, Feasby considered “how to be thoughtful and efficient to make our executives more accessible with minimal use of time.” All nine videos were therefore shot in two days, and the company made sure the project did not creep past its original timetable. Feasby also repurposed the videos and posted them on the corporate intranet for RBC’s 80,000 employees.
ARC Resources Ltd. is pursuing a similar strategy. Three to four years ago, the oil and gas company produced a glossy print annual report but “we’ve completely changed our approach,” says David Carey, Senior Vice President of Capital Markets. This year, ARC poured time and effort into the online annual, and even made liberal use of video, inviting six senior officers to each address a pressing question within their area of expertise. “The videos are pertinent and punchy,” says Carey.
Craib cautions that the success of video often hinges to some degree on the magnetism of the management team. “If you have an intriguing and interesting CEO, video is fantastic,” she says. “If you have a boring CEO, you probably don’t want a video.”
The charisma question aside, getting the senior managers to participate can be challenging. In 2012, Vancouver-based Lululemon Athletica did a six-minute-plus video annual review, which took a playful approach to the challenge of camera-shy execs. CFO John Currie introduces himself on screen, followed by rapid-fire footage where he makes a face and asks: “What? I didn’t do it well?” and then CEO Christine Day erupts in peals of laughter.
Cutting Edge: Integrated Reports
“In Canada and North America, there are not a lot of companies that have fully embraced the concept of integrated reporting,” says Kelly Freeman, Director of Investor Relations at Potash Corporation of Saskatchewan. For PotashCorp, which produced its first integrated annual report last year, the approach underscores the idea that creating value “is not just a function of financial strategies and capital decisions,” he explains. Value creation must extend to all key stakeholders – investors, employees, customers, and communities.
Many imagine that by looking beyond the financials, an integrated report would naturally turn into a doorstop, but Freeman argues otherwise. PotashCorp’s first integrated annual was 160 pages long, roughly the same length as reports from earlier years. “When you start bringing more elements into your discussion, you need a filter so you don’t end up with a report that’s 300 pages long,” he says.
To reach its targeted audience, PotashCorp printed 9,000 copies of the full integrated annual and more than 20,000 copies of a 36-page summary integrated report. The company did an online version of the integrated report, as well, and Freeman maintains that the web is where the integrated report will truly evolve. “Our integrated report is still a work in progress,” he says. “But that’s where we see the future for us.”
More than other variations on the annual report formula, integrated reports make most sense for certain industries, especially those with pressing social and/or environmental concerns. “Integrated reports really depend on the sector,” says Sonya Mehan, Senior Manager of IR at Open Text Corporation. “I don’t think they’re anything that will hit tech anytime soon.”
Although Craib maintains that integrated reports represent a trend worth watching, she notes that even companies in industries where sustainability is paramount have been slow to change.
“I could see an integrated report in the mining industry because many companies are in the hot seat for sustainability practices,” says Craib. She therefore surveyed the approximately 100 companies on the global mining index and found that only 33 produced any sort of CSR report at all.
Less Is More
OpenText, a tech company with no consumer following and over 95% institutional ownership, produces a 10-K wrap with a letter to shareholders on the inside of the four-colour cover. “If we were a Starbucks, we might use the annual report as a marketing tool,” says Mehan. “But we don’t have a retail product and we’re not a retail investor-focused company. And so for us, this works.”
Mehan points out that publishing a printed report poses challenges because “by the time the annual comes out, the information is old news.” At OpenText, the most important form of outreach is therefore the company’s analyst days. Last year, when OpenText brought a new CEO on board, the company arranged two analyst days in the U.S., one devoted to pure strategy and the other to products and customers.
In the end, what matters more than how a public company chooses to engage investors is the fact that there’s a genuine effort to communicate effectively with one’s shareholder base. “Some clients don’t want to say a lot, and others are open to transparency,” concludes Craib. “But being honest is always a better way of doing things.”