Directions supplement april_07


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Directions supplement april_07

  2. 2. Directions Monthly April 2007 Issue 11 Welcome to the April edition of Directions Monthly. The annual report has suffered from being an uneasy alliance of several different objectives. But no longer will this report exist as we know it – new legislation means companies will have a range of reporting options. So what form will the annual report take? This month we’ve invited Robert Bruce, a regular columnist for the Financial Times, to shed light on the evolution of the species. Nigel Salter Lucie Harrild The annual report has been on a long journey – taking many shapes and forms along the way. How will companies take advantage of the range of reporting options which they now find available to them, and how will the traditional beast develop? Sometimes it is the sheer lunacy of a policy reporting. They are trying to put across their which brings a real issue into focus. Douglas strategy, their performance, their financial Flint is Group Finance Director with HSBC stability, in ways which they hope ordinary Holdings. He runs the finances of one of the people in the business arena will find easier. largest banks in the world. At a conference Companies hope to both increase the speed last November he talked about his annual with which they can get the message across report. During the implementation of and also the depth of understanding, which international financial reporting standards, tends to be easier to get across in words (IFRS), he had found that the number of rather than figures. new systems codes they had to introduce increased by 67% since the introduction of IFRS in 2004. The annual report and accounts, which back in 1997 had run to Robert Bruce 100 pages, now exceeded 400 pages and Columnist for the Financial was too heavy to be delivered by Times and leading commentator conventional post. The Post Office had on accounting and financial deemed its weight a health and safety reporting issues. issue for postmen. It is an anecdote like that which brings you up short. The whole business of having to send out a full statutory annual report and accounts to shareholders was leading to procedures which made no sense. And at the same time the introduction of IFRS had lead to a very different look to the way that financial information was explained. Inevitably during the first few years of implementation these figures would be largely incomprehensible. It is only going to be in the long term that familiarity and understanding will grow. In the meantime, in the short term, companies need to try other ways of putting their message across to shareholders and other stakeholders. The consequence of this has meant that companies are looking increasingly at employing more elements of narrative
  3. 3. Directions Monthly April 2007 Issue 11 ❝ This legislation has come like an earthquake in the world of producing the annual report and accounts. No one is entirely sure what the landscape will look like once the dust has settled. But there are several distinct and likely consequences. ❝ So people are harking back to the plans they Initially the DTI reckoned that the resulting The third is that the use of short summarised had when the operating and financial review, savings in postage and printing costs would reports can be tailored to different groups. (OFR), was due to become a mandatory part be around £50 million across the corporate Environmental activists need no longer of their annual report and accounts. This world. But, having now made a few more trawl through the rest of the information document was to include a whole range of consultations, they think that this is a wild before identifying the precise information narrative reporting from future strategy to under-estimate. Certainly HSBC will no longer they were looking for, for example. The same key performance indicators. The mandatory have to challenge the health and safety of the would be true of many discrete user groups. element of the OFR was precipitately tugged nation’s postmen. out from under corporate planners’ feet last But ultimately the new legislation has year. But the European rules on producing a Under the legislation, if companies receive one overwhelming advantage. It gives Business Review can conveniently be fitted shareholder approval, shareholders would companies choice. And companies will into its place. only receive a printed version if they make be judged by the choices they make. The what is described as ‘a purposeful request’. tyranny of the old annual report and But the old problems surrounding the annual And even in those circumstances companies accounts will go. Companies now need report and accounts remained. The document may decide that what they send out is a to make sense, and take advantage of, suffers from being an uneasy alliance of several simplified and summarised version. the wide range of options which they different objectives. It is a calling card, a now find available to them. marketing tool which shows off the company’s This legislation has come like an earthquake virtues and aims. It is the repository of the in the world of producing the annual report financial figures, generally indigestible and and accounts. No one is entirely sure what often a solid block of grey type across many the landscape will look like once the dust pages. It is the place where the Chairman and has settled. But there are several distinct the directors strut their stuff. All these elements and likely consequences. pull apart from each other. And it has become increasingly difficult to defend the purpose of The first is that companies are likely to put the annual report and accounts in its position much more resource into their online offerings. of being an odd alliance of the statutory and Traditionally corporate websites have been an non-statutory, the financial and the non- uneasy combination of consumer information financial, the marketing document and the and investor relations. The new legislation is listing requirement. going to make the investor, shareholder and other stakeholder information which appears For once a Government initiative looks into a much more important part of the corporate to have solved the conundrum. offering. Transferring much of the narrative reporting into an online resource, which some This is highly unusual and most people would companies may do, opens up all manner of rack their brains to recall another occasion possibilities. The idea of animated graphics when the Department of Trade and Industry to show how key performance indicators are did something which the corporate sector shaping the achievement of corporate strategy found useful. But what the DTI has done, as a is only one idea which could now become a reality. result of a section of the new Companies Act 2006 which came into force in late January, is The second is that companies will change allow the corporate sector a new route forward. the emphasis of their printed offerings. The combined use of an annual report and Essentially the DTI has enabled companies, accounts as both a shareholder and marketing having gained shareholder approval at an document no longer needs to happen. annual general meeting, to scrap the printed The need to have everything in the same version of the annual report and accounts package vanishes. Different corporate which had to be sent to all shareholders and documents can be produced which can be effectively make an online version the default aimed more directly at the requirements of position. This has far-reaching consequences. different users.
  4. 4. ABOUT US SALTERBAXTER ADVISE COMPANIES ON STRATEGY, BRANDING, CORPORATE COMMUNICATIONS AND DESIGN. Our clients are extremely varied and include FTSE 100 corporations; some of the world’s most exclusive brands; independent, entrepreneurial businesses; world leading educational establishments; law firms; private equity firms and media companies. We name companies, re-invent companies, and re-position companies. We help companies communicate with shareholders and advise them on how to address corporate responsibility. We launch, brand and re-brand. A key area of our expertise is corporate reporting and we advise leading UK and European organisations on strategy and design for their financial and CR communications programmes. We currently work with 12 of the UK FTSE 100. Our offer to clients is a balance of genuine expertise in reporting and CR issues with a commitment to producing outstanding creative design. This has been recognised with our work receiving numerous awards including the ACCA award for innovation in sustainability reporting for our work with O2. Contact: Nigel Salter Lucie Harrild Tel: +44 (0)20 7229 5720 Tel: +44 (0)20 7229 5720 Directions Monthly supplements our main Directions report. This report is published each year and is now regarded as the UK’s most comprehensible analysis of the trends and issues in CR communications. If you want a copy of the full Directions Annual Survey and Report, call us on the number below or email This supplement is printed on Think Bright and is supplied 202 Kensington Church Street by Howard Smith. It is an FSC (Forest Stewardship Council) London W8 4DP certified material and is 100% recyclable. Tel +44 (0)20 7229 5720 Printed by CTD, an ISO 14001 certified and FSC accredited Fax +44 (0)20 7229 5721 company. TT-COC-2142 ©1996 Forest Stewardship Council A.C