Online Reporting

  • Date:01 Sep 2007
  • Type:CompanyDirectorMagazine

Janine Mace provides some pointers on how to bolster shareholder communications now that companies can distribute their annual reports electronically.

The do’s and don’ts of online reporting


Just imagine it – listening to a podcast of your company’s annual report on the train into the office. Although it sounds fanciful now, it could be just one of the developments flowing from the shift to online delivery of corporate annual reports.

While most interest in the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 centres on the new rules permitting companies to use the internet to deliver their annual reports, it may also herald the start of a major rethink about shareholder communications.

Parliamentary Secretary to the Treasurer, Chris Pearce, noted recently: “The use of the internet as the primary mechanism for distributing annual reports is already starting to enable companies to communicate with their shareholders in a more efficient manner.

“Apart from the considerable direct cost savings that this measure delivers, I also envisage that it will facilitate innovative communication and allow for annual reports to be more interactive and user-friendly… For example, the chairman’s report could be delivered through a video presentation.”

Most experts emphasise that the move to online delivery simply recognises the increasing level of internet usage in Australia.

As Interactive Investor director Susan Werkner notes: “The legislation is catching up to how investors want to use the internet. Internet access statistics show there is no reason why anyone who holds shares can’t access information in some way via the internet.”

Her view is supported by new research by the Australian Investor Relations Association (AIRA) showing 79 per cent of retail investors feel it is not important to receive a hard copy annual report anymore, provided the information is available on the company’s website. Only 10 per cent regarded a printed copy as ‘very important’ or ‘critical’.

Ian Matheson, AIRA’s CEO, believes large listed entities currently facing huge print runs and mailouts will take the opportunity to cut costs and demonstrate their environmental credentials. However, he believes many smaller listed companies will continue printing their report, as it forms the company’s flagship marketing document and for them the cost savings would be minimal.

Reassessing communications

Online delivery, however, is about more than just cost savings, according to Matheson. “It is about how you can make a web-based version more accessible and more informative for shareholders and other users.”

One of the key messages from investor relations experts is this reform presents companies with an opportunity to re-assess their entire communication process.

“Companies are using this as an opportunity to revisit their online presence generally,” Matheson says.

Tony Heywood, from communications firm Heywood Innovation, believes companies need to improve their website in tandem with online delivery. “The investor relations section needs to be more noticeable and navigable,” he says. “An explanation about using the online annual report also needs to be there.”

Matheson agrees. “Many companies are spending money on making their websites far more accessible and friendly and creating a more dynamic and interactive document as a quid pro quo for shareholders not receiving a hardcopy,” he says.

Werkner believes some companies are still too focussed on the legislation, not on communication. “It is important not to get hung up with the fact it is on the internet.”

The change may also usher in other technological innovations. Matheson believes sophisticated new tools such as Flash, video clips, clickable sections and key word searching will all help improve communication.

“It becomes not just a document; it becomes an interesting and informative experience that allows shareholders to learn more about the company,” he explains.

While some companies already offer webcasts and conference calls, Heywood expects this to increase, together with the appearance of other communications tools. “It should not be a static experience,” he urges. “It should be a visual, audio experience online.”

Werkner believes adoption of new technologies will increase company interaction with shareholders. She points to examples such as Suncorp, NAB and OneSteel, which are all using their websites to obtain feedback from shareholders via online questionnaires and dialogues.

Matheson even predicts email alerts and podcasts may start appearing to provide short summaries of half or full year reports.

“This change is about giving people a greater range of choices on how to access information, but it is also an opportunity for companies to re-examine the content of their periodic shareholder information,” he says.

“In the continuous disclosure environment, the traditional annual report is a pretty archaic notion as it is a historic reporting document.”

Format: friend or foe?

While all this talk about technological advances opens up exciting possibilities for the future, much of the current debate is about something far more prosaic – the best software format.

To date, many companies – both here and in the UK – have taken the easy option and dumped a simple PDF version of their report on their website. Although PDFs are easy to print, they are poor for onscreen viewing and their size can make them slow to download, making them unpopular with shareholders.

As Heywood’s business partner Lynette Heywood notes, “The adverse reaction to the use of PDF versions in the UK needs to be heeded.”

The Federal Government already recognises the limitations of PDFs, with the upper size limit for documents on government websites adhering to international accessibility guidelines set at 1MB.

Despite this, the Australian Shareholders’ Association (ASA) survey, Annual Reports of the S&P/ASX200: Readiness for online delivery, found corporate reports as large as 14MB, with over 90 per cent exceeding 1MB.

ASA CEO Stuart Wilson believes the main consideration should be the user. “Useability is the key issue,” he says. “We have a guideline of a maximum of 1MB for PDF documents and we think that is a sensible maximum.

“Companies need to keep capacity constraints in mind, especially for retail investors.”

Wilson argues that not all shareholders have access to a high-speed internet service, making splitting reports into bite-sized chunks essential.

“Many companies simply provide a large PDF copy of their annual report… This makes it almost impossible for shareholders without broadband to view the file. It means stakeholders who need specific information have to wade through pages of information before finding what they’re interested in,” he argues.

Matheson agrees that while PDFs are good for printing, they are unsuitable for onscreen viewing. “PDF documents for the most part don’t cut it.”

Making it shareholder-friendly

The ASA survey recommends four primary means of speeding up delivery and navigation of report PDFs and making them more ‘shareholder-friendly’:

  • Byte-servicing – this speeds up the online opening of a PDF by serving the file one page at a time;
  • Online preview – this does not require special software, opens quickly, delivers a single page at a time and allows for easy navigation via an interactive index;
  • Bookmarks – these speed up navigation through large PDFs by allowing the viewer to select the page/section of interest as soon as the file opens; and
  • Split downloads – splitting the PDF into parts and allowing users to select the particular section they need.

ASA research shows while larger companies have moved towards online previews, fewer than one in 10 small companies have adopted this approach.

Wilson believes the ability to print single report sections is vital. While investors may use search, zoom and rotate tools for onscreen reading, feedback from ASA members indicates they always still print some pages so they can make personal notes.

Simple design considerations such as avoiding the use of dark colours and reversing text out of colour blocks are important to avoid wasting printer toner and ensuring better readability, he explains.

“It is also imperative that it is readable in greyscale printing, as not everyone has a colour printer.” Documents that look good in colour can be extremely difficult to read when converted into black and white for printing, Wilson notes.

Given the problems with PDFs, most communications experts believe the best option is moving to the HTML format.

“There are different views on what is popular,” explains Lynette Heywood. “But the best tactic is to make a HTML version.”

She believes online reports need different information presentation. “An online document needs to pull out the big messages as you click through. It should give bite-sized pieces of information.”

ASA is also in favour of HTML and has set up its own online library of reports from the top 200 companies. These have been converted into a mix of PDF and online formats to allow rapid downloading, even without broadband access.

Wilson is also keen to see companies provide financial data that can be downloaded directly into a spreadsheet for easy investor analysis.

Notifying shareholders

Moving to online delivery has inherent risks and it is essential to bring stakeholders with you.

“Companies need to communicate with shareholders as there is the potential for a PR disaster if they are not made aware that this legislation has gone through,” Heywood believes. “Talking about the legislation is crucial.”

Werkner believes the best way to communicate the shift is via mail. “This is sensible as most companies don’t have email addresses for shareholders at present.”

Even this letter or DL card needs careful preparation, notes Lynette Heywood. “If it is worded correctly, then shareholders will respond.”

She recently achieved an impressive 40 per cent response rate to a shareholder mailing for a small mining company, with 77 per cent of respondents accepting online delivery.

Whatever the communication process, it is essential companies meet investors’ expectations when they do access an online report – otherwise they risk investors turning back to hard copy reports.

“We are encouraging members, if for any reason they are unhappy with the online version, to contact the company and register a standing order for a hard copy version,” Wilson says. “It is in everyone’s interest to get this right.”

Heywood also emphasises the importance of getting it right. “If you build expectations and then all they get is a traditional huge PDF document, shareholders will be turned off and probably lost forever,” he says.

“It is crucial to get the persuasive phase right. It must be better than what is available now.”

Matheson agrees the potential for a backlash exists. “Unless companies embrace the tools that are available to make annual reports more accessible, they run the risk of seeing shareholders opt-in for a hard copy within a few years,” he warns.


Essentials for online reporting

According to Interactive Investor’s Susan Werkner, there are ten key essentials for online delivery of annual reports:

1. Notify shareholders early to save on unnecessary printing and distribution costs.

2. Post an easy to use and accessible online report to engage shareholders and permanently convert them to online delivery.

3. Ensure ease of navigation, preferably using one-click navigation and content links to specific pages.

4. Provide easy readability and comprehension through legible font sizes, different zoom levels, crisp images and clean design.

5. Ensure key messages are easily understood using graphs, charts, diagrams, tables and visual aids.

6. Provide fast accessibility without special plug-ins and offer single page or section printing options.

7. Deliver purpose and consistency in line with the company’s values and website content.

8. Take a user-focused approach with simple one-click delivery from the URL and a fast and intuitive search function.

9. Communicate the message interactively using links to webcasts, CEO presentations and feedback forms.

10. Maximise the report’s presence by using the same format throughout the website and ensuring the file format is identified.