Why making an annual report?
For some companies, the primary purpose of an annual report is simply to meet legal requirements. Consequently, they don't invest much in corporate reporting.
On the contrary, many large (and smaller) ones still devote large sums of money, dedicate significant human resources, and show a commitment to making their annual reports informative, communicative and attractive, in printed format and/or online version. Besides providing the figures for the past year(s) and complying with regulatory requirements, their report becomes a strategic document, a reference book, and for some a beacon for investors and stakeholders.
Through good times and crises, and thanks to its content and a number of distinctive attributes, an annual report may also prove to be an information antidote to short-termism, the herd instinct, and blind stock-picking, three flaws in today's global capitalism.
It takes some time and energy to make a good report! The Annual Report on Annual Reports was created to benchmark, rate and rank reports -and reward the annual report teams and managers, and their external advisers and agencies for their efforts.
What is the main purpose of the Annual Report on Annual Reports?
The purpose is to look for and benchmark best practice in order to strive for higher -and highest- standards in financial and performance reporting, investor and stakeholder information, and corporate communication. With richer report content, higher report value, better access to company information and decreased cost of capital as subsequent results.
When was the Annual Report on Annual Reports created?
In 1996. The Annual Report on Annual Reports was created at the Enterprise Group, a small Brussels-based international consulting boutique whose main shareholders were one of the founders and a Dutch holding group. Like many ideas, it originated in a customer request (a bank) for getting their company report compared with best practice in their industry (the financial sector). First a limited survey faxed to customers and interested contacts focused on a few industries, it took off as a wider survey in 1997 and has expanded ever since (see http://www.reportwatch.net/best-annual-reports/archive/).
Covers of the first edition and the 10th anniversary issue of the Annual Report on Annual Reports.
Who created the survey?
The two "generators" of the idea were Vero Escarmelle (a marketing and communication consultant) and Mike Guillaume (an economist and financial specialist). Both were heavy users of reports in their consulting practice ("Volvo, Philips, Saint-Gobain, Canadian banks and a few U.S. industrials were among the references regarding content at that time," remembers Mike) and had an inside experience through the coordination of annual reports for financial institutions. After the spin-off of the reporting unit renamed enterprise.com (or e.com) in 1999, the Annual Report on Annual Reports became a trademark of e.com.
Volvo 1997 and BMO (Bank of Montreal) 2001 annuals.
What is our (report) world?
From the outset the perspective was most international. e.com's founding members had a European, American and Asian background, experience or leaning. Teams initially in charge of the Annual Report on Annual Reports included American, Belgian, British, Canadian, Chinese, French, German, Italian, Russian, Spanish people. Our staff and network have operated in 30 countries and consulted for 100-plus corporate clients from London to Stockholm, from Vancouver to Tokyo, from Illinois to Hong Kong. The rating panel has also always been characterized by its diversity (check at http://www.reportwatch.net/best-annual-reports/report-rating/).
The roots, the angle and, last but not least, the geographical selection -over 50 countries this year- have probably guaranteed a rating that doesn't sound as national or doesn't look as "best foreign oscar report" as other report competitions.
How many companies are selected?
The ReportWatch monitoring process consists of selecting a sample of listed -and an increasing number of non- or partly-listed companies around the globe. We do not claim to have all companies from everywhere selected. But it is fair to say that our list of companies is a representative cross section based on the relative importance of stock markets, aiming at reflecting the industrial and geographical diversity.
The number of companies selected has grown to a range of 1,000 to 1,500 these last three years from 250 to 500 in the first years. That number is both big and small. Although striving for a sample as representative and large as possible, we easily admit to cover a small portion of the worldwide quantity of listed companies, now estimated at about 40,000. A survey of all of them would be a mission impossible to accomplish. Our main goal is to be representative more than to be comprehensive.
How much does it cost to participate?
Nothing. Participation in the survey is entirely free of charge, except of course for mailing, downloading, copying or printing costs incurred.
The use of e.com report evaluation services is no prerequisite to -and no guarantee for- being selected, rated and ranked and is independent of the ReportWatch process and the results as published in the Annual Report on Annual Reports. We view this as a guarantee of neutrality.
What company names are used in the publication?
The name of the company that appears in this document is the one as referred to on the covers or as written or abbreviated in key report sections. For legibility reasons, legal forms or words such as corporation, company, group, holding, etc. have not been reproduced. Names do no take into account mergers, acquisitions or brand identity changes that might have occurred and been approved after the fiscal year-end or the report release.
Which documents are assessed?
Documents named and referred to as "Annual Reports" are assessed, as well as summary versions (reviews, overviews...). Corporate social responsibility (CSR) and sustainability reports are checked, either in printed, PDF or online format, not as such but as a component of annual reporting. Proxy forms or separate governance documents are considered when made accessible enough. Reports simply made up of a legal file (e.g. 10-K, 20-F or other similar GAAP and proxy forms) are considered as eligible -even if they fail to match a significant number of our evaluation criteria- only when they are compared to more elaborate reports. That explains why a number of well-known blue chips do not qualify for being rated and do not appear in the ranking.
What about online reporting?
The sharply increasing use of Internet as a corporate communication and investor relations tool has to be reckoned with. 70 percent of the report evaluation job was based on HTML or PDF versions, downloaded from corporate websites. The rest was done like "in the good old days" with printed copies received from companies. Note that for a number of people, including some of our analysts and panel members, prints are still needed for getting the "feel and touch."
The ReportWatch criteria are based on report content and apply whether published on paper or on screen. The investor, analyst, stakeholder and any reader should find the information required by regulatory bodies as well as what the company makes available beyond compliance in print or online. Does this imply that an online report should be a copy-and -paste of a printed one or, in the future, vice versa? Certainly not. Corporate and investor websites can be used to (re)format, (re)structure, (re)build annual and other reports, and, for the best, to add value by providing extra features and contents for stakeholders. These aspects are increasingly taken into account in our scoring and rating job.
Which criteria are used to score reports?
See: How reports were selected, scored, rated.
Are the report marks made public?
No. Only the ratings are made public. In line with our tradition since the launch of this survey the total score or its breakdown is never publicly disclosed. It may be obtained by companies or their advisers through an order for a Report Scan (an edited output of e.com's internal desk research). The revenues generated through scans and other evaluation services help us produce the Annual Report on Annual Reports -and keep it independent.
How are reports rated?
See: How reports were selected, scored, rated.
What is judged -the company or the report?
Enron 2000 and Microsoft 2007 report covers.
The ranking as well as the (public) rating and (undisclosed) score are based on an evaluation of the company report and output and cannot be interpreted as such as an assessment -and a rating!- of the company that releases the report. That said, investors, and especially long-term ones and other stakeholders, might infer some opinions and decisions based on report content. Robert J. Samuelson once wrote, "Annual reports often tell us more than their authors know or intend." (Newsweek, April 21, 1997). Even though a relationship may be found -or argued- between company, report and shareholder value, mind the deductions! Enron used to produce a decent annual report before its collapse, while a market leader such as Microsoft, among many, has never been capable of publishing an attractive one (even online).Good performance and even less company size don't necessarily translate into good reports.
The survey does not therefore represent directly an offer to buy, sell, hold or trade the securities to which the reports cited or ranked in this survey are related.
