"The Annual Report in the Age of Social Media"

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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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.’ ●
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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
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