The annual report has run into trouble trying to reconcile the different needs of its audience. The latest suggestion is to treat it as the tangible face of the corporate brand.
Corporate communications specialists have long known that annual reports should do more than divulge the information required by regulators - they should 'sell' the company not only to investors but also other audiences, including opinion formers, employees and customers.
But this quest to add marketing and PR value to financial reports has recently been running into sand. True, some imaginative companies have found clever ways to add 'spin'. Benetton, for example, made its annual report look and read like a fashion magazine. And companies such as BT, which has millions of shareholders who are also customers and/or employees, have started using shareholder communications to sell off page, through special offers.
But most companies end up with an uneasy compromise. Their accounts start with pages of gushing text and glossy pictures of smiling board members, employees and charity recipients and then judder sickeningly into the impenetrable jargon of regulator-imposed financial disclosure. The two halves don't add up.
The first lacks credibility. The second lacks readability.
Worse still, different audiences now have an endless appetite for more information. They want to know about likely future performance, the value of internally generated brands or trends in customer and employee satisfaction and loyalty, environmental and social impact, ethical stance and corporate governance policies. And the strain of shoe-horning ever more messages into traditional accounts is beginning to tell.
Some companies are cautious about these demands for more disclosure.
As Mark Rigby, operations and media relations manager for Bass, comments: 'It is very hard to present future strategy without losing competitive advantage.' Equally, Andrew Wood, BT's shareholder communications manager warns that 'it's very easy to give out too much information and for your message to be lost in the words'.
Reconciling the needs of different audiences is also getting difficult.
Specialist investors want detail, for example, and Paul Moore of Bankers Trust Funds Management advises: 'The first thing you can do is fire all the marketers. Don't dress (the annual report) up with too many fancy pictures.' But what about less financially literate audiences that want simplicity? Companies such as BT and Bass are now producing a growing range of separate reports, including short-form reports for the average punter and what Wood calls 'the full Monty' only for those making a specific request. But, warns Mark Goyder, leader of the Royal Society of Arts Tomorrow's Company project, producing reports in isolation to one another may exacerbate misunderstanding and divisions between shareholders.
Cost also plays a part. Printing and distributing a single typical glossy report can run to £6 or more and, when the shareholder register runs to millions, finance directors must take a long hard look at the returns they get for that investment. One radical solution may be to turn the whole production on its head. Why not treat the accounts as just one element of a broader brand communications programme. Instead of seeing investor relations as a job for finance, see it as just one element of corporate brand building.
Looking at this alternative approach, Goyder suggests: 'Companies need to review their annual reports ... and ask how effective a part they play in the total process of communication with their audiences'. The annual report should first and foremost 'bring to life the linkages between the different relationships upon which the company depends for its success', such as those between shareholder, employee, customer, business partner and local community.
In doing so, it should be very different from traditional annual accounts.
It should be published sooner and be sharper and simpler. It should focus on 'the purpose, values and strategy of the organisation'. And it should illustrate the application of these values and strategy via a range of key performance measures covering areas such as 'investing in the future' and 'generating cash', 'living our values', working with suppliers and partners, improving staff skills and knowledge, meeting customer needs and enhancing loyalty, 'developing a culture of innovation and leadership' and 'generating a high level of respect in the community'.
This new-style report would then refer readers wanting further information to more detailed documents, one of which would include the financial small print required by regulators for professional investors.
Treating the annual accounts as just one element of an integrated corporate brand communications exercise may seem a bit radical for fundamentalist accountants but, argues Quentin Anderson, a director of corporate reporting specialist Addison, who worked with Goyder on the project, companies that 'build the long-term integrity of their corporate brand' tend to deliver greater long-term shareholder value. And 'the most tangible face of the corporate brand is the annual report'.