I Rmag Guide Sept09

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

Guide Sept 09.indd 1 14/8/09 12:01:20

Social revolution Whether 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 opportunitiesWhile 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 revolutionMaking the most of

the digital agepage 2

Still valuedThe appeal of the

annual reportpage 4

Disclosure rule changesThe impact on retail voting

page 6

New ways to shareBeyond Facebook

and Twitterpage 8

Print still vitalThe power of paper

page 10

Sponsor’s statementpage 12

Contents

2 IR GUIDE The annual report in the age of social media

Guide Sept 09.indd 2 14/8/09 12:01:20

The annual report in the age of social media IR GUIDE 3

Social revolution

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 and Twitter 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

Guide Sept 09.indd 3 14/8/09 12:01:23


Still valued In 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 volatilityThe 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

Guide Sept 09.indd 4 14/8/09 12:01:23


Proportion of investors

who say the annual report

is useful for:

Still valued

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 supportersJust 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%

Not

icin

g a

stoc

k

Mak

ing

a bu

y de

cisio

n

Mon

itori

ng a

por

tfolio

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

Guide Sept 09.indd 5 14/8/09 12:01:26


Disclosure rule changesFor 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 votingThis 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

Guide Sept 09.indd 6 14/8/09 12:01:26


Disclosure rule changes

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 basesThe 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

Guide Sept 09.indd 7 14/8/09 12:01:36


New ways to shareBlogs and Twitter 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 aboundOther 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

Guide Sept 09.indd 8 14/8/09 12:01:37


New ways to share

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 approachAmerican 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.

Guide Sept 09.indd 9 14/8/09 12:01:41


Print still vitalWhether 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 moneyThis 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

Guide Sept 09.indd 10 14/8/09 12:01:41


Print still vital

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.’ ●

Guide Sept 09.indd 11 14/8/09 12:01:45

Sponsor’s statement

Over 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.


OfficesAtlanta, GABoston, MA

Brentwood, CACharlotte, NCChicago, IL

Cleveland, OHDallas, TXDenver, CO

Fort Lauderdale, FLHauppauge, NYHouston, TX

Los Angeles, CANew York, NYPrinceton, NJ

San Francisco, CAWashington, DC

For more information:Noah Butensky

Phone: +1 631 435 0400Fax: +1 631 435 0422

[email protected]

Guide Sept 09.indd 12 14/8/09 12:01:46

Documents

I Rmag Guide Sept09