Practical perspectives on reporting #4: A lawyer’s view – by their annual reports shall ye know them
By Tamara O’Brien, TMIL’s roving reporter
Or, as the ITV game show might put it, Don’t Hate the Lawyaz. And there was nothing but love for today’s webinar guests: both lawyers from Addleshaw Goddard; both wise in the ways of the annual report.
Richard, a governance specialist, produces Addleshaw Goddard’s (most excellent) Company Secretary’s Checklist which explains mandatory requirements for the annual report (AR). He also shared his views in Trust Me I’m Listed.
Jonathan, head of AG’s employee incentives team, advises on remuneration – the AR’s least glamorous yet most intently scrutinized section.
Also joining Claire was AR writer and Trust me, I’m listed co-author Heather, who can often be found in the company of suits, thrashing out the finer points of language in brand workshops – a pastime beloved of both lawyers and writers. Heather champions the use of natural English, as spoken by humans, in the AR. Or indeed in any communication.
Our theme today was how to meet Financial Reporting Council requirements that the AR should tell a company’s unique and engrossing story, while breezily incorporating such considerations as the Companies’ Act, the UK Corporate Governance Code, GDPR, and the latest Section 172 requirements, to name but few. And to cut the clutter while we’re at it.
As Claire remarked, good luck linking that lot together.
So the stage was set for a battle royal – or at least tug-of-war baronial – between two factions not short on opinion when it comes to the written word. But, disappointingly for me as chronicler, not a bit of it! Turns out lawyers hate obfuscation, pomposity and pusillanimity in AR writing just as much as writers do. And have some interesting insider insights besides.
The bad AR paradox
Richard explained that a bad AR can actually be very useful to investors, in unwittingly revealing a great deal about a company’s internal realities. Some ‘tells’ are:
Too much verbiage (can hide uncertainty over message and strategy; or reveal a culture in which some people can’t be challenged)
Uneven focus (reveals internal fiefdoms)
Uneven tone (reveals a lack of overall, organising intelligence – so how seriously does the company take its reporting?)
For the companies themselves, this represents a disastrous waste of money, time and effort. Claire picked up the point later, saying that as companies have to go through the costly AR process anyway, they might as well make it work for rather than against them – think of it as an investment (and thus get a return) rather than simply a cost.
True story
One questioner raised the issue of truth, and whether we can we trust the AR to tell it. Richard replied that, while we all know you build trust through clarity, transparency, fairness and honesty, there are many ways to skin that particular rabbit. All too often the AR becomes a warehouse of ‘information that is true’, rather than ‘the truth about our company’.
The latter is where storytelling comes in. It takes good communication techniques and skill with language to create a report that contains both true facts, and tells a meaningful, thus true, story. And that someone would want to read because it considers their interests.
In AR terms, that means, for example, don’t just ‘air drop’ a table of your greenhouse gas emissions into your report. Explain what the figures mean in terms of your company strategy for climate change, and how you’re going to achieve it. And, added Heather, in language that everyone understands – not insiders’ special lingo.
Cut-and-paste is not your friend
Clarity is just as important in the remuneration report, said Jonathan. Lawyers get blamed for the quantity of jargon in this section, but often it comes from companies themselves. When asked what it really means, the answer is often “We don’t know – it was in last year’s report!” Using pre-approved text is tempting but ill-advised. Circumstances and challenges change. Investors will always look at information with a jaundiced eye, and ask, are we getting the full picture here?
Love your lawyer
So we ended as we began, in complete agreement. Some parting thoughts:
Heather: Don’t be afraid to be straight-talking and sound human.
Jonathan: Read everything with a fresh pair of eyes. Ask, what does this mean? Is it still relevant?
Richard: Don’t keep bolting on information to create a Frankenstein’s monster of a report! But you’ll need some familiarity with the rules to know what can be left out.
Claire wrapped up by saying “Don’t blame the lawyers! Bring them into the room – you’ll get a better report.”