Consequently, much external attention on companies' annual reports still focuses on directors' pay. But though this disclosure is important, it is not the only important information to be presented in these documents.
According to a new publication from the communications consultants Sampson Tyrrell, the challenge is to "produce an annual report that both achieves best practice in disclosure and educates, motivates and reassures through meaningful narrative and effective design".
The report, Issues in Annual Reporting, says that the annual report is a cost-effective tool for creating a good relationship with investors, with the newly introduced Operating and Financial Review (OFR), offering communications benefits as well as requiring changes to the traditional annual report.
The consultancy describes how the litigious nature of the North American market has encouraged companies to make the US equivalent of the OFR somewhat formulaic. It warns that UK reports should avoid this approach if they are to retain their credibility and aid understanding.
In keeping with its role as a communications specialist, Sampson Tyrrell also points out that companies can use the annual report to project their brands. Since "a strong brand is vital to sustainable success", it says, it is vital to establish it in the minds of investors.
Some companies are seeing such trends as a move towards better reporting on the environment as a method of promoting themselves as well, while others have responded to new technology by putting their accounts on disk. The only problem with this, points out Sampson Tyrrell, is that most City institutions and analysts find this method of displaying accounts information "not at all useful"; only one in eight rated it "fairly useful".
The fact that many companies went down this route before acknowledging that there is an antipathy to it, perhaps supports the idea that companies should regularly seek to find out what their account users want, and update the information accordingly. Sampson Tyrrell recommends an "annual perceptions audit", rather than informal feedback, as the best way of refining the content of annual reports.
The important thing for companies to bear in mind is that information on financial performance is not the only data investors are looking for in the annual report. After all, events are likely to have moved on since the accounts were compiled.
Sampson Tyrrell claims to have established that only a quarter of shareholders see financial performance as the main message of the annual report. Increasingly, they make "informed choices on perceived performance coupled with an assessment of your long-term strategies, your corporate values, and your willingness to measure and communicate your impact on the environment".Reuse content