Shareholders choose content over style

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A JAZZY cover, photographs of the beaming board of directors and a brilliantly obtuse profit-and-loss account may be what the chairman wants in his company's annual report. But it is not what shareholders want.

Companies often go badly wrong when it comes to compiling what can be their only contact with shareholders, according to a survey of more than 1,400 shareholders, analysts, finance directors and investor relations experts published today.

Depressingly enough for the collective egos of the board, only one in six shareholders wanted a picture of the chairman, with only a few more eager for a photograph of the board. A typical shareholder comment was: 'Having photos of directors is only a mark of their own self-importance.'

Finance directors, meanwhile, are mistakenly concerned about the company's image. 'They want eye-catching covers, good paper, and an overall look of quality but neither shareholders nor analysts think any of these are of particular importance.' A shareholder's brutal comment: 'Design cannot improve a company's results. . .'

More seriously for companies, less than a quarter of analysts and only 40 per cent of shareholders thought reports gave a 'true and fair view'. 'An annual report is self- generated by the company so one cannot expect it to be 'true and fair',' one analyst said. 'Reports are not a very reliable source of information. They are probably useful for misleading lenders and shareholders,' an investment expert added.

This will sound familiar to those who have followed the Terry Smith saga. He was suspended last week as head of UK equity research by Phillips & Drew after treading on corporate toes with his description of legal accounting methods used by companies to massage their accounts.

According to the survey, commissioned by McBride's design consultants, some investors are not so easily misled. 'All company reports must be deciphered before one can discard the effects of creative accounting,' one said. Others said: 'Bad results are often disguised', and 'Most figures are 'accounts-speak' adjusted for tax purposes; most other information is cosmetic.' Still, 83 per cent of the shareholders had never contacted a company over its annual report. So they have only themselves to blame.