They are slick, bulging with information, andlargely unread. They are annual reports.
This year, some 8,000 public corporations and an equal number of foundations, public authorities and private corporations will send out their yearly score cards to some 30 millions stockholders, thousands of analysis and other individuals and institutions. The average company may produce 50,000 copies, for perhaps half a billion annual reports in all.
Behind the traditional 8 1/2-by-11-inch cover usually lies an uplifting message from the chief executive officer, colored pictures of smiling employes or attractive products, followed by pages of financial tables, clarifying (or obfuscating) footnotes, and boilerplate language. This ritual testament to fiscal success (or folly) can run up to 100 pages. The average productlion cost per copy not including auditors' fees and the time of executives is approximately $3, according to Corpcom Services, Inc.
All of the effort is rewarded by just 10 minutes of the average stockholder's time says Corpcom.
Enter Bruce Pennington of Hay Associates, a consulting firm based here. About two years ago he decided there must be a better way to present a corporate message. Drawing on his background of journalism, corporate communications and broadcasting, he hit upon the idea of transforming a corporation from cold figures on a printed page into warm bodies on a television screen.
This year, a score of Fortune 500 companies are commiting their annual reports to videotape with Pennington's help. Clients include AT&T, Citicorp, W.R. Grace, IBM, Texaco, United Technologies, Xerox, Amax, Bristol-Myers, Burlington Industries, Control Data, Emory Air Freight, McGrawEdison, Midland Ross and Peat Marwick Mitchell.
While taping corporate information for promotional purposes has become fairly widespread, presentation of annual reports on cable television is a recent phenomenon. Among companies that have beamed their messages via satellite and videotapes to existing and prospective stockholders, analysis and business students are Emhart Corp., International Paper and Parker Drilling.
Typically, the chief executive officer acts as anchorman, making a few remarks on the past year's activities as well as future plans before introducing the chief financial officer, who goes through some of the results in the profit and loss column with the aid of charts and graphs. Interspersed are animated scenes of corporate activites. In the case of an international conglomerate, it meant pictures of production lines from England to Italy to Vermont: bottles clinking, robots performing, machines stamping. An insurance company might picture actual beneficiaries; a bank could trace the flow of dollars from depositors to loan recipients.
The 15to 30-minute presentation falls somewhere between a new documentary and a corporate image film. It is intended as a supplement rather than a substitute for the printed report. As such, it serves to "humanize" the corporation for stockholders and better acquaint them with operations. Market analysts value it as a way to size up a company's management and learn its long-term strategy.
Pennington stresses to clients the importance of candor, bad news along with the good, a "tell not sell" approach. So what if the CEO is nervous on camera; it adds credibility to the film. "The time to start worrying is when the presenters are slick professionals."
But this approach also tends to make the screened annual report an amateurish translation of the printed page, according to Corpcom President William Dunk. As a consultant who reads hundreds of annual reports every year, Dunk calls the video versions "a good idea that hasn't quite happened yet."
Dunk sees a need for more creativity. Yet any Hollywood hijinks in the board room, designed to make shareholders or investment advisers believe a company is dynamic because its CEO is photogenic, would be a real concern to the Securities and Exchange Commission. The regulatory agency has no plans to intervene unless substantial abuses in representation of the facts develop.
The cost of producing a video annual report in simplest form runs about $20,000. Distribution via cable television adds another $15,000. Cable systems try to reach the desired audience of shareholders notices informing them of the broadcast.
From the corporate viewpoint, the results thus far appear mixed. Emhart Corp., a Connecticut-based international corporation engaged in machine manufacturing, pioneered the form. Spokesman John Budd said 2,500 viewers of his company's first report on cable television wrote in for the cassette. He said it was not known how many other saw the report but did not resond. Unfortunately, he said, not many of Emhart's shareholders, whose average age is 65, have cable TV.
International Paper Co. praised cable as a good medium for reaching analysts but not shareholders. The company found it was unable to target cities where stockholders are concentrated or advise them when the tape would be aired. "The most reaction we got was from other companies wanting to know how to do it," said IP spokesman Bruce McKenzie. Despite technical difficulties, he thinks cable TV is a natural for annual reports.
Parker Drilling Co. of Tulsa decided to try the format in an effort to create a corporate identity in a world where one drilling company is indistinguishable from another to the average investor. Its videotape was carried on 128 cable systems in 39 states with a potential viewing audience of 5.7 million people. Once again, the company was unhappy with the lack of feedback, since there are no audience ratings for cable TV. "We were very happy with the videotapes and think the format will succeed when cable TV reaches 30 percent audience penetration," said Susan Dornblaser, director of public relations. By then, she added, it will also be a lot more expensive.