The 10 Best Annual Reports of 1996.And the 10 Worst
Cato, Sid, Chief Executive (U.S.)
It's getting harder and harder to find bad annual reports-an indication, perhaps, that more CEOs are actively involved in creating them. But that doesn't mean the news is all good.
Perhaps tellingly, the CEOs of firms with top-ranking reports understand the value of an effective annual report. "A million shareholders turn to our annual report every year as their No. source of information, their guide to the future of our industry and company," says Richard C. Notebaert, chairman and CEO of Ameritech Corp., who describes his company's report as "a long fireside chat between a CEO and a shareowner about the future."
As Douglas Leatherdale, CEO of The St. Paul, put it: "When it comes to our shareholders, the annual report is The St. Paul's most imprtant communications tool. My view is that an annual report requires the personal involvement and commitment of a company's chairman and CEO year after year."
Over the years, the annual has gradually evolved from a summary of a company's businesses, market position, and financial performance to become a more comprehensive corporate mouthpiece, reflecting future opportunities and growth strategies, as well as current standing. As Notebaert says of Ameritech's report: "It looks forward to survey our growth opportunities, convey our competitive strengths, communicate our vision and strategy for future growth, and report the results we've achieved."
In the best of cases, the finished product demonstrates the efforts of a professional communications team working with an enlightened CEO. "Essentially, content of our annual report is a collaborative effort involving input from the CEO, executive, and plant managers, and our commercial and investor relations functions," says Jim Will, CEO of Armco Inc., whose annual placed third this year. "A key to our success, however, is giving full free dom and responsibility for developing a creative presentation of that content to our communications and production team."
Judging the merits of annual reports inevitably raises the question of just what constitutes a good annual. In evaluating each year's crop, we rely on a point system (see sidebar, above) to designate the 10 best reports. In our 14 years of ranking reports, this year marks the first time that a score of 135 points has been achieved-and by two reports, not just one. Overall, scores have risen each year, with more than 50 reports meeting the 100 point-plus score required to merit "world-class" status for the past four years running. In short, reports are getting better. More companies are moving beyond merely encapsulating strategic direction and financials to presenting a complete corporate profile, communicating everything from a mission statement to how the firm fits into world markets. Fewer fall prey to the sins of obtuse reporting and overblown design.
Erring on the side of tradition continues to be the safest road to achieving the annual report's ultimate purpose-conveying the company's image and corporate mission, an accurate reporting of its market position and financial picture, and a forward-looking view of its future prospects. At the same time, the world's best reports all blend form with function to some extentas evidenced by this year's top 10.
FIRST (TIE) -135 POINTS
Perfect scores for two firms tied an old-line insurance company with worldwide operations with a Midwestern upstart, one of the new breed of telecommunications tigers, for the top slot in 1996. Of the two, the ST. PAUL COS. takes the more comprehensive approach, with greater graphic appeal and more substantive text. St. Paul Chief Executive Douglas W. Leatherdale admitted without prelude that a "relentless parade of storms and floods produced the second-worst total catastrophe loss in our 144-year history. That ended our three-year string of record earnings." His report wins high marks for forthrightness throughout its 76 pages, and an innovative theme that paralleled "Creating value" and "Valuing creativity. …