Function and reception of annual reports
From a linguistic viewpoint, i.e. seen purely as a matter of identifying the sender in the communication process, characterising the production of annual reports is simple: the company is the communicator whose name appears on the published annual report. However, seen from a business perspective, an elaborate annual report requires the co-operation of several departments in a company. Some of these (Finance, Human Resources, Production, etc.) must provide the requisite content, while others (such as those responsible for public relations, investor relations) convert this content into an annual report (cf. de Groot 2014: 242). Companies with sufficient (financial) means and interest may call in specialists (photographers, graphic designers, public-relations agencies, etc.) to assist in the process, whereas those wishing to fulfil only the minimum legal requirements will go with a minimal- istic, no-frills version. This leads us to two crucial and closely-related questions. What is the purpose of producing an annual report? And what is the target audience?
The name annual report clearly indicates that the document concerned reports primarily on the past business year. However, this focus automatically leads to an assessment of the company’s situation at the time of production. Increasingly, annual reports are even extending their content to include a review of the company’s future prospects (see Section 6). Their informative role is clearly apparent in the parts detailing facts and figures about the company, its production, employees and branch offices, its management, financial circumstances and so on. The information to be disclosed (in particular, financial information) is regulated by a wide range of provisions under commercial, corporate and capital-market law. Also to be taken into account are the recommendations of, and standards set by various institutions (e.g., the Principles of Corporate Governance of the OECD3, the Corporate Governance Code in Germany4, the Global Reporting Initiative5, etc.).
Legal provisions relating to the reporting requirement laid on annual reports, and on their financial part in particular (the so-called “annual statement”), are primarily intended to protect companies’ shareholders. Nowadays, millions of people own shares, but only a few of them are involved in managing the companies concerned. As a result, their right to information can only be guaranteed by government action, and by ensuring the information is comprehensible. That is why large, listed stock corporations have to fulfil the most far-reaching publicity requirements. It is also the reason that annual reports are aimed primarily at shareholders, even if other groups also have a statutory right to information; these include financial authorities and employees, where these enjoy the right to participate (Maul 2007: 603). Furthermore, the company itself may, in its own interest, wish to inform other stakeholders: (potential) investors, financial analysts, investment consultants, business journalists, creditors, suppliers, customers, employees, governmental and nongovernmental organisations, and the general public. All these groups demand precise information and/or should be able to form an impression of the enterprise, its brands and its products (Silberschmidt 2013: 55). The annual report thus has two distinct communicative functions, viz. “to give a true and fair view of the state of the company, and to provide a positive image of the company” (Ditlevsen 2012: 92). It may be that only one of these functions is fulfilled, but in most cases the two are combined. The more the latter is the case, reports lose their purely informative character and become more promotional in nature, concerned above all with building an image.
In that case, the aim is to present the company’s product portfolio, its corporate strategy, its ability to compete in a positive light. The focus is now on strengths and - albeit to a lesser extent - weaknesses, on expertise (Ebert 2004: 279), social position (Silberschmidt 2013: 53) and, most importantly, trust in the company (Keller 2009: 32-44; Malavasi 2010: 212). Yet, even as information meets promotion, the two functions may come into conflict (Ditlevsen 2006: 59). For correct information does not always help to build a positive image, and information that pleases a major shareholder may provoke unrest and fear in a general public sensitised to certain issues.
- 3 http://www.oecd.org/daf/ca/oecdprinciplesofcorporategovernance.htm (accessed 21 March 2015).
- 4 https://www.bundesanzeiger.de/ebanzwww/wexsservlet?session.sessionid=e5adcad5- d6913a8434090d63f6d9be14&page.navid=detailsearchlisttodetailsearchdetail&fts_search_list. selected=69319ca6eaf14e18&fts_search_list.destHistoryId=01496 (accessed 21 March 2015).
- 5 https://www.globalreporting.org/Pages/default.aspx (accessed 21 March 2015)
Figure 10.1: Bimbo - Reporte Anual6
Figure 10.2: Bimbo - Informe Anual7
Fulfilling different functions for different target groups is certainly a challenge for text composers. It is made even more complicated by the fact that the intended recipients form a very heterogeneous group. Shareholders range from fund managers, who wish to check financial information (to which they presumably already have access), to small investors, who are in no real position to properly read and absorb a particular section. Investors who stay faithful to a company for years must be addressed differently from speculators whose positions may change within a few hours. The general public is, by definition, a heterogeneous group with a wide range of interests, desires and requirements. It is therefore understandable that many companies generate different annual reports for different recipients (or groups of recipients). For example, the financial authorities will be provided with a text different from that made available to the general public (see Figures 10.1 and 10.2, which show the covers of two different annual reports produced by the Mexican company Bimbo, the “reporte anual” for the Stock Exchange, and the “informe anual” for the general public).
Against this background, it is clear why much information in the annual report is repeated; for example, the most important key figures in a (very technical) annual report are condensed into a summary table of key figures for “speed readers”. For  
this group, an attractive and well-structured layout that makes it easier to find the information of interest is especially important. So much becomes clear when one considers that, according to an adviser on this subject and assuming a length of 200 to 300 pages, the authors of annual reports anticipate a reading time of three minutes for “speed readers”, ten for “fast readers” and an hour for “thorough readers” (Heisters 2010:90-91). The suspicion is “that the annual report may well be consulted, but it is hardly ever read” (Ebert 2002: 141). Hence, it exists as an elaborately designed, glossy brochure that, above a certain size, is only ever absorbed in excerpts, and selectively.