Fooling the shareholders

Having produced more than 500 annual reports of companies in my capacity as Chief Positioning Officer (and promoter) of Trisys, India’s oldest and largest-dedicated annual reports agency, I can state unambiguously that not more than 10 of those reports were created with the express purpose of servicing the shareholder. Standard client refrain was: “Saab, annual report padhta kaun hai?” Consider my experience:

The skim-the-info report: An Ahmedabad-based pharmaceuticals giant started with the brief: “Let us produce a landmark document.” Midway, the executive assigned slashed non-privileged text. Reason: “Why should I give all this information to my competitors on a platter?”

The upar-upar ka report: Some commodities firm (in businesses strongly regulated by the government) will never go into detail. “Zyaada bolenge to phir government mein problem hoga. They will say you are profitable, so why do you need incentives? Please write everything cosmetically,” is their brief. When the shareholder reads the report, he disinvests immediately.

The have-a-change-of-mind report: We were commissioned to create a landmark information-rich report for a commodities company, but gradually the censor prevailed. We realised why: the management wanted to buy into its own stock at low prices and any positive message would have made the exercise expensive.

The information-by-weight report: On a number of occasions, we have been told, “Utna hi likhiye jitna mere Rs 7 a copy ki cost mein fit ho sakey.” So, information is rationed, pages trimmed and printing cost strictly controlled. “Zyaada likhenge to mailing cost bhi toh badhega!”

The banker-and lender-centric report: An exhaustive report is created to enhance lender confidence and mobilise low-cost loans, the differential offsetting the cost of producing the report. The shareholder never gets this copy.

The ‘what’ report? One company did not mail the copies to shareholders at all; a deluxe version was privately circulated among FIIs, instead. Another insisted on a print run that was a quarter of the number of shareholders. Reason: “We can always say that it was misplaced in transit.”

The achhi-achhi report: Some reports are assiduously sanitised. Like a Yash Raj film, everything looks perfect. Until you discover that the company had provided an economic valueadded (EVA) section in the previous year, which has gone missing this year. The defence: “Aisa hai ji ki last year, EVA was in plus, whereas this year it is in minus.” Their philosophy: when you have bad news, duck.

The suitable hybrid report: Years ago, NIIT produced a report that controlled cost and yet enhanced transparency. It simply provided a synopsis of various sections with relevant URLs should the shareholder be interested in downloading more information. You could fault them on the ground that not all shareholders would be Net-friendly but not on their “neeyat”. However, the company discontinued this practice after this.

The author heads Trisys, an annual reports consultancy.