Not-so-good stuff cleverly hidden
Glossy integrated annual reports often say too little
The Chartered Secretaries Southern Africa, in partnership with the JSE, gives an annual reward for excellence in corporate reporting. There are categories for all sizes of Jse-listed companies as well as for unlisted ones, NGOS, the public sector and large and small state-owned enterprises. This year it was decided not to make an award for the large state-owned companies.
No reason was given, but considering the only time we’ve heard about these companies this year has generally been in the context of the leaked Gupta e-mails or equally heart-stopping tales of corruption, it shouldn’t have been a surprise. Still, the reward is not for ethics or good governance, but for excellence in reporting. Presumably having an appalling ethical reputation doesn’t automatically disqualify you, though perhaps it should.
Eskom, which has received many awards in the past for its excellent reporting, apparently didn’t even submit an entry this year.
The more likely reason for not making an award is not because many of the big state-owned companies have been implicated in the sort of dealings that threaten their long-term survival but because they make no reference to this in their annual report.
Transnet, for example, produced a lovely report with great charts, pictures and commentary. There might have been a footnote referring to the issues at the centre of the allegations of corruption that prompted Business Leadership SA to suspend its membership, but it was impossible to find.
However, companies in the private sector aren’t much better. Lucky old KPMG, a major sponsor of the King code, doesn’t even have to produce an integrated annual report. Private-sector companies have also lost sight of the purpose of an annual report, which is presumably to communicate the essence of the company to shareholders and other stakeholders — to tell them about the good stuff and the not-so-good stuff.
Instead, we’re given a glossy marketing document that contains hundreds of pages of pictures, charts and commentary that are so bland as to be pointless. In an era of huge information overload it is frustrating to have to wade through mountains of padding to get the odd useful bit of information, most of which is contained in the dense, almost unreadable, remuneration report.
These documents are put together at enormous cost by armies of writers, photographers and editors, seemingly with the brief: “Whatever you say, say nothing — and particularly nothing that might make the CEO or chairman uncomfortable.” Their delicate task in creating these documents is to balance this brief with the need to tick every box in the King code.
I’m tempted to launch my own competition with awards for brevity and insightful information. Naspers’s 2017 report would have scored on brevity. But it would have lost out for its failure to disclose anything about the biggest risk facing its shareholders, namely the Tencent Variable Interest Entity, or about what could be the second-biggest risk, the controversial financing of ANN7 and the SABC.
I’m tempted to launch my own competition with awards for brevity and insightful information