Satisfy Stockholders

Use annual reports to communicate with core investment constituencies

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Broadway Federal Bank (No. 12 on the black enterprise banks list and a member of the be Black Stock Index) has been in business more than 50 years, but because the company went public only four years ago, there is one area where its directors are relative novices: producing an annual report. The Securities Exchange Act of 1934 requires that all publicly traded companies make yearly financial disclosures to their shareholders.

“It’s a very important document if people read it and it gets wide distribution,” says Paul C. Hudson, president and CEO of Broadway Federal, which has five branches in the greater Los Angeles area. “But I’m not convinced [ours] gets wide distribution and that people read it with the kind of [attention to] detail they should.”

For small African-American-owned businesses with limited budgets, making the most of an annual report can be a challenge. Where annual reports used to be only printed and mailed, today’s technology expands the ways in which they can be made available. Reports can be published on CD-ROM and computer diskette, for example. And with the advent of the Internet and the availability of stock market data online, the annual report can also go online and be more than the obligatory letter from the president and the required financial statements. It can be a way to showcase a company’s personality.

“It’s an instrument that can work in a lot of different ways. It’s the only piece they’re able to give to analysts, partners, shareholders, potential employees and the press that gives a unified vision of their company,” says Bill Cahan, president and creative director of Cahan and Associates, a design firm in San Francisco that has won more than 750 awards for creating annual reports.

Here’s how to make your annual report work harder:
n Write an engaging letter to shareholders. The letter, one of the most widely read parts of the report, should demonstrate leadership. In about 3,000 words, give a comprehensive review of performance and set realistic goals for the coming year. Write crisply and honestly.

“A good indication of candor is how they communicate what didn’t work out according to plan and what remains uncertain in a company’s future,” explains L.J. Rittenhouse, president of UtiliVentures Inc., a consulting firm in New York City that specializes in CEO letters.

  • Create a compelling message. Like a good novel, the report must draw people in, urging them to open it and read it. “It needs to give people a reason to care about the company,” says Cahan. That requires a consistent theme that incorporates the company’s unique products or services.
  • Keep it simple and easy to read. Investment, employment and partnering decisions rest on the company’s message being articulated through a unified package of words, color, texture, shape, size and pictures.
  • Present information clearly and concisely. The report must lay out the information, from management analysis to balance sheets, in an interesting, accessible manner. Avoid jargon and hyperbole. Use boldface type and color so that pertinent figures aren’t lost among the many numbers
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