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It is a game of regulation vs communication

An annual report has a dual purpose with seemingly conflicting audience requirements, leaving the company to assess which is more important or influential on their needs. Communication for all stakeholders or regulation for a narrow target audience?

By Nick Rose  | Director | Head of Reporting Communications

Companies like Vodafone have always had their wider invested audiences at the core of their reporting communications with strong messaging and ease of engagement. They are a connected business in more ways than one and want that simultaneous connection with their audiences – from employees and customers to investors and regulators.

On the flip side, Aviva have recently taken the retrograde step of moving from a very customer, employee and retail shareholder focussed report to producing an annual report that is similar to a Form 20-F. It is inline with reporting regulations but lacking in messaging and communication.

It could be said that Aviva is preparing for iXBRL and the introduction of the European Single Electronic Format regulations in 2020, but whatever the reason Aviva have put regulation over communication.

Two different businesses, two different approaches but with very similar audiences beyond institutional investors and analysts. Both have significant retail shareholdings, Vodafone approximately 350,000 and Aviva 580,000 many of whom will also be employees of their respective businesses.

So why the difference? Is this a question of materiality?

Regulators and advisors continue to state that companies, who publish an annual report, should only report on what is material to the business.

But this question only begets further questions – what is material? and to whom?

What is material to a regulator and an auditor will be different to what is material to an employee or an NGO.

In order to address these questions, businesses need to tackle the challenge facing all businesses – who is your audience, who are your stakeholders with a vested interest in the success of your business?

The increased disclosure regulations of section 172 of the Companies Act – highlighting a need for greater inclusion and transparency on the relationships between the directors of a business and all stakeholders, not just institutional ones – should help answer this question.

The increased levels of stakeholder engagement ensure the directors are reporting on how they have engaged with these audiences, what issues they are most concerned about and what impact these issues have had on the company’s decisions and strategies during the financial year.

In establishing the issues, the question of materiality become clearer and the value a business needs to place on communication becomes more apparent.

Have Aviva placed regulation above communication in relation to their audiences? Will Vodafone be forced to change their approach in the advance of further digital requirements with iXBRL? Only time will tell.

But to misquote Oscar Wilde, there is only one thing worse in reporting than poor communication and that is no communication.

I hope that all businesses continue to realise the importance of this one holistic annual communication to all their stakeholders at the same point in the year. Every year.