Communication Best Practices at Dell, General Electric, Microsoft, and Monsanto

5. Best Practices of the Monsanto Company: Benchmarking World-Class Annual Reports

81 5 Best Practices of the Monsanto Company: Benchmarking World-Class Annual Reports Ted J. Smith III and William C. Adams As every investor knows, the coming of spring is marked not only by late snow storms and early-blooming flowers, but by the sudden efflorescence of another form of hardy perennial, the corporate annual report. Produced each year by over 11,000 publicly traded American companies at an estimated cost of more than $4 billion, and distributed in quantities numbering in the tens of millions, the annual report has become one of the most important and familiar products of corporate communication (Byrne 1987, 42; Zelvin 1987, 14; Flanagan 1993, 52). It must be noted, however, that its current prominence is a relatively recent phenomenon, the result a long period of evolution and refinement. For the first quarter of the twentieth century, there were no formal disclosure requirements for American corporations. In 1926, however, the New York Stock Exchange began encouraging the companies it listed to make periodic reports to their investors. This initiative was followed by passage of the Securities Act of 1933 and the Securities and Exchange Act of 1934, which established formal requirements for publicly owned corporations to report to shareholders on a yearly basis financial information that could affect the value of the company. Some corporations and consultants were quick to recognize the marketing potential of these new annual reports (Droge, Germain, and Halstead 1990). But until about 1955 nearly all consisted of “little more than an income statement, a balance sheet, and a president’s letter saying everything was wonderful” (Jacobson 1988, 52). Beginning in the mid-1950s, companies such as IBM, Litton, General Electric, and General Dynamics began to exploit the full communication and marketing potential of annual reports by introducing a range of innovations in form, content, and structure (Workman 1986). 82 TED J. SMITH III AND WILLIAM C. ADAMS By the mid-1980s, those innovations had become normative, at least in the reports issued by larger corporations (“Annual Report,” 1984; Cato 1985, 19–20). Among the most important and visible changes in form were the use of four-color printing, extensive photographs (first introduced in the 1940s) and informational graphics, imaginative design and layout, high-quality coated papers, varnished covers, and perfect binding (Workman 1986). In terms of content, the principal change was the addition of large amounts of optional unaudited information not required in the filings mandated by the Securities and Exchange Commission (SEC). In conjunction with the innovations in design and a series of expanded reporting requirements imposed by the SEC, the addition of this optional information not only increased the length of the average annual report to 40 pages or more but also encouraged adoption of the typical two-part structure that is now standard. In this two-part structure, the report is divided into a narrative front section and a financial back section. The front section generally includes financial highlights, the president’s letter to shareholders , and one or more narrative discussions or management interviews dealing with such topics as corporate performance and prospects, industry trends and competitive position, management philosophy and initiatives, corporate goals and strategies, product research and pipelines, marketing strategies, social and environmental commitments , and achievements and employee profiles. The back section consists principally of the required independent auditors’ report, a series of mandatory financial statements, extensive notes to the financial statements, and a financial summary. In contrast to the audited and strictly regulated back section, material in the front section is unaudited and, except for the requirement that it must be consistent with the material in the back section, unregulated. The front section therefore offers an opportunity to present a much fuller image of the corporation and to address the interests and concerns of publics other than investors and the financial community, including employees, customers, opinion leaders, journalists, and activists . It was to exploit this opportunity that the innovations in form were introduced in the 1950s and their use has generally been restricted to the front section and covers of the report. Preparation of the financial material now located in the back section of the report has always been the responsibility of corporate accountants and lawyers working in consultation with senior 83 BEST PRACTICES OF THE MONSANTO COMPANY management, and it remains so today. But with the expansion and reformulation of the front section and efforts to “package” the...