There was a time when you could read an annual report in a few hours. Those documents were brief, informative affairs that gave you a sense of the company and the people who ran it.
That is long gone. Now you can spend days plodding through an annual report and emerge feeling you know less about the business and those who run it than you did at the beginning.
I blame the corporate governance industry — the wide swathe of people who include so-called governance experts as well as lawyers, regulators, accountants, analysts, annual report writers and, of course, journalists. For years, some, or all, of these people have been demanding more accountability, more transparency, more information. So what did companies do? They gave it to us. Serves us right.
Now as I wade through the Shoprite annual report — I mean the Shoprite integrated annual report (part of a suite of a whole load of reports) — I must constantly remind myself that this company is in the business of selling beans and other things to lots and lots and lots of people.
That the annual report is a drudge read doesn’t mean those who read it can relax. No, they must constantly be vigilant, because among all the flow charts, governance structure material and marketing guff there are nuggets of great information.
Though, sadly, in Shoprite’s case one bit of extremely useful information has been dropped — the five-year review, which I thought was a requirement. But apparently the board decided not to bother after the adoption and implementation of various new accounting standards in 2019. “It would have required the restatement of all the prior years’ information to make it comparable,” said a company official. Hopefully Shoprite will reintroduce it next year, when the five-year comparative glitch will be out of the system.
But the challenges that Shoprite’s report presents to readers are nothing compared with those presented by Sasol’s. It is evident that Shoprite aims to give all the facts the various regulators, stakeholders and other busybodies demand, but it’s really difficult not to suspect that Sasol is intent on providing enough information to befuddle the readers.
And it’s not just the text. Consider the photos scattered throughout the 500-plus pages of annual reports. They are sufficiently bucolic to suggest that Sasol is in market-gardening with a sideline in petrochemicals.
At least ChatGPT would help ease one part of the compliance burden
Perhaps there are people who have devoted their lives to understanding Sasol and for whom these reports do not make excruciatingly painful reading, but it’s likely that they don’t represent a large portion of the readership or the stakeholders.
Remarkably, because financial institutions can be so tedious, the most enjoyable report I’ve read this year was Investec’s remuneration report. The clarity of the writing meant it was easy to understand the various performance metrics and how they relate to the attainment of threshold, on-target or stretch goals. The report provides a useful insight into the workings of the industry. Of course, nowhere is there justification for anything like the outrageous R172m remuneration package dumped onto CEO Fani Titi.
The sad thing is that all these reports, designed to tick all the boxes that governance experts — and others — demand be ticked, consume huge amounts of resources. Information must be collected from a wide array of sources, and then the story must be told in a matter-of-fact manner that lacks flair. After that the people who read it must spend an inordinate amount of time doing so and making sense of it all. It has become an elite activity.
And one that is surely designed for AI.
The grim reality for companies is that the production of these reports is only a part of the huge and growing compliance burden they face. Every year more rules are piled on the existing mountain of requirements. It’s increasingly difficult to see what purpose it all achieves. A few more people behind bars, or slapped with JSE reprimands, would be useful. Perhaps things would be much worse without the rules. But in general, honest people will behave honestly and fraudsters will find a way around them. At least ChatGPT would help ease one part of the compliance burden.
Amazingly, no South African-listed company has yet resorted to AI to produce its annual report. A limited survey of the market indicates that local corporate executives are indignant at the very thought of their passionately produced reports being created by AI.
But why should they not be done that way?
There’s little in these annual reports that isn’t already available somewhere on the internet, annual financial statements or one of the various regulatory filings. Any additional information that is needed can be topped up by hand, as it were.
And when journalists or analysts have to write a little story about them, well, there’s also ChatGPT. All in all, a win-win solution.
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