Avoid glossing over the facts

As design plays a more pivotal role in making annual reports more readable and informative, good companies recognise the need to steer clear of letting presentation 'camouflage' the facts, say the judges of this year's Hong Kong Management Association (HKMA) Best Annual Reports Awards.

And in an age when corporate governance and regulatory requirements demand that companies provide more disclosure as to the state of their finance and business activities, the annual report becomes a vital snapshot of events.

These were among the findings of the adjudication panel in its report on the Best Annual Reports Awards, which were presented last night at the Island Shangri-La in a ceremony co-organised by the South China Morning Post.

Howard Gorges, chairman of the judges' panel, praised the higher standards of the company reports entered into the competition, which this year had sub-category awards extended to recognise achievements in design and good corporate governance.

'We don't discourage glossy reports, but sometimes the minimum can be necessary,' said Mr Gorges, who is vice-chairman of South China Brokerage and HKMA council member.

'Many companies do well-designed reports, but the object is to get your readers' attention and put the message across. It is not meant to be camouflage for a report that is not very good.'

Mr Gorges said great strides had been made not only by public and non-listed companies, but also non-profit organisations and charities.

'The best non-profits compared with some of the medal winners and, in terms of corporate governance, can be very businesslike in their reports,' he said. 'They have a different kind of purpose and pitch it differently, but they pay a lot of attention to design, presentation and getting the message over.'

He said this approach to annual reports by charities, school foundations and other community organisations was vital if they wanted backing from the Legislative Council and public donations.

In the corporate sphere, Best Annual Report went to CLP for the fifth year running. 'CLP is so competitive and professional in every aspect by trying to be No1 - we are lucky to have different stars over the years who have set the pace,' Mr Gorges said.

'Design is more important for some companies than others because of the amount of interface they have with the public,' Mr Gorges said of CLP's success in winning the citation for Achievement in Design for the general category. 'For other companies design may be more of a matter of making the report attractive, capturing attention and highlighting certain issues.'

Other reports that stood out included Hong Kong Exchanges and Clearing, which scooped gold in the general category and a citation for Achievement in Corporate Governance Disclosure in the general category. The Securities and Futures Commission took gold in the non-profit making and charitable organisations category where it also won a citation for Achievement for corporate governance disclosure.

But it was the companies that pushed for a place with the 'champions' that impressed the judges, with Karrie International, Hysan Development, Transport International Holdings and Nine Dragons Paper among those in the list of Honourable Mentions.

'Big companies like banks and First Pacific dominated particular periods, while contenders have edged up the ranks,' Mr Gorges said. 'Smaller companies have been making great strides in producing better reports and displaying better transparency.'

More companies are recognising the need for transparency whether from regulatory pressure or as part of their responsibility to shareholders. But the judges' report cited areas of corporate governance that needed improvement.

Some companies, for example, were not following such listing requirements as the chairman of the board having to attend annual meetings to answer questions from shareholders. There were also cases where one person held the roles of chief executive and chairman.

'The model is you should have a separation ... to stop the board of directors acting as if they're the only shareholders,' Mr Gorges said.