Sid Cato -- What Makes a Good Annual Report?

Sid Cato's standards for the annual report to shareholders.

The criteria, first promulgated in 1984,
used in judging the best, and worst,
among this key corporate communiqué.

1. Does the front cover demand readership? Has the report utilized not only an intriguing cover statement but, on inside pages, textual callouts, boldface lead-ins, action subheads, bulleted paragraphs and the like? Contain an open, inviting layout, solicit readership on every page and have an action-filled index -- a "talking table of contents"? Design approach present throughout, including in back of the book? (10) + (10) bonus points.

2. Is writing sprightly, and does the text eschew gobbledygook? Use of complex words avoided? (10)

3. Does it contain little more than a letter to shareholders and an operations review? Or does it truly aim to inform fully, presenting items such as a special editorial section, glossary of terms, a mission statement? (10)

4. Truly shed light on the competition, market position and market share, provide a well-organized (and presented) breakdown of operations, results and prospects? The competition and customers named? (5)

5. Photo of the organization's head person used, and does it lead off the shareholder letter? (5)

6. Has management wholeheartedly assumed responsibility, alongside the auditors, for the financials? (0 this year, though still being tracked)

7. Does the document contain biographical data on officers and directors -- more than simply age and year of affiliation? (10)

8. Is it unquestionably other than run-of-the-mill, yet, evolutionary, not revolutionary? (5)

9. Discernible point of view -- a theme well-conceived and woven throughout, more than simply stated on the cover? (5)

10. Communicate a favorable identity of the firm through its stature, articulation and furtherance of understanding of the entity's business and performance? Are women and/or minority directors included on the board? (10)

11. Is financial disclosure more than the five-year data the Securities and Exchange Commission requires, all graphs fully explained, but not in type the same size as body copy? And no reliance on the dreaded EBITDA? (15)

12. Honesty throughout? Bad news delivered without subterfuge or delay? Forthrightness to the ultimate -- no conflicts between the report's parts, for example? (10)

13. Clearly, CEO involvement (whether actual or perceived) in the shareholder letter? (10)

14. The CEO unequivocally presenting revelatory view of the firm and providing substantive insight into where it's headed? (15)

15. Did I like it? Is it honest, sprightly, attractive, informative, focused, pioneering? Merely in technical compliance with the criteria or did it incorporate their intent? To receive all five points a report must (1) use recycled paper, (2) possess a new look, (3) look good, (4) demand readership, (5) have a positive index of at least 40%, (6) be honest and (7) get all 15 points for financial disclosure. And: (8) No pickup photos culled from the worst of the crop and submitted by field personnel who haven't a clue; but (9) must have a board with diversity; (10) not be a two-parter, (11) or a summary annual report (SAR), or (12) incorporated and/or headquartered in Bermuda or Panama.

I assign an annual report a maximum of 135 points. Yours?

1.	Does the front cover demand readership? Has the report utilized not only an intriguing cover statement but, on inside pages, textual callouts, boldface lead-ins, action subheads, bulleted paragraphs and the like? Contain an open, inviting layout, solicit readership on every page and have an action-filled index -- a "talking table of contents"? Design approach present throughout, including in back of the book? (10) + (10) bonus points.

2.	Is writing sprightly, and does the text eschew gobbledygook? Use of complex words avoided? (10)

3.	Does it contain little more than a letter to shareholders and an operations review? Or does it truly aim to inform fully, presenting items such as a special editorial section, glossary of terms, a mission statement? (10)

4.	Truly shed light on the competition, market position and market share, provide a well-organized (and presented) breakdown of operations, results and prospects? The competition and customers named? (5)

5.	Photo of the organization's head person used, and does it lead off the shareholder letter? (5)

6.	Has management wholeheartedly assumed responsibility, alongside the auditors, for the financials? (0 this year, though still being tracked)

7.	Does the document contain biographical data on officers and directors -- more than simply age and year of affiliation? (10)

8.	Is it unquestionably other than run-of-the-mill, yet, evolutionary, not revolutionary? (5)

9.	Discernible point of view -- a theme well-conceived and woven throughout, more than simply stated on the cover? (5)

10.	Communicate a favorable identity of the firm through its stature, articulation and furtherance of understanding of the entity's business and performance? Are women and/or minority directors included on the board? (10)

11.	Is financial disclosure more than the five-year data the Securities and Exchange Commission requires, all graphs fully explained, but not in type the same size as body copy? And no reliance on the dreaded EBITDA? (15)

12.	Honesty throughout? Bad news delivered without subterfuge or delay? Forthrightness to the ultimate -- no conflicts between the report's parts, for example? (10)

13.	Clearly, CEO involvement (whether actual or perceived) in the shareholder letter? (10)

14.	The CEO unequivocally presenting revelatory view of the firm and providing substantive insight into where it's headed? (15)

15.	Did I like it? Is it honest, sprightly, attractive, informative, focused, pioneering? Merely in technical compliance with the criteria or did it incorporate their intent? To receive all five points a report must (1) use recycled paper, (2) possess a new look, (3) look good, (4) demand readership, (5) have a positive index of at least 40%, (6) be honest and (7) get all 15 points for financial disclosure. And: (8) No pickup photos culled from the worst of the crop and submitted by field personnel who haven't a clue; but (9) must have a board with diversity; (10) not be a two-parter, (11) or a summary annual report (SAR), or (12) incorporated and/or headquartered in Bermuda or Panama.

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