The average annual report for a UK-listed company has more words than George Orwell’s 1984 or Jane Austen’s Persuasion, according to research by a lobby group for smaller FTSE companies that calls for an “overhaul” of corporate reporting.
Annual reports have expanded in size by 46 per cent in five years to 95,000 words, or 173 pages, said the Quoted Companies Alliance, as boards have adopted new reporting requirements on topics such as pay and governance.
The alliance said that every year, reports grew by 5,800 words or almost eight pages, adding that the “excessive complexity” of reporting requirements was “weighing down the UK’s shrinking community of publicly quoted companies”.
The QCA wants regulators to review reporting demands and provide guidance to help smaller companies save time and money while safeguarding disclosure to investors.
James Ashton, chief executive of the Quoted Companies Alliance, said: “These door-stopper documents are another example of corporate complexity that must be reduced so the obvious upsides of listed life are not obscured for expanding, entrepreneurial businesses.”
A survey of FTSE chairs in November criticised investors for insisting on “box-ticking” exercises. A letter published this month in response, from a group representing many of the world’s largest investors, called for talks ahead of what is expected to be a difficult season for annual meetings, with many companies reviewing their pay policies.
The Quoted Companies Alliance, which represents the interests of small and mid-cap quoted companies, also argues that companies have been burdened with too much reporting.
The average FTSE 100 annual report is even longer at 147,000 words or 237 pages, said the QCA.
Among midsized companies, those with valuations between £250mn and £750mn, the average annual report has 94,000 words and is growing at 6,100 words or nine pages a year.
But the QCA found that reports were growing particularly fast for the smallest companies, which it said were likely to have the least resources. Analysis of a section of Alternative Investment Market (AIM) companies with valuations of less than £250mn showed reports have grown by 51 per cent in five years.
The QCA is calling on the Department for Business, Energy and Industrial Strategy and the Financial Reporting Council to review reporting requirements and guide companies about what information must be included and what can be disclosed elsewhere or “junked”.
“The perfect annual report should be true, fair and succinct, offering reassurance, insight and clarity to all stakeholders,” said Ashton. “But we risk turning them into vast, hard-to-navigate data dumps. It’s time to close the book on these never-ending stories.”
The survey measured word lengths and page numbers for 100 annual reports in each of three categories: FTSE 100, mid-cap Main Market (£250mn to £750mn market value) and small-cap Alternative Investment Market (less than £250mn).