The average annual report of a UK listed company has more words than George Orwell’s 1984 or Jane Austen Persuasionaccording to research by a small business lobby group the FTSE which calls for a ‘review’ of company reporting.
The size of annual reports has increased 46% in five years to 95,000 words, or 173 pages, the Quoted Companies Alliance said, as boards adopted new reporting requirements on topics such as as compensation and governance.
The alliance said that each year the reports grew by 5,800 words or almost eight pages, adding that the “excessive complexity” of the reporting requirements “weighs on the shrinking UK community of listed companies”.
QCA wants regulators to review reporting requests and provide advice to help small enterprises save time and money while protecting disclosure to investors.
James Ashton, chief executive of the Quoted Companies Alliance, said: “These door stop documents are another example of the complexity of business that needs to be reduced so that the obvious benefits of listed life are not obscured for growing entrepreneurial businesses.”
A survey of FTSE chairmen in November criticized investors for insisting on ‘box-ticking’ exercises. A letter published this month in response, from a group representing several of the world’s biggest investors, called for talks ahead of what is expected to be a tough season for annual meetings, with many companies revising their pay policies.
The Quoted Companies Alliance, which represents the interests of listed small and mid caps, also argues that companies have been burdened with too many reports.
The average FTSE 100 annual report is even longer at 147,000 words or 237 pages, the QCA said.
Among medium-sized companies, those with valuations between £250m and £750m, the average annual report is 94,000 words and growing by 6,100 words or nine pages per year.
But the QCA found that the reports increased particularly rapidly for the smallest companies, which it said were likely to have the fewest resources. Analysis of a section of Alternative Investment Market (AIM) companies with valuations below £250m showed that reporting had risen 51% in five years.
The QCA asks the Ministry of Trade, Energy and Industrial Strategy and the Financial Reporting Council to review reporting requirements and guide companies on what information should be included and what can be disclosed elsewhere or “discarded”.
“The perfect annual report should be truthful, fair and succinct, providing assurance, insight and clarity to all stakeholders,” Ashton said. “But we risk turning them into vast dumps of hard-to-navigate data. It’s time to close the book on these endless stories.
The survey measured the word length and page count of 100 annual reports in each of three categories: FTSE 100, core mid-cap market (market value £250-750m) and stock market. small cap alternative investment (under £250m).