As we round off another season of earnings reports in Korea, I’ve found myself thinking about how few Korean companies really take advantage of of their statutory filings to position the company effectively to investors and market watchers.
Among the most egregious examples of poorly conceived communications in Korea is often the annual report. The annual report, to me, has three main functions:
- It communicates to the market and to potential investors the financial strength of the company;
- It reassures existing shareholders that they have made a wise investment; and
- It provides an opportunity to put the numbers into the context of a business strategy
As a communicator, the third point is, to me, the most important. The numbers are backward looking, and as anyone who has ever bought an investment trust knows, past performance is not a guarantee of future performance (or something like that.)
The blurb at the front of the annual report can be – and indeed often is – mindless fluff, but unlike the financial statements, the blurb provides the company with an opportunity to explain not only where last year’s numbers came from but what the company is going to do to build on those numbers going forward.
I wrote a while ago on the top ten tips for Korean websites, and many of the tenets in that list hold equally true for Korean annual reports – especially when it comes to professional writing skills. However, rather than list out the same old things, I thought I ‘d offer the following “translation” of some of the more common phrases I find in Korean annual reports into the impressions they create in an international reader. Feel free to add to the list.
- “We have overcome many crises and challenges.” Translation: We have not properly monitored the issues in the market
- “Our strategy is to be a top three company.” Translation: We don’t really know what a strategy is, but we think we’d like to have one
- “We are continuing toward our goal of being a company with world class standards.” Translation: We are not a company with world class standards
- “We ask for your continued consideration and support.” Translation: We can’t think of another compelling reason why you might want to invest in our company.
- “Our management philosophy is “Ethical management: best company.” Translation: Our Chairman is not currently in jail
- “We are preparing for a new take off.” Translation: Our business has been flat for the last ten years
- “We making a contribution to the competitiveness of the nation.” Translation: We are essentially a state owned company that puts national policy ahead of our responsibilities to our shareholders
Before I start getting flamed, let me be clear that I know Korean companies don’t mean this when they write those sentences. However, my point is that these kinds of homilies are viewed as suspect simply because they are homilies. The annual report is probably the most expensive single document that a company produces, both in terms of money and resources. If Korean companies spent just half of their usual design and printing expenditure on ensuring that the text was professionally compiled and presented the company in its best possible light, the document would be a significantly more valuable and effective tool for positioning the company among investors and other key stakeholders.