Best of the best: forging ahead
For years, officials of public companies have toyed with electronic reports, 10Ks and proxies in an effort to cut costs, speed delivery and, increasingly, cloak their operations in a ‘green’ mantle.
There were the request-no-paper efforts of the 1990s, and, more recently, the upon-request paper version attempts. But no matter where the default position lay, the retail shareholders – who account for the emperor’s share of mailboxes – have remained stubbornly ambivalent about doing away with the glossy report itself.
Experts figure that those investors who are reasonably curious about the details of the business year read the interesting bits, skim the rest, and then throw the booklet and the 10K in the trash or the recycling bin. A great many shareholders who are passively invested, perhaps as part of a larger portfolio, may not even read that much.
The institutional investors, analysts and others interested in retrievable detail, pored over the columns and then consigned the annual report to one file cabinet and the 10K to another. Electronic versions of the 10K available from the SEC were also harvested and cached.
Into the fray
But Intel of Santa Clara, California, last year committed to the electronic version, jumping in with both feet. The effort cost approximately $30,000 for programmers and design, and saved a whopping $2 million in printing and postage, according to company officials.
That effort among others by Intel was recognized at the Corporate Secretary Magazine Awards when the company won the award for most innovative use of technology, sponsored by CT, honoring Intel for its exemplary use of technology to further its regulatory, compliance and strong governance efforts. Finalists included Citigroup, Coca-Cola Company and Exelon. Winning this category required far more than just a transition to an online proxy and annual report. Intel’s dedication to electronic communication is also evident within the 86,000-person workforce, each of whom is obligated to participate in the annual web-based refresher class on the company’s privacy, security and code-of-conduct policies, as well as department-specific knowledge such as corporate compliance.
‘We make everyone do it,’ says Doug Stewart, Intel’s senior attorney and member of its corporate compliance team. ‘It’s easier to exhort a whole group to do it, rather than harass individuals’ to get around to their annual obligation, he adds. Executives say that using standardized training makes it much easier to ‘slice and dice’ the training, which standardizes the information for all employees.
Ahead of the game
As befits a tech company, Intel has also shifted most of its routine communication with board members to email, and much of the detailed information sharing has been via a dedicated and secured website.
But it was the commitment to e-only annuals and the 10K that first caught the judges’ attention.
Intel executives say they plan to keep only the electronic version in place for 2009, and its executives strongly expect that with each passing year, more and more companies will make efforts to render the slick paper document extinct.
‘We are a leading innovator in technology and it makes sense for us to embrace tech as we go forward,’ explains Stewart. But, he insists, any company can step up its efforts to go electronic to save trouble, time and money: Just talk to vendors or to the big proxy administrators such as Computershare or Broadridge.
‘That’s a good place to start when you want to know how others are approaching this type of technology. They can point to the technologies that have achieved good results. That’s a good first step for companies that don’t have that internal expertise,’ he says.
Intel actually uploaded two versions of the report, a PDF for printing and an interactive HTML to draw shareholders and analysts in, and make it easier for them to find the information they want.
The key, says Stewart, is to hire a good web design firm. ‘We wanted to make it looked like a web page, not a PDF document that no one would read online. This is an interesting way to look at the materials, and it would make the information easier to find. We thought if we made it more interactive they would spend a little more time with it.’ In addition, everything is cross-referenced to make it easier for shareholders to bookmark, save and email.
‘We knew we wanted to make the [annual report] website look interesting, more like a Google or a Yahoo that was designed for the web, rather than just pouring a paper document onto the web, like a lot of other companies do,’ says Stewart.
They got a few complaints from shareholders, however, but not too many. And, adds Stewart, ‘Our website definitely got a higher response than it did in previous years. It was noticeably higher than it was the prior year.’ He also notes the environmental benefits of not printing a glossy annual report that can run to 100 pages, and a 10K that can top 50 pages.
With a head start
Stewart acknowledges that Intel – the world’s largest manufacturer of semiconductors and microprocessors – has some built-in advantages most widely traded companies do not: A board of directors that understands and trusts technology; shareholders who are deeply interested in the computer industry and have few reservations about downloading and saving copies to their computer files; and an implicit imperative to stay in the forefront of electronic applications.
‘We are nowhere near a paperless situation,’ says David Smith, president of the Society of Corporate Secretaries and Governance Professionals, an expert on corporate governance and innovations both failed and fruitful. ‘I wouldn’t say that, in general, board members and shareholders are alienated by technology but, you know, maybe more disinterested.’ He points out that companies have for years been trying to shift the annual proxies to electronic ballots, but the response has generally been even weaker than for paper ballots.
For the near future, Smith says, he considers Intel, which is making the utmost of advances in technology, will be the exception rather than the rule.