Western Michigan University Cooley Law School Blog

Corporate Annual Reports - Plain Language's Last Frontier?

Back in 1979, Rudolf Flesch brought the plain-language movement to the public’s attention with his book How to Write Plain English: A Book for Lawyers & Consumers. Since then, plain language has made great progress in the fields of law and business. It’s all chronicled in Joseph Kimble’s 2012 book Writing for Dollars, Writing to Please: The Case for Plain Language in Business, Government, and Law.

But if an annual shareholder report I received last month is representative of the genre, writers of corporate annual reports have yet to appreciate the benefits of communicating in a clear, direct, and forceful style.

This observation is prompted by the annual report of a billion-dollar producer of branded consumer foods. Here are some passages from the CEO’s “Dear Fellow Shareholders” letter that drove me to reach for my red pen:

“We developed new strategic growth plans…and began to execute against them.” (Are you for growth or against it?)

“We’ll continue to…execute against our global growth priorities.” (Why keep saying what you’re against?)

“We’ll accelerate our differential growth platforms.” (Meaning speed up growth?)

“And we’ll…divest businesses that are growth dilutive.” (Sell off slow growers?)

And the corporation wants to grow its pet food business by “reaching more pet parents.” (Isn’t that precious?)

As a shareholder, does this style of expression give you confidence in the inspirational leadership and enthusiasm of the CEO? Or does he sound like a weasel?

In a separate letter to shareholders, the independent lead director joins in the buzzwords. He reports that the board of directors is “monitoring performance against (rather than toward?) key priorities.” And that it is overseeing a compensation program that “incents the accomplishment of our priorities.” Merriam-Webster.com lists “incent” among the top eight bits of business jargon that people love to hate. It suggests “motivate” instead.

“Words matter,” the Federal Plain Language Guidelines say. “They are the most basic building blocks of written and spoken communication. Don’t complicate things by using jargon [or] technical terms…that people won’t understand.” Corporations are required by the SEC to use plain English in certain sections of their prospectuses. So it’s not unknown territory for them.

Years ago I harnessed the power of plain language to persuade Michigan’s largest bank to accede to a proxy proposal (“Using ‘Plain English’ in Proxy Proposals,” available on SSRN.) On the Flesch readability scale, my proposal scored 51. That’s on a par with Time. In contrast, a representative sample of management’s proxy materials scored -12, more difficult than the Harvard Law Review.

The result? First, the bank hired a Wall Street law firm to attempt to exclude the proposal. Then, when that failed -- and management realized that shareholders would actually understand what I was advocating – the bank folded. Management adopted the proposal without a proxy fight.

Would it be asking too much of corporations to run the text of their annual shareholder reports through a readability program? Simple directions are available here. A good readability score doesn’t guarantee clarity, but a bad score is a pretty good sign of muddy prose – and the need for more work.

I’ve sent the giant food company a copy of this commentary. I’m hoping for a clearer and less buzzwordy annual report next year.

This article scores 50 on the Flesch Reading-Ease scale and is written at a ninth-grade reading level. A study found that the average adult in the U.S. reads at the seventh-grade level. Even college graduates prefer to read materials written at no more than a tenth-grade level.

stockmeyer_otto_sm-1Distinguished Professor Emeritus Otto Stockmeyer has championed the use of plain language ever since beginning his law school career 40 years ago teaching Legal Writing. He is a past president of Scribes – The American Society of Legal Writers and a frequent contributor to the Society’s newsletter, The Scrivener. Click below to read a recent blog post by Professor Stockmeyer critiquing another aspect of legal writing.

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September 15