Businesses throughout Australia depend on their ability to communicate with a range of different groups, all with their own unique requirements and levels of interest in the company.
Shareholders are a notable example of this. As people with a vested financial interest in the performance of a business, it's essential that they're receiving regular updates that are digestible and provide a platform for further engagement.
How are businesses currently managing shareholder communication?
According to Chartered Accountants Australia and New Zealand (ANZ), organisations are currently struggling to provide financial reports that investors and other stakeholders can interpret.
The organisation believes this has nothing to do with the quality of the information provided in general, but rather the sheer amount that is often included in these reports. Chartered Accountants ANZ believes these reports are usually overwhelming for people working outside the financial sector, reducing the effectiveness of the communication.
A survey included in the organisation's reports discovered that businesses are doing little to change their ways with regards to the practices. Only 7 per cent of respondents indicated it was something they are working on improving.
How can this be improved?
There are a number of key features of effective shareholder communication that need to be put into practice to ensure any corporate affairs issues or other financial news is reported in a concise manner.
Compensation advisory firm Pearl Meyer & Partners investigated what it means to improve a company's shareholder communication strategy. One of the most important features is transparency, something that Chartered Accountants ANZ found was being muddled in current financial reports.
Pearl Meyer believes this is an essential practice, regardless of whether the information being communicated is positive or negative. In fact, on most occasions, transparency is valued even more in difficult situations.
A further study completed by PricewaterhouseCoopers (PwC) found that many directors are increasing their demands for direct communication between themselves and shareholders – a reaction to calls for added transparency in these relationships.
According to PwC, this is because the influence shareholders possess has grown notably over the previous 10 years, further increasing the demand for effective communications.
Businesses need to acknowledge their responsibility to provide transparent and useful information to shareholders effectively.