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UBC Theses and Dissertations

An analysis of supplementary data in annual reports of selected Canadian public companies, 1938-1963 Tan, Yam Pin 1965

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AN ANALYSIS OF SUPPLEMENTARY DATA IN ANNUAL REPORTS OF SELECTED CANADIAN PUBLIC COMPANIES 1938 — 1963 by YAM PIN TAN B; A. (Hons. ), University of Singapore, 1963 A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION in the Faculty of Commerce and Business Administration We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA April, 1965 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the r e q u i r e m e n t s f o r an advanced degree a t the U n i v e r s i t y of • B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study* I f u r t h e r agree t h a t p e r -m i s s i o n f o r e x t e n s i v e c o p y i n g of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s r e p r e s e n t a t i v e s . I t i s understood t h a t c o p y i n g or p u b l i -c a t i o n of t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n * Department of f^ O^ > cWtL j) uff<^ » eSS ^[t^-lU/i j 1^6- f"^ The U n i v e r s i t y of B r i t i s h Columbia, Vancouver 8 ? Canada pate ( k y . f t u ii ABSTRACT The study seeks to trace the historical development of the form, design and content of supplementary information in the annual reports of Canadian public companies for the period 1938 1963. Public companies refer to all companies, other than mining and oil companies, whose shares were listed on any one of the five stock exchanges in Canada as of June 1, 1964. Supplementary information is defined as any information which a company furnishes in its annual reports other than the information required to be published by the Companies Act, Canada. Specifically, the study is based on an analysis of the annual reports of 115 Canadian public companies for five selected years, namely: 1938, 1948, 1953, 1958, 1963. The 115 companies were picked by means of stratified random sampling. They represent approximately 19% of the total listed public companies. Among the main findings of the study, three trends were particularly outstanding, namely: the trend toward more disclosure .of supplementary information, the trend toward improved format and design in the presentation of supplementary information and the trend toward an enlarged report. TABLE OF CONTENTS CHAPTER PAGE 1. INTRODUCTION 1 Purpose of Study 1 Definition of Supplementary Information 2 Importance of Supplementary Information 2 Review of related studies 10 Definitions of Terms Used 12 Organization of Chapters 12 11. METHODOLOGY 13 Introduction 13 The Population 13 Sampling Design 15 Final Sample and Usable Results . . . 18 Method of Analysis 20 111. SUPPLEMENTARY TEXT - GENERAL CONTENT FORMAT AND DESIGN 23 Introduction 24 The Sections 24 Photographs or Illustrations 25 Graphs and Charts 31 Colour on Supplementary Text Pages . 36 Size of Report 38 Length of Report 38 Length of Supplementary Information. . 40 Front Cover 41 IV. EXECUTIVE MESSAGE 46 Introduction 46 Functions of the Executive Message . . 47 Frequency of Executive Message . . . . 48 Format and Design 49 Title of Executive Message 54 Salutation 54 Signature 57 Location and Length 59 Content of Executive Message 61 i v , -V. S C O P E O F O P E R A T I O N S 104 I n t r o d u c t i o n 104 F u n c t i o n s of N a r r a t i v e S e c t i o n . . . . 104 N a t u r e and F r e q u e n c y of N a r r a t i v e S e c t i o n 105 F o r m a t and D e s i g n of N a r r a t i v e S e c t i o n 106 T i t l e of N a r r a t i v e S e c t i o n . . 107 L e n g t h of N a r r a t i v e S e c t i o n 107 O r g a n i z a t i o n of N a r r a t i v e S e c t i o n . . . 109 Content of N a r r a t i v e S e c t i o n 109 P r o d u c t S e c t i o n 113 S u b s i d i a r i e s , a f f i l i a t e s and d i v i s i o n s . . 121 V I . F I N A N C I A L S U P P L E M E N T A R Y I N F O R M A T I O N 134 I n t r o d u c t i o n 134 F i n a n c i a l H i g h l i g h t s - N a t u r e a nd F u n c t i o n s 134 F r e q u e n c y of F i n a n c i a l H i g h l i g h t s S e c t i o n 135 F i n a n c i a l H i g h l i g h t s - F o r m a t and D e s i g n 136 F i n a n c i a l H i g h l i g h t s - Content 139 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - N a t u r e and F u n c t i o n s 145 F r e q u e n c y of C o m p a r a t i v e F i n a n c i a l s t a t i s t i c s S e c t i o n 146 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - F o r m a t and D e s i g n 147 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - Content 150 S o u r c e s and A p p l i c a t i o n of W o r k i n g C a p i t a l 156 V l l . O T H E R S U P P L E M E N T A R Y I N F O R M A T I O N 157 I n t r o d u c t i o n . 157 L i s t of O f f i c e r s and D i r e c t o r s 157 T i t l e P a g e 161 T a b l e of Contents 163 C o r p o r a t e Data 164 M i s c e l l a n e o u s I n f o r m a t i o n 165 V l l l . E V A L U A T I O N 171 I n t r o d u c t i o n 171 G e n e r a l T r e n d s 171 The S e c t i o n s 17 5 F r o n t C o v e r 176 E x e c u t i v e M e s s a g e - G e n e r a l 177 E x e c u t i v e M e s s a g e - F o r m a t and D e s i g n 17 8 E x e c u t i v e M e s s a g e - Content 180 i v CHAPTER PAGE Narrative Section 187 Product Section 188 Subsidiaries, Affiliates and Divisions . 188 Financial Highlights 188 Comparative Financial Statistics - General 190 Comparative Financial Statistics - Format and Design 190 Comparative Financial Statistics - Content 191 Sources and Application of Working Capital 193 List of Officers and Directors . . . . . 194 Corporate Data 194 Title Page 194 Table of Contents 194 Miscellaneous Information 195 IX. CONCLUSIONS 196 BIBLIOGRAPHY 198 APPENDIX 1. FREQUENCY DISTRIBUTION OF INDUSTRIAL COMPANIES BY YEAR OF INCORPORATION AND INDUSTRIAL GROUPINGS ACCORDING TO FINANCIAL POST CLASSIFICATIONS 202 li. PERCENTAGE FREQUENCY OF ANNUAL REPORTS BY INDUSTRIAL GROUPINGS, SECTIONS AND YEARS (a ) FINANCIAL INSTITUTIONS 203 (b ) PUBLIC UTILITY. . . 204 (c ) CAPITAL GOBDS 205 (d ) IRON AND STEEL 206 (e ) CONSUMPTION GOODS 207 (f ) FORESTS AND ALLIED PRODUCTS 208 (g ) SERVICE 209 (h ) MISCELLANEOUS 210 111. LIST OF TOPICS FOUND IN FINANCIAL HIGHLIGHTS SECTIONS IN TERMS OF PERCENTAGE FREQUENCY OF TIMES MENTIONED FOR PERIOD 1938-1963 211 IV. LIST OF TOPICS FOUND IN COMPARATIVE FINANCIAL STATISTICS SECTIONS IN TERMS OF PERCENTAGE FREQUENCY OF TIMES MENTIONED FOR PERIOD 1938-1963 213 V. LIST OF ANNUAL REPORTS INCLUDED IN THE SURVEY OF INDUSTRIAL GROUPS 215 v i L I S T O F T A B L E S T A B L E P A G E I. F r e q u e n c y D i s t r i b u t i o n of C o m p a n i e s i n O r i g i n a l S a mple A c c o r d i n g to I n d u s t r i a l G r o u p s 16 I I . F r e q u e n c y D i s t r i b u t i o n of C o m p a n i e s i n F i n a l S a m p l e A c c o r d i n g to I n d u s t r i a l G r o u p s 19 I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s by S e c t i o n s and Y e a r s 26 IV. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to Number of P h o t o s o r I l l u s t r a t i o n s U s e d and Y e a r s 28 V. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to N u m b e r of G r a p h s and/or C h a r t s and Y e a r s 32 V I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to Types of E y e - A p p e a l F e a t u r e s and Y e a r s 35 V I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to Number of C o l o u r s U s e d i n S u p p l e m e n t a r y T e x t P a g e s and Y e a r s 37 V I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to L e n g t h and Y e a r s 39 IX. • P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of F r o n t C o v e r s A c c o r d i n g to N u m b e r of C o l o u r s U s e d and Y e a r s 42 X. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of F r o n t C o v e r s by T o p i c s I l l u s t r a t e d and Y e a r s 44 X I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to T i t l e U s e d and Y e a r s 53 Xll. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to S a l u t a t i o n s and Y e a r s 55 v i i T A B L E P A G E X I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to S i g n a t u r e s U s e d and Y e a r s 58 X I V . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to L e n g t h and Y e a r s 60 XV. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to T o p i c s M e n t i o n e d and Y e a r s 63 X V I . L i s t of F i r s t F i f t e e n M o s t F r e q u e n t l y M e n t i o n e d T o p i c s i n E x e c u t i v e M e s s a g e s A c c o r d i n g to S e l e c t e d Y e a r s 64 X V I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of Comments on F i x e d A s s e t s and Y e a r s 73 X V I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of I n f o r m a t i o n on D i v i d e n d s and Y e a r s 81 X I X . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of Comments on M a r k e t i n g and Y e a r s 83 XX. P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of Comments on Management and Y e a r s 86 X X I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of R e m a r k s about S u b s i d i a r i e s and/or a f f i l i a t e s and Y e a r s 88 X X I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of E x e c u t i v e M e s s a g e s A c c o r d i n g to Types of E m p l o y e e I n f o r m a t i o n and Y e a r s 91 X X I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of N a r r a t i v e S e c t i o n s A c c o r d i n g to L e n g t h and Y e a r s 108 X X I V . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of N a r r a t i v e S e c t i o n s by Types of O r g a n i z a t i o n and Y e a r s 110 v i i i T A B L E P A G E X X V . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of N a r r a t i v e S e c t i o n s A c c o r d i n g to Types of Content, C o v e r a g e and Y e a r s 114 X X V I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of N a r r a t i v e S e c t i o n s A c c o r d i n g to T o p i c s and Y e a r s 115 X X V I I L i s t of F i r s t F i f t e e n M o s t F r e q u e n t l y M e n t i o n e d T o p i c s i n N a r r a t i v e S e c t i o n s i n each of F i v e S e l e c t e d Y e a r s 116 X X V I I I P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of P r o d u c t S e c t i o n s A c c o r d i n g to Types of P r e s e n t a t i o n and Y e a r s 120 X X I X . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of P r o d u c t S e c t i o n s by L o c a t i o n and Y e a r s 123 X X X . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of P r o d u c t S e c t i o n s by L e n g t h and Y e a r s 124 X X X I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of S e c t i o n s on S u b s i d i a r i e s and D i v i s i o n s by Types of P r e s e n -t a t i o n and Y e a r s 127 X X X I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of Types of L i s t showing S u b s i d i a r i e s and D i v i s i o n s A c c o r d i n g to Y e a r s 128 X X X I I I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of S e c t i o n s on S u b s i d i a r i e s and D i v i s i o n s A c c o r d i n g to L o c a t i o n and Y e a r s 131 X X I V . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of S e c t i o n s on S u b s i d i a r i e s and D i v i s i o n s by L e n g t h and Y e a r s 133 X X X V . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of the E i g h t M o s t F r e q u e n t l y M e n t i o n e d T o p i c s i n the F i n a n c i a l H i g h l i g h t s S e c t i o n as of Y e a r 1963. 142 ixi.:;. T A B L E P A G E X X X V I . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of the E i g h t M o s t F r e q u e n t l y M e n t i o n e d T o p i c s i n the C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s S e c t i o n A c c o r d i n g to Y e a r 1963 152 X X X V I I . P e r centage F r e q u e n c y D i s t r i b u t i o n of L i s t of O f f i c e r s and D i r e c t o r s by L o c a t i o n and Y e a r s 160 X X X V 1 1 1 P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of L i s t of O f f i c e r s and D i r e c t o r s A c c o r d i n g to L e n g t h and Y e a r s 162 X X X I X . P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of T a b l e s of Content A c c o r d i n g to L e n g t h and Y e a r s 166 X X X X P e r c e n t a g e F r e q u e n c y D i s t r i b u t i o n of A n n u a l R e p o r t s A c c o r d i n g to Types of M i s c e l l a n e o u s I n f o r m a t i o n and Y e a r s 168 L I S T O F C H A R T S C H A R T P A G E I. L o n g T e r m T r e n d of S e l e c t e d S e c t i o n s f o r P e r i o d 1938 — 1963 27 I I . S t y l e s of P r e s e n t a t i o n of E x e c u t i v e M e s s a g e 50 I I I . L o c a t i o n of S e c t i o n on S u b s i d i a r i e s and D i v i s i o n s 132 C H A P T E R 1 I N T R O D U C T I O N " T h e p r i m a r y o b j e c t i v e i s a n a n n u a l r e p o r t t h a t c o n v e y s i t s m e s s a g e t o t h e s t o c k h o l d e r s - -t h a t s a y s w h a t m a n a g e m e n t w a n t s to s a y a n d t e l l s s t o c k h o l d e r s w h a t t h e y w a n t to k n o w . A l l o t h e r g o a l s a r e s e c o n d a r y . P u r p o s e of S t u d y T h e s t u d y s e e k s to a n a l y z e t h e f o r m a t , d e s i g n a n d c o n t e n t of s u p p l e m e n t a r y i n f o r m a t i o n i n a n n u a l r e p o r t s of 115 C a n a d i a n p u b l i c c o m p a n i e s f o r f i v e s e l e c t e d y e a r s . P u b l i c c o m p a n i e s r e f e r t o t h o s e c o m p a n i e s , o t h e r t h a n m i n i n g a n d o i l c o m p a n i e s , w h o s e s h a r e s a r e l i s t e d o n a n y one of the f i v e s t o c k e x c h a n g e s i n C a n a d a . A s of J u n e 1, 1964, t h e d a t e o n w h i c h t h i s s t u d y b e g a n , t h e r e w e r e 610 s u c h l i s t e d c o m p a n i e s . T h e f i v e y e a r s w h i c h h a v e b e e n s e l e c t e d i n c l u d e 1938, 1948, 1953, 1958 a n d 1963. T h e p u r p o s e of t h i s s t u d y i s t w o f o l d : 1. T o t r a c e t h e h i s t o r i c a l d e v e l o p m e n t of t h e f o r m a t a n d n a t u r e of s u p p l e m e n t a r y i n f o r m a t i o n f o r t h e p e r i o d , 1938 - 1963, a n d w h e r e a p p r o p r i a t e , t o i d e n t i f y s i g n i f i c a n t d i f f e r e n c e s i n d e v e l o p m e n t b e t w e e n i n d u s t r i a l g r o u p i n g s of c o m p a n i e s . 2. T o e v a l u a t e p a s t p r a c t i c e s w i t h r e g a r d t o t h e u s e 1. W i l l i a m E . C h a t l o s , " T h e C h a n g i n g P a t t e r n i n A n n u a l R e p o r t s " , B a n k e r s M o n t h l y , V o l . L.XXV11, No. 10, O c t o b e r I 9 6 0 , p. 28. 2 and n a t u r e of s u p p l e m e n t a r y i n f o r m a t i o n and to suggest, w h e r e a p p r o p r i a t e , i m p r o v e m e n t s i n the d i s c l o s u r e of s u p p l e m e n t a r y i n f o r m a t i o n . D e f i n i t i o n of S u p p l e m e n t a r y I n f o r m a t i o n S u p p l e m e n t a r y i n f o r m a t i o n i s d e f i n e d as any i n f o r m a t i o n w h i c h a company f u r n i s h e s i n i t s a nnual r e p o r t s o t h e r than the i n f o r m a t i o n p r o v i d e d i n the s t a t e m e n t s r e q u i r e d to be p u b l i s h e d by the C o m p a n i e s A c t , Canada. Thus s u p p l e m e n t a r y i n f o r m a t i o n e m b r a c e s a l l i n f o r m a t i o n w h i c h a company p u b l i s h e s i n i t s a nnual r e p o r t other than the B a l a n c e 2 Sheet, the Income Statement, footnotes, the Statement of E a r n e d S u r p l u s and the A u d i t o r s ' R e p o r t . I m p o r t a n c e of S u p p l e m e n t a r y I n f o r m a t i o n The i m p o r t a n c e of s u p p l e m e n t a r y i n f o r m a t i o n can b e s t be d e s c r i b e d by e s t a b l i s h i n g i t s r e l a t i o n s h i p w i t h v a r i o u s i n t e r e s t e d p a r t i e s s u c h as s h a r e h o l d e r s , s e c u r i t y a n a l y s t s , e m p l o y e e s and the p u b l i c . S u p p l e m e n t a r y I n f o r m a t i o n and the S h a r e h o l d e r s Competent o b s e r v a t i o n and c a r e f u l l y c onducted 2. F o o t n o t e s a r e e x c l u d e d f r o m the a n a l y s i s b e c a u s e they a r e n o r m a l l y c o n s i d e r e d as p a r t of the B a l a n c e Sheet of the Income 'Statement. In a d d i t i o n , a study of footnotes i s c u r r e n t l y b e i n g u n d e r t a k e n by a c o l l e a g u e of m i n e , Goh Soo Seah, whose t h e s i s , "A Study of F o o t n o t e s to F i n a n c i a l Statements i n A n n u a l R e p o r t s of S e l e c t e d C a n a d i a n C o m p a n i e s , 1938-1963," i s i n p r o g r e s s . 3 s t u d i e s h a v e c o n f i r m e d t h e f a c t t h a t t h e a v e r a g e s h a r e h o l d e r i s i g n o r a n t of a n d i n d i f f e r e n t t o t h e w h o l e b u s i n e s s o f a n n u a l r e p o r t i n g 3 b y m a n a g e m e n t . E s s e n t i a l l y , t h i s i s b e c a u s e c o m p a n i e s a n d t h e i r s h a r e h o l d e r s a r e n o t s p e a k i n g t h e s a m e l a n g u a g e . C o n v e n t i o n a l f i n a n c i a l s t a t e m e n t s w h i c h f o r m t h e m a i n c o r e of t h e a n n u a l r e p o r t a r e i n h e r e n t l y c o m p l e x . T h i s a r i s e s f r o m t h e f a c t t h a t a c c o u n t i n g i s a t e c h n i c a l a r t w h i c h d o e s n o t l e n d i t s e l f t o o w e l l to a n u n d e r s t a n d -a b l e p r e s e n t a t i o n to t h e a v e r a g e s t o c k h o l d e r . T h e a v e r a g e s h a r e h o l d e r , w h o m w e m a y s a f e l y a s s u m e to b e u n t r a i n e d i n a c c o u n t i n g m e t h o d s , p r o c e d u r e s a n d c o n v e n t i o n s , n a t u r a l l y i s o p p r e s s e d b y t h e c o m p l e x i t y of f i n a n c i a l d a t a a n d f r i g h t e n e d p e r h a p s b y w h a t s e e m s to h i m t h e i n c o m p r e h e n s i b i l i t y of a c c o u n t i n g l a n g u a g e . F e w o f t h e m h a v e e v e r l e a r n e d t h e o r d i n a r y w o r d s of t h e c o r p o r a t e w o r l d . T e r m s s u c h a s " d e f e r r e d c h a r g e s " a n d " s u r p l u s " m e a n s n o t h i n g to t h e a v e r a g e s h a r e -h o l d e r , m a n o r w o m a n . A t t h e s a m e t i m e , t h e a v e r a g e s h a r e h o l d e r i s c a l l e d u p o n e a c h y e a r t o a p p r a i s e t h e p e r f o r m a n c e of m a n a g e m e n t a s p r e s e n t e d i n t h e a n n u a l r e p o r t . T h e a n n u a l r e p o r t i s p r i m a r i l y a s t a t e m e n t to s h a r e h o l d e r s a b o u t m a n a g e m e n t s t e w a r d s h i p of t h e i r b u s i n e s s . T h i s a p p a r e n t p a r a d o x r a i s e s a n i m p o r t a n t q u e s t i o n . C a n s h a r e h o l d e r s b e 3. S e e , f o r e x a m p l e , R e y n o l d s G i r d l e r , " E i g h t e e n M i l l i o n B o o k s N o b o d y R e a d s , " M a n a g e m e n t R e v i e w , V o l . L l l , No. 7, J u l y 1963, p. 24; a n d C h r i s t i a n E . J a r c h o w , " T r e n d s i n A n n u a l R e p o r t i n g s , " T h e C o n t r o l l e r , V o l . X V , No. 9, S e p t e m b e r 1947, p. 448. 4 e x p e c t e d t o e x e r c i s e a d e q u a t e l y t h e i r i n h e r e n t r i g h t s o n t h e b a s i s o f f a c t s w h i c h t h e y do n o t u n d e r s t a n d ? If n o t , w h a t c a n . b e d o n e a b o u t i t ? M a n a g e m e n t h a s l o n g r e c o g n i z e d t h e p r e d i c a m e n t of t h e 4 s h a r e h o l d e r s . B u t i t w a s o n l y r e c e n t l y t h a t a n y t h i n g w a s done to 5 h e l p t h e m . T h e n a t u r e o f s h a r e h o l d e r s ' i g n o r a n c e , w h i c h t h e s t u d i e s c l e a r l y b r o u g h t o u t , s h o u l d n o t b e u s e d a s a n e x c u s e f o r d o i n g n o t h i n g . R a t h e r , i t s h o u l d b e l o o k e d u p o n a s p r o v i d i n g a b e t t e r d i r e c t i o n to e f f o r t s to c o m b a t i t . I t i s t h e d u t y o f m a n a g e m e n t ( a n d a u d i t o r s ) to p u t s h a r e h o l d e r s i n t o a p o s i t i o n to p r o t e c t t h e m s e l v e s . C o r p o r a t e o f f i c e r s c a n n o t p e r m i t t h e m s e l v e s to b e d i s c o u r a g e d f r o m t h e i r e f f o r t s i n t h e e d u c a t i o n of s h a r e h o l d e r s . A p p a r e n t l y , i n r e s p o n s e t o t h e d i r e n e e d to p r o v i d e s h a r e h o l d e r s w i t h u s e f u l a n d u n d e r s t a n d a b l e i n f o r m a t i o n , s u p p l e m e n t a r y i n f o r m a t i o n c a m e to b e i n c o r p o r a t e d i n t o t h e a n n u a l r e p o r t . T h e f o l l o w i n g i n d i c a t e s s o m e of t h e i m p o r t a n t f u n c t i o n s w h i c h a r e s e r v e d b y s u p p l e m e n t a r y i n f o r m a t i o n t o s h a r e h o l d e r s : 1. I t c l a r i f i e s t h e a c c o u n t i n g j a r g o n a n d m a k e s i t m o r e c o m p r e h e n s i v e . 2. I t e x p l a i n s t h e n a t u r e a n d s i g n i f i c a n c e of c h a n g e s i n f i n a n c i a l d a t a a n d p o l i c y . 4. S e e , f o r e x a m p l e , C h r i s t i a n E . J a r c h o w , " T r e n d s i n A n n u a l R e p o r t i n g , " T h e C o n t r o l l e r , V o l . X V , No. 9, S e p t e m b e r 1947, p. 445. 5. S e e , f o r e x a m p l e , D a n i e l J . H e n n e s s y , " W h a t D o e s t h e P u b l i c W a n t i n C o r p o r a t e R e p o r t s ? . " , T h e C o n t r o l l e r , V o l . X V , No. 11, N o v e m b e r 1947, p. 579. 5 3. It draws a t t e n t i o n to the b a s e s of v a l u a t i o n and u n u s u a l s i t u a t i o n s . 4. It d e s c r i b e s the i n t e r r e l a t i o n s h i p of the v a r i o u s data. 5. It d i s c u s s e s management p r o b l e m s of the y e a r c o n c e r n e d , b u s i n e s s c o n d i t i o n s i n g e n e r a l , p r o d u c t s , r e s e a r c h , t a x e s , g o v e r n m e n t s i t u a t i o n s and b u s i n e s s p r o s p e c t s f o r the i m m e d i a t e f u t u r e . 6. It touches on m a t t e r s w h i c h cannot be e x p r e s s e d as s a t i s f a c t o r i l y i n the f i g u r e s t h e m s e l v e s , thus t h r o w i n g a d d i t i o n a l l i g h t on the c o n d i t i o n of the company. S u p p l e m e n t a r y I n f o r m a t i o n and the P u b l i c M o r e and m o r e b u s i n e s s e s today a r e c o m i n g to r e a l i z e that they owe to s o c i e t y c e r t a i n s o c i a l r e s p o n s i b i l i t i e s , ^ that the b u s i n e s s e n t e r p r i s e , e s p e c i a l l y the c o r p o r a t i o n , i s a s e m i - p u b l i c 7 i n s t i t u t i o n , and that a l l b u s i n e s s i n a d e m o c r a t i c c o u n t r y begins w i t h p u b l i c p e r m i s s i o n and e x i s t s by p u b l i c a p p r o v a l . They have found a l s o that the annual r e p o r t can go a l o n g way be y o n d the m e r e r e p o r t i n g of an i n s t i t u t i o n ' s soundness f o r the b e n e f i t of s h a r e h o l d e r s and that i t can s e r v e as an e f f e c t i v e m e d i a of c o m m u n i t y and p u b l i c r e l a t i o n s . The annual r e p o r t has become an expanded means of c o m m u n i c a t i o n 6. See, f o r e x a m p l e , H o w a r d R. Bowen, S o c i a l R e s p o n s i b i l - i t i e s of the B u s i n e s s m a n , New Y o r k : H a r p e r and B r o t h e r s , 1953; and A m e r i c a n Management A s s o c i a t i o n , M a n agement C r e e d s a nd  P h i l o s o p h i e s , R e s e a r c h Study No. 32, New Y o r k : A m e r i c a n M anagement A s s o c i a t i o n , 1942. 7. R i c h a r d s o n Wood, "The C o r p o r a t i o n Goes into P o l i t i c s " , H a r v a r d B u s i n e s s R e v i e w , A u t u m n 1942, p. 60. 6 t h r o u g h w h i c h a c o m p a n y c a n c r e a t e a w h o l e s o m e a n d e c o n o m i c i m a g e i n o r d e r to m a k e i t s e l f f a v o u r a b l y k n o w n to i t s " p u b l i c . "' S u r v e y s i n r e c e n t y e a r s b y t h e O p i n i o n R e s e a r c h C o r p o r a t i o n h a v e s h o w n t h a t c e r t a i n m i s t a k e n n o t i o n s r e g a r d i n g b u s i n e s s 8 a n d b u s i n e s s p r o f i t s a r e w i d e l y e n t e r t a i n e d b y the p u b l i c . T h e r e i s , f o r e x a m p l e , t h e n o t i o n t h a t p r o f i t s a c c r u i n g t o b u s i n e s s a r e s o m e t h i n g of a n e c e s s a r y e v i l a n d t h a t t h e p u b l i c i s b e s t s e r v e d w h e n t h e s e a r e k e p t to a m i n i m u m . A l s o p r e v a l e n t i s t h e i d e a t h a t p r o f i t s a r e e x c e s s i v e -l y h i g h , t h a t m o s t b u s i n e s s e s h a v e a l o t of h i d d e n p r o f i t s . T h e s e f a l s e n o t i o n s m a y h a v e r i s e n f r o m t h e t e r m s i n w h i c h t h e a n n u a l r e p o r t s a r e d r a w n up. T o t h e e x t e n t t h a t s u c h i s the c a s e , t h e r e i s a n e e d to c h a n g e t h e t e r m i n o l o g y o r to u s e s u p p l e m e n t a r y i n f o r m a t i o n to c l a r i f y t h e t e r m s . W h a t e v e r i s done, t h e r e i s s t i l l a n e e d t o u s e s u p p l e m e n t a r y i n f o r m a t i o n to s e t o u t c l e a r l y t h e p r o p e r c o n c e p t s o f t h e r o l e of b u s i n e s s i n v e s t m e n t a n d b u s i n e s s m a n a g e m e n t i n o r d e r to d i s p e l a s f a r a s p o s s i b l e ' t h e s e f a l s e n o t i o n s . S u p p l e m e n t a r y i n f o r m a t i o n i s a l s o u s e f u l i n d i s s e m i n a t i n g c e r t a i n b a s i c p o s i t i v e i d e a s a b o u t t h e e n t e r p r i s e . S o m e o f t h e s e i d e a s i n c l u d e t h e r o l e of t h e b u s i n e s s i n t h e e c o n o m i c s t r u c t u r e o f t h e c o u n t r y , t h e s o c i a l v a l u e of i t s s e r v i c e s , e x p r e s s i o n s o f t h e r e c o g n i t i o n o f t h e 8.* S e e , f o r e x a m p l e , C h r i s t i a n E . J a r c h o w , " T r e n d s i n A n n u a l R e p o r t i n g " , T h e C o n t r o l l e r , V o l . X V , No. 9, S e p t e m b e r 1947, p. 448. 7 s o c i a l r e s p o n s i b i l i t i e s of t h e e n t e r p r i s e to t h e c o m m u n i t i e s i n w h i c h i t o p e r a t e s a n d i n f o r m a t i o n o n t h e i m p o r t a n c e of m a n a g e m e n t a n d t h e v a l u e of m a n a g e r i a l s e r v i c e s . A n o t h e r p o s i t i v e i d e a w h i c h m a n a g e m e n t m i g h t c u l t i v a t e i n i t s r e l a t i o n s w i t h t h e p u b l i c i s t h a t of i n d u c i n g g r e a t e r c o n f i d e n c e i n t h e a c c u r a c y of f i n a n c i a l r e s u l t s a s s h o w n i n t h e a n n u a l r e p o r t s . T h i s c a n b e done, f o r e x a m p l e , b y u s i n g s u p p l e m e n t a r y i n f o r m a t i o n t o e x p l a i n t h e n e t i n c o m e a s p r e s e n t e d i n t h e i n c o m e s t a t e m e n t , p r o v i d e c o m p a r i s o n s of r e p o r t e d i n c o m e o v e r a p e r i o d of y e a r s a n d g r e a t e r d i s c l o s u r e o f s i g n i f i c a n t i n f o r m a t i o n . S u p p l e m e n t a r y i n f o r m a t i o n a n d t h e S e c u r i t y A n a l y s t s T h e t e r m s e c u r i t y a n a l y s t s r e f e r s t o b a n k s a n d b a n k e r s , i n v e s t m e n t h o u s e s , a n d a n y o n e w h o m a k e s a l i v i n g b y b u y i n g a n d s e l l i n g s e c u r i t i e s , i . e . p r o f e s s i o n a l s e c u r i t y a n d b o n d h o l d e r s . I t i s s a i d t h a t a n e f f e c t i v e r e p o r t i s one t h a t m u s t b e s o p r e s e n t e d t h a t i t m e e t s t h e n e e d s n o t o n l y of t h e s h a r e h o l d e r s b u t a l s o 9 of t h e p r o f e s s i o n a l s e c u r i t y a n a l y s t . I t i s a l s o s a i d t h a t s e c u r i t y a n a l y s t s a r e a h i g h l y s o p h i s t i c a t e d a n d h i g h l y s p e c i a l i z e d g r o u p of m e n . 9. H o w a r d L». S h e r m a n , " M o r e p r o g r e s s A h e a d w i t h A n n u a l R e p o r t s , " F i n a n c i a l W o r l d , V o l . C X 1 1 1 , No. 3, J a n u a r y 20, I 9 6 0 , p. 29. T h e y w a n t " a c r e s a n d a c r e s of f i g u r e s . " T h e y a r e " c r i t i c a l a n d d e m a n d i n g . If t h e s e two s t a t e m e n t s a r e a c c e p t e d , t h e n s u p p l e m e n i n f o r m a t i o n m u s t be p r o v i d e d t o m e e t t h e i n s a t i a b l e d e m a n d s of t h e 12 p r o f e s s i o n a l s e c u r i t y a n a l y s t . D o n a l d B. M a c u r d a , P r e s i d e n t of t h e N e w Y o r k S o c i e t y o f S e c u r i t y A n a l y s t s I n c . , h a s s u c c i n c t l y r e c o r d e d t h e r e q u i r e m e n t s o f t h e f i n a n c i a l a n a l y s t a s f o l l o w s : 1. S t a t i s t i c a l s u m m a r i z a t i o n of t h e y e a r ' s r e s u l t s a s c o m p a r e d w i t h t h e p r e v i o u s y e a r ' s p e r f o r m a n c e . 2. I n c o m e a n d ( i n c o m e ) p e r c o m m o n s h a r e d a t a . 3. B a l a n c e s h e e t d a t a t o g e t h e r w i t h p e r c e n t a g e c h a n g e s . 4. P r o d u c t d a t a 5. P r e s i d e n t ' s m e s s a g e s -~ c o n c i s e a n d e x p l a n a t o r y . 6. B a c k g r o u n d a n d f o r e g r o u n d i n f o r m a t i o n a b o u t s a l e s , m a r k e t s , c o m p e t i t i o n , d i r e c t i o n o f r e s e a r c h , e a r n i n g s a n d b a l a n c e s h e e t i n f o r m a t i o n . 7. P i c t u r e s a n d g r a p h s . 8. O u t l o o k a n d r e a s o n s . 9. N o t e s t o f i n a n c i a l s t a t e m e n t s . 10. A u d i t o r s ' c e r t i f i c a t e . 10. G i r d e r , op. c i t . , p. 26. 11. D a n i e l J . H a n n e s s y , " W h a t d o e s t h e P u b l i c W a n t i n C o r p o r a t e R e p o r t s ? " T h e C o n t r o l l e r , V o l . X V , No. 11, N o v e m b e r 1947, p. 579. 12. D o n a l d B. M a c u r d a , " W h a t a F i n a n c i a l A n a l y s t l i k e s i n a n A n n u a l R e p o r t , " F i n a n c i a l W o r l d , V o l . C X V 1 , No. 18, N o v e m b e r 1, 1961, p. 64. 9 11. S o u r c e s and a p p l i c a t i o n of funds t a b u l a t i o n . 12. 10-year d e t a i l e d s t a t i s t i c a l s u m m a r y . 13. O f f i c e r s and d i r e c t o r s w i t h d e t a i l s . 14. M a t u r i n g debt schedule. 15. S a l e s by p r o d u c t and/or m a r k e t . 16. O t h e r data that h e l p s h i m g a i n any i n s i g h t into the company's o p e r a t i o n s . Indeed the s e c u r i t y a n a l y s t i s demanding.' S u p p l e m e n t a r y I n f o r m a t i o n and the E m p l o y e e s L i k e s h a r e h o l d e r s , e m p l o y e e s have c e r t a i n c l a i m s upon management f o r i n f o r m a t i o n . T h e i r whole l i v e l i h o o d f r e q u e n t l y depends upon company v e n t u r e s o v e r w h i c h they m a y have no c o n t r o l . The company's a c h i e v e m e n t and p r o s p e c t s a r e o b v i o u s l y of g r e a t i n t e r e s t to them. They w o u l d l i k e to know, f o r example, whether t h e r e i s adequate p r o v i s i o n f o r t h e i r f u t u r e s e c u r i t y , t h r o u g h p e n s i o n s and p r o f i t s h a r i n g p l a n s , i n s u r a n c e p r o g r a m s and other f r i n g e b e n e f i t s . L i k e s h a r e h o l d e r s again, t h e i r u n d e r s t a n d i n g of f i n a n c i a l s t a t e m e n t i s sketchy. M a n y employ e e s know v e r y l i t t l e about the e c o n o m i c f u n d a m e n t a l s of the b u s i n e s s e s w h i c h e m p l o y them, and i n a d d i t i o n to t h i s , m o s t of t h e m have been f i l l e d up w i t h m i s l e a d i n g propaganda. The r e s u l t i s that e m p l o y e e s f r e q u e n t l y e n t e r t a i n i m p r e s s i o n s w h i c h a r e the r e v e r s e of f a c t s . The s i t u a t i o n w i l l p r o b a b l y continue to e x i s t u n l e s s managements a c c e p t m o r e r e s p o n s i b i l i t y i n p r o v i d i n g t h e i r e m p l o y e e s 10 w i t h p e r t i n e n t data i n u n d e r s t a n d a b l e f o r m . It w o u l d be u n f a i r , of c o u r s e , to p l a c e the whole t a s k on a n n u a l r e p o r t s and expect t h i s m e d i u m alone to p r o v i d e a s a t i s f a c t o r y s o l u t i o n . In f a c t , i t i s q u e s t i o n a b l e how m u c h of the job the annual r e p o r t can be e x p e c t e d to do g r a n t e d the m o s t f a v o u r a b l e c i r c u m s t a n c e s . But i t i s t r u e that whether o r not the s h a r e h o l d e r s ' r e p o r t i s a l s o a d d r e s s e d to employees some of t h e m w i l l r e a d i t f o r what they can get out of i t , and i t i s c e r t a i n l y a f a c t that the r e p o r t s a r e e x a m i n e d by r e p r e s e n t a t i v e s of 13 l a b o u r u n ions. The " m i s i n f o r m e d e m p l o y e e " w i t h vague b e l i e f s , u n d e f i n e d d i s s a t i s f a c t i o n s , and l a r g e l y i n a r t i c u l a t e e motions can p r e s e n t a m o r e s e r i o u s p r o b l e m to management than the u n i n f o r m e d employee. G r a n t e d the above, i t i s p e r t i n e n t that managements p r e s e n t and e x p l a i n f a c t s i n the a n n u a l r e p o r t i n s u c h a way that e m p l o y e e s p e r c e i v e a t r u e p i c t u r e of the o p e r a t i o n s and p r o b l e m s of the b u s i n e s s , as w e l l as i t s f u n d a m e n t a l p o l i c i e s and o b j e c t i v e s so f a r as t h e s e r e l a t e to job s e c u r i t y , wage l e v e l s and p r o d u c t i v i t y . R e v i e w of r e l a t e d s t u d i e s 14 E x c e p t f o r two l i m i t e d s t u d i e s v e r y l i t t l e m a t e r i a l 13. R. G. "Walker, "The M i s i n f o r m e d E m p l o y e e , " H a r v a r d  B u s i n e s s R e v i e w , V o l . X X V I , No. 3, M a y 1948, p. 267. 14. See, f o r example, D o n a l d G e o r g e U s h e r , "An A n a l y s i s of D i r e c t o r ' s L e t t e r s i n A n n u a l R e p o r t s of C a n a d i a n C o r p o r a -t i o n , " g r a d u a t i n g essay, The U n i v e r . s i t y of B r i t i s h C o l u m b i a , V a n c o u v e r , 11 has been w r i t t e n i n Canada about s u p p l e m e n t a r y i n f o r m a t i o n i n a n n u a l r e p o r t s . In the U n i t e d S t a t e s , s u r v e y s of t h i s s u b j e c t have not been e x t e n s i v e a l s o . Two s t u d i e s , however, a r e w o r t h y of mention. 15 The f i r s t w h i c h was u n d e r t a k e n by R e s e a r c h B u r e a u s , I n c o r p o r a t e d i n M i c h i g a n , r e p r i n t e d , w i thout comments, v a r i o u s f e a t u r e s w h i c h w e r e i n c o r p o r a t e d i n annual r e p o r t s . The s u r v e y c o v e r e d 67 6 companies. The s e c o n d ^ w h i c h was u n d e r t a k e n by the A m e r i c a n M a n a g e m e n t A s s o c i a t i o n f o c u s e d on two a s p e c t s of the annual r e p o r t s n a m e l y : 1. The o r g a n i z a t i o n and p r o c e d u r a l p r a c t i c e s i n the p r e p a r a t i o n of a n n u a l r e p o r t of 27 8 c o m p a n i e s and 2. The contents of 100 annual r e p o r t s c h o s e n at r a n d o m f r o m the f i l e s of the A m e r i c a n M a n a g e m e n t A s s o c i a t i o n and f r o m those s u b m i t t e d by c o m p a n i e s p a r t i c i p a t i n g i n the s u r v e y . The l a t t e r a s p e c t of the s e c o n d s u r v e y comes c l o s e to what the p r e s e n t t h e s i s p u r p o r t s to study. It was not concerned, however, w i t h t r e n d a n a l y s i s . 1955; and B r u n o V i c t o r W e s t e r l u n d , "The D e t e r m i n a t i o n of an I d e a l A n n u a l R e p o r t f o r a M i n i n g Company, " g r a d u a t i n g e s s a y , The U n i v e r s i t y of B r i t i s h C o l u m b i a , V a n c o u v e r , 1956. 15. Don A. T a l u c c i (ed. ), The A n n u a l R e p o r t - - a Document of M o d e r n B u s i n e s s , D e t r o i t : R e s e a r c h B u r e a u s , I n c o r p o r a t e d , 1959. 16. E l i z a b e t h R. F l o y d , P r e p a r i n g the A n n u a l R e p o r t , A M A R e s e a r c h Study 46, New Y o r k : A m e r i c a n M a nagement A s s o c i a t i o n , I960. D e f i n i t i o n s of T e r m s U s e d F r o n t c o v e r : T h i s can b e s t be d e f i n e d by means of an i l l u s t r a t i o n . A s s u m i n g that the w o r d c o v e r , as we u n d e r s t a n d i t i n e v e r y d a y speech, t w e r e n e v e r i n e x i s t e n c e , and an an n u a l r e p o r t has ten pages, then page I i s the f r o n t c o v e r . I n s i d e f r o n t c o v e r : T h i s r e f e r s to page 2 of the above i l l u s t r a t i o n . B a c k c o v e r : T h i s r e f e r s to page 10 of the above i l l u s t r a t i o n . I n s i d e b a c k c o v e r : T h i s r e f e r s to page 9 of the above i l l u s t r a t i o n . O r g a n i z a t i o n of C h a p t e r s W i t h r e g a r d to the s t r u c t u r e of the t h e s i s , C h a p t e r I I d e s c r i b e s the method o l o g y of the study; C h a p t e r 111 i s c o n c e r n e d w i t h an o v e r a l l v i e w of s u p p l e m e n t a r y i n f o r m a t i o n . A n a n a l y s i s of the f o r m a t and content of the e x e c u t i v e m e s s a g e i s o f f e r e d i n C h a p t e r IV. A l l s u p p l e m e n t a r y i n f o r m a t i o n t o u c h i n g on the scope of o p e r a t i o n s of the e n t e r p r i s e a r e ta k e n up i n C h a p t e r V. Cha p t e r V I r e v i e w s and a n a l y z e s i n some d e t a i l f i n a n c i a l s u p p l e m e n t a r y i n f o r m a t i o n , and Ch a p t e r V I 1 c o m p l e t e s the a n a l y s i s by t a k i n g up a l l other s u p p l e m e n t a r y i n f o r m a t i o n w h i c h have not been touched upon i n the p r e v i o u s c h a p t e r s . .This b r i n g s the study to C h a p t e r V I 1 1 w h i c h i s c o n c e r n e d w i t h e v a l u a t i o n . C H A P T E R 11 M E T H O D O L O G Y I n t r o d u c t i o n T h i s c h a p t e r u n d e r t a k e s to d e s c r i b e i n d e t a i l t h e v a r i o u s s t e p s t h a t w e r e n e c e s s a r y i n t h e s e l e c t i o n o f t h e s a m p l e . C o m m e n t s o n the t e c h n i q u e o f a n a l y s i s w i l l a l s o b e m a d e . T h e P o p u l a t i o n T h e s a m p l i n g f r a m e t h a t w a s u s e d i n t h e s t u d y i n c l u d e d a l l i n d u s t r i a l c o m p a n i e s ( m i n i n g a n d o i l c o m p a n i e s e x c e p t e d ) w h o s e s h a r e s w e r e l i s t e d o n a n y o n e of t h e f i v e C a n a d i a n s t o c k e x c h a n g e s a s o f J u n e 1, 1964. F i v e l i s t i n g s f r o m the v a r i o u s s t o c k e x c h a n g e s i n C a n a d a w e r e e x a m i n e d a n d c o m p a r e d . C o m p a n i e s w h o s e n a m e s a p p e a r e d o n m o r e t h a n o n e l i s t w e r e s p e c i a l l y n o t e d i n o r d e r to a v o i d d o u b l e c o u n t i n g . I n a l l 610 i n d u s t r i a l c o m p a n i e s w e r e a c c o u n t e d f o r , 6 0 % o f w h i c h w e r e i n c o r p o r a t e d b e f o r e J a n u a r y 1, 1939. T h e c o m p a n i e s w e r e n e x t c l a s s i f i e d i n t e r m s of t y p e s of e s t a b l i s h m e n t s . T h e F i n a n c i a l P o s t i n i t s a n n u a l " S u r v e y o f I n d u s t r i a l s " g i v e s 19 c a t e g o r i e s o f i n d u s t r i a l s ( S e e A p p e n d i x X). F o r t h e p u r p o s e o f t h i s s t u d y i t w a s f e l t t h a t a 19 t y p e c l a s s i f i c a t i o n w o u l d b e t o o e x t e n s i v e a n d u n w i e l d y . A r e g r o u p i n g o f th e v a r i o u s t y p e s w a s 14 made; the 610 c o m p a n i e s w e r e f i n a l l y c l a s s i f i e d into eight i n d u s t r i a l g r o u p i n g s as f o l l o w s : I n d u s t r i a l G r o u p s No. of C o m p a n i e s P e r Cent T o t a l 610 C o n s u m p t i o n goods C a p i t a l goods I r o n and S t e e l S e r v i c e F i n a n c i a l I n s t i t u t i o n s P u b l i c U t i l i t i e s F o r e s t and A l l i e d P r o d u c t s M i s c e l l a n e o u s 119 89 88 85 60 59 47 63 100 19. 6 14. 6 14. 4 13. 9 9. 8 9. 7 7. 7 10. 3 The c o n s u m p t i o n goods c a t e g o r y c o m p r i s e s a l l e s t a b l i s h -ments d e a l i n g i n f o o d s t u f f s , t e x t i l e s , b e v e r a g e s , m i l l i n g and g r a i n . The c a p i t a l goods c a t e g o r y composes of s i x types of e s t a b l i s h m e n t s w h i c h a r e d e f i n e d i n the F i n a n c i a l P o s t , " S u r v e y of I n d u s t r i a l s " as c o n s t r u c t i o n , p r o p e r t y development, e l e c t r i c a l equipment, o i l and pipe l i n e s , c h e m i c a l s and a l l i e d p r o d u c t s and n o n - f e r r o u s m e t a l s . The S e r v i c e group r e f e r s to a l l c o m p a n i e s w h i c h a r e i n v o l v e d i n m e r c h a n d i s i n g and t r a n s p o r t a t i o n . F i n a n c i a l i n s t i t u t i o n s i n c l u d e what the F i n a n c i a l P o s t c l a s s i f i e s as B a n k and F i n a n c e and T r u s t and L o a n s Companies. A l l e s t a b l i s h m e n t s c o n n e c t e d w i t h pulp and p a p e r p r o d u c t i o n , l u m b e r i n g and p r i n t i n g and p u b l i s h i n g a r e g r o u p e d u n d e r F o r e s t and A l l i e d P r o d u c t s . 15 S a m p l i n g D e s i g n A r b i t r a r i l y , i t was f i r s t d e c i d e d that a s a m p l e of 250 f i r m s w o u l d m o r e than adequately r e p r e s e n t the t o t a l p o p u l a t i o n . P a s t e x p e r i e n c e of the F a c u l t y of C o m m e r c e and B u s i n e s s A d m i n i s t r a t i o n at the U n i v e r s i t y of B r i t i s h C o l u m b i a , i n d i c a t e s that when r e q u e s t s f o r a n nual r e p o r t s w e r e made to C a n a d i a n c o m p a n i e s , they w e r e m o r e than w i l l i n g to c o - o p e r a t e . On t h i s b a s i s , i t was f e l t that at l e a s t 200 c o m p a n i e s i n the s a m p l e c o u l d be r e l i e d upon to s u p p l y the n e c e s s a r y data. The 250 c o m p a n i e s w e r e p i c k e d by means of s t r a t i f i e d s a m p l i n g . T h i s p a r t i c u l a r s a m p l i n g d e s i g n was adopted b e cause i t w o u l d enable the w r i t e r to a c h i e v e r e p r e s e n t a t i v e n e s s not o n l y of the t o t a l p o p u l a t i o n but a l s o of each type of i n d u s t r y . The steps that w e r e i n v o l v e d i n the s e l e c t i o n p r o c e s s w e r e as f o l l o w s : F i r s t , the s a m p l i n g l i s t of 610 c o m p a n i e s was t r a n s -s c r i b e d into 5" x 3" c a r d s . E a c h c a r d c o n t a i n e d the f o l l o w i n g data w i t h r e s p e c t to one company -- company name, a d d r e s s , f i s c a l y e a r end, y e a r of i n c o r p o r a t i o n and type of i n d u s t r y . The c a r d s w e r e next s o r t e d a c c o r d i n g to i n d u s t r i a l g r o u p i n g s and f o r e a c h group they w e r e 17 t h o r o u g h l y s h u f f l e d . F i n a l l y , e v e r y s e c o n d c a r d was p u l l e d out •from each of the groups. The s a m p l e thus s e l e c t e d i s shown i n T a b l e 1. 17. The n u m b e r i s o b t a i n e d as f o l l o w s : T o t a l P o p u l a t i o n = 610 _ 2. S a m p l e S i z e 250 TABLE 1 FREQUENCY DISTRIBUTION OF COMPANIES IN ORIGINAL SAMPLE ACCORDING TO INDUSTRIAL GROUPS Industrial Groups Total Consumption Goods Iron and Steel Capital Goods Service Financial Institutions Public Utility Forests and Allied Products Miscellaneous No. of Companies Per Cent 250 100 48 19.2 36 14.4 36 14.4 36 14.4 24 9. 6 24 9. 6 20 8. 0 26 10.4 17 L e t t e r s r e q u e s t i n g the annual r e p o r t s f o r the r e l e v a n t f i v e s e l e c t e d y e a r s , n a m e l y , 1938, 1948, 1953, 1958, 1963, w e r e m a i l e d to e a c h of the 250 companies. The l e t t e r s w e r e s i g n e d by P r o f e s s o r C. L. M i t c h e l l under U n i v e r s i t y l e t t e r h e a d . The n u m ber of annual r e p o r t s r e q u e s t e d f r o m each of the c o m p a n i e s depended upon the y e a r of i n c o r p o r a t i o n of that company. T h i s i s c l e a r s i n c e no company w o u l d have a say, 1938 a n n u a l r e p o r t u n l e s s i t was i n c o r p o r a t e d 18 b e f o r e that y e a r . Thus annual r e p o r t s f o r f i v e s e l e c t e d y e a r s b e g i n n i n g w i t h 1938 w e r e o n l y r e q u e s t e d f r o m companies w h i c h w e r e i n c o r p o r a t e d b e f o r e 1938. B y the same token, a n n u a l r e p o r t s f o r f o u r of the f i v e s e l e c t e d y e a r s b e g i n n i n g w i t h 1948 w e r e r e q u e s t e d f r o m c o m p a n i e s w h i c h i n c o r p o r a t e d a f t e r 1938 but b e f o r e 1948, and so on f o r c o m p a n i e s w h i c h w e r e i n c o r p o r a t e d i n other y e a r s . Two months af t e r the d i s p a t c h of the f i r s t l e t t e r , a s e c o n d r e q u e s t was sent to a l l c o m p a n i e s who h a d not r e s p o n d e d to the i n i t i a l r e q u e s t . A s u m m a r y of the t o t a l r e p l i e s w h i c h w e r e r e c e i v e d i s g i v e n below. 18. F u r t h e r thought i n d i c a t e d that t h i s s tatement i s not exact, s i n c e some of the l i s t e d c o m p a n i e s m i g h t have t u r n e d p u b l i c c o m p a n i e s a f t e r 1938, although they w e r e i n c o r p o r a t e d b e f o r e 1938. The w r i t e r a p p r e c i a t e s that the n u m b e r of r e p o r t s r e q u e s t e d f r o m a company s h o u l d not be b a s e d on i t s y e a r of i n c o r p o r a t i o n but on i t s y e a r of l i s t i n g on the s t o c k exchange, and that c o m p a n i e s w h i c h w e r e p r i v a t e b e f o r e 1938 w o u l d not be able to s u p p l y f i v e r e p o r t s . A l t h o u g h the s a m p l e i g n o r e d s u c h c a s e s , the r e s u l t s of the study a r e not s i g n i f i c a n t l y d i s t o r t e d , s i n c e a r e c h e c k i n g of the l e t t e r s w h i c h a c c o m p a n i e d the r e q u e s t e d r e p o r t s r e v e a l e d that the n u m ber of s u c h c a s e s was i n s i g n i f i c a n t . L e t t e r s sent out 250 R e p l i e s r e c e i v e d 214 U s a b l e r e p l i e s 115 P e r c e n t a g e of r e t u r n s 8 6 % P e r c e n t a g e of u s a b l e r e t u r n s 4 6 % A s i n d i c a t e d above many of the com p a n i e s r e s p o n d e d to the r e q u e s t ; few, however, w e r e able to supp l y u s a b l e r e p l i e s and as a r e s u l t many of the r e t u r n s h a d to be r e j e c t e d . A u s a b l e r e p l y f r o m a company i s one that a t t a c h e d a l l the annual r e p o r t s w h i c h w e r e r e q u e s t e d f r o m that company. Thus i f f i v e a n n u a l r e p o r t s w e r e r e q u e s t e d and o n l y f o u r o r l e s s r e p o r t s w e r e s u b m i t t e d , the r e p l y was s a i d to be unusable. S i m i l a r l y , a r e p l y was s a i d to be non-u s a b l e i f t h r e e a n n u a l r e p o r t s w e r e r e q u e s t e d and o n l y two o r l e s s r e p o r t s w e r e r e c e i v e d . M a n y of the companies w e r e unable to sup p l y the 1938 and 1948 c o p i e s . Some of them w e r e r e l u c t a n t to s u p p l y even " x e r o x e d c o p i e s . " F i n a l S a mple and U s a b l e R e p l i e s The 115 c o m p a n i e s w h i c h m e t our r e q u e s t adequately and thus f o r m the f i n a l s a m p l e of the study a r e c l a s s i f i e d i n T a b l e 11 a c c o r d i n g to i n d u s t r i a l groups. TABLE 11 FREQUENCY DISTRIBUTION OF COMPANIES IN FINAL SAMPLE ACCORDING TO INDUSTRIAL GROUPS Industrial Groups No. of Companies Per Cent Total 115 100 Consumption Goods 23 20. 0 Iron and Steel 19 16. 5 Capital Goods 17 14. 8 Financial Institutions 14 12. 2 Public Utility 13 11. 3 Forests and Allied Products 10 8.7 Service 10 8.7 Miscellaneous 9 7. 8 - 20 In t o t a l 452 annual r e p o r t s w e r e e x a m i n e d f o r the f i v e y e a r s . The i l l u s t r a t i o n below g i v e s a b r e a k d o w n of the n u mber of annual r e p o r t s w h i c h w e r e e x a m i n e d a c c o r d i n g to each of the y e a r s . Y e a r No. of A n n u a l R e p o r t s 1938 67 1948 78 1953 88 1958 104 1963 115 The u n e q u a l d i s t r i b u t i o n of annual r e p o r t s i s e x p l a i n e d by a f a c t n o t e d e a r l i e r , n a m e l y , that only c ompanies i n c o r p o r a t e d b e f o r e 1938 w o u l d be able to su p p l y f i v e annual r e p o r t s . Thus the data above a l l o w s us to a s c e r t a i n e a s i l y that among the 115 companies w h i c h made up the f i n a l s a m p l e , 67 c o m p a n i e s w e r e i n c o r p o r a t e d b e f o r e 1938. M e t h o d of A n a l y s i s A number of annual r e p o r t s w e r e f i r s t e x a m i n e d i n o r d e r to d e t e r m i n e the b a s i c o r g a n i z a t i o n of the m a t e r i a l as w e l l as the p o s s i b l e t o p i c s c o v e r e d i n an annual r e p o r t . On the b a s i s of such e x a m i n a t i o n , s u p p l e m e n t a r y i n f o r m a t i o n i s c l a s s i f i e d i nto t h i r t e e n s e c t i o n s each of w h i c h i s c o n s i d e r e d i n d e t a i l i n l a t e r c h a p t e r s . The t e r m " s e c t i o n " r e f e r s to a b l o c k of i n f o r m a t i o n p l a c e d under a 19 s i n g l e m a j o r heading. The t h i r t e e n s e c t i o n s a r e as f o l l o w s : 19. T w e l v e of the s e c t i o n s a r e adapted f r o m E l i z a b e t h R. F l o y d , P r e p a r i n g the A n n u a l R e p o r t , A M A R e s e a r c h Study 46, New Y o r k : A m e r i c a n Management A s s o c i a t i o n , I960. 21 1. F r o n t C o v e r 2. E x e c u t i v e Menage 3. O f f i c e r s and D i r e c t o r s 4. C o r p o r a t e Data 5. C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s 6. F i n a n c i a l H i g h l i g h t s 7. S o u r c e s and A p p l i c a t i o n of W o r k i n g C a p i t a l 8. P l a n t s , S u b s i d i a r i e s and D i v i s i o n s 9. N a r r a t i v e S e c t i o n 10. P r o d u c t S e c t i o n 11. T i t l e P a g e 12. T a b l e of Contents 13. M i s c e l l a n e o u s s u p p l e m e n t a r y i n f o r m a t i o n The n a t u r e of each s e c t i o n i s d e f i n e d and e x p l a i n e d i n l a t e r c h a p t e r s . The above l i s t i n g does not i n any way i n d i c a t e the r e l a t i v e i m p o r t a n c e of each of the s e c t i o n s . Note that w h e r e a s the f r o n t c o v e r i s c o n s i d e r e d a s e p a r a t e s e c t i o n , b a c k c o v e r s a r e not c o n s i d e r e d as s e p a r a t e s e c t i o n s . T h i s i s b e c a u s e back c o v e r s s o m e t i m e s c o n t a i n one or m o r e of the s m a l l e r s e c t i o n s of i n f o r m a t i o n e. g. p r o d u c t s e c t i o n o r s u b s i d i a r i e s and d i v i s i o n s , w h i c h a r e g e n e r a l l y i n c l u d e d on the i n s i d e pages of the annual r e p o r t . F o r the same r e a s o n , the i n s i d e f r o n t and ba c k c o v e r s a r e not c o n s i d e r e d as s e p a r a t e s e c t i o n s . In l a t e r c h a p t e r s r e f e r e n c e w i l l be made to the l e n g t h of the s e c t i o n s . The l e n g t h i s e x p r e s s e d i n t e r m s of pages. 22 A f u l l page i n c l u d e s a l l the u s e d page on i t . F o r example, i f a page contains o n l y the t a b l e of contents and the r e s t of the page i s l e f t blank, the tab l e of contents i s c o n s i d e r e d to have u s e d up one f u l l page. If a page i s e n t i r e l y blank, i t i s c l a s s i f i e d as other i n f o r m a t i o n . S o m e t i m e s one s e c t i o n of the s u p p l e m e n t a r y i n f o r m a t i o n m a y end on one page and another m a y b e g i n on the same page. In other i n s t a n c e s , two o r m o r e s e c t i o n s w h i c h a r e u s u a l l y c o m p l e t e and s e p a r a t e a r e i n t e g r a t e d into one l a r g e r s e c t i o n . P r o d u c t l i s t and p l a n t l o c a t i o n s , f o r example, a r e s o m e t i m e s c o m b i n e d to make one s e c t i o n . In a l l these c a s e s , e a c h type of s e c t i o n i s c r e d i t e d , on the b a s i s of o b s e r v a t i o n , w i t h the a p p r o x i m a t e p e r c e n t a g e of the space that i t o c c u p i e s on the page. F o r each of the s e c t i o n s c o n s i d e r e d i n l a t e r c h a p t e r s , the technique of a n a l y s i s w h i c h i s adopted, f o l l o w s a s y s t e m a t i c p a t t e r n . A n umber of r e p o r t s i s f i r s t r e v i e w e d to d e t e r m i n e the f o r m a t of the s e c t i o n and the m a i n t o p i c s c o v e r e d i n that s e c t i o n . The c h i e f f e a t u r e s of the s e c t i o n a r e then set out i n w o r k i n g p a p e r s a c c o r d i n g to types of i n d u s t r y . F i n a l l y , s t a t i s t i c a l t i c k s a r e e m p l o y e d to denote the number of r e p o r t s h a v i n g the a p p r o p r i a t e f e a t u r e s i n the a p p r o p r i a t e s e c t i o n . C H A P T E R 111 S U P P L E M E N T A R Y T E X T - G E N E R A L C O N T E N T , F O R M A T A N D D E S I G N I n t r o d u c t i o n T h i s c h a p t e r attempts to p r e s e n t an o v e r a l l v i e w of the content, f o r m a t and d e s i g n of a l l s u p p l e m e n t a r y pages w h i c h a r e found i n the 452 annual r e p o r t s . To some extent the a p p r o a c h m a y be l i k e n e d to a r e a d e r who l e a f s t h r o u g h each of the r e p o r t s w ithout r e a d i n g the text i n d e t a i l . In other w o r d s , th i s chapter m a y be r e f e r r e d to as a d e s c r i p t i o n of f i r s t i m p r e s -sions. The content of t h i s chapter i n c l u d e s a d i s c u s s i o n of the twelve s e c t i o n s , e y e - a p p e a l f e a t u r e s i . e . p hotographs, i l l u s t r a t i o n s , g r a phs, c h a r t s and c o l o u r s , s i z e and l e n g t h of r e p o r t s and the co v e r s e c t i o n . U n l e s s o t h e r w i s e i n d i c a t e d , e y e - a p p e a l f e a t u r e s do not i n c l u d e those on the f r o n t c o v e r , a s e c t i o n , w h i c h i s d i s c u s s e d s e p a r a t e l y . The S e c t i o n s In a t y p i c a l a n nual r e p o r t , the e x e c u t i v e m e s s a g e and the n a r r a t i v e (other than the f i n a n c i a l s tatements) f o r m the m a i n s e c t i o n s of the s u p p l e m e n t a r y text. M o s t of the o t h e r s e c t i o n s a r e s h o r t e r than these two s e c t i o n s . A t i t l e page, the tab l e of contents and a f i n a n c i a l h i g h l i g h t s s e c t i o n n o r m a l l y appear t o w a r d the b e g i n n i n g , and a t a b l e of c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s g e n e r a l l y f o l l o w s ( u s u a l l y after the F i n a n c i a l Statements) the 24 two c e n t r a l s e c t i o n s . T h e r e a r e other s e c t i o n s , however, w h i c h a r e f o u n d i n the t y p i c a l annual r e p o r t but w h i c h m a y appear e i t h e r b e f o r e o r a f t e r the two m a i n s e c t i o n s . They i n c l u d e a l i s t of o f f i c e r s and d i r e c t o r s , names and/or a d d r e s s e s of p l a n t l o c a t i o n s , o f f i c e s , d i v i s i o n s , b r a n c h e s and s u b s i d i a r i e s , c o r p o r a t a data and p r o d u c t i n f o r m a t i o n . A s r e f e r r e d to i n an e a r l i e r c h a p t e r , some of the s m a l l e r s e c t i o n s m a y be g r o u p e d on the same page under s e p a r a t e headings or they m a y be i n t e g r a t e d into one s e c t i o n under a s i n g l e heading. Some of the s e c t i o n s a r e s i m i l a r i n that they c o n t a i n the same k i n d of i n f o r m a t i o n and a r e p r e s e n t e d i n g e n e r a l l y the same way i n e v e r y r e p o r t . O t h e r s e c t i o n s s u c h as a l i s t of b r a n c h e s and s u b s i d i a r y , m a y v a r y w i d e l y . Some r e p o r t s show a l i s t of o f f i c e s and s u b s i d i a r i e s ; o t h e r s f e a t u r e a s e r i e s of p i c t u r e s to i l l u s t r a t e the same i n f o r m a t i o n . T a b l e 111 shows i n r o u g h o r d e r the p e r c e n t a g e of r e p o r t s c o n t a i n i n g e a c h of the t h i r t e e n s e c t i o n s f o r e ach of the f i v e s e l e c t e d y e a r s . The m o s t i m p o r t a n t c o n c l u s i o n to be dr a w n f r o m T a b l e 111 is the f a c t that o v e r the p e r i o d f r o m 1938 to 1963 m o r e and m o r e of the s u r v e y c o m p a n i e s w e r e adding m o r e and m o r e k i n d s of i n f o r m a t i o n to t h e i r a n nual r e p o r t s . T h i s p r o b a b l y was the r e s u l t of a b r o a d e n i n g i n the base of s h a r e o w n e r s h i p i n r e c e n t y e a r s 25 together w i t h an i n c r e a s e i n p u b l i c i n t e r e s t i n b u s i n e s s . Note that the number of co m p a n i e s showing f i n a n c i a l h i g h l i g h t s i n c r e a s e d f r o m 0% i n 1938 to m o r e than 3 6 % i n 1963, and that the n u m b e r of c o m p a n i e s showing long t e r m c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s i n c r e a s e d f r o m 9% i n 1938 to 4 0 % i n 1963 a d i f f e r e n c e of 3 1 % o v e r the t w e n t y - f i v e y e a r p e r i o d . Throughout the p e r i o d m o r e and m o r e co m p a n i e s w e r e i n c o r p o r a t i n g into t h e i r a n nual r e p o r t s i n f o r m a t i o n about company's p r o d u c t s , o f f i c e s and s u b s i d i a r i e s and o f f i c e r s and d i r e c t o r s . The use of a t a b l e of contents was i n c r e a s i n g l y accepted. O b v i o u s l y , the lon g t e r m t r e n d f o r the p a s t t w e n t y - f i v e y e a r s h a d been a move t o w a r d f u l l e r 20 d i s c l o s u r e of i n f o r m a t i o n on a l l p hases of b u s i n e s s o p e r a t i o n s and a c t i v i t i e s ;(,see C h a r t 1 on next page). T h i s t r e n d was t r u e of each of the se v e n i n d u s t r i a l g r o u p i n g s of c o m p a n i e s studied. i(See A p p e n d i x 11). The i n d i c a t i o n seems to be that c o m p l e t e n e s s i n r e p o r t i n g i s b e c o m i n g m o r e and m o r e an a c c e p t e d fact. P h o t o g r a p h s or I l l u s t r a t i o n s The t e r m " i l l u s t r a t i o n s " i s u s e d to mean l i n e d r a w i n g s and s k e t c h e s . It does not i n c l u d e graphs, c h a r t s o r maps. It i s s a i d that the t r e n d of r e c e n t y e a r s has been t o w a r d p o p u l a r i z i n g , i f not g l a m o u r i z i n g , the annual r e p o r t . T a b l e I V 20. A s m a l l e r p e r c e n t a g e of c o m p a n i e s w e r e showing i n f o r m a -t i o n about company's p r o d u c t and s u b s i d i a r i e s i n 1963 than i n 1958. The change however was s l i g h t and t h e r e f o r e i n s i g n i f i c a n t . It i s not known when the s l i g h t dip began o v e r the f i v e y e a r i n t e r v a l . 26 TABLE 111 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS BY SECTIONS A N D YEARS Sections 1938 1948 1953 1958 1963 Total number of reports analyzed 67 78 88 104 115 Front cover 100.0% 100.0% 100.0% 100.0% 100.0= Executive message 94.0 93.6 98.8 99.0 98.3 List of officers and directors 88.0 91.0 95.4 98.1 97.4 Corporate data 40.3 48.7 63.6 75.0 78.3 List of subsidiaries and divisions 38.9 48.7 56.8 59.6 58.3 Miscellaneous information 35.8 48.7 55.7 56.7 53.1 Comparative financial statistics 8 .9 11.5 17.0 31.7 40.0 -Ercduct Section 14.9 24.4 36.4 40.4 36.5 Financial highlights - 3.8 14.8 29.8 36.5 Title page 25.3 25.6 30.7 27.8 28.7 Narrative section 4.4 8.9 10.2 10.5 19.1 Sources and Application of Working Capital - 1.3 4.5 13.0 18.2 Table of contents 1.5 7.6 5.6 8.6 11.3 28 TABLE IV PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS A C C O R D I N G T O NUMBER O F P H O T O S OR ILLUSTRATIONS USED A N D YEARS Number of Photos or Illustrations 1938 1948 1953 1958 1963 Total N o . of Reports 67 78 88 104 115 1 - 5 6.0% 6.4% 13.7% 17.3% 20.9% 6 -10 3.0 7.6 6.8 16.3 14.8 11 -15 - 3.8 10.2 8.7 12.2 16 -20 - 1.3 1.1 2 .9 6.1 21 -25 - 2.6 1.1 - 1.7 26 -30 - - 1.1 3.8 -More than 30 - - 1.1 2.8 0.8 Percentage of Total Reports with Photographs or Illustrations 9.0% 21.7% 35.1% 51.8% 56.5% 29 shows that photographs and i l l u s t r a t i o n s w e r e the m a i n f e a t u r e s by w h i c h p o p u l a r i z i n g was effected. It i s evident f r o m T a b l e I V that o v e r the p a s t t w e n t y - f i v e y e a r s f r o m 1938 to 1963, the number of companies u s i n g photo-graphs o r i l l u s t r a t i o n s i n t h e i r a n n ual r e p o r t s h ad i n c r e a s e d by m o r e than 6 t i m e s - 9% i n 1938 as c o m p a r e d to 5 6 % i n 1963. The s u r v e y showed that the av e r a g e number of p i c t u r e s and i l l u s t r a t i o n s p e r r e p o r t i n c r e a s e d f r o m 0. 2 to m o r e than 4 i n t w e n t y - f i v e y e a r s . 1958 was the m o s t " p i c t o r i a l " y e a r w i t h an a v e r a g e of 5. 5 p i c t u r e s . The m a x i m u m n u m b e r of photographs found i n any one r e p o r t was 48. It came f r o m a 1958 r e p o r t . W h i l e many com p a n i e s w e r e u s i n g m o r e c o l o u r photography on the i n s i d e of the r e p o r t the b u l k of the p i c t u r e s w e r e s t i l l b l a c k and white. A s w i l l be shown i n l a t e r c h a p t e r s , photographs w e r e i n c r e a s i n g l y i n t r o d u c e d on pages w h i c h t r a d i t i o n a l l y c o n t a i n e d nothing but d e s c r i p t i v e and s t a t i s t i c a l m a t t e r s u c h as the e x e c u t i v e m e s s a g e , f i n a n c i a l h i g h l i g h t s and lon g t e r m f i n a n c i a l r e v i e w . They w e r e a l s o u s e d to help c r e a t e a theme that u n i f i e d and r a n t h r o u g h the e n t i r e r e p o r t . The a p p r o a c h i n r e c e n t y e a r s was t o w a r d the use of l a r g e r and f u l l page i l l u s t r a t i o n s and photographs. S e v e r a l r e a s o n s m a y be off e r e d f o r t h i s d i s t i n c t t r e n d . 30 The f i r s t and m o s t i m p o r t a n t i s the f a c t that many c o m p a n i e s r e a l i z e d that p i c t o r i a l a r t c o u l d help g r e a t l y i n the d i f f i c u l t p r o b l e m of i n t e r e s t i n g people i n the f i n a n c i a l and e c o n o m i c f a c t s of b u s i n e s s . It i s not enough me r e l y to o f f e r f a c t u a l i n f o r m a t i o n i f managements want t h e i r c o m p a n i e s to be u n d e r s t o o d , p e o p l e m u s t be a t t r a c t e d to acce p t the f a c t s i n an u n d e r s t a n d a b l e way. P h o t o g r a p h s and i l l u s t r a -t i o n s a r e v a l u a b l e i n i n c r e a s i n g r e a d e r s h i p . They r e l i e v e the monotony of the page, and may l u r e even those who w o u l d o r d i n a r i l y l o o k o n l y at the p i c t u r e s into r e a d i n g the p r i n t e d word. A s e c o n d r e a s o n , w h i c h i s a c o r o l l a r y of the f i r s t , i s the f a c t that photographs a r e not o n l y v a l u a b l e i n l i g h t e n i n g some-thin g that c o u l d o t h e r w i s e be d u l l but s e r v e s a l s o as a p o s i t i v e v e h i c l e i n c r e a t i n g a c o r p o r a t i o n i m a g e -- about the scope of o p e r a t i o n s , the n a t u r e of p r o d u c t s and the human el e m e n t s b e h i n d the machine. P h o t o g r a p h s a r e e x c e p t i o n a l l y h e l p f u l i n c a s e s w here co m p a n i e s p r o d u c e t e c h n i c a l p r o d u c t s o r p r o d u c t s w i t h w h i c h the a v e r a g e p e r s o n does not come into contact. The t h i r d r e a s o n i s that the t r e n d h a d to a c e r t a i n extent been p e r p e t u a t i n g i t s e l f . The p u b l i c a t i o n of e l a b o r a t e r e p o r t s w h i c h c o n t i n u e d s i n c e the end of the war, had undoubtedly the e f f e c t of i n f l u e n c i n g many com p a n i e s to i m p r o v e the appearance of t h e i r r e p o r t s . 31 G r a p h s and C h a r t s F o r t y y e a r s ago A l f r e d M a r s h a l l w r o te that "the g r a p h i c m e t h o d of s t a t i s t i c s , though i n f e r i o r to the n u m e r i c a l i n a c c u r a c y , has the advantage of e n a b l i n g the eye to take i n at once a l o n g s e r i e s of f a c t s I b e l i e v e that i f t h o r o u g h l y o r g a n i z e d , i t s 21 s p e c i a l v i r t u e s w i l l m a k e i t a g r e a t engine of s c i e n t i f i c i n q u i r y . " H owever, i t was not u n t i l r e c e n t l y that management began to take h eed of M a r s h a l l ' s w o r d s i n the p r e p a r a t i o n of t h e i r a n nual r e p o r t s as T a b l e V c l e a r l y i l l u s t r a t e s . 21. A l f r e d M a r s h a l l , M e m o r i a l s of A l f r e d M a r s h a l l , London: M a c m i l l a n and Co. L t d . , 1925, p. 174. 32 TABLE V PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS A C C O R D I N G T O NUMBER O F GRAPHS A N D / O R CHARTS A N D YEARS N o . of Graphs and/or Charts 1938 1948 1953 1958 1963 Total number of reports analyzed 67 78 88 104 115 1 4 .5% 5.1% 11.4% 6.8% 7.8% 2 1.5 1.3 6.8 4.8 7.8 3 - 1.3 - 2 .9 5.2 4 - 1.3 1.1 0 .9 1.7 5 - 1.3 3.4 2 .9 5.2 6 - 2.6 1.1 5.8 0 .9 7 - - 2.3 0 .9 1.7 8 - 1.3 1.1 - 1.7 9 - 1.3 - 0 .9 -10 - - - - 0.9 More than 10 - - 1.1 0 .9 2.7 Total 6.0% 15.5% 28.3% 26.8% 35.6% 33 L i k e photographs and i l l u s t r a t i o n s , g r a phs and c h a r t s w e r e i n c r e a s i n g l y u s e d by m o r e companies i n r e c e n t y e a r s to supplement a c c o u n t i n g s t a t e m e n t s , c o l u m n a r t a b u l a t i o n and e x t e n s i v e t e x t u a l c o m m e n t a r i e s . O v e r the p e r i o d f r o m 1938 to 1963 the n u m b e r of c o m p a n i e s u s i n g g raphs and/or c h a r t s i n t h e i r a n n u a l r e p o r t h ad i n c r e a s e d by m o r e than 29%. The m a x i m u m number of graphs and/or c h a r t s e m p l o y e d i n any one r e p o r t was found to be 14. T h e r e w e r e t h r e e s u c h r e p o r t s , two of w h i c h w e r e 1963 r e p o r t s ; the r e m a i n i n g one was a 1958 r e p o r t . A s shown i n T a b l e V. one c h a r t or g r a p h a p p e a r e d to be the m o s t p o p u l a r w i t h the c o m p a n i e s f o r any of the s e l e c t e d y e a r s . The a v e r a g e number of graphs and/or c h a r t s i n c r e a s e d f r o m 0. 6 i n 1938 to 1. 4 i n 1963. B a r c h a r t s w e r e found to be the m o s t dominant type of c h a r t i n e a c h of the f i v e y e a r s . S e v e r a l advantages a r e a s s o c i a t e d w i t h a good g r a p h i c a l p r e s e n t a t i o n of data. F i r s t l y , i t h e l ps the r e a d e r to u n d e r s t a n d the g e n e r a l c h a r a c t e r of the change i n each set of data. Secondly, i t shows the r e l a t i o n i n w h i c h changes i n the v a r i o u s s e r i e s s t a n d to one another and t h i r d l y , i t draws att e n t i o n to sequence and c o i n c i d e n c e and to p o s s i b l e connections between the s e r i e s . F o r the u n s k i l l e d , g r a p h s f a c i l i t a t e u n d e r s t a n d i n g . E v e n f o r the m o s t s k i l l e d , they a r e i m p o r t a n t t i m e s a v e r s . G r a p h s help to r e g i s t e r 34 q u i c k u n d e r s t a n d i n g of m a s s e s of f i g u r e s . S o m e t i m e s s h o r t , guarded, tomb s t o n e - l i k e r e p o r t s a r e r a t i o n a l i z e d by a l l e g i n g that a m o r e p l e a s i n g p r e s e n t a t i o n m i g h t offend the s e c u r i t y a n a l y s t who w o u l d then f e e l that an e f f o r t was be i n g made to " s e l l h i m . " However, the o p p o s i t e v i e w was e x p r e s s e d by the P r e s i d e n t of the New Y o r k S o c i e t y of S e c u r i t y A n a l y s t s as f o l l o w s : "The f i n a n c i a l a n a l y s t , i n opening an a n n u a l r e p o r t i s s e e k i n g f o r i n f o r m a t i o n -- f a c t u a l , p i c t o r i a l , g r a p h i c --about a company and i t s i n d u s t r y . S o m e t i m e s the a n a l y s t q u i c k l y t u r n s the pages as a s a m p l i n g of the f a r e to be had i n s i d e . He l o o k s f o r o r d e r l y p r e s e n t a t i o n of the y e a r ' s development and l i k e s the t e x t s u p p o r t e d by s u p p l e m e n t a r y t a b l e s , p i c t u r e s and graphs. He l i k e s a two or t h r e e c o l o u r p r e s e n t a t i o n , f o r i t r e d u ces the t e d i u m of r e a d i n g . The d i s c u s s i o n thus f a r i n the c h a p t e r seems to i n d i c a t e that C a n a d i a n c o m p a n i e s o v e r the p e r i o d f r o m 1938 to 1963 e i t h e r u s e d photographs and i l l u s t r a t i o n s o r graphs and c h a r t s . N o t h i n g i s f u r t h e r f r o m the t r u t h . A good n u m b e r of c o m p a n i e s i n the s u r v e y e m p l o y e d both photographs and graphs. T a b l e V I i l l u s t r a t e s t h i s p o i n t c l e a r l y . 22. M a c u r d a , op. c i t . , p. 64. 35 TABLE VI PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS A C C O R D I N G T O TYPES O F EYE-APPEAL FEATURES A N D YEARS Types of eye-appeal features 1938 1 948 1 953 1 958 1 963 Total number of reports analyzed 67 78 88 104 115 Photos & FI lustrations only 7.5% 11.5% 19.3% 28.8% 30.4% Photos, Illustrations, Graphs and Charts 1.5 10.3 15.9 23.1 26.1 Graphs and Charts only 4.5 5.1 12.5 3.8 9.6 36 C o l o u r on S u p p l e m e n t a r y T e x t P a g e s The t r e n d t o w a r d b r i g h t e n i n g up the body of the r e p o r t i s c l e a r l y i l l u s t r a t e d i n T a b l e V I 1 . It i s c l e a r f r o m the t a b l e that w h e r e a s p r a c t i c a l l y a l l the r e p o r t s w e r e of the b l a c k and white s t o c k i n 1938, o n l y 3 3 % of the r e p o r t s w e r e p r i n t e d e n t i r e l y i n b l a c k and whi t e i n 1963. On the other hand, the number of annual r e p o r t s w i t h one c o l o u r on s u p p l e m e n t a r y t e x t pages i n c r e a s e d f r o m 1. 5 % i n 1938 to m o r e than 3 6 % i n 1963. In a d d i t i o n , many c o m p a n i e s w e r e u s i n g m o r e than one c o l o u r on te x t pages i n 1958 and 1963 than i n 1938, 1948 o r 1953. 37 TABLE VI1 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS A C C O R D I N G T O NUMBER O F C O L O U R S USED IN SUPPLEMENTARY TEXT PAGES A N D YEARS Number of Colours 1938 1 948 1 953 1 958 1 963 Total number of reports 67 78 88 104 115 Black only 98.5% 86.0% 60.0% 31.9% 32.9% 1 1.5% 7.7% 21.6% 31.9% 36.6% 2 7.9 17.3 12.2 3 - 1.3 4.5 4.8 5.2 4 2.4 1.2 2 .9 2.6 5 1.3 1.9 1.7 6 2 .3 2 .9 0 .9 7 1.2 0 .9 2.6 8 1.9 2.6 9 - 1.3 1.2 3.6 2.7 38 S i z e of R e p o r t The 452 r e p o r t s w h i c h w e r e e x a m i n e d v a r i e d c o n s i d e r a b l y i n s i z e . F o r any one y e a r , the m o s t p o p u l a r s i z e was 8 l/2!|,',x 11", and as i l l u s t r a t e d below, 74. 7 % of the r e p o r t s i n 1963 w e r e of t h i s s i z e . 6" x 9", a f a i r l y p o p u l a r s i z e w i t h the o l d e r r e p o r t s showed a steady d e c l i n e i n u s e o v e r t h e ' y e a r s . The s m a l l e s t s i z e was 3 1/4" x 8 1/2" and the l a r g e s t was 9 1/2" x 13 1/2". M o s t of the r e p o r t s other than the ones i l l u s t r a t e d b e l o w r a n g e d a l l the way between these two e x t r e m e s . S i z e of R e p o r t s 1938 1948 1953 1958 1963 T o t a l n u m b e r of r e p o r t s 67 7_8 88 104 115 8 1/2" x 11" 3 5 . 7 % 37. 1% 56. 9% 63. 5 % 74. 7 % 6" x 9" 19. 3 24. 2 10. 3 9. 6 4. 3 L e n g t h of R e p o r t W h i l e the s u r v e y i n d i c a t e d a r a n g e i n the l e n g t h of r e p o r t f r o m a m i n i m u m of f o u r pages to a m a x i m u m of f o r t y - e i g h t pages the t r e n d o v e r the t w e n t y - f i v e y e a r s had been t o w a r d the u s e of l a r g e r r e p o r t s . T a b l e V I 1 1 i l l u s t r a t e s t h i s point. The l a r g e s t group of company f o r any one p a r t i c u l a r y e a r i n the s u r v e y p u b l i s h e d r e p o r t s of m e d i u m length. T h i s group a l s o c o n s t i t u t e d the m a j o r i t y of the r e p o r t s throughout the p e r i o d studied. A s i n d i c a t e d i n T a b l e V l l l , s h o r t r e p o r t s w e r e 3 9 TABLE VI11 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F A N N U A L REPORTS A C C O R D I N G T O L E N G T H A N D YEARS N o . of Pages 1938 1 948 1 953 1 958 1 963 Total number of Reports 67 78 88 104 115 10 Pages or less (short report) 38.8% 34.6% 28.4% 24.0% 22.7% 11 -24 pages (medium length report) 53.7 52.5 62.6 63.4 60.0 25 or more pages (long report) 7.5 12.9 9.0 12.6 17.3 40 b e c o m i n g unpopular. The s e e m i n g t r e n d t o w a r d t h i c k e r r e p o r t s p e r m i t s space f o r m o r e th o r o u g h r e p o r t i n g as w e l l as m o r e a t t r a c t i v e layout. L e n g t h of S u p p l e m e n t a r y I n f o r m a t i o n The t r e n d t o w a r d t h i c k e r annual r e p o r t s was p a r a l l e l e d by a tendency to devote a g r e a t e r amount of space to s u p p l e m e n t a r y i n f o r m a t i o n . The i l l u s t r a t i o n b e l o w b r i n g s o.ut t h i s point. % of Space devoted to Supp. I n f o r m a t i o n 1938 1948 1953 1958 1963 T o t a l N u m b e r of R e p o r t s 67 7J8 88 104 115 None - 2 5 % of t o t a l space 3. 0% 1 . 3 % -2 6 % - 5 0 % of t o t a l space 30.0 11.5 6.8% 6.7% 9.5% 5 1 % - 7 5 % of t o t a l space 45.0 57.8 64.9 71.0 26.0 M o r e than 7 5% of t o t a l space 22.0 29.4 28.3 22.0 26.0 It i s a p p a r e n t f r o m the above that an i n c r e a s i n g p r o p o r t i o n of comp a n i e s was devoting m o r e than h a l f of the t o t a l space i n t h e i r a n n ual r e p o r t s to s u p p l e m e n t a r y i n f o r m a t i o n . On the other hand, t h e n u mber of r e p o r t s w i t h l e s s than h a l f of the t o t a l space devoted to s u p p l e m e n t a r y i n f o r m a t i o n was m a r k e d l y d e c l i n i n g . T h i s p a t t e r n was g e n e r a l l y t r u e f o r each of the seven i n d u s t r i a l g r o u p i n g s of 41 c o m p a n i e s i n c l u d e d i n the survey. F r o n t C o v e r A l l the 452 r e p o r t s h a d f r o n t and b a c k c o v e r s . Thr:ee r e p o r t s w e r e fo u n d to be without the t i t l e s and f o u r without the y e a r of the r e p o r t . One 1963 r e p o r t added the a n n i v e r s a r y date; company slo g a n was found on f o u r c o v e r s . The f o l l o w i n g i l l u s t r a t i o n sums up the above f a c t s . N u m b e r of R e p o r t s 1938 1948 1953- 1958 1963 T o t a l T o t a l n u m ber of r e p o r t s a n a l y z e d 67 7_8 88 104 115 452 W i t h Company Slogan . 1 2 1 4 W i t h A n n i v e r s a r y Date 1 1 Without T i t l e of R e p o r t 1 1 1 3 Without Y e a r of R e p o r t 1 2 1 4 Southern C a n a d a P o w e r Company L t d . i n i t s 1953 r e p o r t p r i n t e d the company's cr e d o on the f r o n t c o v e r as f o l l o w s : "We a r e a b u s i n e s s e n t e r p r i s e dependent f o r s u c c e s s on the h i g h q u a l i t y and f a i r p r i c e of our s e r v i c e ; on the s k i l l , c o u r t e s y , and l o y a l t y of our e m p l o y e e s ; on the co n f i d e n c e of our i n v e s t o r s ; and on the a b i l i t y of our management to f o r e c a s t and p r o v i d e f o r the s t e a d i l y i n c r e a s i n g e l e c t r i c p ower r e q u i r e m e n t s of our area. . . f o r we • 22 b e l i e v e t h i s i s both good c i t i z e n and good b u s i n e s s . " 22. S o u t h e r n C anada P o w e r Company L t d . , A n n u a l R e p o r t f o r the Y e a r 1953. The M e x i c a n L i g h t and P o w e r Company L t d . e m p h a s i z e d " S e r v i n g 23 M e x i c o f o r O v e r H a l f a C e n t u r y . " C o m p a n i e s s h o u l d note that the c o v e r i s i m p o r t a n t b e c a u s e i t i s the f i r s t i n t r o d u c t i o n to the r e p o r t , and no company s h o u l d c r e a t e a b a d i m p r e s s i o n of i t s e l f by u s i n g an u n a t t r a c t i v e c o v e r . In r e c e n t y e a r s , C a n a d i a n c o m p a n i e s showed a s l i g h t tendency to use c o l o u r s on the f r o n t c o v e r of t h e i r annual r e p o r t s . H owever, the n u mber of s u c h c o m p a n i e s was s m a l l as T a b l e I X c l e a r l y i n d i c a t e s . 23. The M e x i c a n L i g h t and P o w e r Company, A n n u a l R e p o r t  f o r the y e a r 1958. 42 TABLE IX PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F FRONT COVERS A C C O R D I N G T O NUMBER O F C O L O U R S USED A N D YEARS Number of Colours 1938 1948 1953 1958 1963 Total number of Reports 67 78 88 104 115 Black only 92.5% 84.6% 69.4% 57.7% 64.3% 1 7.5 14.1 26.1 35.6 30.4 2 - 1.3 2 .3 4 .9 3.5 3 - 1.1 0 .9 0 .9 4 mm 1.1 0 .9 0 .9 43 Note that m o r e than 6 0 % of the 1963 c o v e r s w e r e s t i l l w i thout c o l o u r . W h e r e c o l o u r s w e r e use d , c o m p a n i e s generally-p r e f e r r e d one c o l o u r alone. F o u r c o l o u r c o v e r s o f f e r the g r e a t e s t p o t e n t i a l i n a t t r a c t i v e n e s s , however, they w e r e not p o p u l a r w i t h C a n a d i a n c ompanies. In o r d e r to r e g i s t e r the company's i d e n t i t y r e a d i l y i n the r e a d e r ' s m i n d , a n u m b e r of r e p o r t s u s e d on t h e i r f r o n t c o v e r s s u c h d e v i c e s as t r a d e m a r k s , company s e a l s and e y e - a p p e a l f e a t u r e s , i . e. photos, c h a r t s , maps etc. The u s e of s u c h d e v i c e s was i n c r e a s i n g s t e a d i l y o v e r the y e a r s as the f o l l o w i n g s t a t i s t i c s i n d i c a t e . 1938 1948 1953 1958 1963 T o t a l n u m b e r of r e p o r t s a n a l y z e d 6_7_ 7_8_ _88 104 115 W i t h T r a d e M a r k or Company S e a l 38. 8% 43. 6% 53. 4% 48. 0% 49. 6% W i t h E y e - A p p e a l F e a t u r e s 13.4 16.7 27.3 37.5 38.3 Where e y e - a p p e a l f e a t u r e s w e r e used, they n o r m a l l y d e p i c t e d some f a c e t of the company's b u s i n e s s s u c h as p r o d u c t s o r s e r v i c e s r e n d e r e d , s o u r c e s of m a t e r i a l s , company's o p e r a t i o n s etc. T a b l e X s u m m a r i z e s a l l the p o s s i b l e t o p i c s w h i c h w e r e i l l u s t r a t e d b y eye-a p p e a l f e a t u r e s on the f r o n t c o v e r s of the r e p o r t s studied. 44 TABLE X PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F FRONT COVERS BY TOPICS ILLUSTRATED A N D YEARS Nature of Topics 1938 1948 1953 1958 1963 Total number of Covers with eye-appeal Features 9 _3 24 39 44 Company Buildings 66.7% 46.2% 37.5% 20.6% 13.7% Company Operations 22.2 46.2 25.0 38.5 45.4 Company Products 11.1 - 29.1 33.3 31.9 Unrelated Topics - 7.6 8.4 7.6 9.0 •45 Two c o n c l u s i o n s a r e obvious f r o m T a b l e X. The f i r s t i s that w h e r e e y e - a p p e a l f e a t u r e s w e r e u s e d on the o l d e r c o v e r s , they tended to d e p i c t company's b u i l d i n g s . The m o d e r n r e p o r t , on the other hand, tended to e m p h a s i z e company's p r o d u c t s or o p e r a t i o n s . The s e c o n d c o n c l u s i o n i s that each y e a r a n u m b e r of r e p o r t s i l l u s t r a t e d on t h e i r f r o n t c o v e r s t o p i c s quite u n r e l a t e d to the b u s i n e s s of the company. The 1958 A n n u a l R e p o r t of I m p e r i a l T o b a c co Company of Canada, f o r example, showed on i t s f r o n t c o v e r f i v e c i r c l e s w h i c h w e r e quite m e a n i n g l e s s by t h e m s e l v e s . F o r t h r e e y e a r s , 1948, 1953 and 1958, I n t e r n a t i o n a l U t i l i t i e s C o r p o r a t i o n d r e s s e d up i t s annual r e p o r t s w i t h a f r o n t c o v e r scene of l a k e s and m ountains -- an i l l u s t r a t i o n that was u n r e l a t e d w h a t s o e v e r to the o p e r a t i o n s of the e n t e r p r i s e . In c o n t r a s t to the above, the f o l l o w i n g may be c i t e d as some of the n o t e w o r t h y t r e a t m e n t s of a nnual r e p o r t c o v e r s : 1. A c o l o u r p h o t o g r a p h p e r t i n e n t to the company's pr o d u c t v l i n e s i n 1958 A n n u a l R e p o r t of M a s s e y F e r g u s o n L t d . 2. T h r e e s e p a r a t e d r a w i n g s i n the 1958 r e p o r t of A n t h e s - I m p e r i a l Company L i m i t e d to i l l u s t r a t e the d i v e r s i f i e d n a t u r e of company's o p e r a t i o n . 3. A map of the t e r r i t o r y s e r v e d i n the 1963 A n n u a l R e p o r t of D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L i m i t e d . 46 ! CHAPTER IV EXECUTIVE MESSAGE Introduction This chapter undertakes to present in considerable detail the format and content of the executive message. The executive message refers to that section of the annual report which is commonly designated as "The President's Report" or "Report of the Directors. " As will be shown later, the executive message may be signed by any one or a combination of the following personnel -- the President, Managing Director, Vice President, Chairman, General Manager or the Secretary. For this reason, it was felt that the term "executive message" would describe the section more adequately than a narrower (though more precise) term such as "The President's Message" or "The Directors' Repoi A small and insignificant number of companies carried two messages in their annual reports. One of these messages was normally designated as the "Report of the Directors" and the other "The Manager's Report. " More often than not, the "Report of the Directors" said little if anything and served as an introduction to the more detailed and informative report of the Manager. F o r p u r p o s e s of t h i s study the two m e s s a g e s w e r e t r e a t e d as one e x e c u t i v e message. F u n c t i o n s of the E x e c u t i v e M e s s a g e The f o l l o w i n g m a y be d e l i n e a t e d as some of the m a i n f u n c t i o n s of the e x e c u t i v e m e s s a g e : 1. To p r o v i d e a supplement to the f i n a n c i a l s t a t e m e n t s , c l a r i f y i n g them, i n t e r p r e t i n g them and m a k i n g them m o r e i n t e r e s t i n g . The e x e c u t i v e m e s s a g e has been r e f e r r e d to as one of the m o s t e f f e c t i v e ways of m a k i n g c o r p o r a t e i n f o r m a t i o n as p a l a t a b l e as pos s i b l e . 2. To p r o v i d e an o p p o r t u n i t y f o r the c h a i r m a n or P r e s i d e n t to give a f i r s t - h a n d account of the o p e r a t i n g p o l i c i e s and p r o b l e m s of the e n t e r p r i s e , the r e s u l t s of w h i c h a r e r e f l e c t e d i n the f i n a n c i a l s tatements i n v i e w of the f a c t that the f i n a n c i a l s t atements a r e supposed to p r e s e n t an o b j e c t i v e m e a s u r e m e n t of what management has a c c o m p l i s h e d , the v a l u e of a s u b j e c t i v e e x p l a n a t i o n f r o m that management of i t s a i m s , p o l i c i e s and p u r p o s e s i s a h i g h l y d e s i r a b l e c o u n t e r p a r t . 3. To c a l l to s h a r e h o l d e r s ' a t t e n t i o n a l l the h i g h spots, f a v o u r a b l e o r u n f a v o u r a b l e , of the company's a f f a i r s throughout the y e a r , and to give r e a s o n s f o r t h e i r o c c u r r e n c e s . 24. W i l l i a m E. C h a t l o s , "The Changing P a t t e r n i n A n n u a l R e p o r t s , " B a n k e r s M o n t h l y , V o l . L X X V 1 1 , No. 10, O c t o b e r I960, p. 105. 4. To d i s c u s s c l e a r l y the a c c o m p l i s h m e n t s , p r o b l e m s and p r o s p e c t s of the o r g a n i z a t i o n . S u mming up, the p u r p o s e of the e x e c u t i v e m e s s a g e i s to f o r t i f y the r e a d e r w i t h i n f o r m a t i o n on how w e l l off the e n t e r p r i s e i s , how b e t t e r o r w o r s e off the e n t e r p r i s e i s c o m p a r e d w i t h p r e v i o u s y e a r s o r w i t h other c o m p a n i e s and how things a r e shaping up f o r the f u t u r e . F r e q u e n c y of E x e c u t i v e M e s s a g e The v a r i o u s f u n c t i o n s w h i c h have been e n u m e r a t e d i n the p r e c e d i n g p a r a g r a p h c l e a r l y i n d i c a t e the f a c t that the e x e c u t i v e m e s s a g e i s a m u s t f o r e v e r y annual r e p o r t . The i m p o r t a n c e of the e x e c u t i v e m e s s a g e cannot be o v e r e m p h a s i z e d . N e v e r t h e l e s s , not e v e r y o n e of the 452 r e p o r t s w h i c h w e r e a n a l y z e d c a r r i e d an e x e c u t i v e message. The i l l u s t r a t i o n b e l o w c l e a r l y b r i n g s out t h i s point. 1938 1948 1953 1958 1963 T o t a l n u m ber of A n n u a l R e p o r t s a n a l y z e d 67 78 88 104 115 T o t a l n u m b e r of R e p o r t s w i t h E x e c u t i v e M e s s a g e 63 73 87 103 113 P e r c e n t a g e of R e p o r t s w i t h E x e c u t i v e M e s s a g e 9 4 % ' 9 3 % 98. 8% 9 9 % 98. Note that quite a few of the o l d e r r e p o r t s d i d not have any e x e c u t i v e m e s s a g e at a l l . P r a c t i c a l l y a l l m o d e r n r e p o r t s ( 1958 and 1963 ), on the other hand, c a r r i e d e x e c u t i v e m e s s a g e s . F o r m a t and D e s i g n One of the m o s t not e w o r t h y i m p r o v e m e n t s that took o v e r the p e r i o d f r o m 1938 to 1963 w i t h r e g a r d to the e x e c u t i v e m e s s a g e was i n the a r e a of p r e s e n t a t i o n . The s u r v e y showed that m o r e and m o r e e x e c u t i v e m e s s a g e s w e r e w r i t t e n i n the f o r m of a m a g a z i n e a r t i c l e . The tendency to p r e s e n t the m e s s a g e i n the f o r m of a l e t t e r , on the other hand, was d i s t i n c t l y d e c l i n i n g as the f o l l o w i n g i l l u s t r a t i o n i n d i c a t e s . S t y l e of P r e s e n t a t i o n 1938 1948 1953 1958 1963 T o t a l number of E x e c u t i v e M e s s a g e _ 3 7J5 _87 103 113 In a L e t t e r F o r m 8 5 . 7 % 7 1 . 2 % 6 5 . 5 % 5 8 . 3 % 5 4 . 9 % L i k e a M a g a z i n e A r t i c l e 14. 3 28. 8 34. 5 41. 7 45. 1 To f a c i l i t a t e v i s u a l i m p r e s s i o n of the two t r e n d s , the above data a r e p l o t t e d on a c h a r t as shown on the next page. The s u r v e y showed that the t r e n d s w e r e g e n e r a l l y i n d i c a t i v e of each of the seven i n d u s t r i a l g r o u p i n g s of c o m p a n i e s i n c l u d e d i n the study. The i n c r e a s i n g a t t e n t i o n w h i c h management p a i d to the a r r a n g e m e n t of the content and l a y o u t of the e x e c u t i v e m e s s a g e r e f l e c t e d i t s c o n c e r n to p r e s e n t the m e s s a g e i n as u n d e r s t a n d a b l e a m a n n e r as p o s s i b l e . The "news m a g a z i n e l o o k " m akes the m e s s a g e p l e a s i n g to the eye, a t t e n t i o n - g e t t i n g and i n t e r e s t p r o v o k i n g . CHART I I Percentage 90 , * — 1938 '48 '53 «58 '63 Styles of Presentation of Executive Message 51: To f a c i l i t a t e r e a d a b i l i t y many r e p o r t s r e s o r t s to j u d i c i o u s u s e of c a r e f u l l y c h o s e n headings. Some of the note-w o r t h y e x a m p l e s i n t h i s c a t e g o r y i n c l u d e d D o m i n i o n B r i d g e Company L t d . , 1963; C a n a d i a n G e n e r a l E l e c t r i c 1963; C a n a d i a n B r e w e r i e s L t d . , 1958, 1963. A r r a n g e m e n t s of t h i s s o r t make a quick r e v i e w p o s s i b l e and enable the r e a d e r to f i n d without d i f f i c u l t y the topic i n w h i c h he i s p a r t i c u l a r l y i n t e r e s t e d . A s m a l l but c ommendable number of r e p o r t s went even f u r t h e r and i n c l u d e d t e r s e and p r e c i s e s u m m a r i e s at the b e g i n n i n g of each p a r a g r a p h of the e x e c u t i v e message. The f o l l o w i n g a r e some of s u c h s u m m a r i e s shown i n the 1948 and 1953 r e p o r t s of M a s s e y - H a r r i s F e r g u s o n L i m i t e d " S a l e s i n c r e a s e 71. 6% o v e r 1947 7 t i m e s 1939, " " P r o f i t s 6 l/4£ p e r s a l e s d o l l a r , $6. 61 p e r common sh a r e , " " E x e c u t i v e changes i n U. S. O r g a n i z a t i o n , " " A d v a n c i n g l a b o u r c o s t s and d e c l i n i n g v o l u m e n a r r o w m a r g i n of p r o f i t . " Headings of t h i s s o r t c l e a r l y e m p h a s i z e the i m p o r t a n t p o i n t s of the mes sage. Headings can be made m o r e u s e f u l by c o l o u r p r i n t i n g and p r o p e r p l a c e m e n t . Some of the f i r m s u s e d headings p r i n t e d i n b l u e , o t h e r s u s e d red. S t i l l o t h e r s u s e d b l a c k headings, but made them stand out t h r o u g h the u s e of b o l d types. E x a m p l e s of su c h r e p o r t s i n d uded T r a n s M o u n t a i n O i l P i p e L i n e Company 1958, The .5.2 Bank of N o v a S c o t i a 1963; D e l t a A c c e p t a n c e C o r p o r a t i o n L i m i t e d 1963. A n o t h e r f e a t u r e of the "news m a g a z i n e l o o k " took the f o r m of n a r r o w c o l u m n s f o r text p u r p o s e . The t w o - c o l u m n a r p r e s e n t a t i o n not o n l y i m p r o v e s the appearance of the page but a l s o s t i m u l a t e s g r e a t e r r e a d a b i l i t y . j 53 T i t l e of E x e c u t i v e M e s s a g e A p p r o x i m a t e l y a l i t t l e m o r e than h a l f of the e x e c u t i v e m e s s a g e s i n any one y e a r (d963 e x c e p t e d ) c a r r i e d the t i t l e " R e p o r t of the D i r e c t o r s . " C u r i o u s l y enough, a p p r o x i m a t e l y 3 5 % of the e x e c u t i v e m e s s a g e s i n any one y e a r w e r e without heading at a l l . The t i t l e " P r e s i d e n t ' s R e p o r t " was not f r e q u e n t l y used. Non r e c u r -i r i n g t i t l e s s u c h as " P r e s i d e n t ' s L e t t e r , " " P r e s i d e n t ' s M e s s a g e , " " P r e s i d e n t ' s R e m a r k s , " " P r e s i d e n t ' s A d d r e s s , " " P r e s i d e n t ' s C omments, " a n d " R e p o r t to P r o p r i e t o r s " w e r e fo u n d i n a handful of r e p o r t s . T a b l e X I s u m m a r i z e s the above p o i n t s . S a l u t a t i o n In e a c h of the f i v e y e a r s r e v i e w e d , a p p r o x i m a t e l y 1 1 % of the e x e c u t i v e m e s s a g e s w e r e not a d d r e s s e d to any p a r t i c u l a r audience. Such r e p o r t s p e r t a i n e d p r e d o m i n a n t l y to companies i n the f i n a n c e and s e r v i c e i n d u s t r i a l groups. A s r e g a r d s the r e s t of the m e s s a g e s , i n the m a j o r i t y of c a s e s the e x e c u t i v e m e s s a g e was a d d r e s s e d s o l e l y to the s h a r e h o l d e r s o r s t o c k h o l d e r s . T h e r e was no t r e n d i n d i c a t i o n that the n umber of su c h m e s s a g e s was i n c r e a s i n g . In each of the f i v e y e a r s , a p p r o x i m a t e l y 8 6 % of the m e s s a g e s f e l l into t h i s c ategory. T h r e e c o m p a n i e s a d d r e s s e d t h e i r e x e c u t i v e m e s s a g e s to other groups i n a d d i t i o n to s h a r e h o l d e r s . T a b l e X I 1 g i v e s a s t a t i s t i c a l r e v i e w of the f a c t s above. 54 TABLE XI PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TITLE USED A N D YEARS Headings Used 1938 1948 1953 1958 1963 Total number of Executive Message 63 73 87 103 113 Report of The Directors 58.7% 58.9% 55.2% 58.2% 46.9% President's Reports - 4.1 5.8 5.8 6.2 Non-recurring Heading 1.6 1.4 4.5 4.0 8.8 Without any Heading 30.7 35.6 34.5 32.0 38.1 55 T A B L E X I 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F E X E C U T I V E M E S S A G E S A C C O R D I N G T O S A L U T A T I O N A N D Y E A R S S a l u t a t i o n 1938 1948 1953 1958 1963 T o t a l No. of E x e c u t i v e M e s s a g e M I I _ I 103 113 To S h a r e h o l d e r s 8 4 . 1 % 8 7 . 7 % 8 5 . 1 % 8 6 . 4 % 8 5 . 8 % To S h a r e h o l d e r s , E m p l o y e e s C u s t o m e r s and P u b l i c - - 1.1 1.0 0. 9 To S h a r e h o l d e r s , E m p l o y e e s and C u s t o m e r s - - - 1.0 0.9 To S h a r e h o l d e r s & E m p l o y e e s - - 1.0 0. 9 To the P r o p r i e t o r s - - 1.1 1.0 0. 9 To P r e f e r r e d S h a r e h o l d e r s 1.6 1.4 1.1 In one company, the 1958 and 1963 r e p o r t s w e r e a d d r e s s e d to both s h a r e h o l d e r s and e m p l o y e e s ; i n another company the r e p o r t s f o r the same y e a r s w e r e a d d r e s s e d to the s h a r e h o l d e r s e m p l o y e e s and c u s t o m e r s . A s i n d i c a t e d i n T a b l e X I 1 one company u s e d the s a l u t a t i o n "To the P r o p r i e t o r s " i n i t s 1953, 1958 and 1963 r e p o r t s ; another company d i r e c t e d i t s m e s s a g e s o l e l y to the " P r e f e r r e d s h a r e h o l d e r s " i n the annual r e p o r t s of the t h r e e e a r l i e r y e a r s . It i s c l e a r that the p r a c t i c e of d i r e c t a d d r e s s to groups other than the s h a r e h o l d e r s was not common, and i n f a c t o n ly j u s t beginning. The s u r v e y i n d i c a t e d the r e c e n t o r i g i n of t h i s p r a c t i c e . In one out of the seven c a s e s d i d i t date b a c k b e f o r e 195 8. One w o u l d expect a r e p o r t w h i c h a d d r e s s e d to e m p l o y e e s or c u s t o m e r s ;as w e l l as to s t o c k h o l d e r s , to c o n t a i n i n g e n e r a l m o r e m a t e r i a l of i n t e r e s t to t h e m than a r e p o r t not so a d d r e s s e d . The s u r v e y , however, d i d not b e a r out t h i s e x p e c t a t i o n . The 1948 r e p o r t of The New B r u n s w i c k Telephone Company L i m i t e d w h i c h was a d d r e s s e d s o l e l y to the s h a r e h o l d e r s c o n t a i n e d as m u c h em p l o y e e i n f o r m a t i o n as the 1953, 1958 or 1963 r e p o r t s w h i c h w e r e a d d r e s s e d to the e m p l o y e e s and c u s t o m e r s as w e l l . J e f f e r s o n L a k e P e t r o C h e m i c a l s of Canada, L t d . , made no r e f e r e n c e to e m p l o y e e s although i t s 1958 and 1963 e x e c u t i v e m e s s a g e s were a d d r e s s e d "To S h a r e h o l d e r s and E m p l o y e e s . " The same case was t r u e of the 1963 57 a n nual r e p o r t of Johnston T e r m i n a l s and S t o r a g e L i m i t e d , w h i c h was a d d r e s s e d to the s h a r e h o l d e r s , e m p l o y e e s and c u s t o m e r s . Si g n a t u r e A l l e x e c u t i v e m e s s a g e s w e r e signed, the m a j o r i t y i n each y e a r , by the P r e s i d e n t only. T r e n d a n a l y s i s i n d i c a t e d , however, that the p e r c e n t a g e of s u c h m e s s a g e s , i . e. , s i g n e d by the P r e s i d e n t only, was d e c r e a s i n g s l o w l y o v e r the y e a r s (See T a b l e X I 1 1 ). On the other hand, a s m a l l but i n c r e a s i n g p e r c e n t a g e of r e p o r t each y e a r c a r r i e d b o t h the P r e s i d e n t ' s and the C h a i r m a n ' s s i g n a t u r e s . The s u r v e y d i d not i n d i c a t e any t r e n d w i t h r e g a r d to e x e c u t i v e m e s s a g e s w h i c h w e r e s i g n e d by the C h a i r m a n alone o r by the P r e s i d e n t and m a n a g i n g d i r e c t o r . Other s i g n a t u r e s o r c o m b i n a t i o n of s i g n a t u r e s w h i c h w e r e u s e d by a s m a l l n u mber of c o m p a n i e s but non r e c u r r i n g l y by e ach one of t h e m f o r the f i v e y e a r s i n c l u d e d the f o l l o w i n g : P r e s i d e n t and V i c e P r e s i d e n t , P r e s i d e n t and g e n e r a l m anager, P r e s i d e n t and S e c r e t a r y , P r e s i d e n t , V i c e P r e s i d e n t , and g e n e r a l manager, P r e s i d e n t V i c e P r e s i d e n t and m anaging d i r e c t o r , V i c e P r e s i d e n t and g e n e r a l m a n a g e r and s e c r e t a r y . The 1958 and 1963 r e p o r t s of B o w a t e r s M e r s e y P a p e r Company L i m i t e d , NovaScotia, f o r example, w e r e s i g n e d by the s e c r e t a r y alone. 58 T A B L E XI11 P E R C E N T A G E FREQUENCY DISTRIBUTION OF E X E C U T I V E MESSAGES ACCORDING TO SIGNATURES USED AND YEARS Types of Signature 1938 1948 1953 1958 1963 Total No. of Executive Messages 63_ 73. I I 103 113 By President 88. 9% 84. 9% 78. 2% 74. 7% 70. 8% By President & Chairman 3. 2 4.1 12.7 16. 5 19.5 By Chairman 1.6 5.4 4.6 1.9 2.7 By President and Managing Director 3. 1 1.4 1.1 1.0 2. 7 Others 3. 2 3. 2 3. 4 5. 9 4. 2 L o c a t i o n and L e n g t h , P r a c t i c a l l y a l l e x e c u t i v e m e s s a g e s ( 9 8 % ) i n each of the f i v e y e a r s w e r e p l a c e d at the be g i n n i n g of the r e p o r t , that i s to say, p r e c e d i n g the n a r r a t i v e and f i n a n c i a l statements and f o l l o w i n g the t i t l e page, t a b l e of contents, l i s t s of o f f i c e r s and d i r e c t o r s and f i n a n c i a l h i g h l i g h t s . A s r e g a r d s the l e n g t h of the e x e c u t i v e m e s s a g e , the m a j o r i t y w e r e l i m i t e d to one or two pages. T a b l e X I V . c l e a r l y p o i n t s out t h i s fact. Note, however, that'the one-page l e n g t h was s t e a d i l y d e c l i n i n g i n use o v e r the y e a r s . O n l y 3 6 % of the e x e c u t i v e m e s s a g e s i n 1963 w e r e of t h i s l e n g t h as c o m p a r e d w i t h 6 2 % i n 1938. The two-page length, on the ot h e r hand, was s l o w l y g a i n i n g ground. The same case was t r u e of e x e c u t i v e m e s s a g e s of 3 - 5 page length. T h e r e was some i n d i c a t i o n that l o n g e x e c u t i v e m e s s a g e s , i . e. , m o r e than f i v e pages, w e r e u s e d l e s s and l e s s f r e q u e n t l y o v e r the y e a r s . The l o n g e s t m e s s a g e found i n the s u r v e y was 18 pages, and the s h o r t e s t was h a l f a page. In cases of the l a t t e r type the r e m a i n i n g h a l f page was ta k e n up by a l i s t of o f f i c e r s and d i r e c t o r s . M o s t of the r e p o r t s w i t h l o n g and d e t a i l e d e x e c u t i v e m e s s a g e s d i d not c a r r y a s e p a r a t e n a r r a t i v e s e c t i o n ; a l l t e x t c o v e r i n g the v a r i o u s a s p e c t s of the b u s i n e s s w e r e c o n t a i n e d i n the e x e c u t i v e message. 60 TABLE X I V PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O L E N G T H A N D YEARS Length of Message 1938 1948 1953 1958 1963 Total N o . of Executive Messages 63 73 87 103 113 Half Page 3.2% -.1.4% 1.1% - .9% 1 Page 61.9 45.3 46.0 36.9 36.3 2 Pages 17.4 21.9 21.9 24.3 23.0 3 Pages 4.7 9.6 10.3 16.3 19.5 4 Pages 1.6 2 .7 3.5 2 .9 3.5 5 Pages 3.2 1.4 1.1 4 .9 5.3 More than 5 Pages 8.0 17.7 16.1 14.5 11.5 61 Content of E x e c u t i v e M e s s a g e The s e l e c t i o n of p r o p e r m a t e r i a l f o r i n c l u s i o n i n the e x e c u t i v e m e s s a g e i s one of the m o s t i m p o r t a n t d e c i s i o n s w h i c h m a nagement has to f a c e i n p r e p a r i n g the annual r e p o r t . T h i s i s s o m e t h i n g w h i c h each company m u s t decide f o r i t s e l f i n v i e w of the c i r c u m s t a n c e s s u r r o u n d i n g i t s o p e r a t i o n s . P e r h a p s the b e s t t e r m to d e s c r i b e the e x e c u t i v e m e s s a g e s w h i c h w e r e i n c l u d e d i n the s u r v e y i s v a r i e t y . It was fo u n d that w h i l e some m e s s a g e s r e m a i n e d c l e a r and c o n c i s e o t h e r s w e r e lon g a n d u : n w i e l d l y . Some d i s c u s s e d one or two t o p i c s , o t h e r s d i s c u s s e d v i r t u a l l y e v e r y phase of the company's o p e r a t i o n s . In a d d i t i o n , c e r t a i n t o p i c s a p p e a r e d m o r e f r e q u e n t l y than o t h e r s . On the average, the s u r v e y i n d i c a t e d that an e x e c u t i v e m e s s a g e m e n t i o n e d only s i x out of a p o s s i b l e twenty t h r e e t o p i c s i n 1938, nin e out of twenty t h r e e i n 1953 and 1958 and eight out of twenty t h r e e i n 1948 and 1963. The m a x i m u m number of t o p i c s i n c l u d e d i n any one m e s s a g e was twenty and the m i n i m u m was two. P u t t i n g a s i d e s p e c i f i c i t e m s , the p a r t i c u l a r t r e a t m e n t of w h i c h i s d e t e r m i n e d l a r g e l y by the c i r c u m s t a n c e s of the moment, the t o p i c s w h i c h w e r e c o m m o n l y h a n d l e d i n the e x e c u t i v e m e s s a g e s f e l l g e n e r a l l y into the c a t e g o r i e s of f i n a n c e and a c c o u n t i n g , p r o d u c t i o n p r o b l e m s , e m p l o y e e s r e l a t i o n s , m a r k e t i n g p r o b l e m s , r e s e a r c h and 62 development and the company's p l a c e i n the i n d u s t r y , and i t s r e l a t i o n to the g e n e r a l e c o n o m i c and p o l i t c a l c o n d i t i o n s . T a b l e X V g i v e s a l i s t of t o p i c s i n t e r m s of p e r c e n t a g e • f r e q u e n t l y of e x e c u t i v e m e s s a g e s m e n t i o n i n g them. To enable the r e a d e r to g a i n a b e t t e r p e r s p e c t i v e of the changing p a t t e r n o v e r the y e a r s w i t h r e s p e c t to e m p h a s i s g i v e n to the v a r i o u s t o p i c s , T a b l e X V I i s c o n s t r u c t e d . T h i s t a b l e shows i n o r d e r the f i r s t f i f t e e n m o s t f r e q u e n t l y m e n t i o n e d t o p i c s i n the e x e c u t i v e m e s s a g e s i n each of the f i v e s e l e c t e d y e a r s . 63 T A B L E X V P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F E X E C U T I V E M E S S A G E S A C C O R D I N G T O T O P I C S M E N T I O N E D A N D Y E A R S Top i c s 1938 1948 1953 1958 1963 T o t a l No. of E x e c u t i v e M e s s a g e s 6J5 73 87 103 113 1. E a r n i n g s 87. 3 % 85. 0% 91. 0% 93. 2 % 94. 0° 2. A p p r e c i a t i o n to E m p l o y . 68. 3 76. 7 78. 2 73. 8 77. 0 3. F i x e d A s s e t s 74. 6 74. 0 71. 2 67. 0 61. 0. 4. Sa l e s 42. 9 52. 1 56. 3 60. 2 56. 6 5. • D i v i d e n d s 57. 1 63. 0 55. 2 62. 1 58. 5 6. M a r k e t i n g 20. 6 38. 4 48. 3 41. 7 42. 5 7. Management 30. 2 35. 6 34. 5 48. 5 42. 5 8. S u b s i d i a r i e s / A f f i l i a t e s 23. 8 19. 2 32. 2 39. 8 42. 5 9. O u t l o o k / F u t u r e P r o s p . 14. 3 20. 5 25. 3 30. 1 35. 4 10. W o r k i n g C a p i t a l 42. 9 38. 4 43. 7 35. 0 31. 0 11. P e r s o n n e l R e l a t i o n s 28. 6 46. 5 49. 5 44. 5 29. 2 12. D e p r e c i a t i o n 38. 1 30. 1 29. 9 29. 1 26. 5 13. T a x e s 34. 9 42. 5 44. 8 32. 0 23. 9 14. Bonds, D e b e n t u r e s 19. 1 31. 5 29. 9 27. 2 23. 9 15. P r o d u c t s and S e r v i c e s 3. 2 4. 1 10. 3 16. 5 22. 1 16. C a p i t a l S t o ck 12. 7 20. 5 19. 5 15. 5 18. 6 17. S u r p l u s 22. 2 30. 1 27. 6 10. 7 10. 6 18. E c o n o m y 7. 9 13. 7 6. 9 7. 8 9. 7 19. S t o c k h o l d e r s 4. 8 9. 5 9. 2 12. 6 7. 1 20. P r o d u c t i o n 14. 3 12. 3 12. 6 8. 7 7. 1 21. C ompany P o l i c y 6. 4 6. 8 6. 9 7. 7 7. 1 22. R e s e a r c h 1. 6 2. 7 2. 3 4. 9 7. 1 23. F o r e i g n E x c h a n g e 3. 2 5. 5 2. 3 4. 9 0. 9 T A B L E X V I L I S T O F F I R S T F I F T E E N M O S T F R E Q U E N T L Y M E N T I O N E D T O P I C S I N E X E C U T I V E M E S S A G E S A C C O R D I N G T O S E L E C T E D Y E A R S 1938 1948 1953 1958 1963 1. E a r n i n g s E a r n i n g s E a r n i n g s E a r n i n g s E a r n i n g s 2. F i x e d A s s e t s A p p r e c i a t i o n to E m p l . A p p r e c i a t i o n to E m p l . A p p r e c i a t i o n to E m p l . A p p r e c i a t i o n to E m p l . 3. A p p r e c i a t i o n to E m p l . F i x e d A s s e t s F i x e d A s sets F i x e d A s s e t s F i x e d A s sets 4. D i v i d e n d s D i v i d e n d s S a l e s D i v i d e n d s • Sa l e s 5. S a l e s S a l e s D i v i d e n d s S a l e s D i v i d e n d s 6. W o r k i n g C a p i t a l P e r s o n n e l R e l a t i o n s P e r s o n n e l R e l a t i o n s M a n a g e m e n t M a r k e t i n g 7. D e p r e c i a t i o n T a x e s M a r k e t i n g P e r s o n n e l R e l a t i o n s M a n a g e m e n t 8. T a x e s M a r k e t i n g T a x e s M a r k e t i n g Subs i d / A f f i l i a t e s 9. M a n a g e m e n t W o r k i n g C a p i t a l W o r k i n g C a p i t a l Sub s i d / A f f i l i a t e s Outlook 10. P e r s o n n e l R e l a t i o n s M a n a g e m e n t M a n a g ement W o r k i n g C a p i t a l W o r k i n g C a p i t a l 11. Sub s i d / A f f i l i a t e s B onds /Deb entur es Sub s i d / A f f i l i a t e s T a x e s P e r s o n n e l R e l a t i o n s 12. S u r p l u s D e p r e c i a t i o n D e p r e c i a t i o n O u t l o o k D e p r e c i a t i o n , 13. M a r k e t i n g S u r p l u s Bonds /Debentures D e p r e c i a t i o n T axes 14. B o n d s /Debentur es O u t l o o k / F u t u r e p r o s p e c t s S u r p l u s B onds /Debentures Bonds /Debentures 15. O u t l o o k / F u t u r e p r o s p e c t s C a p i t a l Stock O u t l o o k P r o d u c t s / S e r v i c e s P r o d u c t s / S e r v i c e s 65 C o m p a r i n g the two t a b l e s , the f o l l o w i n g c o n c l u s i o n s may be drawn: 1. T h e r e was some s i m i l a r i t y between the y e a r s w i t h r e g a r d to the p e r c e n t a g e f r e q u e n c y of t i m e s each of the f i r s t ten t o p i c s was m e n t i o n e d ( S e e T a b l e X V ). 2. W i t h one e x c e p t i o n , the f i r s t f i v e t o p i c s w e r e r e f e r r e d to by m o r e than h a l f of the t o t a l n u m b e r s of r e p o r t s i n e ach of the f i v e y e a r s . ( T a b l e X V ). It w o u l d appear that these t o p i c s s h o u l d be d i s c u s s e d i n e v e r y e x e c u t i v e message. 3. P e r s o n n e l r e l a t i o n s w e r e c o m m e n t e d on by an i n c r e a s i n g p r o p o r t i o n of e x e c u t i v e m e s s a g e s f r o m 1938 to 1963. 4. F r o m 1938 to 1963 an i n c r e a s i n g p r o p o r t i o n of c o m p a n i e s made comments on o u t l o o k and f u t u r e p r o s p e c t s . The same t r e n d was t r u e of c o m p a n i e s c o m m e n t i n g on management and s u b s i d i a r i e s and a f f i l i a t e d c o m panies. 5. The p e r c e n t a g e of c o m p a n i e s w h i c h made comments on s u r p l u s o r p r o d u c t i o n d e c l i n e d throughout the p e r i o d f r o m 1938 to 1963. 6. R e s e a r c h and p r o d u c t s and s e r v i c e s w e r e c o m m e n t e d on by an i n c r e a s i n g p e r c e n t a g e of c o m p a n i e s throughout the p e r i o d f r o m 1938 to 1963. T h i s i n c r e a s e d i n t e r e s t i n r e s e a r c h r e f l e c t e d a g r o w i n g a w a r e n e s s on the p a r t of management of the v a l u e of r e s e a r c h a c t i v i t i e s . 66 Note that w h i l e T a b l e X V i n d i c a t e s the p e r c e n t a g e of t i m e s each of the t o p i c s was mentioned, i t g i v e s no clue as to the q u a l i t y of the to p i c s . However, i t was found i n the s u r v e y that the movement o v e r the twenty f i v e y e a r p e r i o d was g e n e r a l l y t o w a r d the p r e s e n t a t i o n of i n f o r m a t i o n i n a m o r e e x p l a n a t o r y and i n t e r p r e t a t i v e v e i n . M o r e d e t a i l s about thi s a s p e c t a r e g i v e n i n the p a r a g r a p h s w h i c h f o l l o w : E a r n i n g s W h i l e the m a j o r i t y of the e x e c u t i v e m e s s a g e s i n e a c h of the f i v e y e a r s r e f e r r e d i n one way or another to the e a r n i n g s o r p r o f i t and l o s s r e s u l t s f o r the y e a r (.Table X V ) few added s o m e t h i n g of an i n t e r p r e t a t i v e c h a r a c t e r . The 1938 and 1948 r e p o r t s w e re m o s t d i s a p p o i n t i n g i n t h i s r e s p e c t . In e a c h of these two y e a r s , l e s s than 8% of the e x e c u t i v e m e s s a g e s d i s c u s s e d the m a i n f a c t o r s w h i c h af f e c t e d , f a v o u r a b l y o r u n f a v o u r a b l y , the r e s u l t s f o r the y e a r . The i l l u s t r a t i o n b e l o w speaks f o r i t s e l f . 1938 1948 1953 1958 1963 Number of e x e c u t i v e m e s s a g e co n t a i n i n g r e f e r e n c e to ea r n i n g s 55 , 62 79 96 106 Number of e x e c u t i v e m e s s a g e co n t a i n i n g f a c t o r s e x p l a i n i n g e a r n i n g s 4 3 16 19 19 P e r c e n t a g e of e x e c u t i v e m e s s a g e c o n t a i n i n g f a c t o r s e x p l a i n i n g e a r n i n g s 7. 3% 4. 9% 20. 0% 19. 8% 18. 0% The s t a t i s t i c s above i n d i c a t e some i m p r o v e m e n t o v e r the y e a r s w i t h r e g a r d to the p r o p o r t i o n of companies w h i c h d i s c u s s e d the r e a s o n s f o r the 67 r e s u l t s a c h i e v e d . T h i s p r a c t i c e , however, was not w i d e s p r e a d and the s i t u a t i o n as of 1963 s t i l l l e f t m u c h to be d e s i r e d . It s i s t r u e that some of the f a c t o r s a f f e c t i n g e a r n i n g s may not be known, and o t h e r s m a y be known o n l y p a r t i a l l y , so that t h e i r q u a n t i t a t i v e s i g n i f i c a n c e cannot be e v a l u a t e d a c c u r a t e l y . S t i l l w i t h the p r o p e r l i m i t a t i o n s i n d i c a t e d , at l e a s t a p a r t i a l e x p l a n a t i o n m i g h t be given. Of those e x e c u t i v e m e s s a g e s w h i c h e x p l a i n e d the r e s u l t s a c h i e v e d , the m a j o r i t y w e r e v e r y w e l l done. The f o l l o w i n g e x c e r p t i s j u s t one example. "We suggest t h e r e a r e t h r e e r e a s o n s f o r 1958 b e i n g our m o s t p r o f i t a b l e y e a r : F i r s t , f u l l p r o d u c t i o n . Second, the m i l l i o n s i n v e s t e d i n m o d e r n equipment t a i l o r e d to s u i t Canada's f l a t r o l l e d s t e e l demands have r e s u l t e d i n i n c r e a s e d e f f i c i e n c y . T h i r d , the w o n d e r f u l job done by our p r o f i t s h a r i n g e m p l o y e e s and staff by i n c r e a s i n g p r o d u c t i o n and l o w e r i n g s c r a p l o s s e s i n e ach o p e r a t i o n , w i t h the r e s u l t that we s h i p p e d m o r e f i n i s h e d s t e e l f r o m 25 each ton of ingots r o l l e d . " O t h e r r e p o r t s w h i c h s h o u l d be c o m m e nded i n t h i s r e g a r d w e r e M a s s e y - H a r r i s - F e r g u s o n L i m i t e d 1953, I m p e r i a l T o b a cco Company of Canada, L i m i t e d 1953, F r u e h a u f T r a i l e r Company of Canada, L i m i t e d 1958 and C r o w n Z e l l e r b a c h C o r p o r a t i o n 1953. The s u r v e y i n d i c a t e d 25. D o m i n i o n F o u n d a r i e s and S t e e l L t d . , A n n u a l R e p o r t f o r the Y e a r  1958, p. 4. 68 no c o n c e n t r a t i o n of those r e p o r t s w h i c h p r o v i d e d e x p l a n a t i o n s of r e s u l t s a c h i e v e d i n any one p a r t i c u l a r i n d u s t r i a l group. They were quite evenly s p r e a d out among the seven i n d u s t r i a l groups. A l o n g w i t h the m o v e m e n t to make the e a r n i n g s f i g u r e m o r e m e a n i n g f u l , an i n c r e a s i n g p r o p o r t i o n of c o m p a n i e s , as f r o m 1953 onwards, w e r e i n c l u d i n g a t w o - y e a r c o m p a r i s o n of e a r n i n g s and net i n c o m e together w i t h e a r n i n g s on a p e r - s h a r e b a s i s . The f o l l o w i n g e x ample i s i l l u s t r a t i v e of the change that took p l a c e o v e r the y e a r s f r o m 1938 to 1963. In 1938 a t y p i c a l r e f e r e n c e to e a r n i n g s or p r o f i t s r a n as f o l l o w s : " A f t e r d e d u c t i o n of a l l c h a r g e s , the m a k i n g of a l a r g e r p r o v i s i o n f o r d e p r e c i a t i o n than was made i n the p r e c e d i n g y e a r , p r o v i s i o n f o r i n c o m e taxes, and deduc t i o n of net p r o f i t s a p p l i c a b l e to m i n o r i t y i n t e r e s t s , the net p r o f i t s f o r the y e a r amounted to $436, 107. 37. 1 , 2 6 In 1948, the s i t u a t i o n d i d not s e e m too m u c h d i f f e r e n t f r o m that i n 1938. C o n s i d e r the f o l l o w i n g : " C o n s o l i d a t e d p r o f i t s f o r the y e a r , a f t e r a l l c h a r g e s and a f t e r a b s o r b i n g a l o s s i n c u r r e d on o p e r a t i o n s i n the U. S. A. , w e r e s a t i s f a c t o r y and amounted to $6, 849, 535. T h i s c o m p a r e s w i t h l a s t year's p u b l i s h e d c o n s o l i d a t e d p r o f i t of $6, 170,414. " B y 1953 the i m p r o v e m e n t was c l e a r . A l t h o u g h t h e r e w e r e a few r e p o r t s w h i c h s t i l l m e r e l y added so m e t h i n g s u c h as " e a r n i n g s w e r e 26. C a n a d i a n B r e w e r i e s L t d . , A n n u a l R e p o r t f o r the Y e a r 1938, p. 4. 27. C a n a d i a n B r e w e r i e s L t d . , A n n u a l R e p o r t f o r the Y e a r 1948, p. 4. 69 s a t i s f a c t o r y " and nothing e l s e , the m a j o r i t y showed a two y e a r c o m p a r i s o n of aggregate e a r n i n g s , the p e r c e n t a g e change and p e r s h a r e f i g u r e s . The f o l l o w i n g e x c e r p t i s t y p i c a l of a 1953, 1958 or 1963 r e p o r t : "Net i n c o m e f o r the y e a r was $3, 893, 240 c o m p a r e d w i t h $3, 120, 344 f o r the p r e c e d i n g y e a r , an i n c r e a s e of 25%. Net e a r n i n g s on the o r d i n a r y s h a r e s e q u a l l e d $5. 03 p e r s h a r e a f t e r p r o v i d i n g f o r the p r e f e r e n c e dividend. Net e a r n i n g s on the same b a s i s f o r the p r e v i o u s y e a r amounted to $4. 00 p e r share. I l 28 To i l l u s t r a t e i n m o r e c o n c r e t e t e r m s the p e r c e n t a g e i n c r e a s e i n the number of e x e c u t i v e m e s s a g e s showing e a r n i n g s on a p e r s h a r e b a s i s o v e r the y e a r s , the:: f o l l o w i n g s t a t i s t i c s a r e h e l p f u l . 1938 1948 1953 1958 1963 Number of E x e c u t i v e M e s s a g e s co n t a i n i n g r e f e r e n c e to ea r n i n g s 55 62 79 96 106 Number of E x e c u t i v e M e s s a g e s showing E a r n i n g s p e r sh a r e 18 19 29 42 62 P e r c e n t a g e of E x e c u t i v e M e s s a g e s showing E a r n i n g s p e r share 3 0 . 3 % 3 0 . 1 % 3 7 . 0 % 4 4 . 0 % 5 8 . 5 % The i l l u s t r a t i o n above i n d i c a t e s that the p e r c e n t a g e of e x e c u t i v e m e s s a g e s showing e a r n i n g s p e r s h a r e i n c r e a s e d f r o m 30. 3 % i n 1938 to 58. 5% i n 1963 a d i f f e r e n c e of a p p r o x i m a t e l y 2 9 % o v e r a twenty f i v e y e a r p e r i o d . E a r n i n g s p e r s h a r e f i g u r e s a r e p a r t i c u l a r l y u s e f u l i n that they help to combat the f a l s e n o t i o n that p r o f i t s a r e e x c e s s i v e . Shown as an aggregate 28. C r o w n Z e l l e r b a c h C o r p o r a t i o n , A n n u a l R e p o r t f o r the Y e a r 1953, p. 3. 70 • f i g u r e , e a r n i n g s m a y appear e x c e s s i v e , but when r e d u c e d to a p e r s h a r e b a s i s t h e i r s i g n i f i c a n c e i s b e t t e r a p p r e c i a t e d . A number of c o m p a n i e s , p r e d o m i n a n t l y p u b l i c u t i l i t i e s , went even f u r t h e r and e x p r e s s e d e a r n i n g s as a p e r c e n t a g e of c a p i t a l i . e. r e t u r n on investment, (i New B r u n s w i c k Telephone Company L i m i t e d 1963; C a n a d i a n W e s t e r n N a t u r a l Gas Company Co. L t d 195 8; Southern Canada P o w e r Company 19385 B r a z i l i a n T r a c t i o n L i g h t and P o w e r Company L t d . , 1948). T h i s was a h i g h l y c o m m e n d a b l e i n n o v a t i o n , s i n c e r e t u r n on i n v e s t m e n t s e r v e s as one of the m o s t i m p o r t a n t c r i t e r i a i n e v a l u a t i n g p e r f o r m a n c e and p r o g r e s s of an e n t e r p r i s e . In some i n s t a n c e s , p r o f i t s w e r e a l s o e x p r e s s e d as a p e r c e n t a g e of other r e l e v a n t d o l l a r f i g u r e s . Thus C a n a d i a n G e n e r a l E l e c t r i c C ompany L i m i t e d showed i n 1953, 1958 and 1963 i n c o m e p e r s a l e s d o l l a r . M a s s e y - H a r r i s - F e r g u s o n L i m i t e d d i d l i k e w i s e i n i t s 1948, 1953 and 1958 annual r e p o r t s . E a r n i n g s o v e r a number of y e a r s w e r e f o u n d to be shown i n a s m a l l but i n c r e a s i n g n u m b e r of companies. T h e s e w e r e often e x p r e s s e d i n g r a p h i c a l f o r m . They w e r e c h a r a c t e r i s t i c of c o m p a n i e s f r o m the s e r v i c e i n d u s t r i a l group. The f o l l o w i n g s t a t i s t i c s a r e p e r h a p s h e l p f u l . 71 1938 1948 1953 1958 1963 N u m b e r of E x e c u t i v e M e s s a g e s c o n t a i n i n g r e f e r e n c e to e a r n i n g s 55 62 79 96 106 N u m b e r of E x e c u t i v e m e s s a g e s c o n t a i n i n g g r a p h i c a l i l l u s t r a -t i o n of e a r n i n g s 1 2 5 6 13 P e r c e n t a g e of E x e c u t i v e M e s s a g e s c o n t a i n i n g g r a p h i c a l i l l u s t r a t i o n of E a r n i n g s 1.8% 3.2% 6.4% 6.-; 3 % 11.5° A p p r e c i a t i o n to E m p l o y e e s T r i b u t e to e m p l o y e e s was a c ommon f e a t u r e found i n the m a j o r i t y of e x e c u t i v e m e s s a g e s i n e ach of the f i v e y e a r s . It c o n s i s t e d of a s i m p l e a c knowledgement of the c o n t r i b u t i o n s of the employees. The f o l l o w i n g e x c e r p t f r o m D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L i m i t e d i s t y p i c a l . The company p l a c e s g r e a t e m p h a s i s on the c o n t i n u i n g e d u c a t i o n and advancement of i t s p e r s o n n e l to m e e t p r e s e n t and f u t u r e r e s p o n s i -b i l i t i e s e f f e c t i v e l y and w i s h e s to e x p r e s s i t s a p p r e c i a t i o n f o r the c o n s c i e n t i o u s m a n n e r i n w h i c h e m p l o y e e s have c a r r i e d out t h e i r r e s p o n s i b i l i t i e s and thus c o n t r i b u t e d to the 29 Company's p r o g r e s s . " 7 S u r p r i s i n g l y , the a n a l y s i s (;See T a b l e X V j i n d i c a t e d that w i t h the e x c e p t i o n of 1938, the percentage'of c o m p a n i e s w h i c h p a i d an a n n u a l t r i b u t e to t h e i r e m p l o y e e s r e m a i n e d f a i r l y constant throughout the twenty f i v e y e a r p e r i o d . 29. D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L i m i t e d , A n n u a l R e p o r t f o r  the Y e a r 1963, p. 8. F i x e d A s s e t s R e f e r e n c e to Table X V b r i n g s to l i g h t the f a c t that the p e r c e n t a g e of e x e c u t i v e m e s s a g e s m a k i n g some s o r t of r e f e r e n c e to f i x e d a s s e t s d e c l i n e d s t e a d i l y o v e r the y e a r s f r o m 1938 to 1963. W h e r e a s 7 4 % of the e x e c u t i v e m e s s a g e s r e f e r r e d to f i x e d a s s e t s i n 1938, o n l y 6 1 % made suc h r e f e r e n c e i n 1963 a d i f f e r e n c e of 1 3 % o v e r the twenty f i v e y e a r p e r i o d . R e f e r e n c e to f i x e d a s s e t s w e r e made i n a v a r i e t y of ways e. g. c a p i t a l e x p e n d i t u r e amounts, types of f i x e d a s s e t s a d d i t i o n s , p l a n t m a i n t e n a n c e , p l a n t m o d e r n i z a t i o n , s a l e of f i x e d a s s e t s , r e a s o n s f o r c a p i t a l e x p e n d i t u r e and ac c o u n t i n g t r e a t m e n t of c a p i t a l expenditure. A company m i g h t u s e each of the above comments s e p a r a t e l y o r i n c o m b i n a t i o n w i t h one o r m o r e of the other i n r e f e r r i n g to f i x e d a s s e t s . T a b l e X V I 1 1 g i v e s an i n d i c a t i o n of the f r e q u e n c y usage of each of these comments. It i s e n c o u r a g i n g to note that an i n c r e a s i n g p e r c e n t a g e of the c o m p a n i e s w h i c h made r e f e r e n c e to f i x e d a s s e t s gave a m o r e e x p l a n a t o r y d e s c r i p t i o n by i n c l u d i n g comments on types of f i x e d a s s e t s a d d i t i o n s o r r e a s o n s f o r c a p i t a l e x p e n d i t u r e s o r both. G e n e r a l l y , the s u r v e y r e v e a l e d that w i t h the e x c e p t i o n of 1938 m o s t of the accounts g i v e n of f i x e d a s s e t s w e r e adequate. Thus B r a z i l i a n T r a c t i o n L i g h t and P o w e r Company L t d d e s c r i b e d i n the 1948 e x e c u t i v e m e s s a g e the aggregate amount of c a p i t a l e x p e n d i t u r e s made d u r i n g the y e a r as c o m p a r e d w i t h that of the p r e v i o u s y e a r , the p e r c e n t a g e i n c r e a s e , the 73 T A B L E X V I 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F E X E C U T I V E M E S S A G E S A C C O R D I N G TO T Y P E S O F C O M M E N T S O N F I X E D A S S E T S A N D Y E A R S Types of Comments 1938 1948 1953 1958 1963 N u m b e r of E x e c u t i v e M e s s a g e s c o n t a i n i n g R e f e r e n c e s to F i x e d A s s e t s 47 _54 JD8 _69 69, C a p i t a l E x p e n d i t u r e A m o u n t s 45. 0% 57. 5 % 50. 0% 49. 5 % 54. 0% Types of F i x e d A s s e t s A d d i t i o n s 30. 0 43. 0 36. 8 39. 2 43. 5 P l a n t M a i n t e n a n c e 25.6 20.0 16. 2 13.1 5.8 P l a n t M o d e r n i z a t i o n 15. 0 24. 0 28. 0 13. 0 16. 0 Sale of F i x e d A s s e t s 8.5 11.1 7.7 13.1 16. 0 Re a s o n s f o r C a p i t a l E x p e n d i t u r e s 4.3 7.4 7.3 10.1 10.1 A c c o u n t i n g t r e a t m e n t of C a p i t a l E x p e n d i t u r e 4. 3 - - 2. 9 1.0 74 s o u r c e s of f i n a n c e and the types of p r o j e c t s . It a l s o c o m p l e m e n t e d the d e s c r i p t i o n w i t h a s e r i e s of p i c t u r e s showing the types of p r o j e c t s c o m p l e t e d and those s t i l l i n p r o g r e s s . A n e x c e p t i o n a l l y neat and c l e a r account of f i x e d a s s e t s 30 was g i v e n i n 1948, by C r o w n Z e l l e r b a c h C o r p o r a t i o n as f o l l o w s : " T o t a l e x p e n d i t u r e s d u r i n g the y e a r on c a p i t a l a s s e t s a g g r e g a t e d $2,711, 000 and i n c l u d e d the f o l l o w i n g l a r g e r p r o j e c t s : C o m p l e t i o n of M a r t i n Inn , $826,000 Other t o w n s i t e b u i l d i n g s 100, 000 New 11. P b o i l e r and t u r b i n e 408,000 P a p e r m a c h i n e i m p r o v e m e n t s 212,000 K r a f t m i l l i m p r o v e m e n t s 109, 000 L o g g i n g equipment, i n c l u d i n g r o a d s . 617, 0.00 t! C r o w n Z e l l e r b a c h d i d not stop at the above. It went on t o e x p l a i n the r e s u l t s or e x p e c t e d r e s u l t s of each of the p r o j e c t s . Other r e p o r t s that w e r e n o t e w o r t h y i n the t r e a t m e n t of f i x e d a s s e t s i n c l u d e d L a k e O n t a r i o P o r t l a n d Cement Co. L t d . , 1958, New B r u n s w i c k Telephone Company L i m i t e d 1958 and 1963, C a n a d i a n G e n e r a l E l e c t r i c Company L i m i t e d 1948, 1953 and 1963. A n o t h e r c l e a r t r e n d w i t h r e s p e c t to f i x e d a s s e t s o v e r the p e r i o d f r o m 1938 to 1963 was the i n c r e a s i n g p e r c e n t a g e of c ompanies w h i c h s u p p l e m e n t e d t h e i r t e x t w i t h g r a p h i c a l r e p r e s e n t a t i o n of f i x e d a s s e t s o v e r s e v e r a l y e a r s . The S t e l l Company of Canada L i m i t e d , f o r example, showed i n i t s 1948 e x e c u t i v e m e s s a g e a b a r c h a r t c o m p a r i n g t o t a l p l a n t e x p e n d i t u r e s w i t h net e a r n i n g s o v e r a ten y e a r 30. C r o w n Z e l l e r b a c h C o r p o r a t i o n , A n n u a l R e p o r t f o r the Y e a r 1948, p e r i o d . In 1963 i t h a d another b ar c h a r t c o m p a r i n g t o t a l c a p i t a l e x p e n d i t u r e s w i t h d e p r e c i a t i o n p r o v i s i o n s o v e r ten y e a r s . S i m i l a r c h a r t s w e r e put up i n M a s s e y - H a r r i s - F e r g u s o n L i m i t e d 1953 and 1958 and New B r u n s w i c k Telephone Company L i m i t e d 1963. The s u r v e y showed that f i x e d a s s e t s i l l u s t r a t i o n s w e r e m a i n l y p r e s e n t e d by c o m p a n i e s of the P u b l i c U t i l i t i e s group. A n i n d i c a t i o n of the t r e n d r e f e r r e d to e a r l i e r i s b e s t i l l u s t r a t e d by the f o l l o w i n g data. 1938 1948 1953 1958 1963 N u m b e r of E x e c u t i v e M e s s a g e c o n t a i n i n g r e f e r e n c e to f i x e d a s s e t s 47 54 68 69 69 N u m b e r of E x e c u t i v e M e s s a g e w i t h i l l u s t r a t i o n s of f i x e d as sets 2 5 6 6 7 P e r c e n t a g e of E x e c u t i v e m e s s a g e s w i t h i l l u s t r a t i o n s of f i x e d a s s e t s 4.2% 9.2% 8.9% 8.7% 1 0 . 2 % Sal e s T a b l e X V c l e a r l y p o i n t s to the f a c t that too many of the s u r v e y c o m p a n i e s w e r e s t i l l r e l u c t a n t to make comments on s a l e s . S i n c e 1948 o n l y s l i g h t l y m o r e than h a l f of the e x e c u t i v e m e s s a g e s r e f e r r e d to t h i s t o p i c each y e a r . I m p r o v e m e n t s t h e r e w e r e , so f a r as n u mber of c o m p a n i e s was c o n c e r n e d , when c o m p a r e d w i t h the s i t u a t i o n i n 1938; the i m p r o v e m e n t , however, was v e r y s l i g h t . Of those m e s s a g e s w h i c h made r e f e r e n c e to s a l e s m o r e than 8 5 % gave aggregate s a l e s f i g u r e each y e a r . In t h i s r e s p e c t alone, the s u r v e y r e v e a l e d a d i s t i n c t i m p r o v e m e n t i n that r e p o r t s of l a t e r y e a r s tended to i n c l u d e not only the s a l e s amount of the y e a r but a l s o that of p r e v i o u s y e a r s together w i t h an i n d i c a t i o n of the p e r c e n t a g e change ov e r the two y e a r s . W i t h r e g a r d to p r o v i d i n g a m o r e d e t a i l e d a n a l y s i s of s a l e s s u c h as g i v i n g r e a s o n s f o r the s a l e s r e s u l t s and showing a b r e a k d o w n of the s a l e s , o n l y a v e r y s m a l l p e r c e n t a g e of the companies took the plunge. N e v e r t h e l e s s , i t i s e n c o u r a g i n g to note that the p e r c e n t a g e was s t e a d i l y i n c r e a s i n g o v e r the y e a r s . The i l l u s t r a t i o n b e l o w i n d i c a t e s t h i s f a c t . 1938 1948 1953 1958 1963 N u m b e r of E x e c u t i v e M e s s a g e s c o n t a i n i n g r e f e r e n c e s to s a l e s _27 _3_8 49_ 62_ 64 P e r c e n t a g e of E x e c u t i v e M e s s a g e s showing aggregate s a l e s amount 89. 0% 87. 0% 96. 0% 90. 1% 90. 1% P e r c e n t a g e of e x e c u t i v e m e s s a g e s c o n t a i n i n g r e a s o n s f o r s a l e s r e s u l t s 8.3 10.5 10.2 19.4 18.8 P e r c e n t a g e of e x e c u t i v e m e s s a g e s showing s a l e s b r e a k d o w n 4.1 7.9 10.2 9.7 11.0 W h e r e i n f o r m a t i o n on s a l e s b r e a k d o w n was gi v e n , i t was al w a y s w e l l p r e s e n t e d . • A n a n a l y s i s of s a l e s by 22 c l a s s e s of p r o d u c t s a p p e a r e d i n the e x e c u t i v e m e s s a g e of So u t h e r n Canada P o w e r Company i n 1948. A s i m i l a r a n a l y s i s a p p e a r e d i n the 1953 m e s s a g e In i t s 1958 e x e c u t i v e m e s s a g e the same company p r o v i d e d an even m o r e f a c t u a l a n a l y s i s of s a l e s a c c o r d i n g to types of c u s t o m e r s together w i t h amounts shown i n d o l l a r s and u n i t s f o r two c o m p a r a t i v e y e a r s . A n o t h e r company, M a s s e y - H a r r i s - F e r g u s o n , p r o v i d e d a h e l p f u l a n a l y s i s of s a l e s a c c o r d i n g to t e r r i t o r i e s and d i v i s i o n s i n i t s 1953 e x e c u t i v e message. A s i m i l a r t r e a t m e n t a p p e a r e d i n the 195 8 message. It i s i n t e r e s t i n g to note that the m a j o r i t y of the c o m p a n i e s w h i c h p r o v i d e d 77;. a n a l y s i s on s a l e s w e r e p u b l i c u t i l i t i e s . M e n t i o n m i g h t be made at t h i s p o i n t about a s m a l l but notew o r t h y number of com p a n i e s w h i c h a t t e m p t e d to e m p h a s i z e p r o g r e s s by r e l a t i n g t h e i r s a l e s r e s u l t s to those of the i n d u s t r y o r economy. The p r a c t i c e was not w i d e s p r e a d and was of r e c e n t o r i g i n . S h e l l Canada L i m i t e d , f o r example, c o m p a r e d i n the 1963 e x e c u t i v e m e s s a g e p e r c e n t a g e i n c r e a s e i n company's s a l e s w i t h p e r c e n t a g e i n c r e a s e i n G r o s s N a t i o n a l P r o d u c t . C a n a d i a n B r e w e r i e s L i m i t e d e x p l a i n e d how company's s a l e s f o l l o w e d i n d u s t r y ' s s a l e s p a t t e r n i n 1958. M a s s e y - H a r r i s - F e r g u s o n L i m i t e d showed s i d e by si d e w o r l d wide s a l e s and company's s a l e s i n Canada d u r i n g 1958. Sal e s f i g u r e s by t h e m s e l v e s a r e w e l l and good. However, to e n s u r e that they do not convey m i s l e a d i n g i d e a s i t i s e s s e n t i a l that s p e c i a l o r u n u s u a l s a l e s (if these a r e i n c o r p o r a t e d ) be e x p l a i n e d or shown s e p a r a t e l y . In t h i s r e s p e c t M a s s e y - H a r r i s - F e r g u s o n L i m i t e d s h o u l d be commended. In the 1948 and 1953 e x e c u t i v e m e s s a g e s , the company showed f o r a p e r i o d of ten y e a r s r e g u l a r b u s i n e s s ( s a l e s ) s e p a r a t e f r o m w a r p r o d u c t i o n . To d r i v e home th i s p o i n t the 1948 m e s s a g e contained, i n a d d i t i o n , a c h a r t i l l u s t r a t i n g the two types of s a l e s . G r a p h s and c h a r t s w e r e adopted by a s m a l l but i n c r e a s i n g p e r c e n t a g e of c o m p a n i e s o v e r the y e a r s to i l l u s t r a t e the s a l e s r e s u l t s . 78 The f o l l o w i n g data give an i n d i c a t i o n of the extent to w h i c h eye a p p e a l f e a t u r e s w e r e u s e d to a i d i n u n d e r s t a n d i n g t h i s t o pic. 1938 1948 N u m b e r of e x e c u t i v e m e s s a g e s c o n t a i n i n g r e f e r e n c e s to s a l e s . . . 27 38 N u m b e r of e x e c u t i v e m e s s a g e s c o n t a i n i n g i l l u s t r a t i o n s of s a l e s . . - 3 P e r c e n t a g e of e x e c u t i v e m e s s a g e s c o n t a i n i n g i l l u s t r a t i o n s of s a l e s - 7.9% 1 2 . 2 % 1 1 . 1 % 1 2 . 5 % A g a i n , the m a j o r i t y of the c o m p a n i e s w h i c h adopted t h i s e x t r a f e a t u r e w e r e p u b l i c u t i l i t i e s . Thus The S t e e l Company of Canada L i m i t e d i n i t s 1963 e x e c u t i v e m e s s a g e showed by means of a b a r c h a r t c o n s o l i d a t e d net s a l e s by q u a r t e r s f o r t h r e e s u c c e s s i v e y e a r s . Such an i l l u s t r a t i o n i s u s e f u l i n i n d i c a t i n g s e a s o n a l s a l e s f l u c t u a t i o n s . B r a z i l i a n T r a c t i o n L i g h t and P o w e r Company L i m i t e d i n c o r p o r a t e d into the 1949 e x e c u t i v e m e s s a g e f o u r b a r c h a r t s i l l u s t r a t i n g f o r ten y e a r s , s a l e of e l e c t r i c i t y , s a l e of gas, number of p a s s e n g e r s u s i n g i t s r a i l w a y s and number of telephones i n s e r v i c e . S a l e s r e c o r d s f o r s u c h a l e n g t h of time p r o v i d e a u s e f u l a i d i n d i s c o v e r i n g s e c u l a r f l u c t u a t i o n s , the l o n g -r u n t r e n d of the b u s i n e s s . D i v i d e n d s That s h a r e h o l d e r s a r e c h i e f l y i n t e r e s t e d i n d i v i d e n d s , t h e r e can be no dispute. It w o u l d appear t h e r e f o r e , that some s o r t of 1953 1958 1963 40 62 64 6 7 8 r e f e r e n c e to t h i s t o p i c i s a m u s t f o r e v e r y e x e c u t i v e message. N e v e r t h e l e s s , as Ta b l e X V i n d i c a t e s , each y e a r a p p r o x i m a t e l y 4 0 % of the e x e c u t i v e m e s s a g e s i n the annual r e p o r t s of the s u r v e y c o m p a n i e s made no r e f e r e n c e to div i d e n d s . M a n a g e m e n t has no excuse f o r b e i n g s i l e n t on t h i s i m p o r t a n t subject. E v e n if no di v i d e n d s w e r e d e c l a r e d d u r i n g the y e a r , s h a r e h o l d e r s a r e s t i l l e n t i t l e d to the r e a s o n s f o r the p a r t i c u l a r a c t i o n taken by management. It i s i n t e r e s t i n g to note, as the s u r v e y r e v e a l e d , that i n a l m o s t e v e r y case i n w h i c h a company p a i d no di v i d e n d s , the c o r r e s p o n d i n g e x e c u t i v e m e s s a g e of the company i s quiet on t h i s m a t t e r . Thus, i t c o u l d be s a f e l y a s s u m e d f r o m the data g i v e n i n T a b l e X V that a p p r o x i m a t e l y 4 0 % of C a n a d i a n P u b l i c c o mpanies d i d not d e c l a r e d i v i d e n d s i n each of the f i v e s e l e c t e d y e a r s. M o s t of the e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e to d i v i d e n d s p r e s e n t e d adequately a b r i e f s u m m a r y of divi d e n d s p a i d d u r i n g the y e a r . The m e s s a g e s of the l a t e r y e a r s , ( i . e. 1953 onwards ) however, tended to be m o r e i n f o r m a t i v e i n that a g r e a t e r p e r c e n t a g e of them p r o v i d e d p e r s h a r e f i g u r e s f o r two c o m p a r a t i v e y e a r s . In f a c t t h e r e was s u f f i c i e n t e v idence to i n d i c a t e that the t r e n d o v e r the y e a r s f r o m 1938 to 1963 was t o w a r d p r e s e n t i n g d i v i d e n d s on a p e r sha r e b a s i s to the e x c l u s i o n of aggregate amounts. The f o l l o w i n g e x c e r p t 80 f r o m Du P o n t of Canada i s t y p i c a l of m o d e r n r e p o r t s . " R e g u l a r q u a r t e r l y d ividends w e r e p a i d on the 7 1/2% p r e f e r r e d stock. D i v i d e n d s t o t a l l i n g 90 cents a sh a r e as c o m p a r e d w i t h 80 cents a share i n 1962 w e r e d e c l a r e d on the c o mmon s t o c k and c o n s i s t e d of th r e e i n t e r i m q u a r t e r l y p ayments of 20 cents a s h a r e and a f i n a l p ayment f o r the y e a r of 30 cents a share. T a b l e X V I 1 1 { S e e next page ) c o n f i r m e d the above f a c t by showing a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the types of i n f o r m a t i o n i n c l u d e d i n those e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e to divi d e n d s . F r o m T a b l e X V 1 1 1 , note that w h i l e the p e r c e n t a g e of e x e c u t i v e m e s s a g e s p r e s e n t i n g d i v i d e n d s on a p e r s h a r e b a s i s ( i c o m m o n and p r e f e r r e d ) i n c r e a s e d o v e r the y e a r s , the p e r c e n t a g e of e x e c u t i v e m e s s a g e s p r e s e n t i n g aggregate d i v i d e n d s d e c r e a s e d o v e r the y e a r s . M a r k e t i n g O v e r the y e a r s f r o m 1938 to 1963 many com p a n i e s came to r e a l i z e that m a r k e t i n g was one t o p i c w h i c h s h o u l d be g i v e n a p l a c e i n the e x e c u t i v e message. W h e r e a s o n l y 20. 6% of the s u r v e y c o m p a n i e s made r e f e r e n c e to t h i s t o p i c i n 1938, the p e r c e n t a g e i n 1963 was 42. 5 % an d i f f e r e n c e of a p p r o x i m a t e l y 2 1 % o v e r the twenty f i v e y e a r p e r i o d (See T a b l e X V ) . References'., to m a r k e t i n g w e r e made i n a v a r i e t y of 31. Du P o n t of Canada L t d , A n n u a l R e p o r t f o r the Y e a r 1963, p. 8 81 TABLE XVI11 PERCENTAGE O F F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TYPES O F I N F O R M A T I O N O N DIVIDENDS A N D YEARS Types of Information 1938 1948 1953 1958 1963 Number of executive messages containing references to dividends 36 46 _4_8 64 66 50.0% 58.8% 58.5% 42.2% 40.1% 41.8 65.0 81.2 67.2 65.0 13.9 15.2 23.0 26.6 30.4 - 2.2 - 6.2 9.1 - 2.8 4.7 1.5 _ 1.2 3.1 -82 ways. N o r m a l l y , the s u r v e y c o m p a n i e s u s e d one o r a c o m b i n a t i o n of any of the f o l l o w i n g c o m m ents: c u s t o m e r s , s a l e s p r o m o t i o n , m a r k e t a r e a , s a l e s c o n t r a c t , p r i c e s and r a t e s , a n nual demand, b a c k l o g o r d e r and c o m p e t i t i o n . T a b l e X I X g i v e s a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of these v a r i o u s c o mments w h i c h w e r e i n c l u d e d i n those e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e s to m a r k e t i n g . The t a b l e b r i n g s to l i g h t the f a c t that i n each of the f i v e y e a r s comments on p r i c e s and r a t e s and on f o r e i g n and d o m e s t i c m a r k e t a r e a s w e r e made m o r e often than on say s a l e s p r o m o t i o n , c u s t o m e r s etc. , when an e x e c u t i v e m e s s a g e made r e f e r e n c e to m a r k e t i n g . G e n e r a l l y speaking, t h i s topic was adequately d i s c u s s e d as f r o m 1948 onwards. Thus C a n a d i a n G e n e r a l E l e c t r i c Company L i m i t e d gave i n i t s 1958 e x e c u t i v e m e s s a g e a s h o r t d e s c r i p t i o n of i t s e x p o r t m a r k e t together w i t h an e x p l a n a t i o n of why i t was c o n c e n t r a t i n g i t s e f f o r t s on t h i s m a r k e t . Du P o n t of Canada devoted two p a r a g r a p h s i n i t s 1948 e x e c u t i v e m e s s a g e s to e x p l a i n why advances i n s e l l i n g p r i c e s of the Company's p r o d u c t s w e r e i n e v i t a b l e . S outhern Canada P o w e r Company L i m i t e d l i s t e d f o u r types of c u s t o m e r s f o r two c o m p a r a t i v e y e a r s i n i t s 1958 e x e c u t i v e message. It a l s o e x p l a i n e d c o n c i s e l y why r a t e s w e r e m a i n t a i n e d i n r e c e n t y e a r s . Of l a t e ( i . e. 1958 and 1963 ) a s m a l l but n o t e w o r t h y n u m ber of com p a n i e s u n d e r t o o k to m a k e th i s t o p i c m o r e i n t e r e s t i n g TABLE X I X PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TYPES O F C O M M E N T S O N M A R K E T I N G A N D YEARS Types of Comments 1938 1948 1953 1958 1963 Number of executive messages containing references to marketing — ]3 28 42 43 48 50.4% 43.0% 45.2% 35.0% 46.0% 30.8 28.5 31.0 28.0 27.0 - 3.6 9.5 18.6 27.0 23.0 21.4 21.4 21.0 19.0 - 14.3 16.8 35.0 23.0 15.4 17.8 9.5 16.3 12.4 - 3.6 4 .7 11.6 8.3 7.7 10.7 9.5 11.6 6.2 84 by means of g r a p h i c a l i l l u s t r a t i o n . M o s t of these c ompanies w e r e p u b l i c u t i l i t i e s . Thus the S t e e l C ompany of Canada L i m i t e d i n i t s 1963 e x e c u t i v e m e s s a g e c o m p a r e d by means of a l i n e c h a r t the p e r c e n t a g e i n c r e a s e i n e m p l o y m e n t cos t s w i t h the p e r c e n t a g e i n c r e a s e i n the s e l l i n g p r i c e s of s t e e l p r o d u c t s f o r a p e r i o d of ten y e a r s . Du P o n t of Canada, i n i t s 1963 e x e c u t i v e m e s s a g e p r i n t e d a c h a r t i l l u s t r a t i n g f o r a ten y e a r p e r i o d the d e c l i n e i n the s e l l i n g p r i c e of Du Font's p r o d u c t s i n the f a c e of a continuous i n c r e a s e i n w h o l e s a l e p r i c e s . M a nagement G e n e r a l l y speaking, s h a r e h o l d e r s want to know a l l about the o f f i c e r s and d i r e c t o r s the men who a r e managing t h e i r c a p i t a l . N e v e r t h e l e s s , as T a b l e X V i n d i c a t e s , o v e r the y e a r s f r o m 1938 to 1963 the m a j o r i t y of executive.: m e s s ages d i d not c o n t a i n any i n f o r m a t i o n about them. E v e n w h e r e r e f e r e n c e s w e r e made to the men who r a n the company, the i n f o r m a t i o n was b a r e l y adequate. M o s t of the e x e c u t i v e m e s s a g e s tended to c o n c e n t r a t e on the annual r e t i r e m e n t o r changes i n o f f i c e r s . Deaths of o f f i c e r s w e r e a l s o f r e q u e n t l y mentioned. Only a h a n d f u l of the m e s s a g e s w h i c h r e f e r r e d to management p r o v i d e d m o r e i n t e r e s t i n g i n f o r m a t i o n s u c h as the e x p e r i e n c e s of o f f i c e r s , i n t e r e s t s of d i r e c t o r s and o f f i c e r s i n the company or i n a f f i l i a t e c o m p a n i e s and management t r a i n i n g . Two 85 c o m p a n i e s d e s c r i b e d how t h e i r managements w o r k e d t h r o u g h advisory-c o m m i t t e e s and what the f u n c t i o n s of these c o m m i t t e e s were. T a b l e X X i n d i c a t e s the p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the types of i n f o r m a t i o n w h i c h w e r e found i n these e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e s to management. S u b s i d i a r i e s and A f f i l i a t e s L i k e some of the t o p i c s a l r e a d y d i s c u s s e d the i d e a that s u b s i d i a r i e s and a f f i l i a t e s s h o u l d p e r h a p s be g i v e n a p l a c e i n the ex e c u t i v e m e s s a g e was c a t c h i n g f a s t o v e r the y e a r s . In spi t e of the f a c t that the m a j o r i t y of e x e c u t i v e m e s s a g e s i n the annual r e p o r t s of s u r v e y c o m p a n i e s d i d not c o n t a i n t h i s t o p i c , the p e r c e n t a g e of those m e s s a g e s w h i c h d i d m a k e r e f e r e n c e to t h i s s u b j e c t i n c r e a s e d f r o m a m e r e 2 4 % i n 1938 to 4 2 % i n 1963 a d i f f e r e n c e of 1 8 % o v e r the twenty f i v e y e a r p e r i o d . G e n e r a l l y s p e a k i n g m o s t of the r e m a r k s made about s u b s i d i a r i e s and a f f i l i a t e s w e r e b r i e f but adequate and a p p r o p r i a t e under the c i r c u m s t a n c e s . Some of the c ommon r e m a r k s p e r t a i n e d to the o p e r a t i n g r e s u l t s of the s u b s i d i a r i e s ( i . e. e a r n i n g s ) p u r c h a s e of s u b s i d i a r i e s and s a l e of s u b s i d i a r i e s . A h a n d f u l of e x e c u t i v e m e s s a g e s i n c l u d e d c a p i t a l e x p e n d i t u r e s i n c u r r e d by the s u b s i d i a r i e s and/or a s h o r t d e s c r i p t i o n of the p r o g r e s s or o p e r a t i o n of the s u b s i d i a r i e s . A n i n d i c a t i o n of how f r e q u e n t each of these r e m a r k s 8 6 TABLE X X PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TYPES O F C O M M E N T S O N M A N A G E M E N T A N D YEARS Types of Information 1938 1948 1953 1958 1963 Number of executive messages containing references to management ]9 26 30 50 48 52.6% 61.5% 73.5% 84.0% 75.4% 68.4 50.0 40.0 30.0 31.3 15.8 7.7 6.7 18.0 10.4 - 3.8 6.7 2.0 4.2 - 3.8 - 2.0 2.1 _ _ 2.0 2.1 87 was made i n those e x e c u t i v e m e s s a g e s w h i c h c o n t a i n e d r e f e r e n c e s to s u b s i d i a r i e s i s g i v e n i n T a b l e X X I . Outlook and F u t u r e P r o s p e c t s L i the d a i l y o p e r a t i o n of t h e i r b u s i n e s s e s , company o f f i c e r s a r e n e c e s s a r i l y m a k i n g p l a n s and e n t e r t a i n i n g g u e s s e s as to what the f u t u r e h o l d s . It w o u l d appear t h e r e f o r e that s o m e t h i n g about the company's outlook and f u t u r e p r o s p e c t s s h o u l d be i n c l u d e d i n the ex e c u t i v e message. However, as T a b l e X V i n d i c a t e s , o v e r the twenty f i v e y e a r s f r o m 1938 to 1963 the v a s t m a j o r i t y of Ca n a d i a n p u b l i c c o m p a n i e s p r e f e r r e d to r e m a i n s i l e n t on t h i s m a t t e r when i t came to m a k i n g a n n u a l r e p o r t s to t h e i r s h a r e h o l d e r s . In 1938 o n l y 1 4 % of the e x e c u t i v e m e s s a g e s i n the annual r e p o r t of C a n a d i a n p u b l i c c o m p a n i e s t o u c h e d on t h i s i s s u e . In 1948, 1953, 1958 and 1963 the pe r c e n t a g e s w e r e r e s p e c t i v e l y 20. 5, 25. 3, 30. 1 and 35. 4. . A l t h o u g h the s t a t i s t i c s p o i n t c l e a r l y to an i n c r e a s i n g t r e n d , the f a c t r e m a i n s that i n 1963 a p p r o x i m a t e l y two t h i r d s of the c o m p a n i e s s t i l l p r e f e r r e d to say n o t h i n g about t h e i r f u t u r e p r o s p e c t s . • W i t h r e g a r d to those e x e c u t i v e m e s s a g e s w h i c h tou c h e d on t h i s subject, not a l l of them r e p o r t e d adequately. Some e x e c u t i v e s contended t h e m s e l v e s w i t h s t a t i n g that they " l o o k f o r w a r d w i t h e x p e c t a t i o n s , " o t h e r s took the easy way out w i t h the statement that " i t i s , of c o u r s e , d i f f i c u l t to f o r e c a s t . " S t i l l o t h e r s v e n t u r e d 88 TABLE XXI P E R C E N T A G E F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TYPES O F REMARKS ABOUT SUBSIDIARIES A N D / O R AFFILIATES A N D YEARS Types of remarks 1938 1948 1953 1958 1963 Number of executive messages containing references to subsidiaries/ affiliates 15 14 28 41 48 40.0% 28.5% 28.6% 31.7% 39.6 l% 20.0 50.0 21.4 26.8 18.7 13.3 7.1 10.7 24.4 14.6 6.6 7.1 10.7 12.2 16.7 Capital expenditures by subsidiaries. . . - - 10.7 9.8 6.2 - 7.1 10.7 9.8 16.7 89 w a r i l y upon the su b j e c t of f u t u r e c o u r s e s of p r i c e s , o r of the economy, but stopped s h o r t of a s p e c i f i c p r e d i c t i o n . Of the ha n d f u l of m e s s a g e s w h i c h r e p o r t e d adequately w e l l on t h i s t o p i c , the m a j o r i t y came f r o m p u b l i c u t i l i t i e s . In a d d i t i o n m o s t of the "good" r e p o r t s w e r e r e c e n t r e p o r t s , i . e. 1953 onwards. The New B r u n s w i c k Telephone Company L i m i t e d i n i t s 1963 e x e c u t i v e m e s s a g e l i s t e d u n der a p a r a g r a p h headed " F u t u r e D e v e l o p m e n t s " a l l the m a j o r p r o j e c t s to be u n d e r t a k e n f o r the f o l l o w i n g y e a r . C a n a d i a n W e s t e r n N a t u r a l Gas Company L i m i t e d i n i t s 1958 e x e c u t i v e m e s s a g e gave under a p a r a g r a p h headed " P l a n t E x p a n s i o n " an e s t i m a t e of the c a p i t a l e x p e n d i t u r e s to be made the f o l l o w i n g y e a r , the u s e s to w h i c h the ex p e n d i t u r e s w i l l be put and an account of the e x p e c t e d f i n a n c i n g to be made. P e r s o n n e l R e l a t i o n s R e f e r e n c e to T a b l e X V i n d i c a t e s that the p e r c e n t a g e of c o m p a n i e s w h i c h p a i d attention to employ e e s and l a b o u r r e l a t i o n s i n t h e i r e x e c u t i v e m e s s a g e s was m u c h h i g h e r i n 1948, 1953 and 1958 than i n 1938 o r 1963. T h i s r e f l e c t e d i n p a r t management r e s p o n s e to the sudden i n c r e a s e i n o r g a n i z e d l a b o u r a c t i v i t i e s a f t e r the war. In the a n a l y s i s , i t was found that the m a j o r i t y of those c o m p a n i e s w h i c h i n c o r p o r a t e d p e r s o n n e l r e l a t i o n s into the e x e c u t i v e m e s s a g e of t h e i r annual r e p o r t s d i s c u s s e d the t o p i c v e r y 90 adequately. In f a c t , a h a n d f u l of these c o m p a n i e s d i s c u s s e d the t o p i c too e x t e n s i v e l y . It was a l s o f o u n d that c e r t a i n types of employee i n f o r m a t i o n w e r e d i s c l o s e d m o r e often than o t h e r s . T a b l e X X I 1 i n d i c a t e s by p e r c e n t a g e f r e q u e n c y some of the m o r e c ommon types of employee i n f o r m a t i o n w h i c h w e r e d i s c l o s e d by those c o m p a n i e s m a k i n g r e f e r e n c e s to p e r s o n n e l r e l a t i o n s . It i s c l e a r f r o m T a b l e X X I 1 that an i n c r e a s i n g p e r c e n t a g e of those c o m p a n i e s w h i c h i n c l u d e d a s e c t i o n on p e r s o n n e l r e l a t i o n s i n t h e i r e x e c u t i v e m e s s a g e s , was m e n t i o n i n g at l e a s t the number of e m p l o y e e s who w o r k e d w i t h the company, e. g. , New B r u n s w i c k Telephone Company, L i m i t e d , 1963. The I m p e r i a l T o b a c co Company of Canada, L i m i t e d , i n i t s 1948 and 1953 e x e c u t i v e m e s s a g e s showed a b r e a k d o w n of the n u m b e r of e m p l o y e e s a c c o r d i n g to l e n g t h of s e r v i c e . S o u t h e r n Canada P o w e r Company L i m i t e d , i n i t s 1958 e x e c u t i v e m e s s a g e , d i s t i n g u i s h e d p e r m a n e n t e m p l o y e e s f r o m t e m p o r a r y employees f o r two c o m p a r a t i v e y e a r s . S u r p r i s i n g l y , the s u r v e y r e v e a l e d that none of the c o m p a n i e s f r o m the c a p i t a l or f o r e s t s and a l l i e d p r o d u c t s i n d u s t r i a l group m e n t i o n e d the n u mber of e m p l o y e e s when m a k i n g r e f e r e n c e s to p e r s o n n e l r e l a t i o n s . T a b l e X X I 1 a l s o i n d i c a t e s that such m a t t e r s as wages, l a b o u r c o n t r a c t and v a l u e of b e n e f i t s p a i d out w e r e i n c r e a s i n g l y f i n d i n g t h e i r way into those e x e c u t i v e m e s s a g e s w h i c h p r o v i d e d a space f o r p e r s o n n e l r e l a t i o n s . On the other hand, i t a p p e a r s that other 91 TABLE XXI1 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F EXECUTIVE MESSAGES A C C O R D I N G T O TYPES O F EMPLOYEE I N F O R M A T I O N A N D YEARS Type of Employee Information 1938 1948 1953 1958 1963 Number of executive messages containing i i 34 43 46 37 11.1% 32.4% 21.0% 24.0% 29.8% 16.7 14.7 37.2 26.2 27.0 5.5 8.0 16.3 30.4 24.3 50.0 53.0 28.0 15.2 13.5 - 11.7 9.3 6.5 13.5 22.2 29.4 20.5 6.5 6.2 _ 5.9 _ 13.0 6.2 m a t t e r s s u c h as c o n t r i b u t i o n s to p e n s i o n and group l i f e i n s u r a n c e w e r e s l o w l y b e i n g edged out f r o m the e x e c u t i v e message. A n o t h e r i n t e r e s t i n g f e a t u r e about p e r s o n n e l r e l a t i o n s was the i n c r e a s i n g p e r c e n t a g e ;(though s m a l l ) of e x e c u t i v e m e s s a g e s w h i c h w e r e s u p p l e m e n t i n g t e x t m a t e r i a l on t h i s t o p i c w i t h g r a p h i c a l and/or p i c t o r i a l i l l u s t r a t i o n s . The f i g u r e s below i n d i c a t e the extent of the i n c r e a s e o v e r the twenty f i v e y e a r p e r i o d . 1938 1948 1953 1958 1963 N u m b e r of e x e c u t i v e m e s s a g e s co n t a i n i n g r e f e r e n c e s to p e r s o n -n e l r e l a t i o n s . .. . 18 34 43 46 37 N u m b e r of e x e c u t i v e m e s s a g e s w i t h i l l u s t r a t i o n s p e r t a i n i n g to p e r s o n n e l r e l a t i o n s . . . - 3 5 5 5 P e r c e n t a g e of e x e c u t i v e m e s s a g e s w i t h i l l u s t r a t i o n s p e r t a i n i n g to p e r s o n n e l r e l a t i o n s - 8.8% 1 1 . 6 % 11. 0%13. 5% The f o l l o w i n g m a y be c i t e d as some of the no t e w o r t h y exe c u t i v e m e s s a g e s w i t h r e g a r d to the above point. The S t e e l Company of C a nada L i m i t e d 1948 p r i n t e d a b a r t c h a r t c o m p a r i n g wages and s a l a r i e s w i t h t a x e s and payments to s h a r e h o l d e r s f o r ten y e a r s . In the same r e p o r t a l i n e c h a r t was e m p l o y e d c o m p a r i n g the p e r c e n t a g e i n c r e a s e i n a v e r a g e h o u r l y e a r n i n g s of p a y r o l l e m p l o y e e s and c o s t of l i v i n g i n d e x ten y e a r s . A s i m i l a r c h a r t a p p e a r e d i n M a s s e y - H a r r i s -F e r g u s o n L i m i t e d 1953. The New B r u n s w i c k Telephone Company L i m i t e d 1958 c o m p a r e d by means of a l i n e c h a r t the p e r c e n t a g e i n c r e a s e i n p a y r o l l w i t h the p e r c e n t a g e i n c r e a s e i n e mployees f o r the p e r i o d 1948-1958. P h o t o g r a p h s showing e m p l o y e e s at w o r k w e r e a l s o p r o f u s e l y used. S i m i l a r c h a r t s w e r e e m p l o y e d by Du P o n t of Canada i n 1948 and 1963. W o r k i n g C a p i t a l A s a t o p i c i n the e x e c u t i v e m e s s a g e , i t i s c l e a r f r o m T a b l e X V that w o r k i n g c a p i t a l was m e n t i o n e d by a d e c r e a s i n g p r o p o r t i o n of c o m p a n i e s o v e r the y e a r s f r o m 1938 to 1963. W h e r e a s 4 3 % of the c o m p a n i e s p a i d a t t e n t i o n to t h i s t o p i c i n t h e i r e x e c u t i v e m e s s a g e s i n 1938, the p e r c e n t a g e was o n l y 31 i n 1963 -- a d i f f e r e n c e of a p p r o x i m a t e l y 1 2 % o v e r the twenty.five y e a r p e r i o d . M o s t of the 1938 and 1948 r e p o r t s , w h i c h r e f e r r e d to t h i s t o p i c , tended to give a s i n g l e amount f o r the w o r k i n g of the y e a r and nothing e l s e . i . e. "The C o n s o l i d a t e d 32 net w o r k i n g c a p i t a l at the end of the y e a r amounted to $10, 941, 924. " L a t e r r e p o r t s ( i . e. 1953 onwards), on the other hand, tended to g i v e c o m p a r a t i v e amounts e. g. " W o r k i n g C a p i t a l at $8, 790, 904 c o m p a r e s 33 w i t h $8, 493, 334 i n the p r e v i o u s y e a r . " D e p r e c i a t i o n A l t h o u g h the t r e n d was t o w a r d a g r e a t e r p e r c e n t a g e of c o m p a n i e s m a k i n g r e f e r e n c e s to d e p r e c i a t i o n i n t h e i r e x e c u t i v e m e s s a g e s , the s u r v e y r e v e a l e d that g e n e r a l l y t h i s t o p i c was p o o r l y t r e a t e d . E v e n those r e p o r t s w h i c h r e p o r t e d e x c e l l e n t l y on other t o p i c s f a l t e r e d on t h i s point. The f o l l o w i n g e x c e r p t , f o r example, i s taken 32. F r a s e r C o m panies L t d . , A n n u a l R e p o r t f o r the Y e a r 1948, p. 6. 33. C r o w n Z e l l e r b a c h C o r p o r a t i o n , A n n u a l R e p o r t f o r the Y e a r 1953, p. 7 94 f r o m the e x e c u t i v e m e s s a g e of the annual r e p o r t of C r o w n Z e l l e r b a c h C o r p o r a t i o n 1963: "We have c o n t i n u e d to u t i l i z e f o r tax p u r p o s e s the h i g h e r d e p r e c i a t i o n a l l o w a n c e s p e r m i t t e d by the T r e a s u r y D e p a r t m e n t s i n c e 1962, as w e l l as the I n v estment T a x C r e d i t a u t h o r i z e d by C o n g r e s s the same yea r . 1 , 3 4 M o s t of the 1938 and 1948 r e p o r t s , w h i l e r e f e r r i n g to d e p r e c i a t i o n , p u b l i s h e d no f i g u r e s . They tended to s k i p o v e r d e p r e c i a t i o n as f o l l o w s : " A f t e r p r o v i d i n g f o r a l l expenses, d e p r e c i a t i o n , c o n t i n g e n c i e s , i n c o m e and e x c e s s p r o f i t t a x e s , the net p r o f i t f r o m o p e r a t i o n s f o r the y e a r was $209, 307. 63. 1 , 3 5 The tendency a f t e r 1953 was to i n d i c a t e the amount of d e p r e c i a t i o n f o r the y e a r alone. O n l y a handful of c o m p a n i e s went f u r t h e r and added c o m p a r a t i v e amounts or an e x p l a n a t i o n r e g a r d i n g d e p r e c i a t i o n . A m o n g these the f o l l o w i n g may be c i t e d . The S outhern Canada P o w e r L i m i t e d i n i t s 1953 e x e c u t i v e m e s s a g e e x p l a i n e d , under a p a r a g r a p h headed " D e p r e c i a t i o n , " the m e a n i n g of d e p r e c i a t i o n , h o w i t was computed, the d e p r e c i a t i o n amount f o r the y e a r and that of the p r e v i o u s y e a r together w i t h the p e r c e n t a g e change. Du P o n t of Canada i n the e x e c u t i v e m e s s a g e of i t s 1953 A n n u a l R e p o r t e x p l a i n e d why d e p r e c i a t i o n i n c r e a s e d d u r i n g the y e a r , the d e p r e c i a t i o n p o l i c y m a i n t a i n e d , and the e f f e c t of d e p r e c i a t i o n p r o v i s i o n i n r e s p e c t of new p l a n t s on income. It a l s o a t t e m p t e d to c r e a t e g r e a t e r u n d e r s t a n d i n g by means of a c o l o u r e d band c h a r t showing d e p r e c i a t i o n , taxes on i n c o m e and net income. 34. C r o w n Z e l l e r b a c h C o r p o r a t i o n , A n n u a l R e p o r t f o r the Y e a r 1963, p 35. O n t a r i o S t e e l P r o d u c t s C o . L t d . A n n u a l R e p o r t f o r the Y e a r 1948, p 95 T a x e s It i s f a i r to say that t a x e s , e s p e c i a l l y i n c o m e and e x c e s s p r o f i t taxes and t h e i r r e l a t i o n s h i p to e a r n i n g s , a r e of m u c h i n t e r e s t to s h a r e h o l d e r s . However, as T a b l e X V p o i n t s out, m o r e and m o r e managements w e r e e x c l u d i n g t h i s i t e m f r o m t h e i r e x e c u t i v e m e s s a g e s when p r e s e n t i n g t h e i r annual r e p o r t s to s h a r e h o l d e r s . In 1938, f o r example, 3 5 % of the e x e c u t i v e m e s s a g e s c o n t a i n e d r e f e r e n c e to t h i s t o p i c ; i n 1963 the p e r c e n t a g e d r o p p e d to 24%. A l t h o u g h T a b l e X V r e g i s t e r e d some i n c r e a s e between the y e a r s 1939 - 1953, the t r e n d a f t e r 195 3 was u n m i s t a k a b l y d e c l i n i n g . In g e n e r a l , taxes as a t o p i c w e r e p o o r l y h a n d l e d i n the f i r s t two of the f i v e s e l e c t e d y e a r s . The tendency d u r i n g these y e a r s was to make s l i g h t r e f e r e n c e to t h i s i t e m without a c t u a l l y g i v i n g the n u m e r i c a l amount. The f o l l o w i n g i l l u s t r a t e s some t y p i c a l comments. " A f t e r p r o v i d i n g f o r a l l e xpenses, d e p r e c i a t i o n , c o n t i n g e n c i e s , i n c o m e and e x c e s s p r o f i t s t a x e s , the net p r o f i t f r o m o p e r a t i o n s f o r the y e a r was $209,307. 6 3 " 3 6 " A f t e r p r o v i d i n g f o r D e p r e c i a t i o n and D o m i n i o n and P r o v i n c i a l Income T a x e s , the net p r o f i t f o r the y e a r amounted to $91, 519. 8 5 " 3 7 "Net o p e r a t i n g p r o f i t s , b e f o r e p r o v i d i n g f o r i n t e r e s t on bonds and p r e f e r r e d notes, d e p r e c i a t i o n and i n c o m e t a x e s , amounted to $514, 584. " 3 ^ 36. O n t a r i o S t e e l P r o d u c t s Co. L t d . , A n n u a l R e p o r t f o r the Y e a r 1948, p. 2. .37. O n t a r i o S t e e l P r o d u c t s Co. L t d . , A n n u a l R e p o r t f o r the Y e a r 1938, p. 1 38. A l f r e d L a m b e r t I n c o r p o r a t e d and i t s s u b s i d i a r y c o m p a n i e s , A n n u a l R e p o r t f o r the Y e a r 1948, p. 3. 96 A f t e r 1953 p r e s e n t a t i o n of taxes c o m m o n l y took the f o r m of a p l a i n s t a t e m e n t of f a c t s . The f o l l o w i n g a r e some examples. "The r e s u l t of the y e a r ' s o p e r a t i o n s shows a net p r o f i t of $4, 871, 593 a f t e r p r o v i d i n g $1, 683, 7 50 f o r d e p r e c i a t i o n and $5, 066, 670 f o r i n c o m e taxes. " 3 <^ " D o m i n i o n , P r o v i n c i a l and M u n i c i p a l t a x e s , p a i d o r p r o v i d e d f o r i n 1953, amounted to $2, 780, 366. 76. " 4 0 " F o r the y e a r ended D e c e m b e r 31, 1963, ; e a r n i n g s b e f o r e d e p r e c i a t i o n and i n c o m e taxes w e r e $647, 540 ($759,742 i n 1962)5 d e p r e c i a t i o n p r o v i d e d was $557, 840 ($522, 229 i n 1962); i n c o m e taxes t o t a l l e d $58, 000 ($70, 000 i n 1962). " 4 1 Of c o u r s e , t h e r e w e r e a few annual r e p o r t s w h i c h f e a t u r e d taxes as one of the p r o m i n e n t t o p i c s i n the e x e c u t i v e message. Southern Canada P o w e r Company L i m i t e d , f o r example, i n the e x e c u t i v e m e s s a g e of i t s 1958 r e p o r t e x p r e s s e d the t o t a l amount of taxes p a i d as a p e r c e n t a g e of t o t a l revenue, showed taxes p e r c u s t o m e r together w i t h that of p r e v i o u s y e a r and c a r e f u l l y p o i n t e d out that the t a x b i l l d i d not i n c l u d e o t h e r f o r m s of taxes s u c h as a u t o m o b i l e and t r u c k l i c e n c e s , c u s t o m s , g a s o l i n e taxes etc. , w h i c h w e re a b s o r b e d by other accounts. The P r e s i d e n t of John L a b a t t L i m i t e d i n the 1963 e x e c u t i v e m e s s a g e s t a t e d c l e a r l y that "the tax b u r d e n on the b r e w i n g i n d u s t r y was not e a s e d 39. C a n a d i a n C e l a n e s e L i m i t e d , A n n u a l R e p o r t f o r the Y e a r 1958, p. 3. 410. D o m i n i o n B r i d g e Company L i m i t e d , A n n u a l R e p o r t f o r the y e a r 1958, p. 5. 41. Johnston T e r m i n a l s and Storage L t d . , A n n u a l R e p o r t f o r the Y e a r 1963, p. 1. 97 d u r i n g the y e a r and continues to e x c e e d 40£ on e v e r y d o l l a r . " Du P o n t of Canada i n i t s 1963 e x e c u t i v e m e s s a g e e x p l a i n e d the causes f o r the d e c l i n e i n taxes and p r e s e n t e d a neat band c h a r t c o m p a r i n g taxes and i n c o m e f o r ten y e a r s . Bonds, D e b e n t u r e s and L o a n s The s u r v e y d i d not r e v e a l any t r e n d w i t h r e g a r d to the p r e s e n t a t i o n of t h i s topic. T h i s i s c l e a r s i n c e bonds, debentures or l o a n s w o u l d not be c o m m e n t e d on u n l e s s t r a n s a c t i o n s of some s o r t r e g a r d i n g t h e m took p l a c e d u r i n g the y e a r . H owever, when p r e s e n t e d i n any of the y e a r s t h i s t o p i c was g e n e r a l l y v e r y w e l l d i s c u s s e d . M a s s e y -H a r r i s - F e r g u s o n L i m i t e d , f o r example, i n the e x e c u t i v e m e s s a g e of i t s 1948 annual r e p o r t gave a d e t a i l e d account of l o n g - t e r m funded in d e b t e d -n e s s i n c u r r e d i n Canada and the U n i t e d States, of new s i n k i n g f u n d debentures i s s u e d i n Canada and of a long t e r m l o a n n e g o t i a t e d i n the U n i t e d States. D e t a i l s r e g a r d i n g t e r m s of payment, r e d e m p t i o n and m a t u r i t y dates w e r e a l s o d e s c r i b e d . In a p a r a g r a p h headed " F i n a n c i n g " the C a n a d i a n W e s t e r n N a t u r a l Gas Company L i m i t e d gave a d e t a i l e d account of p r e f e r e n c e s h a r e s and m o r t g a g e bonds s o l d d u r i n g the y e a r . R e a s o n s f o r the s a l e w e r e i n d i c a t e d . F u r t h e r , an e s t i m a t e of a d d i t i o n a l f i n a n c i n g w h i c h m i g h t be n e c e s s a r y d u r i n g the l a t t e r p a r t of the y e a r was a l s o d i s c l o s e d . 98 P r o d u c t s and S e r v i c e s A s a t o p i c , p r o d u c t and s e r v i c e s a p p e a r e d to have ga i n e d c o n s i d e r a b l e g r o u n d o v e r the y e a r s w i t h r e g a r d to a p l a c e i n the e x e c u t i v e m;essage. W h e r e a s o n l y 3. 2% of the e x e c u t i v e m e s s a g e s made r e f e r e n c e to t h i s t o p i c i n 1938, the p e r c e n t a g e i n 1963 was 22. 1 — a d i f f e r e n c e of a p p r o x i m a t e l y 1 8 % o v e r the twenty f i v e y e a r p e r i o d . In the m a i n , c omments on th i s s u b j e c t w e r e b r i e f and d e s c r i p t i v e . They c o m m o n l y r e f e r r e d to new p r o d u c t s l a u n c h e d o r new s e r v i c e s u n d e r t a k e n d u r i n g the y e a r . C a p i t a l S t o ck No t r e n d c o u l d be e s t a b l i s h e d w i t h r e g a r d to the number of e x e c u t i v e m e s s a g e s m e n t i o n i n g c a p i t a l s t o c k o v e r the p e r i o d f r o m 1938 to 1963. L i k e bonds and debentures, c a p i t a l s t o c k was g e n e r a l l y w e l l d i s c u s s e d whenever i t was p r e s e n t e d . R e a s o n s f o r c a p i t a l s t o c k s s u e s , f o r r e d e m p t i o n or f o r any t r a n s a c t i o n c onnected w i t h c a p i t a l s t o c k w e r e often given. The f o l l o w i n g p a s s a g e f r o m D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d i s t y p i c a l of a r e f e r e n c e to c a p i t a l stock. "In the f a l l of 1958 s h a r e h o l d e r s w e r e o f f e r e d the r i g h t to s u b s c r i b e to 319,440 s h a r e s of common st o c k at $25. 00 p e r share. The r e s u l t i n g funds a r e being u s e d f o r g e n e r a l c o r p o r a t e p u r p o s e s and p a r t i c u l a r l y f o r an expanded and a c c e l e r a t e d c a p i t a l p r o g r a m . D u r i n g the y e a r 10, 111 of the outstanding p r e f e r r e d s h a r e s w e r e p u r c h a s e d f o r c a n c e l l a t i o n . "^ 42. D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d , A n n u a l R e p o r t f o r the Y e a r  1948, p. 4. 99 C u r i o u s l y enough, among those e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e s to c a p i t a l stock i n each of the y e a r , s hare i s s u e s w e r e found to be the m o s t f r e q u e n t m e n t i o n e d i t e m . R e d e m p t i o n of p r e f e r r e d s h a r e s came next. R e d u c t i o n i n t o t a l c a p i t a l was m e n t i o n e d i n two ex e c u t i v e m e s s a g e s during 1958 and 1963. S u r p l u s The m o s t obvious c o n c l u s i o n to be drawn f r o m T a b l e X V w i t h r e g a r d to s u r p l u s i s the f a c t that t h i s t o p i c was g r a d u a l l y d i s a p p e a r i n g f r o m the e x e c u t i v e m e s s a g e o v e r the y e a r s f r o m 1938 to 1963. In 1938 2 2 % of the e x e c u t i v e m e s s a g e s made r e f e r e n c e to t h i s t o p i c ; i n 1963 the f i g u r e was r e d u c e d to a m e a g e r 10. 6%. To a c e r t a i n extent, t h i s t r e n d r e f l e c t e d an i n c r e a s i n g r e c o g n i t i o n by management that the t e r m " s u r p l u s " was apt to confuse r a t h e r than to e n l i g h t e n the av e r a g e s h a r e -h o l d e r . M o s t of the e x e c u t i v e m e s s a g e s w h i c h made r e f e r e n c e s to s u r p l u s c o n t a i n e d a statement showing net a d d i t i o n s to e a r n e d s u r p l u s . The f o l l o w i n g e x c e r p t f r o m C r o w n Z e l l e r b a c h C o r p o r a t i o n i s t y p i c a l . " A f t e r g i v i n g e f f e c t to d i v i d e n d s , e a r n e d s u r p l u s showed a net i n c r e a s e of $405, 226. 50 f o r the y e a r . None of the r e p o r t s w h i c h r e f e r r e d to s u r p l u s made any attempt to e x p l a i n the t e r m to the r e a d e r . A few atte m p t e d to b r e a k i t down into sub c a t e g o r i e s as f o l l o w s : 43. C r o w n Z e l l e r b a c h C o r p o r a t i o n , A n n u a l R e p o r t f o r the Y e a r 1938, p. 3. 100 u A s the r e s u l t of the y e a r ' s o p e r a t i o n an amount of $11,611 was c r e d i t e d to S u r p l u s account, b r i n g i n g the account of D e c e m b e r 31, a f t e r s u n d r y a d j u s t m e n t s , to $905, 572. Of t h i s amount $57,797 i s R e s e r v e d S u r p l u s ( r e f u n d a b l e p o r t i o n of E x c e s s P r o f i t s Tax) and $847, 77 5 u n a p p r o p r i a t e d C a p i t a l and E a r n e d S u r p l u s . " Note that without e x p l a n a t i o n of the t e r m s u r p l u s each of the sub-c a t e g o r i e s i s j u s t as confusing. E c o n o m y A s shown i n T a b l e X V e ach y e a r a s m a l l p e r c e n t a g e of e x e c u t i v e m e s s a g e s m e n t i o n e d t h i s topic. The f i n a n c i a l i n s t i t u t i o n s f o r m e d the m a j o r i t y of t h i s s m a l l p e r c e n t a g e of companies. Often the r e m a r k s w e r e vague and s e e m e d quite u n r e l a t e d to the o p e r a t i o n s of the company. S h a r e h o l d e r s It i s c l e a r f r o m T a b l e X V that o v e r the y e a r s f r o m 1938 to 1963, managements came to r e a l i z e that s h a r e h o l d e r s w e r e a l s o i n t e r e s t e d i n knowing about t h e i r f e l l o w s h a r e h o l d e r s . A s a r e s u l t , s h a r e h o l d e r i n f o r m a t i o n was s l o w l y i n c h i n g t h e i r way into the annual r e p o r t s of C a n a d i a n companies. A s shown i n T a b l e XV , the p e r c e n t a g e of e x e c u t i v e m e s s a g e s w h i c h p r o v i d e d i n f o r m a t i o n about s h a r e h o l d e r s was s t i l l v e r y s m a l l each y e a r . N e v e r t h e l e s s , i t i s e n c o u r a g i n g to note that the p e r c e n t a g e was i n c r e a s i n g o v e r the p e r i o d . The m o s t c ommon data g i v e n i n the e x e c u t i v e m e s s a g e s about s h a r e h o l d e r s i n c l u d e d the n u m b e r of s h a r e h o l d e r s and t h e i r g e o g r a p h i c a l d i s t r i b u t i o n . I m p e r i a l T o b a c co Company of Canada, L i m i t e d f o r example, r e p o r t e d i n the e x e c u t i v e m e s s a g e of i t s 1948 annual r e p o r t 44'. The New B r u n s w i c k Telephone Company L i m i t e d , A n n u a l R e p o r t  f o r the Y e a r 1948, p. 7. 101 the f o l l o w i n g : "Our r e c o r d s show that on 31st D e c e m b e r , 1948, we had 18, 366 s h a r e h o l d e r s of whom 9, 287 r e s i d e d i n Canada. It i s g r a t i f y i n g to note that t h e r e i s a steady i n c r e a s e i n the n u m b e r of our C a n a d i a n 45 s h a r e h o l d e r s . " U nder a p a r a g r a p h headed " M o r e S h a r e h o l d e r s " the New B r u n s w i c k Telephone Company L i m i t e d , i n i t s 1958 e x e c u t i v e m e s s a g e , r e c o r d e d the t o t a l n umber of s h a r e h o l d e r s and the d i s t r i b u t i o n of s h a r e h o l d e r s among the p r o v i n c e s . In a d d i t i o n , i t p r o v i d e d a c h a r t , i l l u s t r a t i n g the i n c r e a s e i n the n u mber of s h a r e h o l d e r s f o r the p a s t ten y e a r s . O t h e r n o t e w o r t h y annual r e p o r t s w i t h r e s p e c t to s t o c k -h o l d e r i n f o r m a t i o n i n c l u d e d C a n a d i a n B r e w e r i e s L i m i t e d 1948, B r a z i l i a n T r a c t i o n L i g h t and P o w e r Company L i m i t e d , 1953, Southern Canada P o w e r Company L i m i t e d 1958 and The S t e e l Company of Canada 1938, 1948 and 1953. A p p a r e n t l y , i t was founded i n the s u r v e y that m o s t of the c o m p a n i e s w h i c h i n c l u d e d i n f o r m a t i o n about s h a r e h o l d e r s came f r o m the f o l l o w i n g f o u r i n d u s t r i a l groups C o n s u m p t i o n , S e r v i c e , P u b l i c U t i l i t y and I r o n and S t e e l . P r o d u c t i o n A s a t o p i c , p r o d u c t i o n was f a s t d i s a p p e a r i n g f r o m the e x e c u t i v e m e s s a g e s o v e r the y e a r s f r o m 1938 to 1963. (See T a b l e X V ) 45. I m p e r i a l T o b a cco Company of Canada L t d . , A n n u a l R e p o r t f o r  the Y e a r 1948, p. 4. 102 "Whereas 1 4 % of the e x e c u t i v e m e s s a g e s i n 1938 c o n t a i n e d r e f e r e n c e to th i s t o p i c , the p e r c e n t a g e i n 1963 was 7. M o s t of the e a r l i e r r e f e r e n c e s i . e. i n 1938 r e p o r t s , w e r e b r i e f and u n i n f o r m a t i v e s u c h as " p r o d u c t i o n was m a i n t a i n e d d u r i n g the y e a r . " It was o n l y a f t e r 1948 that comments on p r o d u c t i o n tended to be m o r e s e l e c t i v e and a l i t t l e m o r e i n f o r m a t i v e . That i s to say, management tended to r e f e r to p r o d u c t i o n o n l y when i t h a d something w o r t h m e n t i o n i n g about. The c a s e of D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d was t y p i c a l . In the e x e c u t i v e m e s s a g e of i t s 1938 r e p o r t , t h e r e was no m e n t i o n of p r o d u c t i o n at a l l . In 1948, p r o d u c t i o n was r e f e r r e d to as h a v i n g r e a c h e d c a p a c i t y l e v e l . '-. M anagement was s i l e n t a g a i n i n 1953. In 1958, the f o l l o w i n g was r e p o r t e d : " P r o d u c t i o n of ingots and c a s t i n g i n c r e a s e d f r o m 604, 415 tons to 731, 061 tons a gain of 2 1 % o v e r the p r e v i o u s y e a r , and a t t a i n e d the h i g h e s t l e v e l i n y o u r company's h i s t o r y . "^6 In 1963, under a p a r a g r a p h headed " o p e r a t i o n s " i n the e x e c u t i v e m e s s a g e , management s i n g l e d out p r o d u c t i o n f o r s p e c i f i c m e n t i o n as f o l l o w s : " P r o d u c t i o n of ingots and c a s t i n g s d u r i n g the y e a r was 1, 391, 09 1 tons , a r e c o r d h i g h and an i n c r e a s e of 11. 9% o v e r that of the p r e v i o u s y e a r . T h i s i s the s i x t h c o n s e c u t i v e y e a r i n w h i c h a p r o d u c t i n c r e a s e e x c e e d i n g 1 0 % has been achieved. " ^ In a d d i t i o n , a b a r c h a r t was p r i n t e d i l l u s t r a t i n g the v a r i o u s l e v e l s of p r o d u c t i o n w h i c h h a d been a c h i e v e d by the company d u r i n g the l a s t ten y e a r s . 46. D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d , A n n u a l R e p o r t f o r the Y e a r  1958, p. 4. 47. D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d , A n n u a l R e p o r t f o r the Y e a r  1963, p. 6. 103 C ompany P o l i c y E a c h y e a r a s m a l l n u m b e r of c o m p a n i e s , p r e d o m i n a n t l y p u b l i c u t i l i t i e s and I r o n and S t e e l c ompanies p r e s e n t e d i n the e x e c u t i v e m e s s a g e s of t h e i r a n nual r e p o r t s , a s t atement of t h e i r p r i n c i p l e s and a i m s as they a f f e c t e d the p u b l i c as a whole and the i n d i v i d u a l groups of w h i c h i t was made up. Thus the 1938 e x e c u t i v e m e s s a g e of Southern Canada P o w e r Company L i m i t e d c o n t a i n e d a s t a t e m e n t to the e f f e c t that "the p o l i c y of y o u r company i s to continue to s u p p l y the b e s t s e r v i c e at the b e s t p o s s i b l e c o s t to the p u b l i c . " The P r e s i d e n t of C a n a d i a n G e n e r a l E l e c t r i c Company L i m i t e d , i n the e x e c u t i v e m e s s a g e of i t s 1958 r e p o r t , r e p e a t e d i t s r e s p o n s i b i l i t y to help i n the country's c o n t i n u e d development and to c r e a t e job o p p o r t u n i t i e s . Some c o m p a n i e s i d e n t i f i e d t h e i r i n t e r e s t s w i t h the p u b l i c by m e n t i o n i n g t h e i r c o n t r i b u t i o n to u n i v e r s i t i e s , c o m m u n i t y p r o j e c t s and c h a r i t i e s . Thus, the P r e s i d e n t of D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d , under a p a r a g r a p h " C o m m u n i t y I n t e r e s t s " i n the e x e c u t i v e m e s s a g e of i t s 1958 a n nual r e p o r t s , s t r e s s e d the f o l l o w i n g : " Y o u r company cont i n u e d i t s s u p p o r t of c o m m u n i t y a c t i v i t i e s w i t h g r a n t s , s c h o l a r s h i p s , and b u r s a r i e s to u n i v e r s i t i e s and s c h o o l s , and donations to c h a r i t a b l e w o r k s . A s w e l l , many of our m a n a g e r i a l and staff p e r s o n n e l took an a c t i v e p a r t i n the o p e r a t i o n of these o r g a n i z a t i o n s . Our e m p l o y e e s gave s u b s t a n t i a l s u p p o r t to c h a r i t a b l e and s o c i a l s e r v i c e p r o g r a m s t h r o u g h t h e i r C h a r i t y C h e s t O r g a n i z a t i o n . "48 48. - D o m i n i o n F o u n d a r i e s and S t e e l L i m i t e d , A n n u a l R e p o r t f o r the Y e a r  1958, p. 6. 104 A s T a b l e X V shows, the n u m b e r of c o m p a n i e s w h i c h came out w i t h a statement of p r i n c i p l e s i n t h e i r e x e c u t i v e m e s s a g e s was v e r y s m a l l e ach y e a r . However, o v e r the y e a r s f r o m 1938 to 1963 t h e r e w e r e some i n c r e a s e . R e s e a r c h F e w annual r e p o r t s made comments on r e s e a r c h i n the e x e c u t i v e m e s s a g e , although as T a b l e X V r e g i s t e r s , t h e r e w e r e some i n c r e a s e i n the p e r c e n t a g e of r e p o r t s who d i d so. M o s t of the comments w e r e of a g e n e r a l n a t u r e s u c h as "our r e s e a r c h a c t i v i t i e s c o v e r a l l p h a s e s of s t e e l p r o d u c t i o n . " None of the r e f e r e n c e s c o n t a i n e d any f i g u r e w i t h r e g a r d to r e s e a r c h e x p e n d i t u r e s . F o r e i g n E x c h a n g e T h i s a g a i n was another r a r e t o p i c i n the e x e c u t i v e m e s s a g e s . M o s t of the comments on t h i s t o p i c w e r e r e l a t e d to exchange c o n t r o l and r e g u l a t i o n . O n l y one company i . e. B r a z i l i a n T r a c t i o n L i g h t and P o w e r Company L i m i t e d , gave f i g u r e s on exchange r a t e s . 1 104 C H A P T E R V S C O P E O F O P E R A T I O N S I n t r o d u c t i o n M a ny of the s u r v e y c o m p a n i e s b e l i e v e d that shareholder s w e r e i n t e r e s t e d i n k n owing s o m e t h i n g m o r e about the e n t e r p r i s e than the y e a r l y f i n a n c i a l statements. A s a r e s u l t , many of them w e r e adding to t h e i r a n nual r e p o r t s i n f o r m a t i o n about the scope of o p e r a t i o n i . e. p r o d u c t s , s i z e of o p e r a t i o n , n u m ber of s u b s i d i a r i e s , b r a n c h e s etc. , T h i s chapter attempts to e x a m i n e i n some d e t a i l the n a t u r e and content of s u c h i n f o r m a t i o n . In t e r m s of s e c t i o n s (see C h a p t e r 1 ), t h i s c hapter c o v e r s the n a r r a t i v e s e c t i o n , the p r o d u c t s e c t i o n and the l i s t of l o c a t i o n s , s u b s i d i a r i e s and d i v i s i o n s . F u n c t i o n s of N a r r a t i v e S e c t i o n The m a i n p u r p o s e of the n a r r a t i v e i s to e x p l a i n the o p e r a t i o n of the e n t e r p r i s e , to p r o v i d e i n f o r m a t i o n w h i c h i s not found e l s e w h e r e i n the r e p o r t o r w h i c h i s p r e s e n t e d i n such a m a n n e r that the a v e r a g e r e a d e r w o u l d not u n d e r s t a n d i t . Thus i t a p p e a r s that the n a r r a t i v e d u p l i c a t e s to a c e r t a i n extent the f u n c t i o n s of the e x e c u t i v e message. T h i s i s t r u e but i n p a r t o n l y and helps to e x p l a i n the absence of a n a r r a t i v e s e c t i o n i n those r e p o r t s w h i c h c o n t a i n e d l o n g , b r o a d and d e t a i l e d e x e c u t i v e m e s s a g e s . F o r u n l i k e the e x e c u t i v e m e s s a g e , w h i c h touches on many asp e c t s of the b u s i n e s s but o n l y b r i e f l y , the n a r r a t i v e 105 goes into d e t a i l ; i t e x p l a i n s i n d e t a i l the o p e r a t i o n of the e n t e r p r i s e . A s a consequence the n a r r a t i v e s e c t i o n i s u s u a l l y l o n g e r than the exe c u t i v e message. In a d d i t i o n , i t e m p h a s i z e s l e s s on f i n a n c i a l r e s u l t s and m o r e on other a s p e c t s of the b u s i n e s s such as o p e r a t i o n s , p r o d u c t s , management, m a r k e t i n g , employee r e l a t i o n s and s u b s i d i a r i e s . N a t u r e and F r e q u e n c y of N a r r a t i v e S e c t i o n In a few r e p o r t s the n a r r a t i v e was not a d i s t i n c t and u n i f i e d whole w h i c h was set off f r o m other s e c t i o n s and p l a c e d under one heading. In s u c h c a s e s , a l l s e c t i o n s of the r e p o r t w h i c h d i d not f i t c l e a r l y into any other c a t e g o r y and w e r e e s s e n t i a l l y n e w s - o r i e n t e d w e r e c o n s i d e r e d to be n a r r a t i v e s . Some of these m i g h t i n c l u d e p h otographs, g r a p h s , c h a r t s and other i l l u s t r a t i v e i t e m s ; i n the m a i n , however, they w e r e c o m p r i s e d of t e x t u a l m a t e r i a l . The i n t r o d u c t i o n of a n a r r a t i v e s e c t i o n into the annual r e p o r t was a f a i r l y r e c e n t i d e a , and as T a b l e 111 c l e a r l y i n d i c a t e s , o n l y 4 % of the r e p o r t s i n 1938 made p r o v i s i o n f o r t h i s s e c t i o n . In 1948, the p e r c e n t a g e r o s e to nine. Throughout the p e r i o d , t h i s s e c t i o n b e came a c c e p t e d r a p i d l y and i n 1963, 2 2 % of the a nnual r e p o r t s c o n t a i n e d n a r r a t i v e s e c t i o n s . C u r i o u s l y enough, m o s t of the r e p o r t s w h i c h p r o v i d e d f o r s u c h a s e c t i o n came f r o m c o m p a n i e s w h i c h r e p r e s e n t e d t h r e e p a r t i c u l a r i n d u s t r i a l g r o u p i n g s , n a m e l y : f i n a n c i a l i n s t i t u t i o n s , c o n s u m p t i o n goods a n d f f o r e s t s and a l l i e d p r o d u c t s . (See A p p e n d i x 11 ). 106 F o r m a t and D e s i g n G e n e r a l l y speaking, the n a r r a t i v e s e c t i o n was v e r y w e l l p r e s e n t e d . A g r e a t d e a l of at t e n t i o n was p a i d to s t r e a m l i n i n g t h i s s e c t i o n . F o r t e x t u a l m a t e r i a l m o s t of the r e p o r t s adopted the two-c o l u m n a r m e t h o d of p r e s e n t a t i o n • the so - c a l l e d " m a g a z i n e " look. T o p i c s w e r e w e l l d e p a r t m e n t a l i z e d and p r o v o c a t i v e h e a d l i n e s w e r e often u s e d to i n c r e a s e r e a d e r s h i p . • The g r e a t e s t i m p r o v e m e n t , however, came f r o m the use of photographs, graphs, c h a r t s and other e y e - a p p e a l f e a t u r e s to c o m p l e m e n t the text. W i t h the e x c e p t i o n of y e a r 1938, m o r e than 5 0% of the n a r r a t i v e s e c t i o n s i n any of the other y e a r s c o n t a i n e d e y e - a p p e a l f e a t u r e s o f o n e k i n d o r another. The f o l l o w i n g s t a t i s t i c s e x p l a i n t h i s p o i n t . N u m b e r of r e p o r t s w i t h N u m b e r of n a r r a t i v e sect, w i t h 1938 3 1948 1953 1958 1963 7 7 11 22 4 4 10 20 P e r c e n t a g e of n a r r a t i v e sect. w i t h i l l u s t r a t i o n s . - 57. 2 % 57. 2 % 91. 0% 91. 0% Note that i n 1958 and 1963 p r a c t i c a l l y e v e r y n a r r a t i v e s e c t i o n was i l l u s t r a t e d . In the m a j o r i t y of c a s e s photographs w e r e the m o s t p o p u l a r type of e y e - a p p e a l f e a t u r e used. Thus the 1963 A n n u a l R e p o r t of the T o r o n t o S t a r L i m i e d u s e d s i x t e e n p i c t u r e s to i l l u s t r a t e i t s account of a t y p i c a l w o r k i n g day. L o b l a w s 1963 t r a c e d the development of Canada by means of e l e v e n pages of b l a c k and white photographs. 107 P r o v i n c i a l T r a n s p o r t Company 1953 adopted two s k e t c h e s to i l l u s t r a t e i t s s e r v i c e to the p u b l i c . T i t l e of N a r r a t i v e S e c t i o n The headings w h i c h w e r e u s e d as t i t l e s to the n a r r a t i v e s e c t i o n s w e r e as v a r i e d as the number of r e p o r t s w i t h i n s u c h s e c t i o n s . . They tended to be i n d i v i d u a l i z e d and thus d i d not l e n d t h e m s e l v e s to easy c l a s s i f i c a t i o n . The Bank of N o v a S c o t i a , f o r example, r e l a t e d the s t o r y of "An I n t e r n a t i o n a l B a n k " i n the 1953 n a r r a t i v e s e c t i o n of i t s annual r e p o r t . Hinde and Dauch P a p e r Company of Canada L i m i t e d i n i t s 1958 r e p o r t r e c o r d e d t h r e e t o p i c s i n the n a r r a t i v e s e c t i o n . They w e r e e n t i t l e d " Q u a l i t y C o n t r o l " " I n d u s t r i a l R e l a t i o n s " and " A c c o m p l i s h -ments of 1958. " The 1953 r e p o r t of D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L i m i t e d c a r r i e d a s t o r y about "Canada -- F o u n d a t i o n s of i t s F u t u r e . " A s m a l l n u m b e r of c o m p a n i e s each y e a r p r i n t e d the n a r r a t i v e s e c t i o n without a t i t l e . L e n g t h of N a r r a t i v e S e c t i o n The s u r v e y d i d not r e v e a l any t r e n d w i t h r e g a r d to the len g t h of the n a r r a t i v e s e c t i o n . L e n g t h of n a r r a t i v e s e c t i o n tended to f l u c t u a t e f r o m y e a r to y e a r (See T a b l e X X I 1 1 ). The s h o r t e s t n a r r a t i v e s e c t i o n found i n the s u r v e y was one page and the l o n g e s t was 23 pages. TABLE XXI11 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F NARRATIVE SECTIONS A C C O R D I N G T O L E N G T H A N D YEARS 108 Length of Narrative Section Number of Narrative Sections 1 - 5 pages 6 - 10 pages More than 10 pages 1938 66.7 1948 1953 1958 11 1963 11 33.3% 57.1% 42.8% 18.2% 59.3% 28.6 28.6 72.8 27.2 14.3 28.6 9.0 13.5 109 O r g a n i z a t i o n of N a r r a t i v e S e c t i o n F o u r d i f f e r e n t types of o r g a n i z a t i o n w e r e found i n the s u r v e y w i t h r e g a r d to the p r e s e n t a t i o n of the n a r r a t i v e s e c t i o n . They w e r e as f o l l o w s : 1. The n a r r a t i v e m i g h t be o r g a n i z e d as one u n i f i e d s e c t i o n . It m i g h t d i s c u s s v a r i o u s a s p e c t s of the b u s i n e s s o r i t m i g h t be c o n c e r n e d e x c l u s i v e l y w i t h one s p e c i a l i z e d subject. 2. The n a r r a t i v e m i g h t be c o m p o s e d of two o r m o r e u n i t s each c o m p l e t e i n i t s e l f but a l l k n i t t e d together under one heading. 3. A t h i r d type of o r g a n i z a t i o n took the f o r m of two or m o r e n a r r a t i v e s e c t i o n s each of w h i c h was independent of the other and each of w h i c h was devoted to one s p e c i a l i z e d topic. 4. S o m e t i m e s the n a r r a t i v e c o n s i s t e d of a g e n e r a l r e v i e w s e c t i o n f o l l o w e d by m u l t i - u n i t s e c t i o n s s i m i l a r to those n o t e d i n p o i n t 2 above. T a b l e X X I V g i v e s a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the f o u r types of o r g a n i z a t i o n s . The s u r v e y d i d not r e v e a l any d i s t i n c t t r e n d o v e r the p e r i o d f r o m 1938 to 1963 w i t h r e g a r d to any of the f o u r types of o r g a n i z a t i o n . T h e r e was a s l i g h t i n d i c a t i o n , however, that the lon g r u n ttr e n d of the "one u n i f i e d s e c t i o n " type of p r e s e n t a t i o n was d e c l i n i n g w h i l e that of the " m u l t i - u n i t " type was i n c r e a s i n g . • Content of N a r r a t i v e S e c t i o n T h e r e was a good d e a l of v a r i a t i o n w i t h r e g a r d to the types and extent of t o p i c s c o v e r e d i n the n a r r a t i v e s e c t i o n s . In each 110 TABLE X X I V PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F NARRATIVE SECTIONS BY TYPES O F O R G A N I Z A T I O N A N D YEARS Types of Organization Number of Narrative Sections One Unified Section Multi-unit sections under one heading Independent sections with specialized topics General Review plus multi-unit sections 1938 1 948 1 953 1 958 1 963 66.7 11 9.1 11 33.3% 71.4% 71.4% 9.1% 18.2% 28.6 28.6 45.4 40.9 36.4 36.4 4.5 I l l y e a r , some n a r r a t i v e s d e a l t w i t h a l l a s p e c t s of the b u s i n e s s t h e s e r e s e m b l e d to a c e r t a i n extent the l o n g b r o a d e x e c u t i v e m e s s a g e s . O t h e r s d i s c u s s e d one o r m o r e s p e c i a l i z e d s u b j e c t s . In c e r t a i n y e a r s , a f e w n a r r a t i v e s c o n c e r n e d t h e m s e l v e s c h i e f l y w i t h f i n a n c i a l r e v i e w s , i . e. w i t h t o p i c s n o r m a l l y i n c l u d e d i n the f i n a n c i a l s t atements; s t i l l o t h e r s w e r e devoted m a i n l y to r e v i e w s of t o p i c s w h i c h a r e not n o r m a l l y i n c l u d e d i n the f i n a n c i a l statements such as p u b l i c r e l a t i o n s , m a r k e t i n g management, p r o d u c t s , s u b s i d i a r i e s etc. T a b l e X X V g i v e s an i n d i c a t i o n of the types of c o v e r a g e found i n the n a r r a t i v e s e c t i o n s . , It s h o u l d be p o i n t e d out that the c l a s s i f i c a t i o n s w h i c h w e r e adopted w e r e by no means c l e a n cut. A r b i t r a r y judgment was i n e v i t a b l e i n some cas e s . F o r example, w h e r e a n a r r a t i v e s e c t i o n d i s c u s s e d p r e d o m i n a n t l y f i n a n c i a l t o p i c s but touched l i g h t l y on one or two n o n - f i n a n c i a l s u b j e c t s , i t was c l a s s i f i e d as h a v i n g devoted i t s e l f to a f i n a n c i a l r e v i e w . S i m i l a r l y , a n a r r a t i v e was c l a s s i f i e d as one w h i c h was devoted to a n o n - f i n a n c i a l r e v i e w , i f i t was c o n c e r n e d c h i e f l y w i t h n o n - f i n a n c i a l t o p i c s although one or two f i n a n c i a l t o p i c s m a y be i n c l u d e d a l s o . F r o m T a b l e X X V i t i s c l e a r that i n a l l y e a r s , t h e r e w e r e m o r e n a r r a t i v e s w h i c h c o n c e n t r a t e d on s p e c i a l i z e d s u b j e c t s than on v a r i e d a s p e c t s of the b u s i n e s s o r on f i n a n c i a l t o p i c s . The 112 n u m b er of n a r r a t i v e s w h i c h was c o n c e r n e d m a i n l y w i t h f i n a n c i a l o r n o n - f i n a n c i a l r e v i e w s was i n s i g n i f i c a n t . T h e r e was some i n d i c a t i o n that over the y e a r s f r o m 1938 to 1963, an i n c r e a s i n g p r o p o r t i o n of n a r r a t i v e s was m o v i n g away f r o m the p r a c t i c e of c o v e r i n g s p e c i a l i z e d s u b j e c t s into the p r a c t i c e of d i s c u s s i n g v a r i o u s a s p e c t s of the e n t e r p r i s e . To d e t e r m i n e m o r e a c c u r a t e l y the t o p i c s w h i c h w ere i n c l u d e d i n the n a r r a t i v e s , a n a n a l y s i s of the n a r r a t i v e s e c t i o n s was made. The r e s u l t s a r e shown i n T a b l e X X V I . Note that i n T a b l e X X V I the t o p i c s a r e a r r a n g e d i n o r d e r of p e r c e n t a g e f r e q u e n c y of n a r r a t i v e s e c t i o n s m e n t i o n i n g t h e m d u r i n g 1963. To enable the r e a d e r to g a i n some p e r s p e c t i v e of the e m p h a s i s g i v e n to the v a r i o u s t o p i c s o v e r the y e a r s , T a b l e X X V I 1 i s c o n s t r u c t e d . T h i s t a b l e l i s t s the f i r s t f i f t e e n t o p i c s i n o r d e r of p e r c e n t a g e f r e q u e n c y of n a r r a t i v e s e c t i o n s c o n t a i n i n g t hem i n e ach of the f i v e y e a r s . C o m p a r i n g the two t a b l e s , the f o l l o w i n g c o n c l u s i o n s may be drawn: 1. E x c e p t f o r two t o p i c s , n a m e l y , management and economy, w h i c h showed d e c l i n i n g t r e n d s f r o m 1938 to 1963, none of the o t h e r t o p i c s e x h i b i t e d a c l e a r t r e n d w i t h r e g a r d to the p e r c e n t a g e f r e q u e n c y of n a r r a t i v e s e c t i o n s c o n t a i n i n g them. 2. D i f f e r e n t t o p i c s w e r e e m p h a s i z e d each y e a r . It i s d i f f i c u l t , f o r e xample, to f i n d seven i t e m s w h i c h o c c u p i e d the f i r s t s even p l a c e s i n e a c h of the y e a r s . 113 R e g a r d l e s s of the p l a c e s o c c u p i e d by the t o p i c s and the e m p h a s i s gi v e n to them, the s u r v e y r e v e a l e d that a l l the t o p i c s w h i c h a p p e a r e d i n the n a r r a t i v e s e c t i o n s w e re g e n e r a l l y w e l l d i s c u s s e d and e x p l a i n e d . P r o d u c t S e c t i o n A l l i n f o r m a t i o n about p r o d u c t s -- t e x t u a l o r o t h e r -w i s e -- w h i c h have not been i n c l u d e d i n the e x e c u t i v e m e s s a g e , n a r r a t i v e s e c t i o n or f r o n t c o v e r , come under the domain of t h i s s e c t i o n . T h e r e i s c l e a r e v i d e n c e to show that o v e r the y e a r s 1938 - 1963 t h e r e was an i n c r e a s i n g tendency on the p a r t of C a n a d i a n companies to t e l l of t h e i r p r o d u c t s i n annual r e p o r t s . C o n s i d e r the f o l l o w i n g date:: 1938 1948 1953 1958 1963 No. of annual r e p o r t s a n a l y z e d 67 78 88 104 115 No. of annual r e p o r t s w i t h p r o d u c t s e c t i o n 10 19 32 42 42 P e r c e n t a g e of a n n u a l r e p o r t s w i t h p r o d u c t s e c t i o n 1 4 . 9 % 2 4 . 4 % 3 6 . 4 % 4 0 . 4 % 3 6 . 5 % Note that i n 1938 only 1 5 % of the annual r e p o r t s p r o v i d e d f o r a p r o d u c t se c t i o n . Since then and u n t i l 1963 the f i g u r e was s t e a d i l y i n c r e a s i n g . It a p p e a r e d to have a t t a i n e d i t s peak i n 1958. In 1963, 3 6 % of the annual r e p o r t s c o n t a i n e d p r o d u c t s e c t i o n s . Thus t h e r e was a d i f f e r e n c e of a p p r o x i m a t e l y 2 1 % , f r o m 1938 -- 1963, w i t h r e s p e c t to the number 114 TABLE X X V PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F NARRATIVE SECTIONS A C C O R D I N G T O TYPES O F C O N T E N T C O V E R A G E A N D YEARS Types of content coverage Number of narrative sections One or more specialized subj, A l l Aspects of the business Financial review 1938 33.3 1948 1953 1958 11 42.9 28.6 36.4 9.0 1963 11 66T. 7% 57.1% 71.4% 36.4% 36.4% 36.4 9.0 Non-f inancial review 18.2 18.2 115 T A B L E X X V I P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F N A R R A T I V E S E C T I O N S A C C O R D I N G TO T O P I C S A N D Y E A R S T o p i c s 1938 1948 1953 1958 1963 T o t a l No. of N a r r a t i v e s e c t i o n s _3 7_ 1 1_1 1. S u b s i d i a r i e s and b r a n c h e s - 28. 6% 28. 6% 63. 7 % 63. 7' 2. M a r k e t i n g 66. 7 28. 6 42. 8 63.: 7 50. 0 3. F i x e d A s s e t s 14. 3 42. 8 45. 4 40. 9 4. S a l e s 14. 3 28. 6 36. 4 36. 4 5. E m p l o y e e R e l a t i o n s 33. 3 71. 4 57. 3 9 1 . 0 33. 3 6. E a r n i n g s 42. 8 14. 3 18. 2 33. 3 7. D i v i d e n d s 28. 6 14. 3 27. 3 27. 4 8. G o v e r n m e n t r e l a t i o n s 66. 7 14. 3 14. 3 9. 1 27. ;4 9.- P r o d u c t i o n _ - 36. 6 23. 7 10. C a p i t a l Stock S t r u c t u r e - - 36. 4 22. 8 11. M a t e r i a l s and s u p p l i e s - 28. 6 18. 2 12. S h a r e h o l d e r s 14. 3 14. 3 45. 5 18. 2 13.. M a n a g e m e n t 66. 7 28. 6 28. 6 36. 4 13. 7 14. Bonds and De b e n t u r e s - 27. 3 13. 7 15. R e s e a r c h - 14. 3 27. 3 13. 7 16. O u t l o o k - 28. 6 18. 2 9. 0 17. P r o d u c t s and S e r v i c e - - 36. 4 9. 0 18. E c o n o m y 100. 0 42. 8 42. 8 9. 1 4. 5 19- F o r e i g n E x c h a n g e 33. 3 14. 3 - 9. 1 4. 5 20. Company h i s t o r y 33. 3 42. 8 28. 6 18. 2 4. 5 21. Company p o l i c y - - - 4. 5 U 6 T A B L E X X V 1 1 L I S T O F F I R S T F I F T E E N M O S T F R E Q U E N T L Y M E N T I O N E D T O P I C S IN N A R R A T I V E ! S E C T I O N S I N E A C H O F F I V E S E L E C T E D Y E A R S 1938 1948 1953 1958 1963 1. E c o n o m y E m p l o y e e R e l a t i o n s E m p l o y e e R e l a t i o n s E m p l o y e e R e l a t i o n s S u b s i d i a r i e s and b r a n c h e s 2. M a r k e t i n g E a r n i n g s M a r k e t i n g S u b s i d i a r i e s M a r k e t i n g 3. G o v e r n m e n t r e l a t i o n s C ompany h i s t o r y F i x e d a s s e t s M a r k e t i n g F i x e d a s s e t s 4. M a n a g e m e n t E c o n o m y E c o n o m y F i x e d A s s e t s S a l e s 5. E m p l o y e e r e l a t i o n s S u b s i d i a r i e s S u b s i d i a r i e s S h a r e h o l d e r s E m p l o y e e r e l a t i o n s 6. F o r e i g n E x c h a n g e M a r k e t i n g S a l e s S a l e s E a r n i n g s 7. Company h i s t o r y D i v i d e n d s M a t e r i a l s and s u p p l i e s P r o d u c t i o n D i v i d e n d s 8. - M a n a g e m e n t M a n a g e m e n t C a p i t a l s t r u c t u r e G o v e r n m e n t r e l a t i o n s 9. - F i x e d a s s e t s O u t l o o k M a n a g e m e n t P r o d u c t i o n 10. - S a l e s C o m p a n y h i s t o r y P r o d u c t s and s e r v i c e s C a p i t a l s t o c k 11. - G o v e r n m e n t r e l a t i o n s E a r n i n g s D i v i d e n d s M a t e r i a l s and s u p p l i e s 12. - S h a r e h o l d e r s D i v i d e n d s B o n d s and debentures S h a r e h o l d e r s 13. - F o r e i g n E x c h a n g e G o v e r n m e n t r e l a t i o n s R e s e a r c h M a n a g e m e n t 14. - - S h a r e h o l d e r s E a r n i n g s Bonds and debentures 15. - - R e s e a r c h O u t l o o k R e s e a r c h 117 of c o m p a n i e s w h i c h h ad u s e d the annual r e p o r t to b r i n g t h e i r p r o d u c t s to the a t t e n t i o n of s h a r e h o l d e r s , c u s t o m e r s and p r o s p e c t i v e c u s t o m e r s . It i s i n t e r e s t i n g to note that the m a j o r i t y of these r e p o r t s came f r o m c ompanies w h i c h r e p r e s e n t e d two i n d u s t r i a l g r o u p i n g s n a m e l y : c o n s u m p t i o n goods, and i r o n and s t e e l . T h e r e a r e b a s i c a l l y two r e a s o n s why co m p a n i e s i n c o r p o r a t e p r o d u c t s e c t i o n s into t h e i r a n nual r e p o r t s . The f i r s t i s that i t h e l p s to acquaint r e a d e r s w i t h the f i r m ' s a c t i v i t i e s , and i n a number of i n s t a n c e s i t s e r v e s to r e m o v e m i s t a k e n i m p r e s s i o n s about the company. The s e c o n d i s that i t m a y i n d i r e c t l y induce r e a d e r s to buy the company's p r o d u c t s o r help to make them b e t t e r c u s t o m e r s than they w e r e b e f o r e . A p p a r e n t l y management s e e m e d to th i n k that s i n c e the annual r e p o r t was one of the b e s t ways of r e a c h i n g the m o s t i n t e r e s t e d l i s t of p o t e n t i a l c u s t o m e r s that any company c o u l d have, i t m i g h t as w e l l c o n t a i n i n f o r m a t i o n r e g a r d i n g the company's p r o d u c t s . P r e s e n t a t i o n It was found i n the s u r v e y that the p r o d u c t s e c t i o n c o u l d be p r e s e n t e d i n a v a r i e t y of ways. The f i r s t and m o s t common type of p r e s e n t a t i o n was a l i s t w h i c h c o v e r e d a c o m p r e h e n s i v e v i e w of the whole range of company p r o d u c t s . S o m e t i m e s the l i s t was c o m p l e m e n t e d by a group of p i c t u r e s . The s e c o n d m o s t c ommon type 118 of p r e s e n t a t i o n took the f o r m of a group of p i c t u r e s w i t h d e s c r i p t i v e c aptions o r p a r a g r a p h s but a l l t i e d together u n d e r one heading. Thus D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L i m i t e d p r e s e n t e d twenty s i x c o l o u r pages of p r o d u c t s under the t i t l e s "A P o r t f o l i o of p r o d u c t s s o l d i n the U n i t e d S t a t e s " and "A P o r t f o l i o of p r o d u c t s s o l d i n C a n a d a " i n i t s 1958 annual r e p o r t . A t h i r d type of p r e s e n t a t i o n c o m p r i s e d of a s e r i e s of photographs o r d r a w i n g s , w i t h or without c a p t i o n s , i n t e r s p e r s e d t h r o u g h o u t the r e p o r t but r e l a t e d to each o t h e r and d e p i c t i n g a l l types of company p r o d u c t s . Thus I m p e r i a l T o b a cco Company of Canada L i m i t e d e x h i b i t e d twenty t h r e e b r a n d s of c i g a r e t t e s , tobacco and c i g a r s on t h r e e a l t e r n a t e pages of i t s 1963 annual r e p o r t . F i n a l l y , the p r o d u c t i n f o r m a t i o n m i g h t be p r e s e n t e d i n the f o r m of one or m o r e p i c t u r e s of a p r o d u c t o r p r o d u c t s p l a c e d i n the r e p o r t w h e r e v e r space i s a v a i l a b l e , and not r e l a t e d to the a d j a c e n t text, but r e l a t e d to each o t h e r , i f t h e r e w e r e m o r e than one. T a b l e X X V I 1 1 g i v e s a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of these v a r i o u s types of p r es entation. It i s c l e a r , f r o m T a b l e X X V 1 1 1 , that o v e r the p e r i o d 1938 to 1963, the " l i s t i n g " type of p r e s e n t a t i o n , w i t h or without p i c t u r e s , was r a p i d l y d e c l i n i n g i n use. W h e r e a s 9 0 % of the companies w h i c h p r o v i d e d p r o d u c t i n f o r m a t i o n i n t h e i r 1938 r e p o r t s adopted t h i s type of p r e s e n t a t i o n , the c o r r e s p o n d i n g f i g u r e i n 1963 was 5 9 % a d i f f e r e n c e of m o r e than 3 0 % o v e r the twenty f i v e y e a r s . It i s e q u a l l y 119 c l e a r , on the o t h e r hand, that t h e r e was an i n c r e a s i n g u s e of groups of p i c t u r e s to i l l u s t r a t e the p r o d u c t s of the company. The f i g u r e s i n T a b l e X X V 1 1 1 a r e e x p l a n a t o r y . The use of t h i s s e c o n d type of p r e s e n t a t i o n i n c r e a s e d f r o m a m e r e 1 0 % i n 1938 to m o r e than 3 3 % i n 1963. M a n y of the photographs w e r e b r i l l i a n t l y c o l o u r e d . Some r e a c h e d a r t i s t i c l e v e l s . D i s t i l l e r s C o r p o r a t i o n - S e a g r a m L i m i t e d 1958 and H. C o r b y D i s t i l l e r y L i m i t e d 1953 w e r e c a s e s i n point. L o c a t i o n In a l l y e a r s m o s t of the p r o d u c t i n f o r m a t i o n w e r e p l a c e d t o w a r d the end of the r e p o r t , that i s to say, a f t e r the f i n a n c i a l statements. In t e r m s of t r e n d , however, t h i s p r a c t i c e was d e c l i n i n g i n u s e o v e r the p e r i o d 1938 to 1963. T h e r e i s some i n d i c a t i o n , on the other hand, that t h e r e was an i n c r e a s i n g tendency to l o c a t e the p r o d u c t i n f o r m a t i o n t o w a r d the b e g i n n i n g of the r e p o r t , that i s to say, b e f o r e the e x e c u t i v e message. In a s m a l l n u m ber of c o m p a n i e s , the p r o d u c t i n f o r m a t i o n was e i t h e r p l a c e d between the e x e c u t i v e m e s s a g e and the f i n a n c i a l s t a t e m e n t s o r d i s p e r s e d throughout the r e p o r t . T a b l e X X I X g i v e s a s t a t i s t i c a l s u m m a r y of the f a c t s above. L e n g t h In t e r m s of amount of space o c c u p i e d , the p r o d u c t s e c t i o n r a r e l y e x c eeded two pages i n any one y e a r . The m o s t p o p u l a r l e n g t h was one page. In a number of c a s e s the p r o d u c t i n f o r m a t i o n was c o n t a i n e d i n l e s s than a page», su c h c a s e s , however, a p p e a r e d to 120 TABLE XXVI11 PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F PRODUCT SECTIONS A C C O R D I N G T O TYPES O F PRESENTATION A N D YEARS Types of Presentation N o . of annual reports with product section A List (with or without pictures) A group of pictures together Pictures interspersed but related Pictures where space is available 1938 1 948 1 953 1 958 1 963 10 19 32 42 6.2 4.8 2.4 42 90.0% 79.0% 71.9% 71.4% 59.5% 10.0 21.0 2 1 . 9 21.4 33.4 7.1 o c c u r l e s s and l e s s f r e q u e n t l y o v e r the y e a r s (see T a b l e X X X ) . The same t r e n d s e e m e d to be t r u e of c ases i n w h i c h p r o d u c t i n f o r m a t i o n . c o v e r e d two pages. The s m a l l e s t amount of space e v e r o c c u p i e d by t h i s s e c t i o n was a q u a r t e r ' o f a page and the l a r g e s t amount was twenty s i x pages. L o n g p r o d u c t i n f o r m a t i o n i . e. m o r e than f i v e pages, s e e m e d to be of r e c e n t o r i g i n . A s T a b l e X X X i n d i c a t e s , l o n g p r o d u c t s e c t i o n s w e r e not found i n r e p o r t e a r l i e r than 1953. Where l e s s than one page was u s e d , the r e s t of the space was n o r m a l l y o c c u p i e d by i n f o r m a t i o n r e g a r d i n g s u b s i d i a r i e s and d i v i s i o n s o r o f f i c e r s and d i r e c t o r s . S u b s i d i a r i e s , A f f i l i a t e s and D i v i s i o n s T h i s s e c t i o n i s d e f i n e d as e m b r a c i n g a l l i n f o r m a t i o n r e g a r d i n g the names; a d d r e s s e s and l o c a t i o n s of s u b s i d i a r i e s , a f f i l i a t e s and d i v i s i o n s , w h i c h have not been i n c l u d e d i n the e x e c u t i v e m e s s a g e or n a r r a t i v e s e c t i o n . The m a i n p u r p o s e of th i s s e c t i o n i s c l e a r , that i s , to p r o v i d e the r e a d e r w i t h some i d e a of the extent of the o p e r a t i o n of the company. The p a s t two decades has een the g r o w t h of b i g b u s i n e s s w i t h w i d e s p r e a d s u b s i d i a r i e s and b r a n c h e s . T h i s g r o w t h was r e f l e c t e d d i r e c t l y i n an i n c r e a s e i n the n u m ber of c o m p a n i e s w h i c h was devoting a s e p a r a t e s e c t i o n i n t h e i r annual r e p o r t s to i n f o r m a t i o n about s u b s i d i a r i e s and d i v i s i o n s d u r i n g the p e r i o d 1938 --1963. The f o l l o w i n g data c o n f i r m s t h i s t r e n d . 122 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s A n a l y z e d 67 78 88 104 115 No. of A n n u a l R e p o r t s w i t h S e c t i o n on s u b s i d i a r i e s 26 38 50 62 67 P e r c e n t a g e of A n n u a l R e p o r t s w i t h s e c t i o n on s u b s i d i a r i e s 38. 9% 48. 7% 56. 8% 59. 6% 58. 3 % In 1938, 3 9 % of the annual r e p o r t s c o n t a i n e d a s e c t i o n on s u b s i d i a r i e s and d i v i s i o n s . In 1948, a p p r o x i m a t e l y 4 9 % of the c o m p a n i e s co n t i n u e d the p r a c t i c e when p r e p a r i n g t h e i r a n nual r e p o r t s . S i n c e then the i n c r e a s e was steady u n t i l 1963 when t h e r e a p p e a r e d to be some l e v e l l i n g off i n the t r e n d . Thus f r o m 1938 to 1963 t h e r e was a d i f f e r e n c e of a p p r o x i m a t e l y 1 9 % i n the number of annual r e p o r t s w h i c h p r o v i d e d a se p a r a t e p o r t i o n devoted e x c l u s i v e l y to i n f o r m a t i o n about s u b s i d i a r i e s and d i v i s i o n s . A l l the i n d u s t r i a l g r o u p i n g s f o l l o w e d a p p r o x i m a t e l y the same t r e n d as that i n d i c a t e d i n the i l l u s t r a t i o n above. P r e s e n t a t i o n was n o r m a l l y p r e s e n t e d i n the annual r e p o r t s i n one of the f o l l o w i n g t h r e e ways. The f i r s t and c o m m o n e s t type was a l i s t w h i c h c o v e r e d the whole range of s u b s i d i a r i e s and/or d i v i s i o n s , a f f i l i a t e s , p l a n t s , w a r e h o u s e s , m i l l s etc. T h i s type of p r e s e n t a t i o n was p r e v a l e n t , i n any one y e a r , among m o r e than 8 0 % of the annual r e p o r t s w h i c h c a r r i e d I n f o r m a t i o n w i t h r e s p e c t so s u b s i d i a r i e s o r d i v i s i o n s 123 TABLE X X I X PERCENTAGE F R E Q U E N C Y DISTRIBUTION O F PRODUCT SECTIONS BY L O C A T I O N A N D YEARS L o c a t i o n 1938 1948 1953 1958 1963 No. of annual r e p o r t s w i t h p r o d u c t s e c t i o n 10 19_ _32 _42 42 T o w a r d the end of r e p o r t 9 0 . 0 % 9 4 . 8 % 9 0 . 7 % 8 1 . 0 % 7 6 . 2 % T o w a r d the b e g i n n i n g of r e p o r t 10. 0 5. 2 - 4. 8 11.9 Between the f i n a n c i a l statements and e x e c u t i v e m e s s a g e - - 3. 1 7. 1 4. 8 I n t e r s p e r s e d - - 6. 2 7. 1 7. 1 124 T A B L E X X X P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F P R O D U C T S E C T I O N S B Y L E N G T H A N D Y E A R S L e n g t h of P r o d u c t S e c t i o n 1938 1948 1953 1958 1963 No. of an n u a l r e p o r t w i t h p r o d u c t s e c t i o n 10 19 _32 _42 42 L e s s than 1 page 30. 0% 31. 5 % 25. 0% 22. 8% 16. 6% 1 page 70.0 57.9 46.9 33.3 52.4 2 pages - 10.6 15.7 14.3 11.9 3 pages - - - 2. 4 2. 4 4 pages - - 6. 2 14. 2 7.1 5 pages - - - 2. 4 2. 4 M o r e than 5 pages - - 9. 2 12. 0 7.2 125 a s e p a r a t e s e c t i o n on s u b s i d i a r i e s and d i v i s i o n s . In f a c t , i n two p a r t i c u l a r y e a r s , n a m e l y 1938 and 1958, the p e r c e n t a g e exceeded the 90 f i g u r e m a r k (See T a b l e X X X I ). S o m e t i m e s a map was added to the l i s t . • A t other t i m e s the l i s t was i l l u s t r a t e d by a group of p i c t u r e s or sketches. A d d i n g e y e - a p p e a l f e a t u r e s to the l i s t was a f a i r l y r e c e n t inn o v a t i o n . T h i s f e a t u r e was not found i n the 1938 and 1948 a n n u a l r e p o r t s . The s e c o n d type of p r e s e n t a t i o n took the f o r m of an i n t e g r a t e d set of p i c t u r e s , d r a w i n g s or s k e t c h e s w i t h d e s c r i p t i v e c a p t i o n s o r p a r a g r a p h s . D i s t i l l e r s C o r p o r a t i o n - S e a g r a m L i m i t e d , f o r e xample, p r o v i d e d twenty one s k e t c h e s of a f f i l i a t e d c o m p a n i e s d i s t r i b u t e d throughout the w o r l d i n i t s 1963 a n n u a l r e p o r t . The 1958 annual r e p o r t of C a n a d i a n G e n e r a l E l e c t r i c Company L i m i t e d c o n t a i n e d f i f t e e n d r a w i n g s d e p i c t i n g f i f t e e n p l a n t s o p e r a t i n g throughout Canada. The t h i r d type of p r e s e n t a t i o n , w h i c h was r a r e l y used, c o n s i s t e d of a map showing the d i s t r i b u t i o n and l o c a t i o n of s u b s i d i a r i e s , d i v i s i o n s etc. A p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the t h r e e types of p r e s e n t a t i o n i s g i v e n i n T a b l e X X X I . When a l i s t was u s e d to show s u b s i d i a r i e s and d i v i s i o n s , i t c o u l d a g a i n be o r g a n i z e d i n a v a r i e t y of ways. V e r y often, s u b s i d i a r i e s and d i v i s i o n s w e r e l i s t e d together u n d e r one heading. S o m e t i m e s the l i s t was b r o k e n down by l o c a t i o n s o r t e r r i t o r i e s i n w h i c h the s u b s i d i a r i e s 126 w e r e si t u a t e d . M a s s e y - F e r g u s o n L i m i t e d , f o r example, i n i t s 1958 annual r e p o r t , g r o u p e d i t s w o r l d wide s u b s i d i a r i e s under s i x m a i n t e r r i t o r i e s n a m e l y : N o r t h A m e r i c a , L a t i n A m e r i c a , E u r o p e , A s i a , A u s t r a l i a and A f r i c a . • A t o t h e r t i m e s s u b s i d i a r i e s o r d i v i s i o n s w e r e l i s t e d by types of p r o d u c t s produced. Thus C r o w n Z e l l e r b a c h Canada L i m i t e d , i n the 1958 annual r e p o r t , o r g a n i z e d a l i s t of s u b s i d i a r i e s u nder t h r e e m a i n p r o d u c t s n a m e l y : pulp and p a p e r , l u m b e r and t i m b e r . A f o u r t h type of o r g a n i z a t i o n was to l i s t p l a n t s , s u b s i d i a r i e s and a f f i l i a t e s by n a t u r e of o w n e r s h i p . Thus D o m i n i o n B r i d g e Company L i m i t e d showed " w h o l l y owned s u b s i d i a r y c o m p a n i e s " s e p a r a t e l y f r o m " a s s o c i a t e d c o m p a n i e s " i n i t s 1953 annual r e p o r t . F i n a l l y s u b s i d i a r i e s o r d i v i s i o n s m a y be l i s t e d by t h e i r m a i n f u n c t i o n s p e r f o r m e d . Thus A n t h e s - I m p e r i a l Company L i m i t e d , f o r example, g r o u p e d m a n u f a c t u r i n g p l a n t s s e p a r a t e l y f r o m s a l e s o f f i c e s and w a r e h o u s e s i n i t s 1958 annual r e p o r t . A p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the v a r i o u s types of l i s t i n g i s s u m m a r i z e d i n T a b l e X X X I 1 . In the m a j o r i t y of c a s e s i n each of the f i v e y e a r s i n f o r m a t i o n about s u b s i d i a r i e s and d i v i s i o n s was p r e s e n t e d t o w a r d the end of the r e p o r t , that i s to say, a f t e r the f i n a n c i a l statements. S p e c i f i c a l l y , the s e c o n d l a s t page and the i n s i d e b a c k c o v e r w e r e the 127 T A B L E X X X I P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F S E C T I O N S O N S U B S I D I A R I E S A N D DIVISIONS B Y T Y P E S O F P R E S E N T A T I O N A N D Y E A R S Types of p r e s e n t a t i o n 1938 1948 1953 1958 1963 No. of annual r e p o r t s w i t h s e c t i o n s on s u b s i d i a r i e s and d i v i s i o n s etc. _26 38_ _5J) 6_2_ _67 A l i s t ( w i t h o r without map o r p i c t u r e s ). 92. 4% 81.6% 86. 0% 93. 6% 88. 0°7< I n t e g r a t e d set of p i c t u r e s d r a w i n g s , s k e t c h e s 3. 8 10. 5 12. 0 4. 8 7. 5 A map 3.8 7.9 2.0 1.6 4.5 128 T A B L E X X X 11 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F T Y P E S O F L I S T S HOWING S U B S I D I A R I E S A N D DIVISIONS A C C O R D I N G TO Y E A R S Types o f . l i s t 1938 1948 1953 1958 1963 No. of annual r e p o r t w i t h l i s t s howing su b s i d . d i v i s i o n s etc 24 31 43 58 59 One u n i f i e d whole under one h e a d i n g . . . . . 5 4 . 1 % 3 5 . 5 % 4 1 . 9 % 4 6 . 6 % 3 9 . 0 % B y t e r r i t o r i e s 25.1 25.8 25.5 20.7 25.4 B y f u n c t i o n s 8. 3 22. 6 16. 3 20. 7 23. 7 B y n a t u r e of o w n e r s h i p 12. 5 12. 9 11. 6 10. 3 11. 9 B y types of p r o d u c t - 3. 2 4. 7 1.7 129 m o s t p o p u l a r spots. O v e r the p e r i o d f r o m 1938 to 1963, however, the t r e n d to war d p r o v i d i n g i n f o r m a t i o n about s u b s i d i a r i e s at the end of the r e p o r t was s t e a d i l y d e c l i n i n g . On the other hand, t h e r e was an i n c r e a s i n g tendency to p r o v i d e the same i n f o r m a t i o n t o w a r d the b e g i n n i n g of the r e p o r t , that i s , b e f o r e the executive, message. A s m a l l n u m b e r of c ompanies each y e a r l o c a t e d i n f o r m a t i o n r e g a r d i n g s u b s i d i a r i e s and d i v i s i o n s between the e x e c u t i v e m e s s a g e and the f i n a n c i a l statements. T a b l e X X X I 1 1 s u m m a r i z e s i n s t a t i s t i c a l f o r m the f a c t s above. .Note that i n 1938 m o r e than 7 3 % of the i n f o r m a t i o n w e r e l o c a t e d t o w a r d the end of the r e p o r t . F r o m that t i m e onwards u n t i l 1963 the f i g u r e was n e v e r r e a c h e d again. In 1963, o n l y 5 5 % of the c ompanies c o n t i n u e d to keep the i n f o r m a t i o n t o w a r d the end of t h e i r annual r e p o r t s . In c o n t r a c t , w h e r e a s 2 3 % of the annual r e p o r t s p r e s e n t e d the i n f o r m a t i o n t o w a r d the b e g i n n i n g of the r e p o r t , the c o r r e s p o n d i n g f i g u r e i n 1963 was 4 7 % a d i f f e r e n c e of 2 4 % o v e r the twenty f i v e y e a r p e r i o d . C h a r t 111 c l e a r l y i l l u s t r a t e s the two d i s t i n c t t r e n d s . L e n g t h The tendency throughout the p e r i o d f r o m 1938 to 1963 was to keep i n f o r m a t i o n about s u b s i d i a r i e s and d i v i s i o n s s h o r t and c o n c i s e . M o s t of the c o m p a n i e s tended to confine the i n f o r m a t i o n to 130 one page o r at the m o s t two pages. Only i n a s m a l l n u m ber of i n s t a n c e s d i d the i n f o r m a t i o n e x c e e d m o r e than two pages. The s m a l l e s t amount of space e v e r o c c u p i e d by t h i s type of i n f o r m a t i o n was one tenth of a page and the l a r g e s t was eight pages. T a b l e X X X I V g i v e s a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the f a c t s above. Where l e s s than one page was u s e d , the r e s t of the space was u s u a l l y o c c u p i e d by any or a c o m b i n a t i o n of the f o l l o w i n g i n f o r m a t i o n : l i s t of p r o d u c t s , l i s t of o f f i c e r s and d i r e c t o r s , c o r p o r a t e data and t i t l e page. 131 T A B L E X X X I 1 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F S E C T I O N S ON S U B S I D I A R I E S A N D DIVISIONS A C C O R D I N G TO L O C A T I O N S A N D Y E A R S L o c a t i o n 1938 1948 1953 1958 1963 No. of annual r e p o r t s w i t h s e c t i o n s on s u b s i d i a r i e s and d i v i s i o n s etc ' .26 38 50 62 67 T o w a r d end of r e p o r t 73. 2 % 65. 8% 66. 0% 53. 2 % 55. 2 % T o w a r d beginning of r e p o r t 23. 0 29. 0 26. 0 38. 7 47. 3 Between e x e c u t i v e m e s s a g e and f i n a n c i a l statements 3. 8 5. 2 8. 0 8. 1 7.5 CHART I I I Percentage 80 i i r 1938 '48 '53 '58 '63 Location of Section on Subsidiaries and Divisions 133 T A B L E X X X I V P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F S E C T I O N S O N S U B S I D I A R I E S A N D DIVISIONS B Y L E N G T H A N D Y E A R S L e n g t h of S e c t i o n 1938 1948 1953 1958 1963 No. of an n u a l r e p o r t s w i t h s e c t i o n s on s u b s i d i a r i e s and d i v i s i o n s etc 26 _3_8 _50 _62 67 L e s s than 1 page 4 6 . 1 % 3 9 . 5 % 4 2 . 0 % 3 8 . 7 % 4 4 . 8 % 1 page. 27.0 52.6 38.0 49.9 43.2 2 pages 15.4 5.3 8.0 6.5 6.0 3 pages 11. 5 - 6. 0 3. 3 3. 0 4 pages - 2. 6 4. 0 1.6 M o r e than 4 pages - - 2. 0 - 3. 0 134 C H A P T E R V I F I N A N C I A L S U P P L E M E N T A R Y I N F O R M A T I O N I n t r o d u c t i o n The p u r p o s e of t h i s c h a p t e r i s to i n t r o d u c e t h r e e i m p o r t a n t s e c t i o n s , n a m e l y : f i n a n c i a l h i g h l i g h t s , c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s and the s tatement of s o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l . The t h r e e s e c t i o n s have one f e a t u r e i n common in that they d e a l p r e d o m i n a n t l y w i t h f i n a n c i a l i n f o r m a t i o n , that i s to say, i n f o r m a t i o n that one n o r m a l l y a s s o c i a t e s w i t h the i t e m s i n the f i n a n c i a l statements. Note that the t e r m " p r e d o m i n a n t l y " has been u s e d i n s t e a d of the t e r m " e x c l u s i v e l y . " T h i s i s because non f i n a n c i a l i n f o r m a t i o n s u c h as n u m b e r of em p l o y e e s , v o l u m e of p r o d u c t i o n , n umber of s h a r e h o l d e r s etc. , a r e a l s o n o r m a l l y i n c l u d e d under f i n a n c i a l h i g h l i g h t s and c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s . F i n a n c i a l H i g h l i g h t s - N a t u r e and F u n c t i o n s . The h i g h l i g h t s s e c t i o n m a y be d e f i n e d as a s h o r t s u m m a r y of p e r t i n e n t f i n a n c i a l and o p e r a t i n g f i g u r e s w h i c h i s u s u a l l y p l a c e d n e a r the f r o n t of the an n u a l r e p o r t , that i s to say, b e f o r e the exe c u t i v e message. The f i g u r e s a r e often p r o m i n e n t l y displayed-! u nder b o l d - l e t t e r e d headings s u c h as " h i g h l i g h t s , 11 " r e s u l t s at a g l a n c e " or " r e s u l t s i n b r i e f . " 135 The f i n a n c i a l h i g h l i g h t s s e c t i o n s e r v e s t h r e e m a i n f u n c t i o n s . T hese a r e as f o l l o w s : 1. It p r o v i d e s an a t t r a c t i v e i n t r o d u c t i o n to the m o r e d e t a i l e d i n f o r m a t i o n w h i c h f o l l o w s i t i n the r e p o r t . That i s to say, i t p r o v i d e s the r e a d e r w i t h an i d e a of the m a t e r i a l to be d i s c u s s e d i n there p o r t . 2. F o r many people who r e c e i v e a n nual r e p o r t s but do not have the t i m e or the i n c l i n a t i o n to r e a d t h e m f r o m c o v e r to c o v e r , the h i g h l i g h t s s e c t i o n p r o v i d e a u s e f u l s u m m a r y of the h i g h spots of the r e p o r t . In one sense, t h e r e f o r e , the c a s u a l r e a d e r b e c o mes b e t t e r i n f o r m e d . 3. F o r those p e r s o n s who r e v i e w the annual r e p o r t i n d e t a i l the h i g h l i g h t s s e c t i o n s e r v e s as an easy means of k e e p i n g t h e m i n p e r s p e c t i v e . Of even m o r e i m p o r t a n c e i s the f a c t that i t p r o v i d e s a r e a d y r e f e r e n c e of i m p o r t a n t f i n a n c i a l and o p e r a t i n g data. F r e q u e n c y of F i n a n c i a l H i g h l i g h t s S e c t i o n The l a s t twenty f i v e y e a r s , 1938 - 1963, saw the f i n a n c i a l h i g h l i g h t s s e c t i o n e n j o y i n g i n c r e a s i n g r e c o g n i t i o n and p o p u l a r i t y . In 1963 w e l l o v e r one t h i r d of annualBSports i n the s u r v e y c o n t a i n e d s u c h a s e c t i o n as c o n t r a s t to 19,38 when, to a l l intents and p u r p o s e s , i t was u n h e a r d of. T h i s i s no d e n i a l that the t r e n d was i n c r e a s i n g and at an a m a z i n g r a t e as the f o l l o w i n g f i g u r e s i n d i c a t e . 136 1938 1948 1953 1958 1963 No. of a n n u a l r e p o r t s a n a l y z e d 67 78 88 104 115 No. of a n n u a l r e p o r t s w i t h f i n a n c i a l h i g h l i g h t s s e c t i o n . ... - 3 . 1 3 31 42 P e r c e n t a g e of annual r e p o r t s w i t h f i n a n c i a l h i g h l i g h t s s e c t i o n - 3.8% 1 4 . 8 % 2 9 . 8 % 3 6 . 5 % I n t e r e s t i n g enough, the r a t e of i n c r e a s e i n the use of a h i g h l i g h t s s e c t i o n was m o s t r a p i d among the annual r e p o r t s of f i n a n c i a l i n s t i t u t i o n s and p u b l i c u t i l i t i e s . (See A p p e n d i x 11 ). The f o r e s t s and a l l i e d p r o d u c t s i n d u s t r i a l group, on the other hand, a c t u a l l y e x p e r i e n c e d a d e c l i n e i n the u s e of t h i s s e c t i o n . F i n a n c i a l H i g h l i g h t s - F o r m a t and D e s i g n In the m a j o r i t y of c a s e s the i t e m s i n the h i g h l i g h t s s e c t i o n w e r e l i s t e d u n d e r one heading. The p r o p o r t i o n of c o m p a n i e s f o l l o w i n g t h i s p r a c t i c e i n c r e a s e d f r o m 6 7 % i n 1948 to m o r e than 7 8 % i n 1963. In a s m a l l n u m b e r of i n s t a n c e s , e s p e c i a l l y among companies w i t h l o n g f i n a n c i a l h i g h l i g h t s , s u b t i t l e s w e r e u s e d s u c h as " o p e r a t i n g h i g h l i g h t s , " " f i n a n c i a l h i g h l i g h t s " " b a l a n c e sheet i t e m s " etc. However as the s t a t i s t i c s b e l o w i n d i c a t e s , t h i s p r a c t i c e was not p o p u l a r o v e r the p e r i o d f r o m 1938 to 1963. N a t u r e of P r e s e n t a t i o n 1938 1948 1953 ,1958 1963 No. of A n n u a l R e p o r t s w i t h H i g h l i g h t s s e c t i o n - 3 13 31 42 P e r c e n t a g e of h i g h l i g h t s under one heading - 6 6 . 7 % 6 9 . 2 % 7 7 . 4 % 7 8 . 6 % P e r c e n t a g e of h i g h l i g h t s w i t h sub-headings - 33.3 30.8 22.6 21.4 137 Of l a t e , that i s , f r o m 1958 to 1963, a s m a l l but n o t e w o r t h y number of c o m p a n i e s , p r e d o m i n a n t l y p u b l i c u t i l i t i e s , added g r a p h i c a l i l l u s t r a t i o n s to the h i g h l i g h t s s e c t i o n . In t o t a l t h e r e w e r e s i x s u c h companies. N u m b e r of Y e a r s O v e r the twenty f i v e y e a r s , 1938 to 1963, m o s t of the s u r v e y c o m p a n i e s showed f i n a n c i a l h i g h l i g h t s f o r two y e a r s i r r e s p e c t i v e of whether o r not changes between the two y e a r s was a l s o shown i n an a d d i t i o n a l column. However, w h i l e the l o n g t e r m t r e n d w i t h r e g a r d to the above p r a c t i c e was g e n e r a l l y d e c l i n i n g , the p r o p o r t i o n of c o m p a n i e s showing f i n a n c i a l h i g h l i g h t s f o r two y e a r s tojgether w i t h changes between the y e a r s was i n a c t u a l f a c t , i n c r e a s i n g . S i m i l a r i n c r e a s i n g t r e n d s w e r e evident of c o mpanies showing f i n a n c i a l h i g h l i g h t s f o r t h r e e y e a r s . No p a r t i c u l a r t r e n d was d i s c l o s e d w i t h r e g a r d to C a n a d i a n companies showing f i n a n c i a l h i g h l i g h t s f o r m o r e than t h r e e y e a r s . The p r o p o r t i o n of s u c h companies r e m a i n e d c o n s i s t e n t l y a r o u n d an a v e r a g e of 14%. O n l y f o u r c o mpanies c a r r i e d f i n a n c i a l h i g h l i g h t s f o r one y e a r . The m a x i m u m number of c o m p a r a t i v e y e a r s found i n any one r e p o r t was twelve. T h e r e was o n l y one s u c h r e p o r t . The f o l l o w i n g s t a t i s t i c s s u m m a r i z e the f a c t s above. 138 No. of C o m p a r a t i v e Y e a r s of H i g h l i g h t s Items 1938 1948 1953 1958 1963 No. of annual r e p o r t s w i t h f i n a n c i a l h i g h l i g h t s s e c t i o n - _3 _1_3 _3_1 _42 1 y e a r - - - 9. 7 % 2. 4% 2 y e a r s (without change c o l u m n ) - 1 0 0 . 0 % 7 7 . 0 % 6 1 . 3 % 5 4 . 7 % 2 y e a r s ( w i t h change c o l u m n ) - - 7.7% 9. 7 % 14. 3 % 3 y e a r s - - - 6. 5 14. 3 M o r e than 3 y e a r s - - 15. 3 12. 8 14. 3 Number of L i s t e d Items M o s t of the f i n a n c i a l h i g h l i g h t s s e c t i o n s c o n t a i n e d between s i x to f i f t e e n i t e m s . O v e r the twenty f i v e y e a r s r e v i e w e d , th i s p r a c t i c e was adopted by an i n c r e a s i n g p r o p o r t i o n of companies. A s m a l l and d e c r e a s i n g p r o p o r t i o n of f i n a n c i a l h i g h l i g h t s s e c t i o n s c o n t a i n e d l e s s than f i v e o r m o r e than f i f t e e n i t e m s o v e r the same p e r i o d . L o n g f i n a n c i a l h i g h l i g h t s s e c t i o n s w e r e u s e d p r e d o m i n a n t l y by p u b l i c u t i l i t i e s and c o m p a n i e s f r o m the f o r e s t s and a l l i e d p r o d u c t s i n d u s t r i a l group. A s t a t i s t i c a l i l l u s t r a t i o n of the f a c t s m a y be u s e f u l . 139 No. of Items i n F i n a n c i a l H i g h l i g h t s S e c t i o n 1938 1948 1953 1958 1963 No. of annual r e p o r t s w i t h f i n a n c i a l h i g h l i g h t s s e c t i o n 3 L3_ 31_ 42 - - 7. 7 % 6. 5% 2. 4% - - 15. 4 41. 9 42. 8 - 66. 7* 30. 7 38. 7 42. 8 - 33. 3 38. 5 6. 5 9. 5 •* 7. 7 6. 4 2. 5 L e n g t h In any one y e a r m o r e than 8 0 % of the h i g h l i g h t s s e c t i o n s w e r e c o n t a i n e d i n one page. The two-page l e n g t h was u s e d by f i v e c o m panies i n 1958 and 1963; d u r i n g the same y e a r s another s i x com p a n i e s m a n a g e d the h i g h l i g h t s s e c t i o n s on h a l f - a - p a g e lengths. In t h e l a t t e r c a s e s , the r e s t of the space was n o r m a l l y o c c u p i e d by a l i s t of o f f i c e r s and d i r e c t o r s o r was u s e d as a t i t l e page. F i n a n c i a l H i g h l i g h t s - Contents The s e l e c t i o n of r e l e v a n t f a c t s to be i n c l u d e d i n the f i n a n c i a l h i g h l i g h t s s e c t i o n i s another c r i t i c a l phase i n the p r e p a r a t i o n of annual r e p o r t s . H e r e , of c o u r s e , the data w h i c h m a y be i n c l u d e d i n the s u m m a r y w i l l depend somewhat upon the r e l a t i v e s i g n i f i c a n c e * T h i s f i g u r e m a y not be too r e p r e s e n t a t i v e i n v i e w of the f a c t that t h e r e w e r e o n l y t h r e e r e p o r t s w i t h f i n a n c i a l h i g h l i g h t s s e c t i o n d u r i n g that y e a r . 140 of the v a r i o u s f a c t s i n a p a r t i c u l a r b u s i n e s s . What management s h o u l d r e c o g n i z e i s the f a c t that the p r e s e n t a t i o n of t h i s s u m m a r y may r e s u l t i n some r e a d e r s q u i t t i n g at that p o i n t who m i g h t o t h e r w i s e have gone f u r t h e r . On the other hand, t h e r e m a y be so m e t h i n g i n t h i s s u m m a r y w h i c h catches the i n t e r e s t of the r e a d e r and ind u c e s h i m to delve deeper into the r e p o r t . It was found i n the s u r v e y that the types of data p r e s e n t e d i n the h i g h l i g h t s s e c t i o n v a r i e d c o n s i d e r a b l y . Some com p a n i e s c o n c e n t r a t e d on i n c o m e statement data and o t h e r s on b a l a n c e sheet data. • S t i l l o t h e r s p a i d a good d e a l of a t t e n t i o n to n o n - f i n a n c i a l data. G e n e r a l l y speaking, m any of the h i g h l i g h t s s e c t i o n s c o n t a i n e d a f e w of e a c h of the t h r e e types of data. A n attempt was made to l i s t the d i f f e r e n t i t e m s i n the f i n a n c i a l h i g h l i g h t s . A l l t o l d , t h e r e w e r e m o r e than s i x t y d i f f e r e n t i t e m s . F o r p u r p o s e of a n a l y s i s the i t e m s w e r e g r o u p e d into 36 t o p i c s . Some of the t o p i c s w e r e m e n t i o n e d m o r e f r e q u e n t l y than o t h e r s . A p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the v a r i o u s t o p i c s w h i c h w e r e found i n the h i g h l i g h t s s e c t i o n i s g i v e n i n A p p e n d i x 111. In t h i s chapter c omments w i l l be made on l y on some of the m o r e f r e q u e n t l y m e n t i o n e d t o p i c s . T a b l e X X X V i s an e x c e r p t f r o m A p p e n d i x 111. A n a l y z i n g T a b l e X X X V and o v e r l o o k i n g y e a r 1948, the p e r c e n t a g e f i g u r e s of w h i c h m i g h t not be r e p r e s e n t a t i v e i n v i e w of the f a c t that o n l y t h r e e c o m p a n i e s c o n t a i n e d f i n a n c i a l h i g h l i g h t s s e c t i o n s , the f o l l o w i n g c o n c l u s i o n s may be drawn: 141 1. Income statement data w e r e m e n t i o n e d m o r e f r e q u e n t l y than b a l a n c e sheet data o r n o n - f i n a n c i a l data. 2. O v e r the y e a r s f r o m 1953 to 1963, the p r a c t i c e of i n c l u d i n g net i n c o m e and d i v i d e n d s f i g u r e s i n the h i g h l i g h t s s e c t i o n was f a i r l y w e l l e s t a b l i s h e d among C a n a d i a n c o m p a n i e s as a b a s i c p r i n c i p l e of e f f e c t i v e f i n a n c i a l r e p o r t i n g . 3. The number of s u r v e y companies w h i c h i n c l u d e d s a l e s and w o r k i n g c a p i t a l f i g u r e s i n the h i g h l i g h t s s e c t i o n d i d not show any p a r t i c u l a r t r e n d o v e r the ten y e a r s f r o m 1953 to 1963. 4. The n u m ber of c o m p a n i e s w h i c h f o l l o w e d the p r a c t i c e of d i s c l o s i n g i n f o r m a t i o n about t a x e s , f i x e d a s s e t s or e mployees a l l showed a d e c l i n i n g t r e n d f r o m 1953 to 1963. Note that under each of the t o p i c s shown i n T a b l e X X X V a n u mber of i t e m s w e r e i n c o r p o r a t e d . M o r e d e t a i l s about some of these i t e m s a r e g i v e n i n the p a r a g r a p h s w h i c h f o l l o w . Net Income o r P r o f i t T h r e e i t e m s w e r e i n c l u d e d under t h i s t o p i c , n a m e l y : t o t a l net i n c o m e , net i n c o m e p e r c ommon or p r e f e r r e d s h a r e and net i n c o m e p e r d o l l a r of s a l e . F r o m 1948 to 1963, the p r o p o r t i o n of c o mpanies w h i c h i n c l u d e d t o t a l net i n c o m e i n the h i g h l i g h t s s e c t i o n was a c t u a l l y i n c r e a s i n g . No t r e n d , however, c o u l d be e s t a b l i s h e d w i t h r e g a r d to the number of c ompanies w h i c h showed p e r s h a r e f i g u r e s . N e v e r t h e l e s s , i t was c l e a r f r o m the s u r v e y that "net i n c o m e p e r p r e f e r r e d s h a r e " was m e n t i o n e d i n only a s m a l l n u m ber of i n s t a n c e s and m a i n l y 142 T A B L E X X X V P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F T H E E I G H T M O S T F R E Q U E N T L Y M E N T I O N E D T O P I C S IN T H E F I N A N C I A L H I G H L I G H T S S E C T I O N AS O F Y E A R 1963 T o p i c s M a x i m u m number of t i m e s m e n t i o n e d 1. Net i n c o m e o r p r o f i t . . . . 2. D i v i d e n d s 3. Sale 4. Taxes 5. S h a r e h o l d e r s ' equity. . . . 6. W o r k i n g c a p i t a l 7. T o t a l A s s e t s 8. N u m b e r of E m p l o y e e s . . 1938 1948 1953 1958 1963 13 31 46. 2 64. 5 15. 4 38. 5 100. 0 43. 8 32. 3 25. 8 42 100. 0% 84. 6% 80. 6% 88. 1% 33. 3 69. 2 54. 8 66. 7 47. 6 66.7 69.2 51.6 38.1 35. 7 22. 6 26. 2 15.4 12.9 26.2 23. 8 143 by c o m p a n i e s f a l l i n g under the i r o n and s t e e l i n d u s t r i a l group. T h i s f a c t a p p l i e s e q u a l l y w e l l to the i t e m "net p r o f i t p e r d o l l a r of sale. " The f o l l o w i n g i l l u s t r a t i o n i s h e l p f u l . Items 1938 1948 1953 1958 1963 M a x i m u m number of t i m e s m e n t i o n e d T o t a l net i n c o m e o r p r o f i t N et i n c o m e p e r s h a r e ( common or p r e f e r r e d ) Net i n c o m e p e r d o l l a r of s a l e D i v i d e n d s 13 31 42 33.4%,. .46.2% 5 1 . 7 % 64. 4% 66.7 46.2 35.4 47.6 33. 3 7. 7 U n d e r t h i s t o p i c , the t r e n d o v e r the y e a r s f r o m 1948 to 1963 was a move t o w a r d the p u b l i c a t i o n of m o r e and m o r e p e r sh a r e f i g u r e s ( common o r p r e f e r r e d s h a r e s ) . In c o n t r a s t , the p r o p o r t i o n of c o m p a n i e s showing t o t a l d i v i d e n d s ( common or p r e f e r r e d ) had a c t u a l l y d e c l i n e d o v e r the same p e r i o d as i n d i c a t e d below. Items 1938 1948 1953 1958 1963 M a x i m u m number of t i m e s m e n t i o n e d D i v i d e n d s p e r s h a r e ( c o m mon or p r e f e r r e d ) T o t a l dividends ( common o r p r e f e r r e d ) 13 31 42 33. 3% 46. 2 % 51. 6% 52. 4 % 66. 7 69. 3 35. 5 42. 9 Sale s S u r p r i s i n g l y , s a l e s f i g u r e s f o u n d t h e i r way i n the h i g h l i g h t s s e c t i o n of the s u r v e y annual r e p o r t s only a f t e r 1948. T o t a l , 144 val u e of s a l e s was d i s c l o s e d i n p r a c t i c a l l y a l l c a s e s . V o l u m e of sa l e s was m e n t i o n e d l e s s f r e q u e n t l y . A s m a l l but commendable number of companies f r o m t h r e e i n d u s t r i a l g r o u p s , n a m e l y ; c o n s u m p t i o n goods, s e r v i c e and f o r e s t s and a l l i e d p r o d u c t s , gave a l s o s a l e s f i g u r e s by types of c u s t o m e r s , p r o d u c t s or departments. U n f o r t u n a t e l y , t h i s p r a c t i c e s e e m e d to be dying out o v e r the p e r i o d 1953 to 1963 as the f o l l o w i n g i l l u s t r a t i o n c l e a r l y p o i n t s out. Items 1938 1948 1953 1958 1963 M a x i m u m n u m b e r of t i m e s - 3 21 42_ - - 46. 2 64. 5 47. 6 - - 30. 8 38. 7 28. 6 Sale s b r e a k d o w n by c u s t o m e r s , 15. 4 9. 7 4. 8 Taxes A l l the h i g h l i g h t s s e c t i o n s w h i c h c o n t a i n e d t h i s t o p i c gave the t o t a l amount of i n c o m e taxes. O n ly t h r e e companies added amounts showing i n c o m e t a x p e r common share. The com p a n i e s w e r e e x c l u s i v e l y f r o m the i r o n and s t e e l i n d u s t r i a l group and the f i g u r e s a p p e a r e d i n the 1958 and 1963 annual r e p o r t s . S h a r e h o l d e r s ' E q u i t y L i k e s a l e s , t h i s t o p i c a p p e a r e d i n the h i g h l i g h t s s e c t i o n o nly a f t e r 1948. Under t h i s t o p i c the m o s t f r e q u e n t i t e m i n c l u d e d was the v a l u e of t o t a l s h a r e h o l d e r s ' equity. S h a r e h o l d e r s ' equity p e r c o m m o n s h a r e , on the other hand, a p p e a r e d l e s s often. 145 N e v e r t h e l e s s , the p r o p o r t i o n of c o m p a n i e s w h i c h i n c l u d e d t h i s i t e m i n the f i n a n c i a l h i g h l i g h t s s e c t i o n s h a d been i n c r e a s i n g o,vcr.."the y e a r s f r o m 1953 to 1963. The i l l u s t r a t i o n b e l o w s u m m a r i z e s the f a c t s above. I t e m 1938 1948 1953 1958 1963 M a x i m u m number of t i m e s m e n t i o n e d - _3 13 31 42 V a l u e of t o t a l s h a r e h o l d e r s ' equity - - 7.7% 22. 6% 28. 6% S h a r e h o l d e r s ' E q u i t y p e r c o m m o n s h a r e - - 7.7 6.4 7.2 V a l u e of c o mmon S h a r e h o l d e r s ' equity - - 7.7 6.4 7.2 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - N a t u r e and F u n c t i o n T h i s s e c t i o n m a y be d e f i n e d as a s t a t i s t i c a l r e v i e w of k e y f i n a n c i a l and o p e r a t i n g i t e m s o v e r a p e r i o d of y e a r s and i s u s u a l l y p l a c e d t o w a r d the end of the r e p o r t , that i s to say, a f t e r the f i n a n c i a l s tatements. It i s v a r i o u s l y t i t l e d s u c h as " c o m p a r a t i v e r e c o r d , " " o p e r a t i n g s u m m a r y , " " r e v i e w of p a s t ten y e a r s . " In m o s t c a s e s , however, the t e r m " s t a t i s t i c s " i s u s e d s u c h as " s i x y e a r s t a t i s t i c a l r e v i e w . " " S t a t i s t i c a l S u mmary, " " c o m p a r a t i v e s t a t i s t i c s , " etc. C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s e r v e many f u n c t i o n s . A m o n g some of the m o s t i m p o r t a n t a r e the f o l l o w i n g : 1. They c a l l , a t t e n t i o n to the c o u r s e and b e h a v i o u r of i m p o r t a n t f i n a n c i a l i t e m s o v e r a p e r i o d of y e a r s . 146 2. They a r e v a l u a b l e as a quick means of c o n v e y i n g e s s e n t i a l data at a glance. 3. They help a new r e a d e r to get a c q u a i n t e d w i t h the company and an o l d r e a d e r to r e f r e s h h i s m e m o r y m o r e e a s i l y . 4. They obviate r e f e r e n c e to the accounts of p r e v i o u s y e a r . B y p r o v i d i n g an h i s t o r i c a l b a c k g r o u n d they become m o r e v a l u a b l e to the a n a l y s t who o t h e r w i s e m u s t t u r n to h i s own d e v i c e or a s u m m a r y p u b l i s h e d by some s t a t i s t i c a l s e r v i c e . F r e q u e n c y of F i n a n c i a l S t a t i s t i c s S ection. It i s e n c o u r a g i n g to note that o v e r the y e a r s f r o m 1938 to 1963, an i n c r e a s i n g n u m b e r of C a n a d i a n c o m p a n i e s h a d taken off the h i s t o r i c a l w r a p s of s e c r e c y and p r o v i d e d m o r e d e t a i l e d s t a t i s t i c s f o r a l a r g e n u m ber of i t e m s . The g r o w i n g p o p u l a r i t y of a f i n a n c i a l s t a t i s t i c a l s e c t i o n among C a n a d i a n c o m p a n i e s i s c l e a r l y b r o u g h t out i n the f o l l o w i n g i l l u s t r a t i o n : 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s A n a l y z e d 67 7 8 88 104 115 No. of A n n u a l R e p o r t s w i t h f i n a n c i a l s t a t i s t i c a l s e c t i o n 6 9 15 33 46 P e r c e n t a g e of A n n u a l R e p o r t s w i t h f i n a n c i a l s t a t i s t i c a l s e c t i o n 8.9% 1 1 . 5 % 1 7 . 0 % 3 1 . 7 % 4 0 . 0 % One of the m o s t i n t e r e s t i n g f e a t u r e s of the above i l l u s t r a t i o n i s the f a c t that o v e r the twenty f i v e y e a r s the p r o p o r t i o n of s u r v e y c o m p a n i e s i n c o r p o r a t i n g a f i n a n c i a l s t a t i s t i c a l s e c t i o n into t h e i r annual r e p o r t i n c r e a s e d by m o r e than f o u r t i m e s ; f r o m 9% i n 1938 to 4 0 % i n 1963. 147 It m i g h t be s a i d that t h i s p r a c t i c e was i n i t i a t e d i n d e f e r e n c e to the needs of s e c u r i t y a n a l y s t s . N e v e r t h e l e s s , i t was evident f r o m the s u r v e y that t h e r e was a s t u d i e d e f f o r t to m a k e t h i s i n f o r m a t i o n a t t r a c t i v e and r e a d a b l e to the a v e r a g e s h a r e h o l d e r . C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - F o r m a t and D e s i g n A t t e m p t s w e r e made by a number of com p a n i e s to i n c r e a s e the r e a d a b i l i t y of the f i n a n c i a l s t a t i s t i c s s e c t i o n s by u s i n g d i f f e r e n t shadings o r d i f f e r e n t c o l o u r s to d i s t i n g u i s h d i f f e r e n t columns and the i n f o r m a t i o n w i t h i n the columns. In a number of i n s t a n c e s , g r a p h i c i l l u s t r a t i o n s w e r e p r o v i d e d w h i c h c o m p a r e d the m o r e i m p o r t a n t i n d i v i d u a l i t e m s . U n f o r t u n a t e l y , t h i s p r a c t i c e was not w i d e l y a c c e p t e d by C a n a d i a n c o m p a n i e s o v e r the p e r i o d f r o m 1938 to 1963; i n f a c t t h e r e was some i n d i c a t i o n that the lon g r u n t r e n d o v e r the same p e r i o d showed some d e c l i n e . The f o l l o w i n g i l l u s t r a t i o n s i s i n d i c a t i v e of the l o n g - t e r m t r e n d . 1938 1948 1953 1958 1963 No. of f i n a n c i a l s t a t i s t i c s s e c t i o n s 6 9 15 33 46 No. of f i n a n c i a l s t a t i s t i c s s e c t i o n s w i t h i l l u s t r a t i o n s 1 5 6 7 11 P e r c e n t a g e of f i n a n c i a l s t a t i s t i c s s e c t i o n w i t h i l l u s t r a t i o n s 1 6 . 7 % 5 5 . 5 % 4 0 . 0 % 2 1 . 2 % 3 5 . 5 % N u m b e r of C o m p a r a t i v e Y e a r s F r o m 1938 to 1963, the m o s t f r e q u e n t p e r i o d of c o m p a r i s o n w i t h r e g a r d to f i n a n c i a l s t a t i s t i c s was found to be ten y e a r s . 148 S h o r t p e r i o d c o m p a r i s o n s , that i s , l e s s than f i v e y e a r s , w e r e p o p u l a r o n l y d u r i n g 1938 and 1948. S i n c e that t i m e and u n t i l 1963, i t s p o p u l a r i t y waned c o n s i d e r a b l y . L o n g e r p e r i o d c o m p a r i s o n , that i s , s i x to ten y e a r s , on the other hand, was f o u n d to be f a i r l y w e l l a c c e p t e d by C a n a d i a n companies. In f a c t , o v e r the twenty f i v e y e a r p e r i o d f r o m 1938 to 1963, the p r o p o r t i o n of s u r v e y c o m p a n i e s f o l l o w i n g t h i s p r o c e d u r e h a d m o r e than doubled: 3 3 % to 69%. A s m a l l number of c o m p a n i e s f r o m t h r e e i n d u s t r i a l groups, n a m e l y : f i n a n c i a l i n s t i t u t i o n s , f o r e s t s and a l l i e d p r o d u c t s , and s e r v i c e , showed c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s f o r m o r e than ten y e a r s . However, the e n t h u s i a s m w h i c h p r o p e l l e d t h i s p r a c t i c e that began i n 1948 was not s u s t a i n e d f o r the r e s t of the p e r i o d . A s a consequence, i n 1963 only 4 % of the s u r v e y companies con t i n u e d to p u b l i s h f i n a n c i a l s t a t i s t i c s f o r m o r e than ten y e a r s . The s h o r t e s t p e r i o d of c o m p a r i s o n found i n the s u r v e y was two y e a r s and the l o n g e s t was 63 y e a r s . The s i x t y t h r e e y e a r p e r i o d was shown i n i n t e r v a l s of f i v e and ten y e a r s . The f o l l o w i n g i l l u s t r a t i o n g i v e s a c o n c i s e c a p s u l e r e v i e w of the f a c t s above. N u m b e r of y e a r s I l l u s t r a t e d i n c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 1938 1948 .1953 1958 1963 N u m b e r of annual r e p o r t s w i t h c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 2 - 5 y e a r s 6 - 1 0 y e a r s M o r e than t e n y e a r s 15 33 46 66. 7% 44. 4% 33. 3 % 30. 2 % 26. 1% 33. 3 33. 3 40. 0 60. 8 69. 5 22.3 26.7 9. 0 4. 4 149 L e n g t h The tendency o v e r the y e a r s was to confine the c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s e c t i o n w i t h i n a space of two pages. The one page l e n g t h was u s e d m o s t f r e q u e n t l y i n any one y e a r . The two page l e n g t h was u s e d l e s s often. A s m a l l number of c o m p a n i e s expanded the f i n a n c i a l s t a t i s t i c s s e c t i o n to o c c u p y m o r e than two pages. T h i s p r a c t i c e , however, was d e c l i n i n g i n u s e o v e r the p e r i o d f r o m 1938 to 1963 as i n d i c a t e d below: L e n g t h 1938 1948 1953 1958 1963 N u m b er of annual r e p o r t s w i t h c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 6 9 15 33 46> 1 page 5 0 . 0 % 6 6 . 7 % 4 6 . 7 % 6 3 . 6 % 5 4 . 3 % 2 pages 33.3 11.1 46.7 27.3 39.1 M o r e than 2 pages 16. 7 22. 2 6. 6 9. 0 6. 6 N u m b e r of l i s t e d i t e m s The i t e m s w h i c h w e r e i n c l u d e d i n the c o m p a r a t i v e s t a t i s t i c s s e c t i o n r a n g e d f r o m a l i t t l e m o r e than those u s e d on the " h i g h l i g h t s " page to a c o m p i l a t i o n of p r e v i o u s b a l a n c e sheets o r i n c o m e s tatements. A c t u a l p r a c t i c e , f o r the m o s t p a r t , was s o m e w h e r e between the two e x t r e m e s . S p e c i f i c a l l y , the m a j o r i t y of the r e p o r t s i n any one y e a r c o n t a i n e d between e l e v e n and twenty i t e m s . T h i s p r a c t i c e was u s e d by an i n c r e a s i n g p r o p o r t i o n of companies o v e r the p e r i o d f r o m 1938 to 1963. S h o r t s t a t i s t i c s s e c t i o n , that i s , those c o n t a i n i n g between one to ten i t e m s , on the other hand, l o s t t h e i r a p p e a l c o n s i s t e n t l y throughout 150 the same p e r i o d . L o n g s e c t i o n s , that i s , those c o n t a i n i n g m o r e than twenty i t e m s , w e r e u s e d i n a s m a l l n u m ber of i n s t a n c e s and p r e d o m i n a n t l y by p u b l i c u t i l i t i e s and co m p a n i e s of the f o r e s t s and a l l i e d p r o d u c t s i n d u s t r i a l group. i n a d d i t i o n , they w e r e of f a i r l y r e c e n t o r i g i n . In on l y one out of the t h i r t e e n c a s e s d i d i t date b a c k to 1948. The f o l l o w i n g s t a t i s t i c s a r e h e l p f u l as an i l l u s t r a t i o n . N u m b e r of i t e m s i n c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s e c t i o n s 1938 1948 1953 1958 1963 N umber of annual r e p o r t s w i t h c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s _6 _9 1_5_ 33__ 46 s e c t i o n s 1 - 10 i t e m s . . , 50. 0% 33. 3 % 40. 0% 30. 3 % 26. 1% 11 - 20 i t e m s 50.0 55.6 60.0 54.5 58.7 20 - 40 i t e m s . - 11.1 - 15.2 15.2 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - Contents The m o s t notable f e a t u r e about the contents of t h i s s e c t i o n was the l a c k of u n i f o r m i t y i n the number of i t e m s i n c l u d e d . It was fo u n d that the s u r v e y c o m p a n i e s c a r r i e d i n t o t a l m o r e than one h u n d r e d d i f f e r e n t i t e m s i n thi s p a r t i c u l a r s e c t i o n . F o r p u r p o s e s of t h i s a n a l y s i s , the i t e m s w e r e r e g r o u p e d into 37 t o p i c s . Some of these t o p i c s w e r e shown m o r e f r e q u e n t l y than o t h e r s . A p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the d i f f e r e n t t o p i c s i s l i s t e d i n A p p e n d i x IV. The e n s u i n g p a r a g r a p h s seek to a n a l y z e i n d e t a i l some of the m o r e f r e q u e n t l y m e n t i o n e d t o p i c s i n the f i n a n c i a l s t a t i s t i c s s e c t i o n . 151 T a b l e X X X V I l i s t s the eig h t m o s t f r e q u e n t l y m e n t i o n e d t o p i c s i n t h i s s e c t i o n a c c o r d i n g to y e a r 1963.' Net Income F r o m T a b l e X X X V I i t i s c l e a r that the p r a c t i c e of showing net i n c o m e f i g u r e s was f a i r l y w e l l a c c e p t e d by C a n a d i a n companies i n p r e s e n t i n g c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s . In f a c t , o v e r the y e a r s f r o m 1938 to 1963, the p r o p o r t i o n of s u r v e y companies w h i c h i n c l u d e d net i n c o m e f i g u r e s i n the f i n a n c i a l s t a t i s t i c s s e c t i o n s i n c r e a s e d by m o r e than t h r e e t i m e s f r o m 1 7 % i n 1938 to 6 1 % i n 1963. In m o s t i n s t a n c e s , t o t a l net i n c o m e wad d i s c l o s e d and e v e r y i n d i c a t i o n p o i n t e d to an i n c r e a s e i n t h i s p r a c t i c e . F r o m 1953 to 1963, a s m a l l but r a p i d l y i n c r e a s i n g n u m b e r of companies added "net i n c o m e p e r common s h a r e " f i g u r e s to the f i n a n c i a l s t a t i s t i c s s e c t i o n as w e l l . The i r o n and s t e e l c o m p a n i e s went even f u r t h e r and e x p r e s s e d net i n c o m e as a p e r c e n t a g e of s a l e s . U n f o r t u n a t e l y , t h i s p r a c t i c e was not s u s t a i n e d and as a r e s u l t only 4 % of the companies w i t h f i n a n c i a l s t a t i s t i c s s e c t i o n c ontinued t h i s p r a c t i c e i n 1963 as i n d i c a t e d below: Items 1938 1948 1953 1958 1963 M a x i m u m number of t i m e s m e n t i o n e d _6 9_ 1_5 _3_3 46 T o t a l net i n c o m e f i g u r e s 16. 7% 33. 3 % 33. 3 % 51. 5 % 52. 2 % Net Income p e r C o m m o n Sh a r e - - 6.7 12.2 30.4 N e t Income as P e r c e n t a g e of S a l e s - 22.2 13.4 6.0 4.4 152 T A B L E X X X V 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F T H E E I G H T M O S T F R E Q U E N T L Y M E N T I O N E D T O P I C S I N T H E C O M P A R A T I V E F I N A N C I A L S T A T I S T I C S S E C T I O N A C C O R D I N G T O Y E A R 1963 T o p i c s M a x i m u m number of t i m e s m e n t i o n e d 1. N et i n c o m e 2. D i v i d e n d s 3. Taxes 4. F i x e d A s sets 5. D e p r e c i a t i o n 6. E x p e n s e s 7. S h a r e h o l d e r s ' E q u i t y . . . 8. Sal e s Revenue 1938 1-948 1953 1958 1963 16. 7 50. 0 6. 0 16. 7 15 33 16.7 44.4 26.6 11. 1 33. 3 66.7 46.7 51. 5 51. 5 46 16.7% 4 4 . 4 % 5 3 . 3 % 5 7 . 9 % 6 1 . 4 % 50. 0 50. 0 60.6 47.8 11. 1 33. 3 36. 4 41. 3 22.2 22.2 42.4 39.1 13.3 30.3 37.0 11. 1 26. 6 45. 5 37. 0 D i v i d e n d s F r o m T a b l e X X X V I the long r u n t r e n d o v e r the p e r i o d f r o m 1938 to 1963 was a g e n e r a l i n c r e a s e i n the p r o p o r t i o n of companies i n c l u d i n g d i v i d e n d s i n the f i n a n c i a l s t a t i s t i c s s e c t i o n . However, as i n d i c a t e d below, the p r o p o r t i o n of companies w h i c h showed the v a l u e of t o t a l d i v i d e n d , c o m mon and/or p r e f e r r e d , d i d not a c t u a l l y e x p e r i e n c e any p a r t i c u l a r t r e n d o v e r the twenty f i v e y e a r s , f r o m 1938 to 1963. The p r o p o r t i o n of com p a n i e s w h i c h d i s c l o s e d d i v i d e n d s p e r s h a r e (common and/or p r e f e r r e d ), on the other hand, showed a d i s t i n c t i n c r e a s e o v e r the same p e r i o d . Items 1938 1948 1953 1958 1963 M a x i m u m n u m b e r of t i m e s m e n t i o n e d 6 9 15 33 46 T o t a l d i v i d e n d s - P r e f e r r e d a n d / o r c o mmon • 3 3 . 4 % 5 5 . 5 % 3 9 - 9 % 5 7 . 6 % 3 5 . 7 % Di v i d e n d s p e r s h a r e - P r e f e r r e d and/or c o m m o n - 11.1 6.7 39.4 39.1 Taxes The d e s i r a b i l i t y of d i s c l o s i n g i n f o r m a t i o n about taxes i n the f i n a n c i a l s t a t i s t i c s s e c t i o n was w e l l r e c o g n i z e d by an i n c r e a s i n g n u m b e r of com p a n i e s d u r i n g the p e r i o d f r o m 1938 to 1963. (See T a b l e X X X V I ). In p r a c t i c a l l y a l l c a s e s t o t a l amount of i n c o m e taxes was d i s c l o s e d . "Income tax p e r c o m mon s h a r e , " on the other hand, was d i s c l o s e d by a n e g l i g i b l e n u m ber of companies. 154 F i x e d A s sets No c l e a r t r e n d c o u l d be e s t a b l i s h e d w i t h r e g a r d to the p r o p o r t i o n of c o m p a n i e s d i s c l o s i n g i n f o r m a t i o n about f i x e d a s s e t s i n the f i n a n c i a l s t a t i s t i c s s e c t i o n . A s i n d i c a t e d i n T a b l e X X X V I , the p e r c e n t a g e f i g u r e tended to f l u c t u a t e f r o m y e a r to y e a r . N e v e r t h e l e s s , i t was evident f r o m the s u r v e y that the m o s t c ommon i t e m i n c l u d e d u nder t h i s t o p i c was the t o t a l net v a l u e of f i x e d a s s e t s . Other i t e m s i n c l u d e d under t h i s t o p i c w e r e value of new c o n s t r u c t i o n , p l a n t a d d i t i o n s and p l a n t r e t i r e m e n t . E x p e n s e s It i s e n c o u r a g i n g to note that o v e r the p e r i o d f r o m 1938 to 1963 an i n c r e a s i n g p r o p o r t i o n of c ompanies r e c o g n i z e d the p r a c t i c e of i n c l u d i n g expense f i g u r e s i n the f i n a n c i a l s t a t i s t i c s s e c t i o n as a b a s i c p r i n c i p l e of e f f e c t i v e f i n a n c i a l r e p o r t i n g . (See T a b l e X X X V I )i Under this g e n e r a l t o p i c , i n t e r e s t s on l o a n s w e r e c o m m o n l y shown. In quite a n u m ber of i n s t a n c e s " t o t a l o p e r a t i n g e x p e n s e s " w e r e i n c l u d e d although no e x p l a n a t i o n was g i v e n as to what they a c t u a l l y c o m p r i s e d of. Other types of expenses i n c l u d e d under t h i s t o p i c , but shown i n f r e q u e n t l y , w e r e "maintenance expense, " "other expenses, " " a d m i n i s t r a t i v e expenses, 11 " e x p l o r a t i o n e x p e n s e s " and " s e l l i n g and g e n e r a l expenses. " S h a r e h o l d e r s ' E q u i t y The i n c l u s i o n of t h i s t o p i c i n the f i n a n c i a l s t a t i s t i c s s e c t i o n was of f a i r l y r e c e n t o r i g i n as shown i n T a b l e X X X V I . 155 Two i t e m s w e r e i n c l u d e d under t h i s t o p i c , n a m e l y : t o t a l s h a r e h o l d e r s equity ( c o m m on and/or p r e f e r r e d ) and s h a r e h o l d e r s ' equity p e r s h a r e ( c o m mon and/or p r e f e r r e d ). The i l l u s t r a t i o n b e l o w gives a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the t i m e s e ach i t e m was m e n t i o n e d f o r the p e r i o d 1938 to 1963. Items 1»93 8 1948 1953 1958 1963 M a x i m u m N u m b e r of t i m e s m e n t i o n e d _6 9_ _15 33 46 T o t a l S h a r e h o l d e r s ' E q u i t y ( c ommon a n d / o r p r e f e r r e d ) - - - 21. 3 34. 7 S h a r e h o l d e r s ' E q u i t y p e r s h a r e ( c ommon and/or p r e f e r r e d ) - - 13. 3 24. 2 21.8 It m i g h t be i n t e r e s t i n g to note that none of the com p a n i e s f r o m the f i n a n c e and s e r v i c e i n d u s t r i a l groups i n c l u d e d i n f o r m a t i o n about s h a r e h o l d e r s ' equity i n the f i n a n c i a l s t a t i s t i c s s e c t i o n . S a l e s Revenue G e n e r a l l y speaking, the long r u n t r e n d was an i n c r e a s e i n the p r o p o r t i o n of co m p a n i e s i n c o r p o r a t i n g s a l e s f i g u r e s into the f i n a n c i a l s t a t i s t i c s s e c t i o n (See T a b l e X X X V I ). The number of d i f f e r e n t i t e m s i n c l u d e d under t h i s t o p i c can b e s t be e x p l a i n e d by the f o l l o w i n g i l l u s t r a t i o n w h i c h shows a p e r c e n t a g e f r e q u e n c y d i s t r i b u t i o n of the t i m e s e ach i t e m was shown f o r the p e r i o d 1938 to 1963. Items M a x i m u m number of t i m e s m e n t i o n e d V a l u e of T o t a l s a l e s S a l e s b r e a k d o w n a c c o r d i n g to s o u r c e V o l u m e of S a l e s 1938 1948 1953 1958 1963 15 33 46 11. 1% 26. 7 % 39. 4% 32. 8% 22. 2 20. 0 18. 2 13. 1 6.7 6. 1 2. 2 Sale s p e r c u s t o m e r - - - 3. 0 2. 2 It i s c l e a r f r o m the i l l u s t r a t i o n above that the "value of t o t a l s a l e s " was d i s c l o s e d by an i n c r e a s i n g p r o p o r t i o n of c o m p a n i e s o v e r the p e r i o d f r o m 1948 to 1963. "Sales v a l u e s b r o k e n down a c c o r d i n g to s o u r c e " w e r e i n t r o d u c e d p r e d o m i n a n t l y by p u b l i c u t i l i t y companies. U n f o r t u n a t e l y , t h i s p r a c t i c e was not w i d e s p r e a d n o r s u s t a i n e d and as a consequence a g e n e r a l d e c l i n e was r e g i s t e r e d throughout the whole p e r i o d . The same f a c t a p p l i e s to the i t e m "volume of s a l e s " although i t was i n t r o d u c e d e x c l u s i v e l y by co m p a n i e s b e l o n g i n g to the f o r e s t s and a l l i e d p r o d u c t s group. S o u r c e s and A p p l i c a t i o n of W o r k i n g C a p i t a l T h i s s e c t i o n r e f e r s to statements of s o u r c e and a p p l i c a t i o n of w o r k i n g c a p i t a l w h i c h w e re i n c l u d e d i n the annual r e p o r t s of some of the s u r v e y companies. No attempt i s made h e r e to a n a l y z e s u c h statements i n d e t a i l s i n c e they have been w e l l e x a m i n e d i n " F i n a n c i a l R e p o r t i n g i n Canada. 49 S u f f i c e to note h e r e that o v e r 49. F i n a n c i a l R e p o r t i n g i n Canada, F i f t h S u m m a r y of F i n a n c i a l R e p o r t s by the I n d u s t r i a l and M e r c a n t i l e C o m p a n i e s i n Canada, T o r o n t o : The C a n a d i a n I n s t i t u t e of C h a r t e r e d A c c o u n t a n t s , 1963. the p e r i o d f r o m 1938 to 1963, a s m a l l but i n c r e a s i n g number of c o m p a n i e s was i n c o r p o r a t i n g w o r k i n g c a p i t a l statements into t h e i r a nnual r e p o r t (see T a b l e 111 ). On the whole, i t i s c l e a r that o v e r the p e r i o d examined, a statement of s o u r c e s and a p p l i c a t i o n of funds was not c o n s i d e r e d to be an e s s e n t i a l p a r t of an annual r e p o r t . 157 C H A P T E R V I 1 O T H E R S U P P L E M E N T A R Y I N F O R M A T I O N I n t r o d u c t i o n The t e r m "other s u p p l e m e n t a r y i n f o r m a t i o n " i s chosen to e n t i t l e t h i s c h a p t e r f o r want of a b e t t e r phase. It i s not i d e n t i c a l and s h o u l d not be c o n f u s e d w i t h another t e r m " m i s c e l l a n e o u s i n f o r m a t i o n " w h i c h d e s c r i b e s a s e p a r a t e s e c t i o n (see C h a p t e r 11 ) but w h i c h i s a l s o e x a m i n e d here. Other s e c t i o n s w h i c h a r e e x a m i n e d i n t h i s chapter i n c l u d e the f o l l o w i n g : l i s t of o f f i c e r s and d i r e c t o r s , t i t l e page, tab l e of contents and c o r p o r a t e data. L i s t of O f f i c e r s and D i r e c t o r s T h i s s e c t i o n r e f e r s to a l i s t i n g of the names and f r e q u e n t l y the t i t l e s of the o f f i c e r s and d i r e c t o r s of the company. S o m e t i m e s the names and t i t l e s of the o p e r a t i n g e x e c u t i v e s and .or the top management of s u b s i d i a r i e s w e r e a l s o mentioned. The m a i n p u r p o s e of t h i s s e c t i o n i s to l e t s h a r e h o l d e r s know who a r e p r i m a r i l y r e s p o n s i b l e f o r m anaging the company and who can, t h e r e f o r e , be h e l d a c c o u n t a b l e f o r the f i r m ' s o p e r a t i o n s . The p r a c t i c e of i n c o r p o r a t i n g a l i s t o r l i s t s of o f f i c e r s and d i r e c t o r s into the annual r e p o r t s was w e l l a c c e p t e d by 158 C a n a d i a n companies o v e r the p e r i o d f r o m 1938 to 1963. M o r e and m o r e co m p a n i e s r e c o g n i z e d that e f f e c t i v e c o r p o r a t e r e p o r t i n g was i n c o m p l e t e w i t h o u t the d i s c l o s u r e of s u c h i n f o r m a t i o n . The f o l l o w i n g s t a t i s t i c s a r e i l l u s t r a t i v e of the g r o w i n g p r a c t i c e . 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s A n a l y z e d 67 78 88 104 115 No. of A n n u a l R e p o r t s w i t h l i s t of O f f i c e r s / D i r e c t o r s 59 71 84 102 112 P e r c e n t a g e of A n n u a l R e p o r t s w i t h l i s t of O f f i c e r s / D i r e c t o r s 8 8 . 0 % 9 1 . 0 % 9 5 . 4 % 9 8 . 1 % 9 7 . 4 % I l l u s t r a t i o n A n u m b e r of c o m p a n i e s added human touch to t h i s s e c t i o n b y p r e s e n t i n g photographs of t h e i r d i r e c t o r s and l e a d i n g e x e c u t i v e s . In m o s t c a s e s , t r a d i t i o n a l head and s h o u l d e r p i c t u r e s w e r e u t i l i z e d . It i s i n t e r e s t i n g to note that t h i s i n n o v a t i o n , w h i l e not w i d e s p r e a d , was g r o w i n g d u r i n g the y e a r s f r o m 1948 to 1963. The f o l l o w i n g s t a t i s t i c s i l l u s t r a t e t h i s point. 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s w i t h L i s t of O f f i c e r s / D i r e c t o r s 59 71 84 102 112 No. of A n n u a l R e p o r t s w i t h P h o t o g r a p h s showing o f f i c e r s / d i r e c t o r s - 1 2 5 5. P e r c e n t a g e of A n n u a l R e p o r t s w i t h photographs showing O f f i c e r s / D i r e c t o r s - 1.4% 2.3% 4.8% 4.4% 1 5 9 L o c a t i o n In any one of the s e l e c t e d y e a r s m o r e than 7 0% of the companies p r e s e n t e d the l i s t showing the names and t i t l e s of o f f i c e r s and d i r e c t o r s t o w a r d the f r o n t of the r e p o r t , that i s to say, b e f o r e the e x e c u t i v e message. In a d d i t i o n , t h i s p r a c t i c e was adopted by an i n c r e a s i n g p r o p o r t i o n of companies f r o m 1938 to 1963. Two c o m p a n i e s f r o m the i r o n and s t e e l i n d u s t r i a l group l o c a t e d the l i s t between the e x e c u t i v e m e s s a g e and the f i n a n c i a l s tatements. A n o t h e r two companies f r o m the c o n s u m p t i o n goods i n d u s t r i a l group l o c a t e d the l i s t w i t h i n the f i n a n c i a l statements. The r e s t of the companies p l a c e d the l i s t t o w a r d the end of the r e p o r t , that i s to say, a f t e r the f i n a n c i a l statements. T h i s p r a c t i c e , however, as i n d i c a t e d i n T a b l e X X X V 1 1 , was f o l l o w e d by a d e c r e a s i n g p r o p o r t i o n of companies d u r i n g the p e r i o d f r o m 1938 to 1963. L e n g t h In t e r m s of amount of space o c c u p i e d , m o s t of the s e c t i o n s w e r e c o n t a i n e d w i t h i n l e s s than one page. The h a l f page le n g t h s e e m e d to be m o s t p o p u l a r . A n u m b e r of companies c o v e r e d the s e c t i o n i n one page. T h i s p r a c t i c e , however, a p p e a r e d to have l o s t i t s a p p e a l o v e r the y e a r s f r o m 1938 to 1963. L o n g l i s t s of o f f i c e r s and d i r e c t o r s , that i s to say, those o c c u p y i n g two o r m o r e pages, w e r e u s e d i n a s m a l l n u mber of i n s t a n c e s . The s h o r t e s t l e n g t h found i n the s u r v e y was one q u a r t e r of a page and the l o n g e s t was 160 T A B L E X X X V 1 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F L I S T O F O F F I C E R S A N D D I R E C T O R S B Y L O C A T I O N A N D Y E A R S L o c a t i o n 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s w i t h L i s t of O f f i c e r s / D i r e c t o r s T o w a r d fr o n t . o f r e p o r t T o w a r d end of r e p o r t B e t w een E x e c u t i v e M e s s a g e & F i n a n c i a l Statements 59 71 84 102 112 72. 9% 77. 5% 81. 0% 84. 5% 81. 3 % 25. 4 21. 1 19. 0 14. 6 17. 9 0. 9 0. 8 W i t h i n F i n a n c i a l Statements 11. 7 1. 4 161 seven pages. In the m a j o r i t y of those cases where the l i s t ended ha l f way down the page, the r e m a i n d e r of that page was u s e d to show c o r p o r a t e data. T a b l e X X X V 1 1 1 g i v e s a c o n c i s e c a p s u l e r e v i e w of the f a c t s above. T i t l e P a g e In each of the f i v e s e l e c t e d y e a r s , s l i g h t l y m o r e than a q u a r t e r of the annual r e p o r t s c a r r i e d a t i t l e page. W i t h the e x c e p t i o n of one r e p o r t , a l l of t h em i n c l u d e d the name of the company. The t i t l e of the r e p o r t was e x c l u d e d i n two i n s t a n c e s . T r a d e m a r k or company s e a l was a l s o f o u n d i n an i n c r e a s i n g p r o p o r t i o n of the annual r e p o r t s f r o m 1938 to 1963. M o s t of the r e p o r t s w h i c h o m i t t e d the t i t l e page p r o b a b l y d i d so i n o r d e r to a v o i d r e p e a t i n g the i n f o r m a t i o n a l r e a d y f o u n d on the f r o n t c o v e r . In a l l but f o u r c a s e s , the t i t l e page was l o c a t e d on the f i r s t r i g h t hand page of the a n n u a l r e p o r t . In the s e f o u r c a s e s , i t was p l a c e d on the i n s i d e f r o n t c o v e r of the r e p o r t . - L e n g t h The m a j o r i t y of the r e p o r t s w h i c h c a r r i e d a t i t l e page u t i l i z e d one f u l l page f o r t h i s s e c t i o n . 3h a f a i r n u m ber of i n s t a n c e s , the t i t l e i n f o r m a t i o n was c o n t a i n e d i n l e s s than a page. In a l l t hese l a t t e r c a ses the r e m a i n d e r of the page was u t i l i z e d by any one of the f o l l o w i n g s e c t i o n s : c o r p o r a t e data, l i s t of s u b s i d i a r i e s , 162 T A B L E X X X V I 1 1 P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F L I S T O F O F F I C E R S A N D D I R E C T O R S A C C O R D I N G T O L E N G T H A N D Y E A R S L e n g t h No. of A n n u a l R e p o r t s w i t h l i s t of o f f i c e r s / d i r e c t o r s L e s s than 1 page 1 page 1 1/2 and 1 3/4 pages 2 pages M o r e than 2 pages 1938 50 1948 1953 1958 1963 71 84 102 30. 5 25.4 22.6 13.7 5. 1 4. 2 4. 8 1.7 4.2 1.2 3.0 1. 2 112 62. 7% 66. 2 % 70. 2 % 75. 5% 70. 6% 17. 9 1. 6 163 l i s t s of o f f i c e r s and d i r e c t o r s o r tab l e of contents. T a b l e of Contents It has been n o t e d i n an e a r l i e r c h a p t e r that the t r e n d o v e r the p a s t twenty f i v e ye a r s f r o m 1938 to 1963 was towa r d s the . c o m p i l a t i o n of t h i c k e r r e p o r t s . D e s p i t e t h i s e x p a n s i o n i n the scope of the an n u a l r e p o r t s , f ew co m p a n i e s w e r e c o n s c i o u s of the n e c e s s i t y of i n c l u d i n g a t a b l e of contents as the f o l l o w i n g i l l u s t r a t i o n i n d i c a t e s . 1938 1948 1953 1958 1963 No. of A n n u a l R e p o r t s A n a l y z e d 67 78 88 104 115 No. of A n n u a l R e p o r t s w i t h T a b l e of Contents 1 6 5 9 13 P e r c e n t a g e of A n n u a l R e p o r t s w i t h T a b l e of Contents 1.5% 7.6% 5.6% 8.6% 1 1 . 3 % It i s c l e a r f r o m the i l l u s t r a t i o n above that w i t h the ex c e p t i o n of 1963, l e s s than 1 0 % of the annual r e p o r t s h a d a t a b l e of contents i n each of the other f o u r y e a r s . E v e n where t a b l e s of contents w e r e i n c l u d e d , the tendency h a d been to give only the names of the m a j o r s e c t i o n s w ithout any i n f o r m a t i o n of the contents of each of the s e c t i o n s . That i s to say the tendency h a d been to a v o i d g i v i n g the names of sub-s e c t i o n s as w e l l . T h e r e w e r e a few r e p o r t s , of c o u r s e , w h i c h gave co m p l e t e and d e t a i l e d t a b l e of contents. T h i s p r a c t i c e , however, e x p e r i e n c e d a d e c l i n i n g t r e n d throughout the p e r i o d f r o m 1938 to 1963. 164 L e n g t h In e a c h of the f i v e s e l e c t e d y e a r s , the m a j o r i t y of the c o m p a n i e s u s e d one f u l l page to c o n t a i n the table of contents. The tendency, however, o v e r the p e r i o d f r o m 1938 to 1963 had been to move away f r o m t h i s p r a c t i c e . On the o t h e r hand, t h e r e was an i n c r e a s i n g tendency to confine the ta b l e of contents w i t h i n l e s s than a page, p r e f e r a b l y h a l f a page, and to w o r k i t into the t i t l e page layout. L o n g t a b l e s of contents i . e. those e x c e e d i n g one page, w e r e e x t r e m e l y r a r e . O n l y two c a s e s w e r e found i n the s u r v e y (.see T a b l e X X X I X " ) : E a c h o c c u p i e d two pages. C o r p o r a t e D a t a T h i s s e c t i o n r e f e r s to the names and/or a d d r e s s e s of a t t o r n e y s , a u d i t o r s , t r a n s f e r agents, p r i n c i p a l o f f i c e and r e g i s t r a r s . Such i n f o r m a t i o n i s u s e f u l to the s h a r e h o l d e r who w i s h e s to c o r r e s p o n d w i t h the company o r to t r a n s f e r s h a r e s . C o r p o r a t e data a r e fundamentals. F r o m 1938 to 1963, m o r e and m o r e co m p a n i e s w e r e r e c o g n i z i n g the i m p o r t a n c e of t h i s s e c t i o n and i n c o r p o r a t i n g i t into the annual r e p o r t s . The i l l u s t r a t i o n b e l o w i s i n d i c a t i v e of t h i s g r o w i n g trend. 165 1938 1948 1953 1958 1963 N u m b e r of A n n u a l R e p o r t s A n a l y z e d 67 78 88 104 115 No. of A n n u a l R e p o r t s w i t h C o r p o r a t e D a t a 27 38 56 78 90 P e r c e n t a g e of A n n u a l R e p o r t s w i t h C o r p o r a t e D a t a 40. 3% 48. 7% 63. 6% 75. 0% 78. 0% The s t a t i s t i c s c l e a r l y i n d i c a t e that o v e r the twenty f i v e y e a r p e r i o d f r o m 1938 to 1963, the p r o p o r t i o n of s u r v e y c o m p a n i e s w h i c h i n c l u d e d c o r p o r a t e data i n t h e i r annual r e p o r t s had n e a r l y doubled: 4 0 % to 78%. L e n g t h G e n e r a l l y speaking, the c o r p o r a t e data s e c t i o n o c c u p i e s a s m a l l amount of space. It was f o u n d i n the s u r v e y that p r a c t i c a l l y a l l the c o m p a n i e s c o n f i n e d t h i s s e c t i o n w i t h i n h a l f a page. O v e r the p e r i o d f r o m 1938 to 1963 two t r e n d s w e r e c l e a r w i t h r e g a r d to the l e n g t h of t h i s s e c t i o n a d e c l i n i n g t r e n d to u s e the h a l f page le n g t h and an i n c r e a s i n g t r e n d to u s e the o n e - q u a r t e r page length. In the m a j o r i t y of c ases t h i s s e c t i o n was i n t e g r a t e d w i t h a l i s t of o f f i c e r s and d i r e c t o r s . In a s m a l l n u m ber of i n s t a n c e s i t was shown on the same page as a l i s t of s u b s i d i a r i e s . In even r a r e r c a s e s i t was w o r k e d i n t o the t i t l e page layout. M i s c e l l a n e o u s I n f o r m a t i o n T h i s s e c t i o n e m b r a c e s the v a r i o u s types of i n f o r m a t i o n w h i c h have not been i n c l u d e d and a n a l y z e d i n any of the s e c t i o n s a l r e a d y d i s c u s s e d . It was found i n the s u r v e y that some of t h e m o c c u p i e d one or two sentences and w e r e p l a c e d w h e r e v e r space was a v a i l a b l e e. g. 166 T A B L E X X X I X P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F T A B L E S O F C O N T E N T A C C O R D I N G T O L E N G T H A N D Y E A R S L e n g t h 1938 1948 1953 1958 1963 No. of annual r e p o r t s -w i t h t a b l e of contents 1_ _6 _5 _9 13 L e s s than 1 page - 1 6 . 7 % 2 0 . 0 % 4 4 . 4 % 4 6 . 0 % 1 page 100. 0 66. 6 60. 0 55. 6 54. 0 2 pages - 16. 7 20. 0 167 annual m e e t i n g announcement, s a m p l e s of a d v e r t i s e m e n t s of company p r o d u c t s and company t r a d e mark. O t h e r s o c c u p i e d a g r e a t e r amount of space and w e r e i n t e g r a t e d into another s e c t i o n or they stood apart. E x a m p l e s of s u c h types of i n f o r m a t i o n i n c l u d e a g l o s s a r y of t e r m s , l i s t of p u b l i c a t i o n s by company, i n f o r m a t i o n on d i s t r i b u t i o n of s a l e s or i n c o m e d o l l a r and i n f o r m a t i o n on m a r k e t s f o r company p r o d u c t s . P e r h a p s the b e s t way to a n a l y z e t h i s s e c t i o n i s to l i s t the v a r i o u s types of m i s c e l l a n e o u s i n f o r m a t i o n and the n u m b e r of r e p o r t s i n w h i c h they w e r e i n c l u d e d . T h i s i s done i n T a b l e X X X X . Note that u n d e r t h i s s e c t i o n , company t r a d e m a r k s r e f e r to t r a d e m a r k s i n the body of the r e p o r t and exclude t r a d e m a r k s on the f r o n t c o v e r o r t i t l e page. T a b l e X X X X i n d i c a t e s a r i s i n g t r e n d i n the n u m b e r of c ompanies w h i c h i n c o r p o r a t e d t r a d e m a r k s into t h e i r a n nual r e p o r t s d u r i n g the p e r i o d f r o m 1938 to 1963. The m a j o r i t y of these c o m p a n i e s came f r o m t h r e e i n d u s t r i a l groups, n a m e l y : c o n s u m p t i o n goods, f i n a n c e and s e r v i c e . A s i m i l a r t r e n d was e x p e r i e n c e d d u r i n g the same p e r i o d w i t h r e g a r d to the n u m b e r of c ompanies w h i c h p r i n t e d p i c t u r e s that w e r e not i n any way r e l a t e d to the text i n the a nnual r e p o r t . A g a i n , the s u r v e y showed an i n c r e a s i n g p r o p o r t i o n of c ompanies w h i c h i n c l u d e d an e x p l a n a t i o n of the c o v e r design. T h i s e x p l a n a t i o n , w h i c h 168 T A B L E X X X X P E R C E N T A G E F R E Q U E N C Y D I S T R I B U T I O N O F A N N U A L R E P O R T S A C C O R D I N G T O T Y P E S O F M I S C E L L A N E O U S I N F O R M A T I O N A N D Y E A R S Types of i n f o r m a t i o n 1938 1948 1953 1958 No. of an n u a l r e p o r t s w i t h m i s c e l l a n e o u s i n f o r m a t i o n 24 _3_8 49 _59 61 Company t r a d e m a r k s ( e x c l u d i n g t r a d e m a r k s on f r o n t c o v e r and t i t l e page 20. 8% 26. 3 % 49. 0% 52. 5 % 52. 5 % P i c t u r e s not r e l a t e d to text 12. 5 26. 3 38. 8 44. 1 49. 2 A n n u a l m e e t i n g A nnouncement 41. 6 28. 9 26. 5 25. 1 36. 1 E x p l a n a t i o n of c o v e r d e s i g n - 2. 6 4. 1 15. 3 19. 7 I n f o r m a t i o n on d i s t r i b u t i o n of s a l e s o r i n c o m e d o l l a r (a s e p a r a t e s e c t i o n of r e p o r t ) - 21. 0 12. 2 11. 9 11. 5 I n f o r m a t i o n on m a r k e t f o r company p r o d u c t 4.2 13.2 12.2 10.2 11.5 Company c r e d o 4. 2 5. 2 10. 2 1. 7 8. 2 Sa m p l e of company a d v e r t i s e -m ent 4. 2 5. 2 12. 2 6. 8 6. 8 Whole page devoted to heading i n t r o d u c i n g s e c t i o n s of the r e p o r t 12. 5 7. 8 6. 1 5. 1 1. 6 G l o s s a r y of t e r m s u s e d i n r e p o r t - - - 1. 7 1. 6 L i s t of p u b l i c a t i o n s by company 4. 2 2. 6 169 u s u a l l y o c c u p i e d a s m a l l amount of space, was a l m o s t a l w a y s l o c a t e d on the i n s i d e f r o n t cover. A n n u a l r e p o r t s a r e g e n e r a l l y m a i l e d out to s h a r e h o l d e r b e f o r e the a nnual g e n e r a l m e e t i n g takes p l a c e . It was found i n the s u r v e y that a number of managements s e i z e d the o p p o r t u n i t y of m a k i n g us e of the a nnual r e p o r t to announce the date, t i m e and p l a c e of the a n nual m e e t i n g . T h i s p r a c t i c e , however, was not w i d e s p r e a d . In f a c t , as T a b l e X X X X i n d i c a t e s , i t e x p e r i e n c e d a d e c l i n i n g t r e n d f r o m 1938 to 1963. A n n u a l m e e t i n g announcements w e r e found to be v a r i o u s l p l a c e d . N e v e r t h e l e s s , the m a j o r i t y of the c o m p a n i e s tended to confine t hem w i t h i n the f i r s t f o u r pages of the annual r e p o r t . U n d e r a s e p a r a t e s e c t i o n i n the a nnual r e p o r t , a numbe of c o m p a n i e s d i s c l o s e d i n f o r m a t i o n on the d i s t r i b u t i o n of the s a l e s or i n c o m e d o l l a r . Note that t h i s does not i n c l u d e s i m i l a r i n f o r m a t i o n found i n the e x e c u t i v e message. The i n f o r m a t i o n was n o r m a l l y p r o v i d i n the f o r m of a p i e - c h a r t . However, as T a b l e X X X X a g a i n i n d i c a t e s , t h i s p r a c t i c e was not p o p u l a r and l o s t a p p e a l c o n s i d e r a b l y d u r i n g the p e r i o d f r o m 1938 to 1963. A n u m b e r of c o m p a n i e s p r o v i d e d a l i s t of the p r i n c i p a l m a r k e t s f o r the company p r o d u c t s . S o m e t i m e s the l i s t was shown i n a s e p a r a t e s e c t i o n . A t other t i m e s i t was i n t e g r a t e d w i t h p r o d u c t i n f o r m a t i o n . T a b l e X X X X i n d i c a t e s that w i t h the e x c e p t i o n of 1938, the p r o p o r t i o n of c o m p a n i e s d i s c l o s i n g m a r k e t i n f o r m a t i o n was 170 c o n s i s t e n t l y a r o u n d 1 1 % o v e r the y e a r s f r o m 1948 to 1963. F i n a l l y , i t i s i n t e r e s t i n g to note that the i n t r o d u c t i o n of a g l o s s a r y of t e r m s u s e d i n the annual r e p o r t was of f a i r l y r e c e n t o r i g i n . It was u s e d i n 1958 and 1963 by two companies f r o m the f o r e s t and a l l i e d p r o d u c t s i n d u s t r i a l group. 171 C H A P T E R V I 1 1 E V A L U A T I O N , I n t r o d u c t i o n T h i s c h a p t e r p u r p o r t s to evaluate the m a i n changes w h i c h took p l a c e i n the annual r e p o r t w i t h r e g a r d to s u p p l e m e n t a r y i n f o r m a t i o n f o r the p e r i o d f r o m 1938 to 1963. In a d d i t i o n , i t attempts to suggest i m p r o v e m e n t s w h i c h m a y be e f f e c t e d i n those a r e a s w here d i s c l o s u r e i n s u p p l e m e n t a r y i n f o r m a t i o n was fo u n d to be d e f i c i e n t . A r e v i e w of g e n e r a l t r e n d s i s f i r s t u n dertaken. T h i s i s f o l l o w e d by an e v a l u a t i o n of each of the s e c t i o n s . G e n e r a l T r e n d s Without doubt, t h e r e w e r e s i g n i f i c a n t changes i n annual r e p o r t s o v e r the twenty f i v e y e a r s f r o m 1938 to 1963. B r i e f l y , the f o l l o w i n g m a y be d e l i n e a t e d as some of the m a i n t r e n d s that w e r e evident f r o m the s u r v e y : 1. The t r e n d t o w a r d m o r e d i s c l o s u r e of f a c t s . 2. The t r e n d t o w a r d i m p r o v e d f o r m a t and design. 3. The t r e n d t o w a r d an e n l a r g e d r e p o r t . T o w a r d m o r e D i s c l o s u r e of F a c t s C o r p o r a t e r e p o r t i n g w i t h r e s p e c t to d i s c l o s u r e of f a c t s a f f e c t i n g b u s i n e s s o p e r a t i o n s underwent a p e r i o d of e v o l u t i o n f r o m 1938 to 1963. In p a r t , the e v o l u t i o n was due to a change i n the v i e w p o i n t b e h i n d the r e p o r t . M a n y of the 1938 r e p o r t s , w h i c h c o n s i s t e d of a s e r i e s of condensed f i n a n c i a l statements and a l e t t e r of t r a n s m i t t a l , i n d i c a t e d that d u r i n g and p r i o r to that y e a r , annual r e p o r t i n g was c o n s i d e r e d a y e a r l y c h o r e to be d i s p o s e d of as c o n v e n i e n t l y as p o s s i b l e The attitude of m o s t managements s e e m e d to be that so lon g as the i n t e g r i t y of c a p i t a l was m a i n t a i n e d , a f a i r r e t u r n e a r n e d and a r e a s o n a b l e amount of d i v i d e n d s d i s t r i b u t e d , the d e t a i l and manner i n w h i c h t h i s was a c c o m p l i s h e d w o u l d not be of. m u c h c o n c e r n to the s h a r e h o l d e r s . F r o m 1948 onwards, t h e r e w e r e s t r o n g i n d i c a t i o n s that t h i s attitude was be g i n n i n g to change. M a n a g e m e n t became m o r e c o n s c i o u s of i t s r e l a t i o n s h i p to the s h a r e h o l d e r s as w e l l as to the employe e s and c u s t o m e r s . M a n y r e c o g n i z e d that s h a r e h o l d e r s and employe e s w e r e e n t i t l e d to m o r e i n f o r m a t i o n about the b u s i n e s s . A s a r e s u l t they began to r e v e a l m a t t e r s i n t h e i r annual r e p o r t s about which they w e r e p r e v i o u s l y s e c r e t a t i v e , such as e a r n i n g s , r e a s o n s f o r e a r n i n g s , c a p i t a l e x p e n d i t u r e , w o r k i n g c a p i t a l etc. , The t r e n d t o w a r d d i s c l o s u r e of m o r e and m o r e i n f o r m a t i o n has been c l e a r l y i l l u s t r a t e d i n T a b l e 111. It was found that p r o g r e s s i n t h i s r e s p e c t was e s p e c i a l l y r a p i d d u r i n g the p e r i o d f r o m 1953 to 1963. In f a c t , t h e r e w e r e n u m e r a b l e i n s t a n c e s d u r i n g these y e a r s when the s h a r e h o l d e r was a c t u a l l y inundated w i t h too m u c h i n f o r m a t i o n . 173 P e r h a p s what management s h o u l d r e c o g n i z e at t h i s p o i n t i s the f a c t that r e p o r t s of g r e a t e r content a r e not n e c e s s a r i l y b e t t e r r e p o r t s . • S h a r e h o l d e r s s h o u l d not be g i v e n so g r e a t a m a s s of i n f o r m a t i o n that they w i l l be d e t e r r e d f r o m r e a d i n g i t . To enhance u n d e r s t a n d i n g , non e s s e n t i a l s s h o u l d be'excluded. What i s needed t h e r e f o r e i s s e n s i t i v e d i s c r i m i n a t i o n so that f i n a l i n f o r m a t i o n p r e s e n t e d to s h a r e h o l d e r s i s that w h i c h b e s t r e f l e c t s the o p e r a t i o n s of the p a r t i c u l a r company and the c i r c u m s t a n c e s of the p a r t i c u l a r t i m e . T o w a r d I m p r o v e d F o r m a t and D e s i g n I m p r o v e d f o r m a t and d e s i g n w e r e b r o u g h t about t h r o u g h changes i n v a r i o u s f e a t u r e s of the annual r e p o r t . T h e r e was, f i r s t of a l l , g r e a t e r a t t e n t i o n p a i d to the a r r a n g e m e n t of content and l a y o u t so that the r e p o r t become m o r e p l e a s i n g to the eye and i n t e r e s t p r o v o k i n g . Secondly, e y e - a p p e a l f e a t u r e s s u c h as c h a r t s , g r a p h s , maps and photographs w e r e u s e d i n c r e a s i n g l y to s u p p l e m e n t or r e p l a c e a c c o u n t i n g s t a t e m e n t s , c o l u m n a r t a b u l a t i o n and e x t e n s i v e t e x t u a l c o m m e n t a r i e s . The photographs i l l u s t r a t e d p r o d u c t s , p l a n t s and i n t e r e s t i n g phases of the company's work. C h a r t s and g r a p h s d e p i c t e d p a s t a c t i v i t i e s and i n d i c a t e d p o s s i b l e f u t u r e developments. In s h o r t , a n nual r e p o r t s w e r e i l l u s t r a t e d m o r e p r o f u s e l y and made m o r e a t t r a c t i v e and i n t e r e s t i n g . • A w o r d of c a u t i o n i s a g a i n needed at t h i s point. M anagement s h o u l d not c o n c e r n t h e m s e l v e s w i t h m a k i n g the annual 174 r e p o r t a t t r a c t i v e to the d e t r i m e n t of i t s contents, w h i c h i s a f t e r a l l , w hat m a t t e r s most. Too abundant photographs tend to confuse the r e a d e r and d i v e r t a t t e n t i o n f r o m i m p o r t a n t r e a d i n g m a t t e r . Of c o u r s e t h e r e seems to be no p a r t i c u l a r m e r i t , on the o t h e r hand, i n b e i n g o l d f a s h i o n e d i n t h i s r e s p e c t . The s u g g e s t i o n h e r e i s that i l l u s t r a t i o n s s h o u l d be u s e d d i s c r i m i n a t e l y . P h o t o g r a p h s a r e i n t e r e s t i n g when they s e r v e a r e a l p u r p o s e , that i s to say, when they a r e i l l u s t r a t i v e of the text of the r e p o r t . A " h i t and m i s s " photo p l a c e d w h e r e space i s a v a i l a b l e and u n r e l a t e d to the t e x t w i l l not s i g n i f y much. In contrafet, p i c t u r e s of new i m p o r t a n t f i x e d a s s e t s w i l l h e l p to c l a r i f y the text. In s h o r t , i t i s e s s e n t i a l that p i c t u r e s and the text s h o u l d a l l be woven into a homogeneous p a t t e r n . W i t h r e g a r d to c h a r t s and graphs the f o l l o w i n g r e s e r v a t i o n s s h o u l d be k e p t i n mind. 1. C h a r t s and graphs s h o u l d be kept as s i m p l i e d as p o s s i b l e . The i n f o r m a t i o n s h o u l d be p r e s e n t e d i n a f o r m that can b e s t be u n d e r s t o o d by the r e a d e r . A good c h a r t i s one that i s e a s i l y u n d e r s t o o d . A t t e n t i o n s h o u l d be drawn to foc u s upon the f a c t s p o r t r a y by the c h a r t and not upon the i n t r i c a c y of the chart. 2. C h a r t s and g raphs s h o u l d give the r e a d e r a l l the i n f o r m a t i o n that he needs to u n d e r s t a n d i t s meaning. It s h o u l d not p r e s e n t m e a n i n g l e s s f a c t s and f i g u r e s . 175 3. C h a r t s and g raphs s h o u l d not attempt to t e l l too m u c h at one time. The human m i n d i s s u c h that i t can c o m p r e h e n d o n l y a few thoughts at a t i m e . E a c h c h a r t o r graph, t h e r e f o r e , s h o u l d c o n t a i n a m i n i m u m of f a c t s . The r e a d e r s h o u l d be e x p e c t e d to draw a m i n i m u m m u m b e r of c o n c l u s i o n s f r o m each c h a r t or graph. T o w a r d an E n l a r g e d R e p o r t The t r e n d t o w a r d an e n l a r g e d annual r e p o r t has been c l e a r l y i n d i c a t e d i n T a b l e V I 1 1 . It has a l s o been no t e d that l a r g e r r e p o r t s p e r m i t space f o r m o r e thorough r e p o r t i n g as w e l l a s s m o r e a t t r a c t i v e layout. No r u l e s or p r e s c r i p t i o n s can be l a i d down to t e l l m anagement what the b e s t length of an annual r e p o r t s h o u l d be. S u f f i c e to say h e r e that the r e p o r t s h o u l d be l a r g e enough p h y s i c a l l y to suggest thoroughness and c o m p l e t e n e s s . A t the same t i m e i t s h o u l d not be so b u l k y as to f r i g h t e n the r e a d e r . The danger of a r e p o r t b e c o m i n g too v o l u m i n o u s i s v e r y r e a l indeed. The S e c t i o n s A p e r t i n e n t q u e s t i o n i s "how many of the t h i r t e e n s e c t i o n s s h o u l d an annual r e p o r t i n c l u d e ? " I d e a l l y , e a ch and e v e r y one of the s e c t i o n s s h o u l d be i n c l u d e d , c o n s i d e r i n g the f u n c t i o n s w h i c h they s e r v e and w h i c h have been e l u d i c a t e d i n e a r l i e r c h a p t e r s . In p r a c t i c e , however, t h e r e a r e no h a r d and f a s t r u l e s to d e t e r m i n e the content of company a n n u a l r e p o r t s . N e v e r t h e l e s s , i t i s s u b m i t t e d h e r e , that t h e r e a r e c e r t a i n m i n i m u m r e q u i r e m e n t s w h i c h an annual r e p o r t s h o u l d meet. To a c h i e v e a w e l l - b a l a n c e d i n f o r m a t i v e content an a nnual r e p o r t s h o u l d c o n t a i n at l e a s t the f o l l o w i n g s e c t i o n s . 1. F r o n t C o v e r 2. E x e c u t i v e M e s s a g e .3. L i s t of o f f i c e r s and d i r e c t o r s 4. C o m p a r a t i v e data 5. C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 6. F i n a n c i a l h i g h l i g h t s 7. N a r r a t i v e s e c t i o n 8. S o u r c e s and a p p l i c a t i o n of funds. The above s h o u l d be c o n s t r u e d as m i n i m u m r e q u i r e m e n t s . They s h o u l d not d e t e r m o r e a m b i t i o u s managements f r o m expanding the scope of the annual r e p o r t to i n c l u d e , a l l the t h i r t e e n s e c t i o n s . "How s h o u l d e ach s e c t i o n be p r e s e n t e d ? " "What s h o u l d each conta i n ? " T h ese a r e questions w h i c h w i l l be taken up i n the ensuing p a r a g r a p h s . F r o n t C o v e r The i m p o r t a n c e of the f r o n t c o v e r cannot be o v e r -emphasized.. B e i n g the f i r s t i n t r o d u c t i o n to the r e p o r t , as i n d i c a t e d i n C h a p t e r 111, a company s h o u l d s t r i v e to c r e a t e a good i m p r e s s i o n of i t s e l f by u s i n g an a t t r a c t i v e c o v e r . This, can be e f f e c t e d i n the f o l l o w i n g manner. F i r s t , the c o v e r s h o u l d r e a d i l y i d e n t i f y the company i n the r e a d e r ' s mind. W h e re p o s s i b l e , t h i s s h o u l d be done i n a d i s t i n c t i v e though d i g n i f i e d m a n n e r s u c h as i n c l u d i n g a c o l o u r e d p h o t o g r a p h d e p i c t i n g t y p i c a l company o p e r a t i o n s or p r o d u c t s . Secondly, the name of the company s h o u l d be d i s p l a y e d i n b o l d r e a d a b l e type. T h i r d l y , the y e a r of the r e p o r t s h o u l d a l s o be d i s p l a y e d c l e a r l y so that the b o o k l e t can be found e a s i l y when i t i s f i l e d w i t h other r e p o r t s . F i n a l l y , a good s o l i d stock, h e a v i e r than the body paper, s h o u l d be u s e d f o r the c o v e r . 177 E x e c u t i v e M e s s a g e - G e n e r a l The complexity" of f i n a n c i a l s t a t e m e n t s has d r i v e n m any an a v e r a g e s h a r e h o l d e r to r e l y e n t i r e l y upon the e x e c u t i v e m e s s a g e f o r i n f o r m a t i o n . F o r t h i s r e a s o n alone, i t i s e s s e n t i a l that the m e s s a g e s h o u l d be w e l l executed. Often s i g n e d "on be h a l f of the b o a r d " and t h e r e f o r e b e a r i n g "a stamp of a p p r o v a l " f r o m the b o a r d of d i r e c t o r s the e x e c u t i v e m e s s a g e has c o n s i d e r a b l e i n f l u e n c e upon the r e a d e r . Thus u n l e s s the s t o r y of the e n t e r p r i s e i s w e l l t o l d i n the f i r s t p l a c e , the r e s u l t s of the y e a r ' s o p e r a t i o n w h i c h a r e made known to the p u b l i c w i l l be open to m i s i n t e r p r e t a t i o n and wrong i n f e r e n c e s . These, i n t u r n , m a y w o r k to the d e t r i m e n t of the company On the other hand, a s t o r y w e l l t o l d can g r e a t l y i n c r e a s e the confi d e n c e of the s h a r e h o l d e r s i n management. The s u r v e y r e v e a l e d m a ny e x e c u t i v e m e s s a g e s that w e r e w o r t h y of c o m p l i m e n t s . N e v e r t h e l e s s , i t a l s o r e v e a l e d f a r too many managements who w e r e r e l u c t a n t to p r o v i d e a p e r s o n a l o p i n i o n on the p r o g r e s s of the company. T h e r e w e r e many e x e c u t i v e m e s s a g e s , e s p e c i a l l y those of 1938, w h i c h to a l l intents and p u r p o s e s , m i g h t be . c l a s s i f i e d as dead l e t t e r s s i n c e they m e r e l y gave i n f o r m a t i o n a l r e a d y a pparent e l s e w h e r e . The e x e c u t i v e m e s s a g e s h o u l d be an e x p r e s s i o n of the top man's op i n i o n . It s h o u l d s t r e s s on f u t u r e o p e r a t i o n s and outlook. It s h o u l d c a l l s h a r e h o l d e r s ' a t t e n t i o n to a l l the h i g h spots, f a v o u r a b l e o r u n f a v o u r a b l e of the company's a f f a i r s throughout the y e a r . 178 Above a l l , i t s h o u l d a v o i d r e p e a t i n g f a c t s and f i g u r e s a l r e a d y apparent and f o u n d e l s e w h e r e i n the r e p o r t . In the p a r a g r a p h s w h i c h f o l l o w , suggestions f o r an i m p r o v e d e x e c u t i v e m e s s a g e a r e d i s c u s s e d i n two p a r t s . The f i r s t d eals w i t h the'format and d e s i g n of the e x e c u t i v e message. The s e c o n d is c o n c e r n e d w i t h the content of the message. E x e c u t i v e M e s s a g e - F o r m a t and D e s i g n U n d e r the g e n e r a l heading " F o r m a t and D e s i g n " the f o l l o w i n g a r e some of the m o r e i m p o r t a n t f e a t u r e s that w i l l be d i s c u s s e d : 1. L o c a t i o n , heading and s a l u t a t i o n 2. L e n g t h 3. O r g a n i z a t i o n or s t y l e of p r e s e n t a t i o n . L o c a t i o n , T i t l e and S a l u t a t i o n P r e f e r a b l y , the e x e c u t i v e m e s s a g e s h o u l d be l o c a t e d n e a r the b e g i n n i n g of the r e p o r t . It s h o u l d be d i n s t i n c t i v e l y t i t l e d and p r o p e r l y a d d r e s s e d so as to a r r e s t the a t t e n t i o n of the r e a d e r . Subheadings a r e u s e f u l when c a r e f u l l y chosen. They help a g r e a t . d e a l to make the r e p o r t r e a d a b l e . L e n g t h The m o s t e f f e c t i v e e x e c u t i v e m e s s a g e s a r e those that l i m i t t h e m s e l v e s to a b i r d ' s eye v i e w of the f i n a n c i a l c o n d i t i o n s and o p e r a t i o n s of the e n t e r p r i s e . The f a c t s s h o u l d be t o l d p r e c i s e l y yet adequately. The best m e s s a g e s appear to be s h o r t , one o r two page v e r s i o n s o r at the m o s t t h r e e pages. M a nagement s h o u l d be 179 aware of the l a c k of i m p a c t of m a s s e s of p r i n t e d m a t e r i a l s on s h a r e h o l d e r r e a d e r s h i p . R e a d e r s a r e l i k e l y to f a l l b e h i n d when they have to p l o u g h t h r o u g h an eighteen page e x e c u t i v e message. O r g a n i z a t i o n It does not r e a l l y m a t t e r m u c h whether the e x e c u t i v e m e s s a g e i s w r i t t e n i n the f o r m of a l e t t e r o r l i k e a m a g a z i n e a r t i c l e . What i s m o r e i m p o r t a n t i s the f a c t that the m a t e r i a l s h o u l d be a r r a n g e d so that i t can e a s i l y be u n d e r s t o o d . T h i s can be e f f e c t e d by a n u mber of ways one of w h i c h w o u l d be to a v o i d c r o w d i n g too many d i f f e r e n t t o p i c s on one page. In a d d i t i o n , and t h i s i s even m o r e i m p o r t a n t , management s h o u l d a v o i d c r o w d i n g two or m o r e t o p i c s i n one p a r a g r a p h . M a n y of the e x e c u t i v e m e s s a g e s that w e r e w r i t t e n i n the f o r m of a l e t t e r f a i l e d m i s e r a b l y i n t h i s r e s p e c t . " M i x e d p a r a g r a p h s " tend to .create c o n f u s i o n i n the r e a d e r s ' mind. E a s y to g r a s p a r r a n g e m e n t s can a l s o be e f f e c t e d by the u s e of t e r s e a n d p r c i s e s u m m a r i e s p l a c e d at the b e g i n n i n g or b e s i d e each p a r a g r a p h . S u m m a r i e s of t h i s s o r t can be made even m o r e u s e f u l by c o l o u r p r i n t i n g . P e r h a p s , the a p pearance of the page can b e s t be i m p r o v e d by two c o l u m n a r p r e s e n t a t i o n . The u s e of n a r r o w columns f o r t e x t p u r p o s e s has the advantage of s t i m u l a t i n g g r e a t e r r e a d a b i l i t y . 180 E x e c u t i v e M e s s a g e - Content In an e a r l i e r c hapter, i t has been noted that s i n c e no two c o m p a n i e s a r e e x a c t l y a l i k e , each company m u s t decide f o r i t s e l f , depending upon the c i r c u m s t a n c e s s u r r o u n d i n g i t s o p e r a t i o n , the t o p i c s to be i n c l u d e d i n the e x e c u t i v e message. A l t h o u g h a l i s t w i l l be s u g g e s t e d h e r e as the b a s i s of a good e x e c u t i v e m e s s a g e , i t s h o u l d be b o r n e i n m i n d that some of the t o p i c s may not be a p p l i c a b l e to c e r t a i n companies. Some co m p a n i e s have t h e i r own s p e c i a l p r o b l e m s w h i c h d e s e r v e r e c o g n i t i o n i n the e x e c u t i v e m e s s a g e but w h i c h cannot be c o n s i d e r e d here. The s u g g e s t e d t o p i c s , t h e r e f o r e , s h o u l d be c o n c e i v e d of as p r o v i d i n g a f r a m e w o r k on w h i c h to b u i l d the e x e c u t i v e message. They a r e to be u s e d by a company o n l y to the extent to w h i c h they a r e a p p l i c a b l e , and they m u s t al w a y s be s u b o r d i n a t e to the s p e c i a l p r o b l e m s of the company. • R e g a r d l e s s of w h a t e v e r t o p i c s a r e i n c l u d e d , t h e r e a r e c e r t a i n b a s i c q u a l i t i e s w h i c h an e x e c u t i v e m e s s a g e m u s t have b e f o r e i t can be c o n s i d e r e d adequate. The f o l l o w i n g a r e some of the q u a l i t i e s : F i r s t , the s t o r y of the o p e r a t i o n s s h o u l d be t o l d f r a n k l y and s i n c e r e l y . G e n e r a l l y speaking, p r a c t i c e s such as i n t r o d u c i n g a s u b j e c t i n one y e a r when i t p o i n t s up a c i r c u m s t a n c e e x t r e m e l y f a v o u r a b l e to management's p o s i t i o n and d r o p p i n g i t i n a s u c c e e d i n g y e a r when i t shows a c o n t r a r y r e s u l t s h o u l d be avoided. 181 Undoubtedly t h e r e w i l l be t i m e s when s t o r i e s of u n s u c c e s s o r f a i l u r e a r e d i f f i c u l t and p a i n f u l to t e l l . N e v e r t h e l e s s they m u s t be t o l d w i t h c l a r i t y and candor. B u t whether i n s u c c e s s or f a i l u r e the a p p r o a c h of the e x e c u t i v e m e s s a g e s h o u l d be to t e l l what happened and why i t happened. Secondly, the subjects w h i c h a r e d i s c u s s e d i n the e x e c u t i v e m e s s a g e s h o u l d be t i m e l y and s i g n i f i c a n t . R e a d e r s a r e i n t e r e s t e d i n k n owing about the p r o b l e m s c u r r e n t l y i n the m i n d s of management. • A t the same t i m e they seek e x p l a n a t i o n s to some of the questions i n t h e i r own mind. A l l s i g n i f i c a n t p r o b l e m s a f f e c t i n g the w e l f a r e of the company, whether p r e s e n t l y o r i n the f u t u r e , s h o u l d be b r o ught to the a t t e n t i o n of the s h a r e h o l d e r s . The d o c t r i n e of f u l l d i s c l o s u r e when a p p l i e d to the e x e c u t i v e m e s s a g e means that a l l m a t t e r s of s e r i o u s consequence to the company s h o u l d not f a i l e to be c o m m e n t e d upon i n a s i n c e r e manner. T a b l e X V l i s t s twenty t h r e e t o p i c s w h i c h w e r e found i n the e x e c u t i v e m e s s a g e s . It i s s u g g e s t e d h e r e that the f i r s t e l e v e n t o p i c s p r o v i d e an adequate f r a m e w o r k f o r a good e x e c u t i v e message. The other t w e l v e topics, s h o u l d not appear i n the m e s s a g e u n l e s s s p e c i a l c o n d i t i o n s w a r r a n t t h e i r i n c l u s i o n . "What s h o u l d be d i s c u s s e d u nder each of the e l e v e n t o p i c s ? " The p a r a g r a p h s below p r o v i d e some i n d i c a t i o n . 182 E a r n i n g s A s a v e r y m i n i m u m t h i s t o p i c s h o u l d i n c l u d e a t w o -year c o m p a r i s o n of net i n c o m e as w e l l as e a r n i n g s on a p e r s h a r e b a s i s . The y e a r ' s aggregate p r o f i t s s h o u l d be i n c l u d e d ; o t h e r w i s e i t s o m i s s i o n i s l i k e l y to cause s u s p i c i o n . O t h e r p o i n t s w h i c h m i g h t be r e f e r r e d to i n c l u d e an i n d i c a t i o n of the extent to w h i c h the p r o f i t s a r e " a b n o r m a l " and " n o n r e c u r r i n g " and a b r e a k d o w n of e a r n i n g s i f the company i s i n two u n r e l a t e d b u s i n e s s e s . It m i g h t be u s e f u l to i n d i c a t e the p e r c e n t a g e change i n p r o f i t m a r g i n between the c u r r e n t and p r e v i o u s y e a r s . A d i s c u s s i o n of the m a i n f a c t o r s w h i c h a f f e c t the r e s u l t s of the y e a r i s m o s t d e s i r a b l e . A n i n d i c a t i o n of how these same f a c t o r s a r e l i k e l y to o p e r a t e i n the f u t u r e i s even m o r e h e l p f u l . A p p r e c i a t i o n to E m p l o y e e A v e r y c ommon f e a t u r e i n annual r e p o r t s , t h i s t o p i c s h o u l d not be o v e r l o o k e d . It c o n s i s t s of a s i m p l e acknowledgement and a p p r e c i a t i o n of the c o n t r i b u t i o n of the e m p l o y e e s d u r i n g the p e r i o d under r e v i e w . F i x e d a s s e t s Under t h i s t o p i c t h e r e ought to be a c l e a r statement of the amount a c t u a l l y expended on new f i x e d a s s e t s e i t h e r by r e p l a c e m e n t or expansion. A n i n d i c a t i o n of the m a j o r types of f i x e d a s s e t s together w i t h the r e s p e c t i v e amount of e x p e n d i t u r e w o u l d be m o s t enli g h t e n i n g . R e a s o n s f o r c a p i t a l e x p e n d i t u r e m i g h t a l s o be g i v e n -- t h i s would, f o r 183 example, be an a p p r o p r i a t e p l a c e to d e s c r i b e a c a p i t a l e x p a n s i o n p r o g r a m . T h i s t o p i c can be made m o s t i m f o r m a t i v e i f some i n d i c a t i o n of the c a p i t a l e x p e n d i t u r e c o m m i t t e d at y e a r end together w i t h the p r o p o s e d e x p e n d i t u r e f o r the c o m i n g y e a r i s d i s c l o s e d . S a l e s A c o m p r e h e n s i v e c o v e r a g e of t h i s t o p i c s h o u l d i n c l u d e the f o l l o w i n g or a m a j o r p o r t i o n of the f o l l o w i n g p o i n t s : 1. Two y e a r c o m p a r i s o n of aggregate s a l e s f i g u r e s together w i t h p e r c e n t a g e changes. 2. E x p l a n a t i o n of the r e a s o n s f o r the changes w h i c h took p l a c e . 3. T o t a l s a l e s f i g u r e d i v i d e d to show n o r m a l and s p e c i a l or u n u s u a l s a l e s . 4. B r e a k d o w n of s a l e s between m a j o r f i e l d s of a c t i v i t y e. g. by t e r r i t o r i e s o r d i v i s i o n s , by types of p r o d u c t s and by types of c u s t o m e r s . 5. A c o m p a r a t i v e statement of s a l e s to i n d i c a t e s e a s o n a l f l u c t u a t i o n s , c y c l i c a l f l u c t u a t i o n s , s e c u l a r f l u c t u a t i o n s and long r u n t r e n d s . T h i s may be e f f e c t e d by means of a c h a r t or graph. D i v i d e n d s A n i n d i c a t i o n of the c o m p a r a t i v e t o t a l amount of d i v i d e n d s p a i d d u r i n g the y e a r and that p a i d d u r i n g the p r e v i o u s y e a r i s i n d i s p e n s a b l e to adequate r e p o r t i n g on t h i s t o p i c . A n e x p l a n a t i o n of the d i v i s i o n of p r o f i t s into d i v i d e n d s and r e t a i n e d e a r n i n g s m i g h t be s t a t e d where n e c e s s a r y . P e r s h a r e f i g u r e s a r e u s e f u l i n d i s p e l l i n g f a l s e n o t i o n about 184 the s i z e of di v i d e n d s . It m i g h t be u s e f u l to state the amount of p r e f e r r e d d i v i d e n d s i n a r r e a r s ; some i n d i c a t i o n of the p r o s p e c t s of payments s h o u l d be d i s c u s s e d w h ere a p p l i c a b l e . D i v i d e n d p o l i c y s h o u l d be d i s c u s s e d without a c t u a l c o m m i t m e n t as to f u t u r e payments. The amount of and r e a s o n s f o r d i s t r i b u t i n g s t o c k d i v i d e n d s s h o u l d be ex p l a i n e d . M a r k e t i n g V a r i o u s types of i n f o r m a t i o n m i g h t be d i s c l o s e d under t h i s t o p i c . Some of the m o r e p e r t i n e n t ones i n c l u d e s p r o d u c t p r i c e s and s e r v i c e s a l e s . P r i c e s and r a t e s can b e s t be shown by an i n d i c a t i o n of t h e i r m o vements i n r e l a t i o n to the c o s t of l i v i n g o r c o m p a r a b l e p r i c e s . It m i g h t be u s e f u l to i n d i c a t e , u nder t h i s t o p i c , the r e l a t i v e standing of the f i r m i n the i n d u s t r y , that i s to say, s h a r e of m a r k e t . Some i d e a of the demand m i g h t be o b t a i n e d i f the amount of new o r d e r s w e r e given. It w o u l d be h e l p f u l a l s o to show the s i z e and amount of u n f i l l e d o r d e r s together w i t h the e s t i m a t e d c o m p l e t i o n date. M a nagement It i s not s u f f i c i e n t to i n d i c a t e the r e t i r e m e n t s , death and/or r e p l a c e m e n t of top management p e r s o n n e l alone. P r e f e r a b l y some i n f o r m a t i o n about the e x p e r i e n c e of o f f i c e r s and d i r e c t o r s and t h e i r i n t e r e s t s i n the company or i n a f f i l i a t e c o mpanies s h o u l d a l s o be made known. S t e r e o t y p e announcement about the " s e v e r e l o s s s u f f e r e d when d i r e c t o r A B C p a s s e d away" without any i n d i c a t i o n of the c o n t r i b u t i o n made by the h i g h o f f i c e r s h o u l d be avoided. 185 S u b s i d i a r i e s and A f f i l i a t e s The f o l l o w i n g s h o u l d be s u f f i c i e n t to c o n s t i t u t e an adequate c o v e r a g e of t h i s t o p i c : 1. N u m b e r of s u b s i d i a r i e s and a f f i l i a t e s . 2. P u r c h a s e and/or f o r m a t i o n of s u b s i d i a r i e s d u r i n g the y e a r . 3. O p e r a t i n g r e s u l t s of s u b s i d i a r i e s . 4. N a t u r e of o p e r a t i o n and l o c a t i o n of s u b s i d i a r i e s . Outlook and F u t u r e P r o s p e c t s T h i s i s one t o p i c w h i c h no e x e c u t i v e m e s s a g e s h o u l d o v e r l o o k . The f u t u r e i s the p l a c e w here the s u c c e s s or f a i l u r e of the company l i e s and the s h a r e h o l d e r at l e a s t expects f r o m the c h a i r m a n an a l m o s t p e r s o n a l o p i n i o n on what the f u t u r e h o l d s f o r the company. Comments on f u t u r e p r o s p e c t s c o u l d be extended to c o v e r many subj e c t s . O n l y the m o r e i m p o r t a n t ones w i l l be c o n s i d e r e d here. These i n c l u d e the f o l l o w i n g : 1. M a j o r p r o b l e m s that m a y be f a c i n g management. 2. P r o s p e c t s of any non r e c u r r i n g p r o f i t s o r l o s s e s . 3. Management's plans f o r expanding i t s p l a n t s and p r o d u c t s . 4. A n y m a j o r l i t i g a t i o n that i s pending by o r a g a i n s t the c o r p o r a t i o n . 5. Management's p l a n to seek new f i n a n c i n g . 6. B u s i n e s s p r o s p e c t s of the company i . e. outlook f o r s a l e s , m a n u f a c t u r i n g , m a t e r i a l s , new v e n t u r e s etc. , 7. P r o s p e c t s of the i n d u s t r y i n w h i c h the company i s situated. It w o u l d be e x t r e m e l y h e l p f u l i f r e a s o n s c o u l d be i n c l u d e d i n any p a r t i c u l a r v i e w p o i n t that i s taken. W h i l e management cannot be too 186 s p e c i f i c about t h e i r f u t u r e p r o s p e c t s , they s h o u l d a l s o a v o i d b e i n g too g e n e r a l i n t h e i r comments. Sonorous and empty statements to the e f f e c t that "today the company stands on the t h r e s h h o l d . ..." and e x t r e m e c o n v e n t i o n a l s t a t e m e n t s , s u c h as "we lo o k f o r w a r d c o n f i d e n t l y to the f u t u r e " s h o u l d be avoided. W o r k i n g C a p i t a l A t w o - y e a r c o m p a r i s o n of w o r k i n g c a p i t a l together w i t h the p e r c e n t a g e change w o u l d be adequate f o r t h i s t opic. Schedules showing s o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l a r e b e s t e x c l u d e d f r o m the e x e c u t i v e m e s s a g e and shown i n a s e p a r a t e s e c t i o n . P e r s o n n e l R e l a t i o n s U n d e r t h i s t o p i c , i n n u m e r a b l e comments m i g h t be made. H e r e again, l i k e " outlook and f u t u r e p r o s p e c t s " o n l y the m o r e i m p o r t a n t c o m ments a r e suggested. These i n c l u d e the f o l l o w i n g : 1. N umber of e m p l o y e e s 2. Wage r a t e s and p a y r o l l 3. P e n s i o n s 4. I n s u r a n c e 5. U n i o n r e l a t i o n s . R e f e r e n c e to uni o n s i s i m p o r t a n t i n o r d e r to d i s p e l the n o t i o n that they a r e being i g n o r e d . If a l l u s i o n s to unions a r e made when r e l a t i o n s a r e f a i r i n s t e a d of o n l y when r e l a t i o n s a r e s t r a i n e d a m o r e " f a v o u r a b l e " i m p r e s s i o n m i g h t be cr e a t e d . 187 N a r r a t i v e A s i n the case of the e x e c u t i v e m e s s a g e , i m p r o v e m e n t s i n the n a r r a t i v e s e c t i o n can be a t t a c k e d along two f r o n t s , n a m e l y : f o r m a t and d e s i g n and content. W i t h r e g a r d to f o r m a t and design, m u c h of what has been s u g g e s t e d about the e x e c u t i v e m e s s a g e apply e q u a l l y w e l l to the n a r r a t i v e . In f a c t , b e c a use the n a t u r e of the n a r r a t i v e s e c t i o n i s s u c h that i t r e q u i r e s a g r e a t d e a l of space, i t i s i m p e r a t i v e that s t r e a m l i n i n g of t h i s s e c t i o n be w e l l attended to i f the d e s i r e to a t t r a c t and h o l d the att e n t i o n of the r e a d e r . The appearance of the n a r r a t i v e s e c t i o n may be i m p r o v e d by two c o l u m n a r p r e s e n t a t i o n w i t h wide m a r g i n s . The n a r r a t i v e s h o u l d be b o l d l y and a t t r a c t i v e l y t i t l e d . S u b t i t l e s o r subheadings may be u s e d w i t h advantage to i n d i c a t e the i m p o r t a n t t o p i c s d i s c u s s e d . P h o t o g r a p h s , c h a r t s and graphs and o t h e r i l l u s t r a t i o n s when j u d i c i o u s l y used, can a l l add to make the n a r r a t i v e i n t e r e s t p r o v o k i n g and m o r e r e a d a b l e . W i t h r e g a r d to the content of the n a r r a t i v e no p r e s c r i p t i o n of t o p i c s can be o f f e r e d . T h i s i s one a r e a w h i c h each company m u s t decide f o r i t s e l f . The i m p o r t a n t p o i n t to note, however, i s that manage-m e n t sh o u l d a v o i d drowning i m p o r t a n t i n f o r m a t i o n i n a sea of w o r d s by l o n g t e x t u a l e x p l a n a t i o n s . A n a r r a t i v e s e c t i o n w i t h m a s s e s of u n b r o k e n t e x t u a l m a t e r i a l m a k e s r e a d i n g a m a j o r c h o r e and defeats i t s m a i n purpose. 188 No doubt c e r t a i n things n e e d to be explained. N e v e r t h e l e s s , the s h a r e h o l d e r s h o u l d be i n f o r m e d but not deluged. S t i l t e d language s h o u l d be avoided. The n a r r a t i v e s h o u l d be an easy f l o w i n g s t o r y w i t h l o g i c a l t r a n s i t i o n f r o m one p a r t to another. P r o d u c t S e c t i o n T h i s s e c t i o n can be u s e d w i t h advantage i f i t i n c l u d e s photographs i l l u s t r a t i n g t e c h n i c a l p r o d u c t o r p r o d u c t s w h i c h the a v e r a g e p e r s o n does not come in t o contact. P h o t o g r a p h s a r e a l s o h e l p f u l i n i l l u s t r a t i n g new p r o d u c t s . M a nagement s h o u l d b e ware, however, of t u r n i n g the annual r e p o r t into an a d v e r t i s i n g b r o c h u r e w h i c h m a y i n c u r the w r a t h of s h a r e h o l d e r s . M a n agement s h o u l d r e a l i z e that the m a i n p u r p o s e of the annual r e p o r t i s to i n f o r m s h a r e h o l d e r s . It i s not a v e h i c l e f o r doing s a l e s p r o m o t i o n . S u b s i d i a r i e s , A f f i l i a t e s and D i v i s i o n s T h i s s e c t i o n has g e n e r a l l y been w e l l t r e a t e d i n theannual r e p o r t s and needs no f u r t h e r comment. F i n a n c i a l H i g h l i g h t s C o n s i d e r i n g the f a c t that one of the chief f u n c t i o n s of t h i s s e c t i o n i s to s p o t l i g h t s i g n i f i c a n t r e s u l t s i t s h o u l d be p l a c e d c l o s e to the f r o n t of the r e p o r t , p r e f e r a b l y f o l l o w e d by the e x e c u t i v e message. C o m p a r a b l e f i g u r e s f o r two y e a r s s h o u l d be the r u l e . T h e r e i s no 189 n e c e s s i t y f o r extending the f i n a n c i a l h i g h l i g h t s s e c t i o n to c o v e r two o r t h r e e pages. One page wo u l d p r o v i d e m o r e than adequate space to d e s c r i b e t h i s s e c t i o n . F i n a n c i a l h i g h l i g h t s s h o u l d be r e d u c e d to a r e a s o n a b l e n u m b e r so that the l a y o u t w i l l be a t t r a c t i v e and the i n f o r m a t i o n can be r e a d i l y g rasped. • L o n g f i n a n c i a l h i g h l i g h t s a r e bound to r e d u c e g r e a t l y the r e a d e r s h i p i mpact. It i s s u b m i t t e d h e r e that ten to f i f t e e n i t e m s w o u l d p r o v i d e enough l e e w a y to p e r m i t the i n c l u s i o n of m o s t of the s i g n i f i c a n t f i g u r e s and, at the same t i m e , r e t a i n the b r e v i t y v i t a l to o b t a i n i n g s h a r e h o l d e r r e a d e r s h i p . "What data s h o u l d be i n c l u d e d i n the f i n a n c i a l h i g h l i g h t s ? " H e r e again, no f o r m u l a can be p r e s c r i b e d . The content of the f i n a n c i a l h i g h l i g h t s s e c t i o n m u s t depend somewhat upon the r e l a t i v e s i g n i f i c a n c e of the v a r i o u s f a c t s i n the b u s i n e s s . The i m p o r t a n t p o i n t to r e m e m b e r is that the f i n a n c i a l h i g h l i g h t s s e c t i o n s h o u l d not be u s e d to draw attention to only those m a t t e r s w h i c h a r e f a v o u r a b l e and thus b e c omes a convenient way of o v e r l o o k i n g other m a t t e r s w h i c h a r e l e s s f a v o u r a b l e . The p u r p o s e of the h i g h l i g h t s s e c t i o n i s to p r o v i d e a c l e a r statement of the s a l i e n t f e a t u r e s i n the r e p o r t and s a l i e n t f e a t u r e s i n c l u d e both f a v o u r a b l e and un f a v o u r a b l e f e a t u r e s . S i n c e r i t y i s the i n d i s p e n s a b l e q u a l i t y i n r e p o r t i n g , i t m u s t p r e v a i l throughout the r e p o r t . P e r h a p s the t e r m " h i g h l i g h t s " i t s e l f i s m i s l e a d i n g s i n c e i t connotes s o m e t h i n g f a v o u r a b l e . P e r h a p s th i s s e c t i o n s h o u l d be e n t i t l e d by some other names su c h as " s a l i e n t 190 f e a t u r e s " o r " s i g n i f i c a n t f a c t s . " C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - G e n e r a l It i s d i f f i c u l t to a p p r e c i a t e why so many c o m p a n i e s o m i t t h i s s e c t i o n f r o m t h e i r annual r e p o r t s . A f t e r a l l , m o s t of the f i g u r e s to be s t a t e d a r e u s u a l l y o b t a i n a b l e f r o m the accounts of the p r e c e e d i n g y e a r s . Imagine the i r r i t a t i o n s of a s h a r e h o l d e r who w i s h e s to c o m p a r e a f i g u r e w i t h that t h r e e , f o u r or f i v e y e a r s ago and cannot do so b e c a u s e the c o m p a r a t i v e f i g u r e i s o m i t t e d . In su c h a ca s e he m u s t p r e s u m a b l y go b a c k to the o l d r e p o r t s , i f he can f i n d them, i n o r d e r to o b t a i n the i n f o r m a t i o n he wants. Thus u n l e s s c o m p a r a t i v e f i g u r e s a r e g i v e n anyone who m i g h t w i s h to r e v i e w the l a s t ten y e a r s of a company w i l l have to do a c o n s i d e r a b l e amount of study and c o m p i l a t i o n of f i g u r e s f r o m the annual b a l a n c e sheets and i n c o m e statements. It i s s e l d o m that the i n s e r t i o n of c o m p a r a t i v e f i g u r e s , o t h e r than i n group accounts where m i n o r a d j u s t m e n t s have to be made, give r i s e to any s e r i o u s p r o b l e m . C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - F o r m a t and D e s i g n A s i n the case of the b a l a n c e sheet and income statement, the a v e r a g e s h a r e h o l d e r cannot expect to a t t a i n an u n d e r s t a n d i n g of s t a t i s t i c a l t a b u l a t i o n s without c o n s i d e r a b l e m e n t a l e f f o r t . F o r m a t and design of t h i s s e c t i o n t h e r e f o r e a r e i m p o r t a n t c o n s i d e r a t i o n s f o r management. C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s h o u l d be so a r r a n g e d that they f a c i l i t a t e u n d e r s t a n d i n g . Shadings o r c o l o u r s may be u s e d e f f e c t i v e l y to d i s t i n g u i s h f i g u r e s of the m o s t r e c e n t y e a r f r o m those of p r e v i o u s y e a r s . Changes 191 between s u c c e s s i v e y e a r s s h o u l d be shown i n an a d d i t i o n a l c o l u m n w i t h the i n c r e a s e s and d e c r e a s e s c l e a r l y i n d i c a t e d . The use of graphs o r c h a r t s to i l l u s t r a t e c e r t a i n k e y i t e m s i s h i g h l y d e s i r a b l e . It w o u l d be e x t r e m e l y h e l p f u l i f the s u m m a r y c o u l d be b r o k e n down into segments s u c h as i n c o m e statement data, b a l a n c e sheet data, p r o d u c t data etc. , Where c o m p a r a t i v e data a r e g i v e n f o r o n l y two or t h r e e y e a r s i t s h o u l d be noted that they do not make a t r e n d o r e s t a b l i s h a p a t t e r n . S i n c e t r e n d i n d i c a t i o n i s one of the m a i n p u r p o s e s of t h i s s e c t i o n , i t i s c l e a r that a lon g p e r i o d of y e a r s i s r e q u i r e d . It i s s u g g e s t e d that c o m p a r a t i v e f i g u r e s f o r at l e a s t ten y e a r s s h o u l d be given. They w i l l l e n d r e a l i t y and p r e c i s i o n to wha t e v e r the P r e s i d e n t may say i n h i s r e p o r t about l o n g - t e r m t r e n d o r f i n a n c i a l p o l i c i e s of the company. C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - Content H e r e again, c h o i c e of i t e m s to be i n c l u d e d i n the c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s e c t i o n s h o u l d a l w a y s be guided by the d e s i r e to throw m a x i m u m l i g h t on the o p e r a t i o n s , p r o b l e m s and p o l i c i e s of the company. A l i s t i n g of a l l the i t e m s w h i c h s h o u l d be i n c l u d e d i n t h i s s e c t i o n cannot be p r e s c r i b e d here. E a c h company m u s t decide f o r i t s e l f depending upon the n a t u r e of i t s b u s i n e s s , w h i c h i t e m s b e s t r e f l e c t i t s o p e r a t i o n s , p r o b l e m s and p o l i c i e s . N e v e r t h e l e s s , i t i s s u b m i t t e d that t h e r e a r e c e r t a i n b a s i c i t e m s w h i c h e v e r y company s h o u l d r e v e a l i n th i s s e c t i o n . T hese a r e : 1. Sales r e v e n u e 2. C o s t of s a l e s 3. E x p e n s e s 192 4. Net i n c o m e 5. D i v i d e n d s 6. Taxes 7. F i x e d a s s e t s 8. D e p r e c i a t i o n 9. C u r r e n t a s s e t s 10. C u r r e n t l i a b i l i t i e s 11 S h a r e h o l d e r s ' equity. A g g r e g a t e r e v e n u e f r o m d i f f e r e n t s o u r c e s s h o u l d be segregated.- Where a company has two o r m o r e m a i n s o u r c e s of revenue i t w o u l d be d i f f i c u l t to u n d e r s t a n d the a f f a i r s of the company u n l e s s the revenue f r o m each m a j o r a c t i v i t y i s shown s e p a r a t e l y . B y the same token i n c o m e f r o m n o r m a l o p e r a t i o n s s h o u l d be d i s t i n g u i s h e d f r o m i n c o m e f r o m u n u s u a l t r a n s a c t i o n s i n o r d e r to a v o i d m i s l e a d i n g i n f e r e n c e s . R a t i o s s h o u l d be u s e d m o r e f r e q u e n t l y . They p r o v i d e one of the b e s t ways to i n t e r p r e t the f i n a n c i a l and s t a t i s t i c a l i n f o r m a t i o n E x a m p l e s of s i g n i f i c a n t r a t i o s i n c l u d e p e r s h a r e data e. g. net i n c o m e p e r c ommon s h a r e , d i v i d e n d s p e r c o m m o n sh a r e , i n c o m e p e r d o l l a r of s a l e s , w o r k i n g c a p i t a l r a t i o and r e t u r n on inv e s t m e n t . No s u g g e s t i o n i s made h e r e that the c o m p a r a t i v e f i n a n c i a l s t a t i s t i c s s e c t i o n s h o u l d c o n t a i n m o r e and m o r e t a b u l a r data. T h e r e is no i m p l i c a t i o n that the m o r e the s t a t i s t i c a l data the b e t t e r the r e p o r t . M e r e b u l k of f i g u r e s s h o u l d not be the o b j e c t i v e . In f a c t , some of the r e p o r t w h i c h w e r e s t u d i e d w o u l d do b e t t e r i n p r e s e n t i n g the l o n g - r a n g e 193 v i e w by c u t t i n g down on t h e i r t o t a l volume of s t a t i s t i c a l data. One i m p o r t a n t p o i n t to note when p r e s e n t i n g f i n a n c i a l s t a t i s t i c s i s the f a c t that p r i c e changes a r e not r e f l e c t e d i n the f i g u r e s u n l e s s a d j u s t m e n t s a r e made where i m p o r t a n t p r i c e changes have o c c u r r e d and cannot be i n c o r p o r a t e d into the r e p o r t - they s h o u l d be c l e a r l y i n d i c a t e d . P r i c e l e v e l p r o b l e m c a n be o v e r c o m e to some extent by i n d i c a t i n g , whenever p o s s i b l e , p h y s i c a l v o l u m e or quantity r e p r e s e n t e d by the d o l l a r f i g u r e s e. g. p h y s i c a l v o l u m e of s a l e s , n u m ber of telephones i n s e r v i c e , v o l u m e of p r o d u c t i o n . S o m e t i m e s e f f e c t i v e c o m p a r i s o n can be achieved,by showing the r e l a t i v e g r o w t h of the company and that of the i n d u s t r y . A d i f f i c u l t y h e r e m i g h t be l a c k of data about the i n d u s t r y . S o u r c e s and A p p l i c a t i o n of W o r k i n g C a p i t a l D e s p i t e the s m a l l r e c e p t i o n g i v e n to statements of s o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l by the s u r v e y companies, i t i s s u b m i t t e d h e r e that the value of s u c h statements i s so g r e a t to the r e a d e r that they s h o u l d be i n c l u d e d i n a l l annual r e p o r t s . A statement of s o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l s e r v e s a u s e f u l p u r p o s e i n b r i n g i n g out the d i f f e r e n c e between r e p o r t e d p r o f i t s and w o r k i n g c a p i t a l a v a i l a b l e f o r use. It i s a u s e f u l i n s t r u m e n t f o r i n d i c a t i n g m o r e c l e a r l y events and changes i n the company's f i n a n c i a l s tatements i n a way not shown i n the b a l a n c e sheet and i n c o m e statement. 194 L i s t of O f f i c e r s and D i r e c t o r s U nder t h i s s e c t i o n i t m i g h t be u s e f u l to show the a f f i l i a t i o n s of d i r e c t o r s who a r e not c o r p o r a t e o f f i c e r s . T h i s w i l l enable the s h a r e -h o l d e r to know what r e l a t i o n s h i p s e x i s t and what c o n t r i b u t i o n s m i g h t be e x p e c t e d f r o m the d i r e c t o r s . I n f o r m a t i o n s u c h as number of y e a r s each o f f i c e r o r d i r e c t o r has s e r v e d and age of c h i e f o f f i c e r s w i l l be h e l p f u l . P h o t o g r a p h s showing c o r p o r a t e o f f i c e r s a r e w e l l and good. However, st u f f y h e a d - a n d - s h o u l d e r s p i c t u r e s s o m e t i m e s make a page l o o k l i k e s o m e t h i n g out of a h i g h s c h o o l y e a r book. It i s s u g g e s t e d h e r e that h e a d - a n d - s h o u l d e r s p i c t u r e s be r e p l a c e d by w a r m i n f o r m a l p i c t u r e s e l e c t e d to give the r e a d e r an i m p r e s s i o n of d y n a m i c c o r p o r a t e l e a d e r s h i p . C o r p o r a t e Data T h i s i s f u n d a m e n t a l i n f o r m a t i o n and s h o u l d be i n c l u d e d i n e v e r y r e p o r t . T i t l e P a g e T h i s s e c t i o n may be a v o i d e d i f i t r e p e a t s the i n f o r m a t i o n a l r e a d y found on the f r o n t cover. T a b l e of Contents T h i s s e c t i o n i s not a m u s t f o r e v e r y r e p o r t , but i s c e r t a i n l y a r e c o m m e n d e d p r a c t i c e f o r any m u l t i - p a g e booklet. A s the scope of the annual r e p o r t expands i t b e c o mes i n c r e a s i n g l y n e c e s s a r y to i n c l u d e 195 a t a b l e of contents. • A s a r u l e of thumb, a t a b l e of contents i s of m a r g i n a l i m p o r t a n c e i n an annual r e p o r t of ten,pages o r l e s s . M i s c e l l a n e o u s I n f o r m a t i o n Some of the i n f o r m a t i o n i n c l u d e d under t h i s s e c t i o n can v e r y w e l l be e l i m i n a t e d . E x a m p l e s of such i n f o r m a t i o n i n c l u d e p i c t u r e s w h i c h a r e not r e l a t e d to text, s a m p l e s of company a d v e r t i s e m e n t , whole pages devoted to headings i n t r o d u c i n g s e c t i o n s of the r e p o r t and a g l o s s a r y of f i n a n c i a l t e r m s . , . A g l o s s a r y of f i n a n c i a l t e r m s on the l a s t page of the annual r e p o r t does not a t t r a c t the a v e r a g e r e a d e r . If the a v e r a g e r e a d e r does not u n d e r s t a n d i n f o r m a t i o n at a q u i c k glance, he i s going to i g n o r e i t . He wants to u n d e r s t a n d i n f o r m a t i o n as he r e a d s i t . 196 I C H A P T E R I X C O N C L U S I O N S i The i m p o r t a n c e of s u p p l e m e n t a r y i n f o r m a t i o n has been c l e a r l y i n d i c a t e d i n the study. Its m a i n f u n c t i o n has been to a i d i n u n d e r s t a n d i n g and e v a l u a t i n g the f i n a n c i a l accounts. A t t h e same t i m e , i t a l s o d i s c u s s e s s u b j e c t s not d i r e c t l y connected w i t h the f i n a n c i a l s t atements and touches on those a s p e c t s of the company's a f f a i r s w h i c h m a y be of g e n e r a l and i m p o r t a n t i n t e r e s t to the r e a d e r . • Without doubt, t h e r e had been a v a s t i m p r o v e m e n t i n the qu a l i t y of an n u a l r e p o r t s f r o m 1938 to 1963. E s s e n t i a l l y , t h i s i m p r o v e m e n t was e f f e c t e d by an i m p r o v e m e n t i n the q u a l i t y of s u p p l e m e n t a r y i n f o r m a t i o n . In 1938 and p o s s i b l y p r i o r to 1948, annual r e p o r t s w e r e b r i e f and s e v e r e l y p l a i n and u n a t t r a c t i v e even f o r a f o r m a l r e p o r t . S i n c e 1948 and u n t i l 1963, the tendency was i n the other d i r e c t i o n . M anagement r e c o g n i z e d that those who w e r e not e x p e r i e n c e d i n f i n a n c i a l a n a l y s i s c o m p r i s e d the l a r g e m a j o r i t y of the s h a r e h o l d e r s and the tendency was to c a t e r i n c r e a s i n g l y to them. Since t e c h n i c a l m a t t e r s w e r e u s u a l l y beyond t h e i r c o m p r e h e n s i o n , the annual r e p o r t was w r i t t e n f o r t hem and i l l u s t r a t e d p r o f u s e l y w i t h p i c t u r e s , c h a r t s and graphs. In a d d i t i o n , i n c r e a s i n g t e x t u a l m a t e r i a l s w e r e i n c o r p o r a t e d into the r e p o r t to help e x p l a i n the f i n a n c i a l statements as w e l l as to d i s c u s s s u b j e c t s of a non f i n a n c i a l nature. In c e r t a i n i n s t a n c e s , so m u c h i n f o r m a t i o n was i n c l u d e d that one wonders whether i t was d i g e s t i b l e to the s h a r e h o l d e r s . The r e a l danger s e e m e d to be that r e p o r t s by 1963 had become too v o l u m i n o u s . T h e r e w e r e i n s t a n c e s when i t a p p e a r e d that the s h a r e h o l d e r was o v e r w h e l m e d w i t h d e t a i l . No f i x e d f o r m u l a has been suggested f o r the i m p r o v e m e n t of s u p p l e m e n t a r y i n f o r m a t i o n . • What has been s u g g e s t e d i s that m anagement s h o u l d e x e r c i s e judgment, d i s c r i m i n a t i o n and l e a d e r s h i p i n t e l l i n g the s t o r y of the company's y e a r . • A company has not o n l y a r i g h t but a duty to e x p l a i n the r e s u l t s of i t s o p e r a t i o n s . T h i s i t m u s t do i n t e r m s of s i n c e r i t y and t r u t h i f i t i s to c a r r y c o n v i c t i o n . Management m u s t e x e r c i s e judgment i n choosing s i g n i f i c a n t b o l d and v i v i d d e s c r i p t i o n s o r f i g u r e s . Whether i n s u c c e s s o r f a i l u r e , i t i s the duty of management to t e l l what happened and why i t happened. 198 B I B L I O G R A P H Y 1. B O O K S A m e r i c a n M a n a g e m e n t A s s o c i a t i o n . M anagement C r e e d s and P h i l o s o p h i e s . R e s e a r c h Study No. 32. New Y o r k : A m e r i c a n Management A s s o c i a t i o n , 1942. Bowen, H o w a r d R. S o c i a l R e s p o n s i b i l i t i e s of the B u s i n e s s m a n , New Y o r k : H a r p e r and B r o t h e r s , 1953. F l o y d , E l i z a b e t h R. P r e p a r i n g the A n n u a l R e p o r t . A M A R e s e a r c h Study 46. New Y o r k : A m e r i c a n M a nagement A s s o c i a t i o n , I960. M a r s h a l l , A l f r e d , M e m o r i a l s of A l f r e d M a r s h a l l . London: M a c m i l l a n and Co. L t d . , 1925. T a b u c c i , Don A. (.ed). The A n n u a l R e p o r t -~ A Document of M o d e r n  B u s i n e s s . D e t r o i t : R e s e a r c h B u r e a u s , I n c o r p o r a t e d , p. 1959. 11 A R T I C L E S A n d e r s o n , W. R. " S h o u l d a Company T e l l ? " D i s c l o s u r e of I n f o r m a t i o n to E m p l o y e e s " , The A c c o u n t a n t , V o l . CX1V, No. 4504, A p r i l 18, 1961,pp. 403-7. A n s o n , H e r r i c k . " R e p o r t i n g P r a c t i c e s " , J o u r n a l of A c c o u n t a n c y , V o l . C X 1 1 , No. 4, O c t o b e r 1961, pp. 30-2 A u b r e y , W i l l i a m s , " T r e n d i n A c c o u n t i n g T e r m i n o l o g y and F o r m R e v e a l e d by 1946 C o r p o r a t e R e p o r t s " , J o u r n a l of A c c o u n t a n c y , V o l . L X X 1 V , No. 4, O c t o b e r 1947, pp. 310.7. B a k e r , R o b e r t O. " Y o u r A n n u a l R e p o r t -- T o m b s t o n e s o r E v i d e n c e of L i f e " , The C o n t r o l l e r , V o l . X X , No. 1, J a n u a r y 1952, pp. 70-1. B e d f o r d , N o r t o n M. " U s i n g S u p p l e m e n t a r y D a t a to I n t e r p r e t e d Income", The A c c o u n t i n g R e v i e w , Vol. 1. X X V 1 1 1 , No. 4, O c t o b e r 1953, pp. 517-21. B e k s o r t , A. C. "What'sWrong w i t h F i n a n c i a l R e p o r t i n g " ? The A c c o u n t i n g  R e v i e w , V o l . X X V 1 1 , No. 1, J a n u a r y 1952, pp. 57-62. Benham, Thomas W. " K e y i n g Y o u r A n n u a l R e p o r t to Today's S t o c k h o l d e r s " F i n a n c i a l W o r l d , V o l . C X V 1 , No. 18, N o v e m b e r 1, 1961, p. 72-4. 199 B i r d , R onald. "The U s e of P u b l i s h e d A c c o u n t s : The V i e w p o i n t of an E c o n o m i s t " , The A c c o u n t a n t , V o l . C X X 1 V , No. 3972, F e b r u a r y 3, 1951, pp. 101. 5. B r a n d t , P h i l i p J. " C a se of the M i s l e a d i n g F i n a n c i a l R e p o r t " , C r e d i t and F i n a n c i a l Management, V o l . L X 1 V , No. 4, A p r i l 1962, pp. 14-5. C a m p b e l l , D. "What C o r p o r a t i o n s say about A n n u a l R e p o r t s " , P u b l i c  R e l a t i o n s J o u r n a l , Vol.. X V , No. 5, M a y 1959, pp. 21-3. C h a t l o s , W i l l i a m E. "The Changing P a t t e r n i n A n n u a l R e p o r t s " , B a n k e r s M o n t h l y , Vol.- L X X V 1 1 , No. 10, O c t o b e r 15, 1060, pp. 28-34. C o l l i n s , J a m e s H. "The O r d e a l of the A n n u a l R e p o r t " , P u b l i c U t i l i t i e s  F o r t n i g h t l y , V o l . L l l , No. 11, N o v e m b e r 19, 1953, pp. 772-74. Co u t t s , W.B. " A c c o u n t i n g R e s e a r c h " , The C a n a d i a n C h a r t e r e d  Accountant, V o l . C X X X , No. 2, F e b r u a r y 1962, pp.. 161-6. C r a n e , N. E. " S e c u r i t y A n a l y s t l o o k s at A n n u a l R e p o r t s " , J o u r n a l of  A c c o u n t a n c y , V o l . CV, No. 1, M a r c h 1958, pp. 31-6. Densem, W. G. "Is i t T r u e and F a i r " , The A c c o u n t a n t , V o l . C X X 1 1 , No. 3957, O c t o b e r 21, 1950, pp. 385-400. D e v e r , E. J. " S t o c k h o l d e r R e l a t i o n s : A R o u n d Up of Ideas U s e d by L e a d e r s i n F i e l d to c u l t i v a t e S h a r e h o l d e r s as C u s t o m e r s and F r i e n d s " , P r i n t e r ' s Ink, V o l . C C 1 V , No. 1, J u l y 2, 1948, pp. 36-8. E a r n e s t , Dale. "The Accountant's P a r t i n L a b o u r M a n a g e m e n t R e l a t i o n s " , J o u r n a l of A c c o u n t a n c y , Vol.. X C , No. 1, pp. 12-25. G i l b e r t , L e w i s D. " I m p r o v i n g c o m m u n i c a t i o n between p u b l i c c o r p o r a t i o n s and t h e i r s t o c k h o l d e r s " , New Y o r k C e r t i f i e d P u b l i c A c c o u n t a n t , V o l . X X X 1 1 No. 4, A p r i l 1962, pp. 237-45. G i r d l e r , R e y n o l d s , " E i g h t e e n M i l l i o n B o o k s Nobody Read s " , Management  R e v i e w , V o l . C l l , No. 7, J u l y 1963, pp. 24-6. G r a d y , Paul.. "A P r o p o s a l f o r the A d o p t i o n of Standards of D i s c l o s u r e f o r C hanging P r i c e L e v e l s " , J o u r n a l of A c c o u n t a n c y , Vol.. X C 1 V , No. 5, N o v e m b e r 1952, pp. 565-69. G r a h a m , G o r d o n A. " A c c o u n t i n g f o r good c o m m u n i c a t i o n s " , C r e d i t  and F i n a n c i a l Management, V o l . L X 1 V , No. 1, J a n u a r y 1962, pp. 18-9. 200 G r e g o r y , R. H. " C u r r e n t T r e n d i n R e p o r t T e r m i n o l o g y and F o r m " , J o u r n a l of A c c o u n t a n c y , V o l . C X X X 1 V , No. 5, N o v e m b e r 1947, pp. 386-96. Grund, Benjamin.. " I m p r o v i n g the Standards of A c c o u n t i n g R e p o r t s " , New • Y o r k C e r t i f i e d P u b l i c A c c o u n t a n t , V o l . 31, No. 4, A p r i l 1961, pp. 239-40. Hannessy, D. J.. "What Does P u b l i c Want i n C o r p o r a t e R e p o r t s ? " . The C o n t r o l l e r , Vol.. X V , No. 11, N o v e m b e r 1947, p. 579. Hume, Nutcombe H. "The U s e of P u b l i s h e d A c c o u n t s : The V i e w p o i n t of an I n v e s t o r " , The A c c o u n t a n t , V o l . C X X 1 1 1 , No. 3965, D e c e m b e r 16, 1950, pp. 610-15. J a r c h o w , C h r i s t i a n E. " T r e n d s i n A n n u a l R e p o r t i n g " , The C o n t r o l l e r , Vol.. X V , No. 9, S e p t e m b e r 1947, pp. 445-449. J a r c h o w , C h r i s t i a n E. " I n t e r p r e t a t i o n of C o r p o r a t i o n ' s F i n a n c i a l P o s i t i o n to i t s A u d i e n c e s " , The C o n t r o l l e r , V o l . X V , No. 9, September 1947, pp. 444-49. . K e e l , R. O. A. " F i n a n c i a l r e p o r t i n g and the W o r l d economy w i t h p a r t i c u l a r r e f e r e n c e to r e p o r t i n g to o u t s i d e r " , The A c c o u n t a n t , V o l . C X L V 1 1 , No. 4590, N o v e m b e r 24, 1962, pp. 673-81. . Khan, L a w r e n c e R. "Inadequacies of F i n a n c i a l R e p o r t s " , F i n a n c i a l W o r l d , V o l . C X 1 V , No. 17, O c t o b e r 26, I960, pp. 64-68. . K n o w l t o n , Don.. "The S e m a n t i c s of A n n u a l R e p o r t s " , The C a n a d i a n C h a r t e r e d A c c o u n t a n t " , Vol.. L l 1, No. 1, J a n u a r y 1948, pp. 7 9 - 8 L . L a m b i e , J. M. " F i n a n c i a l R e p o r t s Can be w r i t t e n so P e o p l e can u n d e r s t a n d them", J o u r n a l of A c c o u n t a n c y , V o l . L X X X 1 V , No. 1, J u l y 1947, pp. 40-45. L i e b e r m a n , Sidney, " T r e n d s i n C o r p o r a t e R e p o r t s to S t o c k h o l d e r s " , The C o n t r o l l e r , Vol.. X V , No. 2, F e b r u a r y 1947, pp. 82-3. M a c u r d a , D o n a l d B. "What a F i n a n c i a l A n a l y s t L i k e s i n an A n n u a l R e p o r t , " F i n a n c i a l W o r l d , V o l . C X V 1 , No. 18, N o v e m b e r 1, 1961, p. 64. . Nash, A r t h u r L. " B a n k e r Says-Some A u d i t R e p o r t s A r e S t i l l N o t G ood Enough: D e t r i m e n t a l to B o r r o w e r and C P A " , J o u r n a l of A c c o u n t a n c y , N o v e m b e r 1952, pp. 560-64. . P a r k i n s o n , B r a d b u r y B. " S c i e n t i f i c D i s c l o s u r e : I n f o r m a t i o n f o r S h a r e h o l d e r s and the P u b l i c " , The A c c o u n t a n t , V o l . C X 1 1 1 , No. 3926, M a r c h 18, 1950, pp. 287-91. . R o s e n t h a l , H. C. " A n n u a l R e p o r t s : How and Why to Get the C o n t e m p o r a r y l o o k on a m o d e r a t e budget", P u b l i c R e l a t i o n s J o u r n a l , Vol.- X I X , No. 5, M a y 1963, pp. 26-7. 201 R o s e t h a l , H e r b e r t C. "What do f e m a l e s t o c k h o l d e r s t h i n k of y o u r annual r e p o r t ? " P u b l i c R e l a t i o n s J o u r n a l , Vol.. X V 1 1 , No. 9, September 1961, pp. 7-8. Sherman, H o w a r d L.. " I n s i d e the Y e a r ' s b e s t A n n u a l R e p o r t s " , I n d u s t r i a l M a r k e t i n g , V o L X L f l l , No. 12, D e c e m b e r 1962, pp. 69-72. Sherman, H o w a r d L. " A m e r i c a n E l e c t r i c P o w e r -- F i r s t U t i l i t y to Win Top A n n u a l R e p o r t A w a r d " , F i n a n c i a l W o r l d , V o l . C X V 1 , No. 18, N o v e m b e r 1, 1961, pp. 61-74. Sherman, H o w a r d L. " M o r e P r o g r e s s A h e a d w i t h A n n u a l R e p o r t s " , F i n a n c i a l W o r l d , Vol.. C X 1 1 1 , No. 3, J a n u a r y 20, I960, pp. 29-31. Sherman, H o w a r d L.. " A n n u a l R e p o r t A P o w e r f u l C o r p o r a t e V o i c e " , F i n a n c i a l W o r l d , V o l . C X V , No. 4, J a n u a r y 25, 1961, pp. 27-28. Sherman, H o w a r d L. "New T r e n d s i n A n n u a l R e p o r t P h o t o g r a p h y " , P u b l i c R e l a t i o n s J o u r n a l , Vol.. X V I 1 1 , No. 12, D e c e m b e r 1962, pp. 21-24. S m i t h , W. 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X X I , No. 1, A u t u m n 1942, pp. 60-70. 202 APPENDIX 1 F R E Q U E N C Y DISTRIBUTION O F INDUSTRIAL C O M P A N I E S BY YEAR O F INCORPORATION A N D INDUSTRIAL G R O U P I N G S A C C O R D I N G T O F INANCIAL POST CLASSIFICATION YEAR O F INCORPORATION INDUSTRIAL GROUPS Before After Jan After Jan After Jan After Jan Dec 31 1, 1938 1, 1948 1, 1953 1, 1958 1938 Before Dec Before Dec Before Dec Before Dec TOTAL 31, 1948 31, 1953 31, 1958 31, 1963 Iron and Steel 63 12 8 4 1 88 Merchandising 43 12 4 2 7 68 Public Utility 42 4 5 7 1 59 Foodstuffs 35 8 3 2 2 50 Pulp,Paper and Lumber 28 9 1 3 _ 41 Construction 20 2 7 5 5 39 Textiles 34 3 1 - - 38 Banking and financing 11 4 6 7 5 33 Trust and Loan 14 - 5 3 5 27 Beverages 18 2 1 - - 21 Transportation 6 7 2 1 1 17 Chemical and Al l ied 7 - 4 - 1 12 Property and develop-ment 3 - — 5 4 12 O i l and pipelines 1 - 6 4 1 12 Mi l l ing and Grain 10 - - - - 10 Electrical equipment 2 2 - 3 1 8 Non-ferrous metals 1 1 1 3 - 6 Printing & publishing 2 - - 2 2 6 Miscellaneous 38 9 6 3 7 63 T<~ \T A 1 7A An 54 43 610 APPENDIX 11 (a) PERCENTAGE F R E Q U E N C Y O F A N N U A L REPORTS BY INDUSTRIAL G R O U P I N G S , SECTIONS A N D YEARS F I N A N C I A L INSTITUTIONS Sections 1938 1948 1953 1958 1963 Total number of reports analyzed 8 9 9 ]2 ]4 Front cover 100.0% 100.0% 100.0% 100.0% 100.0C Executive Message 75.0 88.9 100.0 100.0 100.0 List of officers and directors 100.0 100.0 100.0 100.0 100.0 Corporate data 25.0 22.2 33.3 66.6 42.8 List of subsidiaries and divisions 62.5 77.8 77.8 83.4 78.6 Miscellaneous information 50.0 43.9 66.6 41.7 50.0 Comparative financial statistics - - 22.2 8.3 57.0 Product section - 22.2 33.3 25.0 35.7 Financial highlights - - 11.1 41.7 64.2 Title page 25.0 33.3 55.5 33.3 42.8 Narrative section 25.0 33.3 33.3 25.0 35.7 Sources and application of Working Capital - - 11.1 - -Table of contents _ — 11.1 8.3 7.1 204 A P P E N D I X 11 (,b) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S P U B L I C U T I L I T Y S e c t i o n s ' 1938 1948 1953 1958 1963 T o t a l No. of R e p o r t s A n a l y z e d _12 12 12 _13 _13 F r o n t c o v e r 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% E x e c u t i v e m e s s a g e 100.0 100.0 100.0 100.0 100.0 L i s t of o f f i c e r s and d i r e c t o r s 64.2 83.4 91.7 100.0 100.0 C o r p o r a t e data 33. 3 50. 0 83. 4 84. 7 92. 4 L i s t of s u b s i d i a r i e s and d i v i s i o n s 25. 0 33. 3 33. 3 30. 4 38. 4 M i s c e l l a n e o u s i n f o r m a t i o n 25. 0 75. 0 75. 0 77. 0 84. 7 C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 33.3 41.7 41.7 84.7 84.5 P r o d u c t s e c t i o n - - 16. 6 23. 1 15. 4 F i n a n c i a l h i g h l i g h t s - - 16. 6 46. 1 61. 5 T i t l e page 7. 1 8. 3 33. 3 38. 4 30. 4 N a r r a t i v e s e c t i o n - - - 7. 7 30. 4 S o u r c e s and A p p l i c a t i o n of w o r k i n g c a p i t a l - - 8. 3 - 7. 7 Ta b l e of contents 7. 1 16. 6 8. 3 - 7. 7 205 A P P E N D I X 11 (c ) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S C A P I T A L GOODS Sect i o n s 1938 1948 1953 1958 1963 T o t a l number of r e p o r t s a n a l y z e d _4 _5 8 _13 x. 17 F r o n t C o v e r 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% E x e c u t i v e M e s s a g e 100.0% 100. 0% 100. 0% 1 0 0 . 0 % 9 4 . 1 % L i s t of O f f i c e r s and D i r e c t o r s 100.0 100.0 100. 0 100.0 94.1 C o r p o r a t e Data 25.0 40.0 62.5 77.0 82.4 L i s t of s u b s i d i a r i e s and d i v i s i o n s 50. 0 60. 0 62. 5 69. 2 70. 6 M i s c e l l a n e o u s i n f o r m a t i o n 25.0 20.0 37.5 30. 4 47:2 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s - - 12.5 15.4 35.3 P r o d u c t S e c t i o n 20. 0 37. 5 38. 4 29. 4 F i n a n c i a l H i g h l i g h t s - - - 15. 4 23. 6 T i t l e P a g e 25. 0 20.0 37.5 23.1 29.4 N a r r a t i v e s e c t i o n - - - 7.7 11.8 S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l - - - 7. 7 23. 6 T a b l e of contents - - - - 5. 9 206 A P P E N D I X 11 (d ) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S I R O N A N D S T E E L Sectio n s 1938 1948 1953 1958 1963 T o t a l number of r e p o r t s a n a l y z e d 14 15 16 19 19 F r o n t c o v e r 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% E x e c u t i v e m e s s a g e 85. 7 93. 4 93. 9 94. 9 94. 9 L i s t of o f f i c e r s and d i r e c t o r s 78. 6 93. 4 87. 5 89. 5 89. 5 C o r p o r a t e data 35.7 46.7 50.0 57.9 73.7 L i s t of s u b s i d i a r i e s and d i v i s i o n s 42. 8 53. 4 56. 2 63. 2 57. 9 M i s c e l l a n e o u s i n f o r m a t i o n 21. 2 33. 3 43. 8 63. 2 42: 1 C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s - 6. 5 6. 2 26. 3 36. 8 P r o d u c t s e c t i o n 28. 3 40. 0 50: 0 68. 5 57. 9 F i n a n c i a l h i g h l i g h t s - 13.3 18.7 31.6 47.4 T i t l e P a g e 28.3 26.6 ,12.5 36.8 11.1 N a r r a t i v e s e c t i o n - 6. 5 12. 5 5. 2 15. 5 S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l - 6. 5 6. 2 26. 3 26. 5 T a b l e of contents - - - 5. 2 11. 1 207 A P P E N D I X 11 Co ) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S C O N S U M P T I O N GOODS Sections 1938 1948 1953 1958 1963 T o t a l number of r e p o r t s a n a l y z e d 14 19 21 22 23 F r o n t c o v e r 100.0% 100. 0% 100. 0% 100 . 0 % 1 0 0 . 0 % E x e c u t i v e m e s s a g e 100.0 88.2 100.0 100.0 100.0 L i s t of o f f i c e r s and d i r e c t o r s 92.9 88.2 95.4 100.0 100.0 C o r p o r a t e data 64.2 63.2 7 6.2 81.8 87.0 L i s t of s u b s i d i a r i e s and d i v i s i o n s 21. 2 36. 8 57. 1 59. 1 47. 9 M i s c e l l a n e o u s i n f o r m a t i o n 35. 7 52. 7 57. 1 40. 8 52. 2 C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s - 7.7 4.7 18.2 21.7 P r o d u c t s e c t i o n 21. 2 36. 8 47. 7 45. 5 60. 9 F i n a n c i a l h i g h l i g h t s - - - 4.5 21.7 T i t l e page 28. 3 42. 1 33. 3 22. 7 34. 8 N a r r a t i v e s e c t i o n - 11. 1 9. 5 4. 5 17. 4 S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l - - 4. 7 4. 5 4. 3 Tab l e of contents - 15. 5 9. 5 9. 1 • 13. 1 208 A P P E N D I X (f ) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S F O R E S T S A N D A L L I E D P R O D U C T S Sectio n s 1938 1948 1953 1958 1963 T o t a l n u m ber of r e p o r t s a n a l y z e d _6 _7 _8 10 10 F r o n t c o v e r 100. 0% 100. 0% 100. 0% 100. 0% 100. 0% E x e c u t i v e m e s s a g e 100.0 100.0 100.0 100.0 100.0 L i s t of o f f i c e r s and. d i r e c t o r s 100.0 J.00. 0 100.0 100.0 100.0 C o r p o r a t e data 50. 0 57. 1 62. 5 70. 0 90. 0 L i s t of s u b s i d i a r i e s and d i v i s i o n s 33. 3 42. 9 50. 0 40. 0 50. 0 M i s c e l l a n e o u s i n f o r m a t i o n 16. 7 28. 6 50. 0 80. 0 60. 0 C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s - - 25. 0 40. 0 30. 0 P r o d u c t s e c t i o n 16. 7 14. 6 37. 5 40. 0 10. 0 F i n a n c i a l h i g h l i g h t s - 50. 0 60. 0 30. 0 T i t l e page 16. 7 14. 6 37. 5 40. 0 10. 0 N a r r a t i v e s e c t i o n - 14. 6 25. 0 40. 0 30. 0 S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l - - 30. 0 30. 0 Tab l e of contents - - 30. 0 40. 0 209 A P P E N D I X (g ) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S S E R V I C E S e c t i o n s 1938 1948 1953 1958 1963 T o t a l N u m b e r of R e p o r t s A n a l y z e d 5 7_ 8 ^ . IP-F r o n t C o v e r 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % E x e c u t i v e M e s s a g e 100.0 100.0 100.0 100.0 100.0 L i s t of o f f i c e r s and d i r e c t o r s 100.0 85.8 100.0 100.0 100.0 C o r p o r a t e data 20.0 28.6 50.0 87.5 70.0 L i s t of s u b s i d i a r i e s and di v i d e n d s 60. 0 57. 2 62. 5 50. 0 60. 0 M i s c e l l a n e o u s i n f o r m a t i o n 60. 0 71. 5 62. 5 62. 5 50. 0 C o m p a r a t i v e F i n a n c i a l S t a t i s t i c s 20. 0 14. 6 12. 5 37. 5 20. 0 P r o d u c t S e c t i o n - - 12.5 12.5 10.0 F i n a n c i a l h i g h l i g h t s - 14. 6 37. 5 37. 5 30. 0 T i t l e P a g e 20. 0 - 25. 0 12. 5 20. 0 N a r r a t i v e s e c t i o n S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l - - - 12. 5 20. 0 T a b l e of contents - - 12. 5 210 A P P E N D I X (;h) P E R C E N T A G E F R E Q U E N C Y O F A N N U A L R E P O R T S B Y I N D U S T R I A L G R O U P I N G S , S E C T I O N S A N D Y E A R S M I S C E L L A N E O U S S e c t i o n s 1938 1948 1953 1958 1963 T o t a l n u m b e r of r e p o r t s a n a l y z e d F r o n t c o v e r 4 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % 1 0 0 . 0 % E x e c u t i v e m e s s a g e 100. 0 L i s t of o f f i c e r s and d i r e c t o r s 7 5. 0 C o r p o r a t e data 50. 0 L i s t of s u b s i d i a r i e s and d i v i s i o n s 50. 0 M i s c e l l a n e o u s i n f o r m a t i o n 100. 0 C o m p a r a t i v e f i n a n c i a l s t a t i s t i c s 25. 0 P r o d u c t s e c t i o n 50. 0 F i n a n c i a l h i g h l i g h t s T i t l e page 7 5. 0 N a r r a t i v e s e c t i o n 25. 0 S o u r c e s and a p p l i c a t i o n of w o r k i n g c a p i t a l T a b l e of contents 100. 0 100. 0 100. 0 100. 0 75. 0 50. 0 50. 0 50. 0 83. 4 66. 6 50. 0 50. 0 25. 0 33. 3 33. 3 50. 0 100.0 100.0 100.0 100.0 85. 8 85. 8 42. 9 28. 6 14. 6 25. 0 16. 7 28. 6 14. 6 88. 9 66. 6 55. 8 43. 9 42. 9 43. 9 33. 3 11. 1 33. 3 11. 1 33. 3 11. 1 211 A P P E N D I X 111 L I S T O F T O P I C S F O U N D IN F I N A N C I A L H I G H L I G H T S S E C T I O N S IN T E R M S O F P E R C E N T A G E F R E Q U E N C Y O F T I M E S M E N T I O N E D F O R P E R I O D 1938 — 1963 T o p i c s 1938 M a x i m u m number of t i m e s m e n t i o n e d Income s t a t e m e n t t o p i c s : 1. Net i n c o m e 2. D i v i d e n d s 3. • S a l e s 4. T a x e s 5. E x p e n s e s 6. D e p r e c i a t i o n 7. R e t a i n e d e a r n i n g s 8. E a r n i n g s 9. O t h e r Income 10. D e v e l o p m e n t co s t s B a l a n c e Sheet T o p i c s : 1. S h a r e h o l d e r s ' equity 2. T o t a l a s s e t s 3. W o r k i n g c a p i t a l 4. C a p i t a l e x p e n d i t u r e s 1948 1953 J 13_ 100. 0% 84. 6% 33. 3 69. 2 46.2 66. 7 69. 2 33. 3 33. 3 23. 1 7. 7 38. 5 7. 7 7. 7 66. 7 15. 4 15. 4 38. 5 7. 7 1958 1963 31 16. 1 12. 9 3. 2 42 80. 6% 88. 1% 54. 8 66. 7 64. 5 47. 6 51. 6 38. 1 19.4 16.7 19.4 16.7 14. 3 22.6 11.9 7. 1 2. 4 32. 3 35. 7 12. 9 . 26. 2 22. 6 26. 2 12. 9 23. 0 212 A P P E N D I X 111 C o n t i n u e d T o p i c s 1938 1948 1953 1958 1963 B a l a n c e sheet t o p i c s : 5. C a p i t a l s t o ck - - 30. 8 32. 3 19. 0 6. L o n g t e r m debt - 33. 3 30. 8 12. 9 19. 0 7. S h o r t t e r m i n v e s t m e n t - - 23. 1 9. 7 9. 5 8. G r o s s i n c o m e r e s e r v e - - 15.4 6. 5 7. 1 9. C u r r e n t a s s e t s - 33.3 15.4 9.7 7.1 10. L o n g t e r m loans - - - 3. 2 7. 1 11. T o t a l d e p o s i t s - - - 3. 2 7. 1 12. C a p i t a l funds - - 15.4 9.7 4.8 13. . R e c e i v a b l e s - - - 3. 2 4. 8 14. . C u r r e n t l i a b i l i t i e s - 33. 3 7.7 9. 7 2. 4 15. C a p i t a l i n v e s t m e n t - - - 3. 2 2. 4 16. O t h e r a s s e t s - - - - 2. 4 Other t o p i c s 1. " N u m b e r of e m p l o y e e s - 100.0 53.8 25.8 23.8 2. N u m b e r of c u s t o m e r / p o p u l a t i o n - - 7.7 16.1 19.0 3. • E m p l o y e e b e n e f i t s - 66.7 30.8 9.7 11.9 4. N u m b e r of s h a r e h o l d e r s - 33.3 15.4 19.4 9.5 5. N u m b e r of b r a n c h e s / s u b - - 15. 4 9. 7 9. 5 6. ' V o l u m e of p r o d u c t i o n - - 7.7 12. 9 7. 1 7. M i l e s of p o l e l i n e s - - 7.7 6.4 4.9 8. A c c u m u l a t e d deprn - 33. 3 - - 4. 9 9. C a s h f l o w - - - 2. 4 10. No of telephones i n use - - 7. 7 3. 2 213 A P P E N D I X I V L I S T O F T O P I C S F O U N D I N C O M P A R A T I V E F I N A N C I A L S T A T I S T I C S S E C T I O N S IN T E R M S O F P E R C E N T A G E F R E Q U E N C Y O F T I M E S M E N T I O N E D F O R P E R I O D 1938 1963 T o p i c s 1938 M a x i m u m number of t i m e s m e n t i o n e d 6 1948 1953 6 2 11 Income st a t e m e n t t o p i c s : 1. N et i n c o m e 1 6 . 7 % 4 4 . 4 % 5 3 . 3 % 2. D i v i d e n d s 16.7 44.4 26.6 3. T a x e s 4. D e p r e c i a t i o n 5. • E x p e n s e s 6. S a l e s revenue 7. R e t a i n e d e a r n i n g s 8. Other i n c o m e 9. C o s t of s a l e s 10 O p e r a t i n g r a t i o B a l a n c e Sheet t o p i c s : 1. F i x e d a s s e t s 2. S h a r e h o l d e r s ' e q u i t y 3. W o r k i n g c a p i t a l 4. C u r r e n t a s s e t s 16. 7 16. 7 16. 7 11. 1 11. 1 22. 2 11. 1 22. 2 11. 1 33. 3 33. 3 33. 3 26. 6 6. 6 6. 7 6. 7 13. 3 13. 3 6. 7 1958 1963 33 51. 5 36. 4 42. 4 45. 5 9. 1 3. 0 3. 0 30. 3 33. 3 21. 2 46 5 7 . 9 % 6 1 . 4 % 51. 5 50. 0 50. 0 41. 3 39. 1 37. 0 24. 2 17. 4 5. 7 6. 5 2. 2 5 0 . 0 % 6 6 . 7 % 4 6 . 7 % 6 0 . 6 % 4 7 . 8 % 37. 0 30. 4 23. 9 5. T o t a l a s s e t s 11. 1 13. 3 18.2 23.9 214 A P P E N D I X I V - C o n t i n u e d T o p i c s 1938 1948 1953 1958 1963 B a l a n c e Sheet t o p i c s : 6. L o n g t e r m debt - 11, 1 6.7 18.2 21.7 7. C u r r e n t l i a b i l i t i e s - - 6. 7 21. 2 21. 7 8. N o t e s and r e c e i v a b l e s - 11. 1 i- 6. 1 13. 1 9. C u r r e n t r a t i o - - ' - 9. 1 8. 7 10. I n v e s t m e n t i n s e c u r i t i e s - 11. 1 6. 7 6. 1 4. 4 11. T o t a l d e p o s i t s - - 6.7 3.0 4.4 12. C a s h - 11.1 - 3. 0 4. 4 13. R e t u r n on i n v e s t m e n t - - - 3. 0 4. 0 14. R e s e r v e s - 11.1 6.7 6.1 2.2 15. I n t a n g i b l e f i x e d a s s e t s - 11. 1 - 6. 1 2.2 16. A s s e t t u r n o v e r - - - - 2.2 17. C o n t r i b u t e d s u r p l u s - - - - 2. 2 18. M i n o r i t y i n t e r e s t s - - - 6. 1 2. 2 19. I n v e n t o r i e s - - - - 2. 2 O t h e r t o p i c s : 1. E m p l o y e e s ( i n c l u d i n g e m p l oyee b e n e f i t s ) - 11. 1 13. 3 12. 1 19. 6 2. C u s t o m e r and p o p u l a t i o n 50. 0 33. 3 20. 0 24. 2 15. 2 3. P r o d u c t i o n 33.3 22.2 13.3 12.1 8.7 4. S h a r e h o l d e r s 16.7 11.1 13.3 6.1 6.5 5. S u b s i d i a r i e s ' - - 6. 7 6. 1 6. P r i c e and R a t e s 16. 7 11. 1 - -7. Tons of s h i p m e n t s - - - 3.. 0 2. 2 A P P E N D I X V L I S T O F A N N U A L R E P O R T S I N C L U D E D I N T H E S U R V E Y B Y I N D U S T R I A L G R O U P S Co n s u m p t i o n Goods 1. B e l d i n g - C o r t i c e l l i L i m i t e d 2. B r o o k e B o n d Canada L i m i t e d 3. C a n a d i a n B r e w e r i e s L i m i t e d 4. C a n a d i a n C e l a n e s e L i m i t e d 5. C a t e l l i G o od P r o d u c t s L i m i t e d 6. C r u s h I n t e r n a t i o n a l L i m i t e d 7. • Cunningham D r u g S t o r e s L i m i t e d 8. D a v i d &: F r e r e L i m i t e e 9. D i s t i l l e r s C o r p o r a t i o n - S e a g r a m s L t d 10. D o m i n i o n C o r s e t Co L t d 11. D o m i n i o n D a i r i e s L i m i t e d 121 Dover I n d u s t r i e s L i m i t e d 13. H. C o r b y D i s t i l l e r y L i m i t e d 14. I m p e r i a l Tobacco Go. of Canada L t d 15. I n t e r i o r B r e w e r i e s L i m i t e d 16. • L a b a t t , John L t d 17.. . L a u r a S e c o r d Candy Shops L i m i t e d 18. L o b l a w C o m p a n i e s L i m i t e d 19. • P e n m a n s L i m i t e d 20. • Quinte M i l k P r o d u c t s L i m i t e d 216 A P P E N D I X V C o n t i n u e d 21. Ruby Foo's E n t e r p r i s e L i m i t e d 22. V i a u L i m i t e d 23. Y o r k K n i t t i n g M i l l s L t d I r o n and S t e e l 1. A n the s I m p e r i a l L i m i t e d 2. B r i d g e s and Tank Co. of Canada L t d 3. Canada M a c h i n e r y C o r p o r a t i o n L t d 4. Canada W i r e and C a b l e Co. L i m i t e d 5. C a n a d i a n G e n e r a l E l e c t r i c Co L t d 6. C a n a d i a n L o c o m o t i v e Co L t d 7. • C a n a d i a n Westinghouse Co L t d 8. D o m i n i o n B r i d g e Co. L t d 9. D o m i n i o n F o u n d r i e s and S t e e l Co L t d 10. F i t t i n g L i m i t e d 11. F r u e h a u f T r a i l e r Co. of Canada L i m i t e d 12. G r e e i n g I n d u s t r i e s L t d 13. Hayes S t e e l P r o d u c t s L t d 14. J e n k i n s B r o t h e r s L i m i t e d 15. - M a s s e y - H a r r i s - F e r g u s o n L i m i t e d 16. O n t a r i o S t e e l P r o d u c t s Co L t d 17. R o b e r t M o r s e C o r p o r a t i o n L i m i t e d 18. Tappan G u r n e y L i m i t e d 19. The S t e e l Company of Canada L i m i t e d .217 A P P E N D I X V C o n t i n u e d C a p i t a l Goods 1. B a r t a c o I n d u s t r i e s L i m i t e d 2. B i r d C o n s t r u c t i o n Co. L t d .3. . C o n s o l i d a t e d B u i l d i n g Co. L t d 4. C o n s o l i d a t e d G l a s s I n d u s t r i e s L t d 5. D o m i n i o n G l a s s Co.- L t d 6. D o m i n i o n M a g n e s i u m L t d 7. D o m i n i o n T a r and C h e m i c a l Co. L t d 8. I n t e r n a t i o n a l P a i n t s {Canada ): L t d 9. J e f f e r s o n L a k e P e t r o - C h e m i c a l s of Canada L t d 10. L a k e O n t a r i o P o r t l a n d C e m ent Co. L t d 11. M. E. P. C. C a n a d i a n P r o p e r t i e s L t d 12. R e y n o l d s A l u m i n u m Co. of Canada 13. S h e l l Canada L t d 14. • S u p e r i o r P r o p a n e L t d 15. T r a n s M o u n t a i n O i l P i p e L i n e Company L t d 16. Webb & Knapp (Canada ) L t d 17. W e s t e r n P a c i f i c P r o d u c t s &: C r u d e O i l P i p e l i n e s L t d F i n a n c i a l I n s t i t u t i o n s 1. Canada P e r m a n e n t M o r t g a g e Co. 2. C o r o n a t i o n C r e d i t C o r p o r a t i o n L t d 3. C r e d i t A c c e p t a n c e C o r p o r a t i o n L t d 4. D e l t a A c c e p t a n c e C o r p o r a t i o n L t d 218 A P P E N D I X V C o n t i n u e d 5. I n v e s t o r s S y n d i c a t e of Canada L t d 6. M o n t r e a l C i t y and D i s t r i c t Savings B a n k 7. N o r a c F i n a n c e C o r p o r a t i o n L t d 8. O n t a r i o L o a n and Debenture Co 9. The Bank of Nova S c o t i a 10. H u r o n and E r i e M o r t g a g e C o r p o r a t i o n 11. The R o y a l T r u s t Company 12. T r a d e r s F i n a n c e C o r p o r a t i o n L t d 13. T r a n s C a n a d i a n M o r t g a g e C o r p o r a t i o n (West) L t d 14. U n i o n A c c e p t a n c e C o r p o r a t i o n L t d P u b l i c U t i l i t i e s 1. A n g l o - C a n a d i a n Telephone Company 2. B r a z i l i a n T r a c t i o n , L i g h t & P o w e r L t d 3. C a n a d i a n I n t e r n a t i o n a l P o w e r Co. L t d 4. Canad i a n W e s t e r n N a t u r a l Gas Co L t d 5. E a s t e r n L i g h t and P o w e r Co L t d 6. I n t e r n a t i o n a l U t i l i t i e s C o r p o r a t i o n 7. N o r t h e r n Telephone Co L t d 8. N o r t h w e s t e r n U t i l i t i e s L i m i t e d . 9. Okanagan Telephone Company 10. Southern Canada P o w e r Co L t d 11. The M e x i c a n L i g h t and P o w e r Co L t d 12. The New B r u n s w i c k Telephone Co L t d 219 A P P E N D I X V C o n t i n u e d 13. U n i o n Gas Company of Canada L i m i t e d F o r e s t s and A l l i e d P r o d u c t s 1. B o w a t e r s M e r s e y P a p e r Company 2. C r o w n Z e l l e r b a c h Canada L i m i t e d 3. Donohue B r o t h e r L t d 4. F r a s e r C o m p a n i e s L i m i t e d 5. H e n d e r s h o t P a p e r P r o d u c t s L i m i t e d 6. Hinde & Dauch P a p e r Co of Canada L i m i t e d 7. M i n a s B a s i n P u l p & P a p e r Co L t d 8. Sun P u b l i s h i n g Co L t d 9. The G r e a t L a k e s P a p e r Co L t d 10. T o r o n t o S t a r L t d S e r v i c e 1. • A g n e w - S u r p a s s Shoe S t o r e s L t d 2. C a n a d i a n P a c i f i c R a i l w a y Co 3. E l e c t r o l i e r C o r p o r a t i o n 4. G o r d o n M a c k e y & S t o r e s L t d 5. Hudson's B a y Company 6. Okanagan H e l i c o p t e r s L t d 7. • P r o v i n c i a l T r a n s p o r t Co 8. R o b i n , Jones & W h i t m a n L t d 9. Shoppers C i t y L t d 10. The White P a s s & Y u k o n C o r p o r a t i o n L t d A P P E N D I X V C o n t i n u e d M i s c e l l a n e o u s 1. • A l f r e d L a m b e r t I n c o r p o r a t e d 2. A s h T e m p l e L i m i t e d 3. C a n a d i a n C u r t i s s - W r i g h t L t d 4. D o m i n i o n O i l c l o t h &c L i n o l e u m L t d 5. Du P o n t of C a nada S e c u r i t i e s L t d 6. J ohnston T e r m i n a l s & Storage L t d 7. Shully's I n d u s t r i e s L i m i t e d 8. The Hughes-Owens Co ( L t d ) 9. U n i t e d A m u s e m e n t C o r p o r a t i o n L i m i t e d 

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