We can all agree that the past year and a half has been unique. As the Covid-19 pandemic forced businesses and schools to close, we all had to adjust to a new remote lifestyle. Among other things, we had to learn and master new ways of communicating with our families, friends and colleagues to share information and maintain relationships.
Companies also had to rethink their communications strategies and how best to share information with their stakeholders in this tense, unprecedented environment. In 2020, employees, partners and investors were anxious to understand how companies planned to mitigate risk during the crisis, as well as what challenges they anticipated. Today, I’ve found that stakeholders want to know what companies learned, how they improved business practices and how they plan to ensure success once the crisis is behind us.
Under normal circumstances, transparency in corporate disclosure is crucial to securing and maintaining stakeholder trust. This is even more true during a crisis, as company leadership is forced to make tough — sometimes unpopular — decisions to bolster the organization against an uncertain future.
The Covid-19 pandemic has proven to me that transparency — both in what you say and how you say it — is vital for corporate disclosure. If you haven’t done so already (and I hope you have), consider how incorporating some of the strategies outlined below might improve your Form 10-K, proxy, code of conduct and other disclosure documents and enhance your stakeholder relations efforts.
The Value Of Plain Language
Plain language in corporate disclosure documents can offer distinct benefits to the reader and, ultimately, the issuing company. Individuals may be able to absorb and understand information faster when the copy is drafted in plain language. As a result, these documents are likely to be viewed more favorably and help generate trust.
Many companies recognize that plain language delivers distinct advantages. Still, years of using ingrained technical jargon can make it difficult to put this knowledge into practice. Employees responsible for drafting disclosure documents can feel shackled to past years’ templates and struggle to find a way to break the mold. Too often, they create clunky, lengthy documents that are hard to read and understand.
The pandemic presented an ideal opportunity to change our disclosure behaviors. It created drastic changes, so starting fresh now can help ensure companies create a better product.
Here are some key ideas to consider when you’re crafting disclosure documents.
• Avoid technical jargon. Opt for commonly understood words and simple copy that is easy to read and digest, especially for your stakeholders who may not be industry experts.
• Don’t bury the lede. Taking paragraphs (or even pages) to get to the point is cumbersome, can discourage readers and can breed mistrust for your audience.
• Keep it short. Using common words and shorter sentences demands less work from readers and enables them to more easily understand a written message.
• Show, don’t tell. Often you can enhance (or even replace) some text with a chart, a table or a more sophisticated graphic. These elements can make your document more visually appealing and make certain information — particularly numbers and processes — easier to understand.
Bottom line: Communicating in plain language supports your company’s efforts to build trust and confidence with investors and other stakeholders. Not only have I found that people are more likely to read, understand and recall key messages from your disclosure documents, but they are also more likely to have a lasting positive impression of your organization.
Transparency And Trust
Companies should respect and prioritize their stakeholders’ time and act as good partners by offering corporate information in a clear, digestible format. This includes explaining what the company is and is not doing quickly and concisely. Companies that chose to lead with transparency in the first year of the Covid-19 pandemic likely inspired confidence from their investors that will carry into the future.
Consider, for example, adjustments to executive payments. In many cases, companies saw a need to alter their compensation plans last year as long-term equity awards that pre-dated March 2020 lost value and performance goals set for annual bonuses became impractical. Some organizations opted to add an element of discretion by enabling their boards or compensation committees to modify awards at the end of the performance period.
Exercising discretion when it comes to executive compensation can be challenging; investors are often wary of changes, specifically when companies increase awards. Therefore, it’s paramount to carefully create a disclosure that precisely outlines the company’s decision to keep stakeholders’ trust. Companies should explain the rationale for their decisions, identify the affected incentive plans and provide insights into what peer companies are doing for comparability. Some companies accomplish this by providing visual timelines that show when decisions were made against a backdrop of economic and virus-related news, but that is certainly not the only option. The point is that crafting a transparent disclosure to help investors understand discretionary changes will increase the odds that they will support the actions and help reinforce their faith in the company.
The Covid-19 pandemic forced companies to rethink how they communicate with their stakeholders and how best to share information. Don’t make the mistake of falling back on your text-heavy, jargon-filled documents when operations return to normal. Companies should seize this opportunity to continue using plain language and increasing transparency in their documents to help secure their audience’s trust.
Originally posted on Forbes