Most of us know instinctively that using plain language is a good idea. “Please give me the most convoluted proxy statement possible,” said no investor, ever. But if you need some confirming data to convince your Board or your boss, take 60 seconds to read this blog post.
A recent study by Labrador and BVA Group, a research and consulting firm, shows that rewriting typical corporate disclosures in plain language has distinct benefits. In short, people can absorb information faster, are more likely to understand and remember what they read, and view plain language documents more favorably. Companies that produce such documents generate a valuable asset: trust.
Objective benefits
The first thing we looked at was efficiency. The study tested eight paragraphs of roughly 100 words each. Half of the samples were written in typical corporate-speak and half were rewritten in plain language. While only 40% of the participants were able to grasp an “original” paragraph in 30 seconds or less, 60% got through the rewritten paragraphs in that time frame.
The increase in perceived clarity was almost as striking. Participants who read “original” paragraphs said they understood the samples 49% of the time. Comprehension rose to 68% for rewritten paragraphs, even though participants might have been reading those faster. Reinforcing this finding, 72% of our study participants described the plain language samples as “clear.”
The third objective feature we tested was retention. Does it matter if an investor can quickly read and understand your proxy statement if she doesn’t remember critical information when she votes? We found that participants retained information from the rewritten paragraphs 58% of the time, compared to 41% of the time for “original” paragraphs. Furthermore, over half of our participants specifically did not remember the content from “original” paragraphs.
Subjective benefit
Plain language delivers the advantages of efficiency, clarity, and comprehension by making documents more inviting and easier to read. In the study, participants found plain language samples “well-written” 64% of the time, and “well-organized” 66% of the time (compared to 48% and 49% for the original copy). As a result, participants were far more likely to call the plain language samples “pleasant” to read (58%) than they were to say favorable things about the original samples (41%).
The bottom line
If you want investors (and regulators, media, and proxy advisors) to be favorably inclined toward your company, you can boost your chances by communicating in plain language. People are more likely to read, understand, and remember your disclosure, and are more likely to come away with a positive impression.