An Analysis of the Readability and Style of Letters to Stockholders

Abstract

One of the most effective communication links between corporate management and investors is the annual report. The letter to the shareholders in the report exemplifies the one-on-one communication attempt by chief executive officers and other high level executives with owners. This article examines thirty shareholder letters written by executives who are classified as highly successful based on their own annual salaries and/or the return to shareholders or company performance. The researchers found the letters written by these successful executives to fall within accepted readability levels. The letter writers adhere to convention in the use of numbers and the use of compound adjective. Section headings are not frequently used. The tone of the opening paragraph is usually equivocal or positive even though the first sentences frequently reflect a lack of “you attitude.” In general, the reports written by these successful executives conform to modern-day standards.

Discourse in the Marketplace: The Making of Meaning in Annual Reports

“…Advice on how to improve the readability and design of annual reports has come from Fielden and Dulek (1984), Haggie (1984), Anderson and Imperia (1992), and Arfin (1993). Dorrell and Darsey (1991) studied the readability of the annual letters to stockholders and found that they were understandable but often lacked a &dquo;you&dquo; attitude in writing style. Subramanian, Insley, and Blackwell (1993) reviewed the relationship between the performance of companies and the readability of their annual reports, finding that the annual reports of companies that performed well were easier to read than those of companies that did not perform well.…”

Readability of Notes to the Financial Statements and the Adoption of IFRS

“…Further, to improve the readability of written material, the relationship between the difficulty experienced by users in reading a text and the characteristics of that text must be measured. Accordingly, readability indices have been developed to measure the effectiveness of written communication (Dorrell and Darsey ; Jones ). The better‐known indices are the Fog (Gunning , ; Kwolek ) and Flesch (Flesch , , ) Indices, which will be discussed in the research design and variable definitions section.…”

An Exploration of Authentic, Servant, Transactional, and Transformational Leadership Styles in Fortune 500 CEO Letters

“…For instance, researchers (Amernic et al, ; Palmer, King, & Kelleher, ) studied Jack Welch's CEO letters at General Electric over a 20‐year period to conclude that he applied five change conversations as well as distinct metaphors in his letters. Other researchers (Dorrell & Darsey, ; Patelli & Pedrini, ) considered the author's tone in leadership letters to conclude leaders predominantly write their letters with a positive tone, which increases corporate performance.…”