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Evaluating the 2021 Annual Reports

14 Apr 2022  

It is annual report season. If you own individual stocks, this is the time of year when annual reports and proxy statements arrive in your mailbox.

I like to dabble in stocks and I’ve been reviewing this year’s mailings. It is amazing how some companies invest in their annual report and mail out a well considered update on the firm. Other companies do the absolute minimum required by law.

Public companies are obligated send out a certain amount of information. The two required things are a 10-K and a Notice of Annual Meeting and Proxy Statement. The 10-K is a financial document that starts off with a long list of risks and then goes deep into financial details. The Proxy Statement outlines matters up for vote at the annual meeting, like the routine appointment of an auditing firm and election of directors.

Beyond that, the annual report is up to the company. Some firms create insightful reports and others do the absolute minimum.

Saving Money

There is a temptation to save money on the annual report. Many investors don’t review the documents, and index funds don’t care. Big stock analysts are not an important audience, either; they can just meet with the executives or listen to presentations at analyst meetings.

Still, while it is tempting do the minimum, this seems like a poor decision.

Reasons to Invest

There are compelling reasons to invest in a quality annual report.

– Build connection with investors

This is perhaps the most important reason: an annual report is a chance to inform investors about the company and encourage them to stick with the investment. Many executive lament that there are fewer and fewer patient, long-term investors. A good way to get more of them is to keep them posted about what you are doing.

– Enhance the company brand

An annual report can play an important role in building the brand. A company that invests in an annual report sends a branding signal: the firm is confident, has a story to tell, is committed to quality and is eager to engage.

A firm that just sends the 10-K printed on wafer thin papers sends a different message: the company doesn’t invest in quality, doesn’t have a story worth telling and doesn’t care about investors.

– Strengthen employee relations

People want to work for company they are proud of, and company that is doing good things in the world. Employees can look at a thoughtful annual report and feel a sense of pride. When executives recognize employees in the document it further strengthens relations.

– Help the CEO

Communication is a critical part of being an effective CEO. It isn’t enough to set the strategy; you need to constantly communicate it to be sure people are clear. The annual report can help with this. The annual report is also a chance for the CEO to build their personal brand.

The Best

The best annual reports do three things.

First, the report should have a credible discussion of the results. How did the company do? Was it a good year or not? Why?

Second, the annual report should talk about how the company is contributing to society. This is a chance for a firm to rise above the short-term numbers. Is the company helping the environment? How so? Is the firm embracing inclusion and diversity? In what ways? Recognizing employees is a critical part of this section.

Third, the report should discuss plans for the future. What are the big focus areas? Annual reports are public documents, so sharing specific details is not smart: competitors read these documents, along with everyone else. Still, in general terms, what is the path forward?

2021 Highs and Lows

Here is my assessment of some of the annual reports I’ve received this year. I’m using the grading scale we employ at Kellogg: A, B, C, D

Abbott: A

Medical-device giant Abbott created a beautiful 2021 annual report. There is a letter from the CEO, a review of the businesses and a financial report. Abbott clearly wants to communicate with investors and cares about their views.


This company gets a well-deserved C. The annual report is an attractive document, with quality production. The problem here is the content: AT&T has delivered terrible results for investors, and the annual report fails to respond to the issues. Instead, it starts off with corporate-speak: “The Dawn of a New Age of Connectivity.” That is an empty phrase. A better start might be this: “Wow. Just terrible results but don’t give up all hope. We aren’t dead yet.”

Baxter: C

This large healthcare company another example of a company doing just about the minimum required. The only good news is that the proxy statement starts off with relatively informative letters from the CEO and the lead independent director.

Boeing: A

It is hard to find a company that has had more trouble in recent years than Boeing: a massive COVID downturn and safety issues with the 737 Max. Boeing doesn’t dodge this bad news in its annual but the report has a hopeful feel: the well-constructed update has a tone of humility and resilience. It is appropriately positive.

BNY Mellon: A

Sometimes a firm gets the balance right: just enough polish and detail. BNY Mellon achieves this. The annual report features a fairly long letter from CEO Todd Gibbons. He discusses results, the BNY business and the firm’s contributions to society. This is a well done report.


A great annual report should feel significant. The CSX annual delivers on all fronts; it is a polished document. It is clear and easy to follow. The design is lovely. The paper is thick. It feels like the annual report from a company that invests in quality and customer service.

Cleveland-Cliffs: A

This booming steel producer sent a quality update for investors. The annual report consists of about 10 glossy pages, followed by the usual 10-K material printed on thin paper. The combination works: the first section simply summarizes what the business is focused on. The following detail then develops the story. Bravo.

Eli Lilly: C

This large pharma company has taken a step back in recent years, at least in terms of its annual report. The company used to create an impressive report. This year it sent the minimum. It gets a C only because there is a short letter to investors from the CEO and independent director.


General Electric has had some difficult financial times, so it isn’t a surprise that its annual report has been scaled back from the glory days of Jack Welch and Jeff Immelt. Still, this year the company sent a thoughtful, in-depth business review.

Kimberly-Clark: D

You would think a paper company would understand that there is something powerful in printed documents. Sadly, that isn’t the case for Kimberly-Clark. KC gets a well-deserved D for a terrible packet with no message at all for investors.

Surely a marketing company like Kimberly-Clark can do better than this.

KraftHeinz: C

Given Kraft’s reputation for saving money, it isn’t a big surprise that the company doesn’t spend a dollar more than necessary on the annual report.

The firm narrowly avoids a D with a very short letter from the Lead Director.
KraftHeinz has had some difficult times. Instead of saving money all the time, the firm should invest in telling its story.

That is true when it comes to managing its brands as well.

M&T Bank: A+

A few companies really embrace the power of the annual report. The most impressive report I received in recent weeks is from M&T Bank. This Buffalo-based regional bank sent a beautiful Message to Shareholders. It includes financial results and a discussion of the economy, what it means for the company, and how the firm is responding. The company clearly cares about this document: the colors are vibrant, the paper is thick, the content is thoughtful.

Raytheon: A

Defense-giant Raytheon sent a respectable annual report: a business update followed by the 10-K. This approach works well.

Stryker: D

Boo, boo, tomatoes, tomatoes. This medical device firm did absolutely nothing in terms of an annual report. The mailing was a 10-K and a Notice of 2022 Annual Meeting. Stryker’s mailing is completely disappointing. It is an insult to investors and employees.

The executive team at Stryker should be embarrassed.

Textron: B

Textron is a complex company; the firm makes everything from golf carts to business jets. This report works well; it reviews the different business segments, provides a financial update, and outlines in general terms the road ahead.

Verizon: D

Verizon started 2021 with a stock price of $59 and ended the year at $52. A basic 500 index fund increased in value almost 30% during the same period. Verizon had a terrible year.

How does the company explain the year? Nothing. There is no annual report to speak of, no explanation, just a short letter from the CEO and lead independent director that starts off: “Verizon’s corporate purpose to create networks that move the world forward has never felt so vital.”


Waste Management: D

The people who put together this annual report seem to think the only thing that matters is the cover. The firm took the 10-K and the annual meeting notice, bound them into one document and put an attractive picture on the front. It is labeled “2021 Annual Report” but that is a very generous description of the document. There is no letter to shareholders, nothing about the company, no comment on strategy or ESG. This is a disappointing report.

Zimmer Biomet: C

There is a lot that Zimmer Biomet could discuss in its annual report: key investment areas, efforts to rebound from COVID, the spin-off of ZimVie. None of these issues gets any real attention, however. The report is modest, a few pages tacked onto the front of the 10-K. Is it better than some? It is. But it is not even close to sufficient.

2 Responses

  1. Justin Kim says:

    Good article. I would argue an additional reason to invest in writing a compelling annual report is the benefit that accrues back to the company itself from the process of writing the document. Putting together a coherent narrative with sentences and paragraphs and so forth takes time. The iterative process of rewrite and revision is a mechanism to attain clarity in logic and thought. I would argue that would help the CEOs and executives themselves as they put together their long-term plans.

    And I came across this quote from Warren Buffett some time ago that hammers home the point: “Two years ago, I hit the 50-year mark as CEO of Berkshire and used the occasion to write a special report to the company’s owners. I reflected on what had gone particularly well or poorly, what I’d learned, and what I hoped would get done in the future. As you might guess, I ended up being the prime beneficiary of this effort. There’s nothing like actually writing something out to clarify thinking.”

    • Tim Calkins says:

      Hi Justin—I completely agree. The process of thinking through the report adds a lot of value. It is a chance for the leadership team to reflect on results and the path forward.

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