Annual Corporate Reports Weren’t Always Dull Propaganda

In its heyday, the annual corporate report approached a work of art: a handsome glossy document crowded with splendid color photographs showing a company’s officers and smiling employees hard at work.

Pages crammed with data, statistics and charts underscored the message that things were going really well -- or, if not, would soon be right back on track. What annual reports lacked in candor they made up for in presentation, their prose crafted with care by consultants specializing in the art of best-foot forward. The annual report was, in short, a piece of propaganda designed to make management look good and stockholders feel good.

As bland as annual reports may feel today -- in an era of cost-cutting and heightened regulation -- the ritual is more than 160 years old, and its history is a monument to American individualism.

The honor of the first conventional annual report has often been attributed to the Borden Co.’s issue in 1858, but some railroads were producing them years before. The Providence & Worcester Railroad, for example, published its first report in 1845.

Before the 1890s, however, few businesses apart from the railroads were public corporations with large numbers of shareholders. The owners of privately held companies typically believed that their internal affairs weren’t the public’s business.

Going Public

A merger wave from 1895 to 1904 created giant new industrial corporations with publicly traded stocks, prompting the New York Stock Exchange to recommend they issue annual summaries of their businesses for shareholders. AT&T began in 1885, Monsanto in 1902.

Although an attitude still prevailed at many companies that they were above such disclosure, those that were published varied wildly in style and content. R.G. LeTourneau, a deeply religious man and an innovator in manufacturing earthmoving equipment, opened his company’s report with a biblical quotation. On the next page, he wrote, “I love to build machinery, I love to design it, but I am constantly aware of the fact that it takes skilled men to test...and operate it...I would like to add that just as a machine needs a man to direct and control it, so man who is God’s mechanical Masterpiece needs God to direct and control him.”

By contrast, William A. Fairburn, president of Diamond Match Co., in 1942 offered his readers 100 tightly filled, personally written pages pontificating on corporate lore, economics, taxation, Congress, democracy, the prevalence of blister rust in Diamond’s vast timberlands and the company’s growth prospects, among other topics.

The first truly modern annual report was probably issued by Elbert H. Gary, the chairman of U.S. Steel, in 1902. It was voluminous, detailed, generously illustrated and actually revealed much about the company’s affairs.

Depression Regression

During the stock-market craze of the 1920s, many companies discovered that an attractive annual report was a useful instrument for security salesmen. A decade later, as the Great Depression raged, the typical report grew simpler, more conversational, and aimed as much at employees as stockholders.

In 1931, Westinghouse explained how its employees agreed to share jobs and contribute part of their wages to help those laid off. A year later, it elaborated on its “work-spreading program to give some of all available work” to as many employees as possible. Workers at all levels, it said, donated 1 percent to 2 percent of their pay, which the company matched, to buy food for furloughed comrades.

In 1940, General Foods tried the novel approach of presenting its corporate information in dialogue form set at a mythical annual stockholders’ meeting.

World War II brought another twist. Companies boasted of their contributions to the war effort, although many couldn’t spell them out in detail for security reasons.

During the economic boom of the postwar years, companies scrambled to portray themselves as modernizing leaders in their fields. Annual reports grew longer, more elaborate, more colorful and usually more self-serving. Their role as propaganda became standardized. Few followed the lead of Warren Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., whose unique approach has turned his annual reports into an educational experience.

Yet for all the variety of approach and format in these reports, many executives even today share the belief of Enders M. Vorhees of U.S. Steel, who said in 1943, “I regard the intelligible annual report not as a duty but as an elementary act of self-preservation.”

(Maury Klein is a professor of history emeritus at the University of Rhode Island and the author of 16 books on American history. The opinions expressed are his own.)

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