PDF blobs are a big problem on investor relations websites. Many companies are dumping important disclosures in these burdensome documents through shortsightedness, poor planning and sometimes as a tactic to bury sensitive information.
A PDF blob is a large, unstructured reproduction of a document originally designed for another medium, such as a printed annual report, a PowerPoint presentation handout or a regulatory filing. While there are many ways to make PDF documents more usable on the Web, few companies take advantage of them. The result is PDF blobs – big files which cause many usability problems and obstruct effective disclosure.
Currently about 20% of the large-cap companies in our IR Web Report Global Rankings™ provide their annual reports in PDF blobs only. This is a high percentage considering that these are the world’s largest, most resourceful companies.
As we come up to annual report season, it would be good for companies to pay a little more attention to how they will be publishing their reports on the Web this year. Companies which dump their annual reports in PDF blobs should know that they are undermining effective disclosure and probably costing their companies more money in the long run.
Why PDF blobs are a problem
The usability problems with PDF documents have been widely chronicled in usability and accessibility tests. In a 2003 essay, usability guru Dr. Jakob Nielsen declared PDFs “unfit for human consumption” before going on to list the many problems highlighted in his research with Web users, including users of investor relations websites.
I wouldn’t go so far as to say all PDF documents are unfit for human use, although most of them are. There are reasonably effective techniques companies can use to improve the usability of PDF documents. Problem is, very few companies either know about PDF optimization techniques or they simply don’t care.
PDF blobs have many inherent usability problems and make access to corporate disclosures so burdensome as to render them useless. The issues range from slow downloading and inaccessibility to blind users, to the fact that PDFs inherit print design conventions that create usability problems for Web users.
These issues are exacerbated by the fact that most people don’t know how to use the Acrobat Reader properly. They use it so infrequently that they don’t know how to search PDF documents or perform other basic tasks like copying information from a PDF for reuse in research reports, news articles or shareholder correspondence.
The usability challenges of big PDF files have been made worse in recent years as regulators have demanded increasing amounts of disclosure. Not only are companies providing more documents in PDF, but existing disclosure documents are getting longer.
Take annual reports as an example. The National Investor Relations Institute (NIRI) in the United States reports in its 2004 annual report survey (PDF 31 KB) that the average annual report swelled to 73 pages from 48 in 2002 and 1999.
That roughly means that annual report PDF blobs are now 50% more difficult to use than before.
How annual report PDF blobs cost you more in the long run
Companies that provide PDF blobs of their annual reports demonstrate an almost complete disregard for communicating effectively with their shareholders and investors.
Some IR departments will claim that cost is their main reason for providing unusable PDFs, but that is not a valid excuse. Even companies with extremely tight budgets can take simple steps to improve the usability of their PDF annual reports without having to use HTML.
In fact, if companies were to invest a modest sum to publish their annual reports and proxy statements in formats other than PDF blobs, they’d probably end up saving money.
By providing HTML annual reports or optimized downloadable reports, companies would make it more attractive for investors to sign up for electronic delivery. The subsequent reduction in print runs would more than offset what companies would have to spend to produce better online documents.
Right now, the choice for investors is often between a nice printed report delivered by mail or a PDF blob sent by email. No prizes for guessing which they’ll choose.
Perhaps the biggest cost of publishing PDF blobs, though, is the lost opportunity to attract new investors and keep existing ones fully informed. This is because any information contained in a PDF blob is much less likely to be read.
By not downloading PDF documents, or viewing them only superficially, investors learn less about companies’ investment merits. This is bound to result in investors making inaccurate assessments of companies’ attractiveness as an investment.
Since the primary job of IR departments is to help their companies achieve accurate valuations, any department that publishes its online annual report, proxy statement or similar important document in a PDF blob is simply not doing its job. Period.
What are the alternatives
There really is no excuse for companies to provide PDF blobs on their IR websites. There are a variety of alternatives that can provide a better experience for investors without breaking your department’s budget.
HTML is by far the best option for Web documents. With a bit of planning and a small investment, there’s no reason, for instance, that every large-cap company cannot provide a highly usable annual financial report in HTML.
Mid- and small-cap companies with limited budgets can easily afford to provide a Downloadable Annual Report using a combination of PDF and spreadsheet downloads that are optimized for onscreen use.
Apart from these, there are no other suitable options. Companies should avoid image-based annual reports from vendors like Shareholder.com and Thomson Financial because these are almost as bad as PDF blobs.
How regulators can help
Regulators must bear some of the responsibility for the PDF blob problem and for the general poor state of online securities disclosure today. There has been little sensible guidance from regulators on online disclosure and most disclosure systems are still based on an outdated printed-document model.
Canada’s technologically challenged regulators, for instance, require companies to use PDF blobs when filing reports on that country’s SEDAR regulatory filings system. The same applies to the Australian Stock Exchange, which seems to accept that the PDF format is not ideal, yet offers no alternatives (see above screenshots).
The U.S. Securities and Exchange Commission, the most technologically astute of all regulators, has also contributed to the problem of PDF blobs. It has given companies confidence to continue the practice because the commission’s guidance for electronic disclosure says PDF is an acceptable format. Unfortunately, the SEC’s guidance in this regard is inadequate as it does not draw distinctions between good and bad PDF files and fails to take into account a wealth of usability research showing that PDF documents represent a significant burden to users.
If companies themselves don’t improve, then investors may well need regulators to provide clearer guidance and to take a lead by forcing issuers to address the usability requirements for online disclosures. If the SEC and others could take regulatory steps to improve communication clarity with plain language rules, they can do the same for Web usability.
Of course, companies can preempt a regulatory remedy by simply doing the right thing. As a new year approaches, lets make it the year we rid the Web of PDF blobs.