Update: On July 26, 2007, the SEC posted the adopting release for the final rule requiring companies to post their proxy materials on their websites. The adopting release states: “The materials must be presented on the Web site in a format, or formats, convenient for both reading online and printing on paper.” This statement has a footnote that goes on to explain: “We believe that requiring readable and printable formats is important so that shareholders have meaningful access to the proxy materials. When determining the readability and printability of formats, issuers should consider the size of the files because many shareholders do not have broadband connections. Although some types of files may be suitable for persons with high-speed Internet access, the readability and printability of a document may be affected significantly by the time that it takes to download the document.” Alan Singer, who I quoted in the original article tells me that in a conversation with SEC staff subsequent to this article, the staff advised him, as is implied in the release, that PDF files are too big and would be troublesome for people who do not use broadband. This development obviously means the SEC is not going back on the usability requirements. It also suggests that companies will need to ensure that it is easy for people to print out the reports or parts of them without having to download large files. I’m leaving the original article in place because I believe it is useful in understanding why the SEC’s decision on online formats is important.
DURING a webinar yesterday about the SEC’s new e-proxy process, attorney Alan Singer of Morgan, Lewis & Brokius LLP dropped a bombshell snippet of news that honestly made my heart sink and my blood boil at the same time. (Yeah, I know I take all this much too seriously.)
He said that the SEC staff were considering allowing companies to use PDF documents instead of HTML to satisfy the requirements for proxy statements and annual reports that are intended for online reading and searching. He said this was because of improvements to the Adobe PDF technology.
I hope the SEC scraps this idea quick because they’re wrong. Despite the major improvements to PDF technology — and I have advocated that companies take advantage of them — PDF is still not a satisfactory replacement for standard web pages when it comes to online reading and use.
If all investors get is PDF documents — no matter how well they are tagged and bookmarked and hyperlinked — fewer investors are going to bother reading their proxy statements and annual reports.
And it doesn’t serve a securities regulator’s investor protection mandate to have an uninformed investor population. Actually, it’s not good for anyone because uninformed people are less likely to invest in the first place, as I explained yesterday.
I’m not anti PDF. I sometimes think PDF reports are better than the HTML options companies provide. But there is a lot of evidence that PDF is a barrier to people being willing to use a document. It’s an impediment to them being able to easily and quickly consume and comprehend information from their computer screens.
Here are a few sources, dug up after a couple of quick Google searches, that illustrate that PDF is far from being loved by all:
* Jakob Nielsen, the world’s leading expert on web usability frequently observes people in usability studies. He’s had a lot to say about PDF over the years based on his observations with real users. See: Avoid PDF for On-Screen Reading (2001), PDF: Unfit for Human Consumption (2003), Gateway Pages Prevent PDF Shock (2003), Investor Relations Website Design (2003), Open New Windows for PDF and other Non-Web Documents (2005), Top Ten Mistakes in Web Design (2007 — PDF Files for Online Reading is his #2 Mistake of all time)
* American Foundation for the Blind. Here’s a link to their search results page for “PDF accessibility.” None of the items returned sing the praises of PDFs. None.
* The Royal National Institute of Blind People. Read their March 2007 (yes, it’s that recent) user guide on how to access PDF if you are blind and use the Jaws software. Really, read it and then imagine yourself being someone who actually needs this guide to be able to use a PDF annual report of a company in whose shares a big part of your savings are invested. It’s not acceptable. Technically, PDF may be accessible, but it’s not in practice if people have to read a manual first.
* Joe Clark, noted expert and author on web accessibility, has actually worked with Adobe to make its PDF technology accessible. His much referenced article Facts and Opinions About PDF Accessibility, in which he dispels some myths against PDF, starts with this as his first point: “Most PDFs on the web should be HTML.”
* Lawyer warns that PDFs fail on accessibility. This article by ZDNet UK quotes lawyer Struan Robertson, a senior associate at Pinsent Masons and the editor of IT law Web site Out-law.com saying: “The legal duty (in the UK) is to provide the information in a way that is accessible and usable. Many PDFs are not accessible and the solution is to provide accessible HTML in addition to PDFs, if you wish to use PDFs.”
* Tim Moore, who says he is “blind as a bat” and runs the My Disability Blog, writes Does everyone hate PDF files, or is it just me? “Listen, I have a fairly fast PC with plently of memory and I use a cable modem. Nonetheless, everytime I click on a search engine link without realizing that the link is to a PDF (I believe the acronym stands for portable document file), I feel sick as soon as I realize what I’ve done.”
* Andy Wibbels, an author and blogger, asks Do You Hate PDFs Too? “I think my big beef is that it always forces the user to open up another application. And often it’s a waste of space like a PowerPoint presentation. I understand PDFs if you’re doing product delivery etc but not for stuff that should be freely available and searchable.” He refers us to…
* Doc Searls, A-list blogger, geek and senior editor at the Linux Journal, has a strong hatred of PDF and also calls out a problem that more people than ever are having with PDF content: an inability to easily reuse it by copying and pasting. “PDFs, no matter how beautiful, are not a joy to quote (how about all them line breaks you have to edit out?), or to link to.”
Of course, there are people who love PDFs. Some are my friends. They tend to be heavy researchers and very experienced web users. But even they will admit that HTML, when done well and with a little imagination, is oh-so much more convenient when you know what you want and where to find it, or when you don’t know what you want and are just browsing.
I thought the final voluntary e-proxy rule was great. It was the first time that the SEC truly acknowledged the need for shareholders to have access to online HTML documents which take advantage of the inherent interactivity of the Web. A couple of the commissioners expressed the hope that companies would step up to the plate to provide usable documents.
The end result seemed like a good trade-off. Companies together would save billions of dollars over time by no longer having to automatically mail printed material, and shareholders and everyone else would finally get better, more engaging and more interactive online documents.
Full HTML annual reports — which companies like GE, IBM, and even smaller firms like Kyphon provide — would become the norm. No more horrible image-based documents. No more PDF blobs as the only option. In time, perhaps, companies would even move to meet the W3C’s Web Accessibility Initiative guidelines for web content.
I thought that was truly visionary. Because if Americans had access to disclosure documents they’d actually like using, I fully expected that they would become more informed investors. And U.S. companies would instantly leap to the front of the global web rankings in terms of not only providing the most comprehensive disclosure information, but doing so in ways that anyone can actually use.
But if the SEC says that PDF is acceptable for the online version, then it will undo all of that. They might as well just let companies link directly to their filings on Edgar — something the rules explicitly bar — because even those are better than only having access to PDFs.
Is Shareholder.com client breaching SEC privacy rules? (July 10, 2007)
My bad experience with first e-proxy notice (July 04, 2007)
E-proxy: do it for love, not money (June 14, 2007)