LAST Friday was supposed to be a big day for Pfizer Inc. (NYSE:PFE), U.S. Securities and Exchange Commission Chairman Christopher Cox and the Center for Plain Language in Washington D.C.
They were going to unveil a new model plain English executive compensation report. But there was a problem. As the New York Times’ Eric Dash tells it, the SEC’s staff in the division of corporation finance, who had not been consulted until a week before the big event, were not willing to sign off on the content of the mock plain English document. They sent over three pages of changes.
In the end, they asked that the text of the mock report be blurred and a disclaimer included to say the document was “hypothetical.” All of which was no doubt just a little embarrassing to Pfizer and its outside consultants.
The Times‘ article plays the story as a classic tussle between starch-collared bean counters and creative communications consultants. It quotes one of Pfizer’s consultants, former English professor Bill Lutz, as saying of the SEC staff: “Communication is not their concern.”
While that comment is ambiguous and probably was not intended to mean that SEC staff don’t care about communication, it nonetheless underscores the challenges of creating plain English documents that are also content complete and accurate. I understand both perspectives because I have produced plain language investment publications for retail investors that had to be vetted by content experts, including regulators and academics. It’s not easy to do. It requires creativity, dedication, attention to detail, and a lot of patience.
Based on their comments on companies’ pay disclosures last week, it’s clear to me that SEC corporation finance staff do indeed care about communication. But they probably care more about the substance of the disclosures. And so they should.
What good is plain English if people aren’t motivated to use it?
Thing is, I have to wonder in this case whether either side is even focused on the right issue. Is a high-end plain English proxy statement that also complies with regulatory standards really what Pfizer should be concerned with right now?
I don’t think so. In fact, I think there are more important things that Pfizer and all of us involved in this business need to address first.
Before people can even begin to read the mandated disclosures in plain English, they have to be motivated to do so. That’s a major problem right there.
As highlighted last year by the NYSE’s Proxy Working Group report (PDF 209KB, 30 pages), high levels of ignorance of the proxy process mean that most retail shareholders are not engaged in annual meetings. Most don’t vote and probably don’t read the proxy statements they get in the mail.
In his speech Friday, Chairman Cox said as much: “We have some empirical evidence that in fact, most retail investors are throwing away the disclosure documents that the SEC requires, rather than reading them.”
And that’s before most companies start the move to default electronic delivery. There is even less incentive for most shareholders to participate in a “notice-only” style meeting.
Why? Because everything about the process is unappealing. From the poor design of Broadridge’s notices of Internet availability, to the clunky usability of the proxy materials and voting sites, to the lack of consistency in how and when companies report voting results, there’s nothing attractive about the process.
And don’t get me started on the fact that shareholder votes don’t really count. Try convincing a first-time voter that their vote matters when some of the items on the ballot are not even binding. They simply won’t understand how their vote can matter if it can be ignored.
What good is it if it’s not in a usable online format?
But even if we assume that people will be motivated, consider what happens next. They must turn on a computer and then find the document on the Web. I just visited Pfizer’s website, which was recently redesigned, and I could not find a link to its proxy statement across nine different first- or second-level pages I viewed in its Investors section and its new separate Corporate Governance section. It’s there somewhere, but it’s not prominent by any stretch of the imagination.
But again, let’s assume investors will find that proxy statement. Now they must be able to render the document in their computer’s software, which may take additional time and introduce new demands on people depending on their capabilities and the format the company chooses to use. And they must then be able to move around the document, print it, save it and manipulate it.
This is often the point at which the whole process comes to a halt. Basic online usability is the most pressing issue for regulators to address because it is a major barrier to any online disclosure being used, plain language or not.
Regulators have been too slow to address these issues, even though they are much easier to fix than converting disclosures to plain English. As I said, I’ve done plain English, so I know of what I speak. Basic usability is much easier and more effective.
I can’t say for sure how well or poorly Pfizer is presenting its mock proxy on the Web because it’s not available online. I know only what I have read in the New York Times, and there’s enough there for me to conclude that basic Web usability hasn’t been incorporated into the design. Things like “a two-page chart” and “using color, different font sizes and a two-column structure” tell me that.
Don’t get me wrong. Plain English, information design and complete and meaningful information are the ultimate determinants of effective disclosure, but only when people are motivated, and only when online disclosure documents are presented in usable formats.
Until then they are like proverbial trees falling in a forest… they will not be read.
P.S. I will be moderating a panel discussion on usable online documents for a webinar being hosted by TheCorporateCounsel.net featuring leading online annual report and proxy statement producers. And our just released guidelines for online shareholder meeting communications contain a wealth of ideas for how to engage shareholders in the meeting process.