In 2021, at the start of Sydney’s very long, very intense covid-19 lockdown, I proposed a side project to my research assistant, Chris, working in Canberra. The ACT was not in lockdown yet, and so Chris had access to all of the fabulous cultural institutions necessary for good business history research. In my work on Australia’s business leaders, I had noted – and filed away for later – my observation that annual reports changed substantially over the course of the twentieth century. Annual reports were often the only source that reliably listed company directors, and along the way I noticed they transformed from very short, austere documents printed on meagre paper; to the introduction of colour imagery printed on textured card stock; to glossy photographs of smiling employees volunteering for some cause or another. I had some travel funds that were, understandably, unlikely to be of use in the near future, and so I asked Chris if he would help collect some data on changes in annual report form and content over the course of the twentieth and early twenty-first centuries. In the resulting discussions, we followed a fairly dystopian script, with our catch ups punctuated by me noting the helicopters with megaphones in the sky and the various breads I was trying to perfect, and Chris discussing going to the movies or to see friends.
The result of this initial work has just been published online, open access, with Accounting History. Research often positions annual reports as vehicles for company compliance with regulated disclosures, or voluntary environmental and CSR initiatives. As such, historical research has generally focused on single firms or industries to understand the way companies have constructed culture, responded to stakeholders and managed scandals. Some have examined the socio-cultural drivers of annual reporting, though longitudinal studies of cohorts of annual reports are rare. This is principally due to challenges with the availability of archival (pre-digital) annual reports, with annual reports hidden amongst opaque finding aids and across multiple formats (finding a computer at the NLA with a CD-ROM drive was a challenge!). Accidentally, in my quest to find the names of Australia’s corporate leaders, I unwittingly collected a reasonable sample of top company annual reports.
Having overcome some of the methodological difficulties, the next task was to decide how to interpret the data. When looking at groups of companies, as I so often do, I tend to gravitate towards institutional theory to understand their collective behaviour. In this case, I argue that organisations shaped their annual reporting behaviour in order to operate within a relational framework of norms, values and assumptions within the bounds of what was considered acceptable. Regulators and the public can coerce firms to behave in a certain way (coercive pressure); professional associations can establish best practice procedures (normative pressure); and competition between firms can lead them to mimic one another or those deemed more powerful (mimetic pressure). Corporate decisions are thus not entirely internal nor rational but are dependent on the pressures of the external ‘iron cage’. Although each company was undoubtedly subject to specific strategic, reputational and operational pressures, my data on cohorts of annual report data over a long period of time prompts a focus on the external institutional environment, rather than firm-specific factors.
Using DiMaggio and Powell’s (1983) work on institutional theory, I focus on external institutional isomorphisms, or those related to Australia’s macro socio-political environment. It disregards mimetic pressure as a firm-level institutional pressure unsuitable for consideration here. Instead, I argue that annual reports have been governed by coercive pressure from company regulations, and expectations from shareholders, customers, employees and broader society. Normative isomorphisms have resulted from standards set by the accounting and public relations professions, annual report awards criteria and external certification committees. Changes in these institutional pillars have influenced the overarching system in which companies operate, and the social practices, norms, obligations and activities that take on a ‘rule like status’. As I find in the data, new regulations, emerging crises and the interests of various activist groups have successfully influenced the shared disclosure practices of large Australian corporations.
Annual reports progressed in three phases: between 1910 and 1952, coercive pressure from regulators encouraged the production of short, austere financial reports. The misadventures of the 1880s property boom and 1890s depression encouraging the colony of Victoria to first enshrine the production of a brief but accurate balance sheet. The contents of the balance sheet became mandatory in the late-1920s, and over the intervening generation various State Companies Acts, and Stock Exchange listing rules, mandated increasingly specific parts of the balance sheet and profit and loss statements. There were few other isomorphisms acting on annual reports at this time, with professional accounting bodies uninterested in the specifics of company disclosure. Australian public expectations were also limited, with the corporate image primarily projected through the company prospectus rather than annual reports.
Figure 1. Goldsbrough Mort and Company Ltd annual report, 1930.
Source: National Library of Australia, N 332.0994 GOL, 4. Permission obtained from the Copyright Holder via the NLA.
Between 1952 and 1986, the intensification of regulatory requirements and accounting standards, alongside normative recommendations from the public relations profession, split reports into ‘narrative’ sections and austere financial disclosures. Developments in company law and the accounting profession on one hand, and the public relations profession on the other, contributed to a new typical type of annual report, with the division of sections based on the competing objectives of transparent information and glossy storytelling. In particular, the decline of the company prospectus – once the outlet for marketing and imagination – increasingly became the domain of lawyers rather than designers and journalists. In response, professional bodies began to recommend the use of annual reports for corporate public relations, for companies to secure goodwill from consumers, employees, and the new middle-class investing public. As a result, reports consistently and collectively transformed into public relations documents in the mid-twentieth century. New ‘narrative’ sections explored the company’s value to Australian society through employment and ownership, and for those who purchased products.
Figure 2. Felt and Textiles annual report, 1964.
Source: National Library of Australia, N 332.0994 FEL, 7. Permission obtained from the NLA and Godfrey Hirst Carpets, 16 August 2024.
From the 1980s, expansion of the regulatory, professional and societal obligations gradually introduced standards of corporate accountability to narrative sections. Although some form of corporate social reporting had been present in Australian companies since the late-nineteenth century, from the 1980s companies’ earlier acknowledgment of customers, employees and Australian society expanded in scope and specificity. Industry recommendations quickly made the link between public relations and CSR reporting, while at the same time shareholder activism, industry recommendations and government regulations established a range of institutional pressures for companies to engage with, and report on, socially responsible initiatives as a form of corporate accountability. Although this was remarkably successful at encouraging the disclosure of CSR activities – from around half of the reports in 1964, to 95 per cent of the sample in 2018 – encroaching on narrative sections forced corporate accountability to sit alongside (and sometimes in conflict with) the use of narrative sections for corporate public relations.
This reveals the historical path dependencies of contemporary annual report disclosures, and the way companies have responded collectively to structural and socio-cultural pressures. The observed homogeneity in content, but the dichotomy of purpose, also has important contemporary implications, specifically for current concerns over disclosure quality and transparency. For example, community, environmental and diversity disclosures areas of significant public concern but are largely unregulated in form or content, contributing to ‘greenwashing’ or the de-coupling between words and actions. Understanding this institutionalised conflict between the purpose of annual reports can, I hope, guide public or regulatory initiatives to improve corporate accountability.