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TRANSCRIPT
INFORMATDESIGN
AN INFORMATION DESIGN HANDBOOK:
CREATING CLEAR FINANCIALDISCLOSURE DOCUMENTS
We live in a visual culture, where information is increasingly communicatedthrough messages in which the verbaland visual are joined together seamlessly.This is the world of information design.The world of business–in its documents,forms, and other materials–will becommunicating less and less until itjoins the information revolution.”
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INFORMATION DESIGN HANDBOOKuction
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PLAIN LANGUAGEAND THE BOTTOM LINEPlain language cansave you money, as these examples illustrate.
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DISCLOSURE C HECKLISTHelpful ways to improve your work,using the fundamentalsof information design.
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ABOUT CHARTDESIGNCharts and diagramsrepresent a synthesisof art and science. This is an overview with recent examples of our work.
CONTENTS
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XBRLNever heard of XBRL?Well, you’d better learn fast becauseSEC ChairmanChristopher Cox saysit’s the future of finan-cial disclosure.
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UNIVERSITY OFMICHIGAN STUDYA study by theUniversity of Michigan’sRoss School ofBusiness has foundfirms with hard-to-readannual reports havelower earnings.
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RESOURCESSome of the sourceswhere you can find outmore about the topicscovered in this booklet.
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INTRODUCTIONPlain language nowincludes informationdesign, the visual andthe verbal workingtogether to create documents that communicate clearlyand effectively.
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INFORMATIONDESIGNInformation design is the “new style ofthinking and writing”that is required whenwriting financial disclosure documentsin plain language.
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EXAMPLESThese real examples show, don’t tell, howplain language andinformation design cantransform financial disclosure documents.
2 INFORMATION DESIGN HANDBOOK: INTRODUCTION
Plain language now includes informationdesign, the visual and the verbal workingtogether to create documents that communicate clearly and effectively.
In1998, the Securities and Exchange Commission published A Plain English Handbook: How to create clear SEC disclosure documents. Since its publication, thishandbook has affected financial disclosures, not just in theU.S., but in Canada, Hong Kong, Singapore, South Africaand other countries where securities regulators haveincorporated the Handbook into their regulations forfinancial disclosure. Yet as sound as the Handbook is, it is showing its age.
While almost one-third of the Handbook is devoted todesign in the plain language document, in terms of what we practice today, the discussion of design is limited. Whenthe SEC prepared the Handbook, information design as a profession was relatively unknown in this country. Today,plain language and information design have joined tobecome one: plain language means joining the verbal and the visual to communicate clearly.
Information Design Information design uses a variety of tools to create a document that transforms data into information and provides that information to readers simply and efficiently.With information design, the document designer and the writer work together to create a document that uses the best devices to communicate. This team must rethink the document and determine which infor mationis best presented verbally and which visually.
This booklet is designed as an addendum to the SEC Handbook with a discussion of information design. It doesn’t tell you what to do, it shows you. As in theHandbook, there are a number of “before” and “after” documents to show you how information design creates a document that communicates more clearly.
Information design incorporates the general and the specific.It rethinks the entire document, and uses short sentenceswith concrete words. Information design does not changethe meaning of a document; it makes that meaning clearerfor the intended audience.
Information Design Can Save MoneyClear communication is good business. While it creates a positive image for the company, it also produces cost savings. Numerous studies have demonstrated very realand significant cost savings in using plain language andinformation design. These savings go directly to the bottom line.
XBRL and Information DesignToday, information design will include XBRL, eXtensibleBusiness Reporting Language. As SEC ChairmanChristopher Cox has said, XBRL will “bring the data to life.”Information design, combined with XBRL, will transformthe very nature of financial disclosure.
The main goal of any financial disclosure document is to create trust. Dense, complicated disclosure documentsdo not build trust. Your goal should be to earn your investors’trust with financial disclosure documents that communicateclearly. By using XBRL, companies will create documentsthat allow investors to access the information they want in the way they want it.
INTRODUCTION
The SEC has instructed companies that they must tell investors thegood, the bad, and the ugly about what’s happening in their business.”– Business Week, September 26, 2005“
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Which would you rather read—a standardForm10-K or any issue of USA Today? Formost people, this isn’t a choice. Of course,they would choose USA Today, because it’s visually appealing and easier to read.USA Today uses information design,while the10-K doesn’t. USA Today isdesigned for contemporary readers, whilethe 10-K is designed for readers with a15th century mind-set.
Clear thinking made visibleInformation design is clear thinking made visible. It isn’tsimply adding some visual devices, such as white space and a serif typeface, to text. With information design youexamine the entire text, asking: What is the purpose of thistext? Who is the audience? What does the audience needto know? How will the audience use this information?What information can be best presented verbally, andwhat information visually?
You want to create a document that is visually compelling,one that your readers want to read. You eliminate long,dense blocks of text in hard-to-read type and use whitespace, short blocks of text, a good serif typeface, andvisual devices such as charts, graphs, maps and diagrams topresent complex information visually. You use a hier archyof type so readers would know what information is more important, and where they are in the document.And you write the entire document in prose that is simpleand direct, and free of jargon and legalese.
A new style of writing and thinkingInformation design is the “new style of thinking and writing” that is required when writing financial disclosuredocuments in plain language. It is the basic form of communication in the visual age. Want to see informationdesign? In addition to USA Today, look at Wired, BusinessWeek, Fortune and any number of other magazines.Publishers have learned this valuable lesson: if yourpublication isn’t visually appealing, no one will pick it off the magazine rack.
And there’s one other place to look for information design:the front section of many annual reports. It isn’t just visually inviting, it’s visually stunning, presenting information by combining the visual and the verbal to communicate clearly and effectively. Why can’t theback of the annual report, whether it is a10-K or typesetfinancial section, be written and presented using thesame techniques? Shouldn’t all investor communication,whether it is a proxy statement, 10-K or other financialdisclosure document be reader friendly? If it were, itmight meet SEC Chairman Christopher Cox’s standard that “it could pass muster with the editors of the Money section of USA Today.”
For more information on Information Design, go tohttp://www.iiid.net/local.htm, the web site for theInternational Institute for Information Design.
INFORMATION DESIGN
4 INFORMATION DESIGN HANDBOOK
The first principle of information designis to always remember that there is areader looking over your shoulder. Youmust constantly ask yourself, ‘Have Icommunicated my message as clearlyas I can?’ Always think of what yourreader wants or needs to know, anddesign your document to meet yourreader’s needs, not yours.”
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These real examples show, don’t tell, how plain language and informationdesign can transform financial disclosure documents.
Annual reports, 10-Ks, proxy statements and other investor communicationscan all benefit from this process.
The following examples demonstrate how information design can transformdense text into forms and documents that are open, accessible, readableand, most important, that communicate clearly. By examining the “before”and “after” examples in this section, you will see how the principles andtechniques of information design can transform a complex document intoone that is reader -friendly.
As you examine these examples, note how much information is communicatedvisually, thus eliminating lengthy, belabored text. The visual and the verbalwork together to communicate effectively, clearly and economically.
EXAMPLES
The challenge of creating truly useful disclosure in the 21st century goes well beyond exhorting the use of everydaylanguage, active voice, personal pronouns and shorter sentences. It extends to the question of what is disclosed,and why. We’ve got to continue to ask investors what they need–in order for them to decide whether to purchase an investmentin the first place and to decide whether to hold or sell.”– Christopher Cox, Chairman, SEC, August 4, 2005
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6 INFORMATION DESIGN HANDBOOK: Introduction
PFIZER: Before
Type hierarchies commu-nicate in one “volume.”
The eye is not led to keyinformation.
There is no upfront at-a-glance view of the thingsyou might want to know.
No navigation aidsthroughout the documentapart from page numbers.
CHALLENGE: Pfizer was among the 40 companies that had theirCD&A tested for readability based on an objective third-party testing using standard readability indices. The average score of their compensation sections was nearly 17 (the goal for text readability for a wide audience is 12). www.pfizer.com
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PFIZER: Before
Important informationand data are buried indense text.
Long, unbroken para-graphs are difficult to readand result in pages that arenot visually appealing.
Type hierarchies commu-nicate in one volume.
Some of the terms need tobe defined.
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“We believed that enhancing our CD&A was the right thing to do. The Board wants to communicate well with its investors. If the CD&Ais not understandable and clear to the average investor – then it’snot serving its purpose in adding value to our investors.”
– Peggy Foran, Senior Vice President – Corporate Governance, Associate General Counsel and Corporate Secretary, Pfizer, Inc.
8 INFORMATION DESIGN HANDBOOK: Introduction
PFIZER: Concept Model
A clear hierarchy: headlines,subheads and body text.
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Navigation folio. CD&A was rewritten andreorganized from thereader’s perspective
Graphic elements are usedto break up long, compli-cated text. This makes theinformation easy-to-readand understand.
CHALLENGE: Pfizer’s challenge was to answer the questionson investors’ minds, namely: why did the company choose topay what was paid, what was the compensation policy, howdoes the policy work, what are the targets, were they met andwhat are the matrices for these targets?www.pfizer.com
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PFIZER: Concept Model
Complex data from differ-ent tables is presentedvisually.
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The chart is tailored toPfizer's compensation program, making it usefuland meaningful.
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Data for each column isexplained and cross-referenced.
The “one number” thatsums up the named execu-tives compensation from allsources is disclosed.
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“Disclose ‘the one number’ that sums up the namedexecutives compensation from all sources.”
– SEC Chairman Christopher Cox, MSNBC, September 5, 2007
10 INFORMATION DESIGN HANDBOOK: Introduction
PFIZER: After
Simple visuals replace longparagraphs of dense text.
Navigation folio. Graphical information isorganized in a way thathelps the reader under-stand Pfizer’s disclosure.
Type hierarchies help thereader follow the organiza-tion of the information.
CHALLENGE: Pfizer invested considerable time and effortcreating this new CD&A. Investors tested said they wereable to find the information they were looking for quicker,the information was much clearer and what they got wasinformation they could understand.www.pfizer.com
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PFIZER: After
Required tables are gathered at the end of the document so they do not interrupt the flow of the text.
Required tables and foot-notes are presented asclearly as possible.
Table allows us to translatecomplex data into mean-ingful information.
Terms and definitions areintegrated into text.
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“Pfizer believes in transparency and taking this step wasappropriate and essential to us in fulfilling our commit-ment to exercise good governance practices.”
– Peggy Foran, Senior Vice President – Corporate Governance,Associate General Counsel and Corporate Secretary, Pfizer, Inc.
12 INFORMATION DESIGN HANDBOOK: Introduction
MILLIPORE: Before
Boilerplate language andscientific terms do notpresent a clear picture ofbusiness strategy.
A hard-to-read, one-column format is not visually appealing to the reader.
Typographic hierarchy isnot clear and segmentinformation is buried inseveral different sections.
Content organization isneeded as customer infor-mation is not presented inthe context of sales andmarketing strategy.page 7
CHALLENGE: Millipore’s long, scientifically complex sentencesdo not convey their strategic advantages as a life scienceleader. Content was not organized in a reader-friendly format.www.millipore.com
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MILLIPORE: After
Colorful charts and graphics illustrate businessand strategy at-a-glance.
Utilizing the company’sproprietary typeface andlogo supports brandidentity.
Global geographic rev-enues are clearly depictedand communicate businessstrategy.
Plain language in atwo-column format, flush left, ragged right,with callouts to highlightkey points is much easier to read.
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“Using plain language and information design, we createda new 10-K using color, charts and graphics to help readers understand the transformative change occurringat the company and Millipore’s new brand identity.”
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14 INFORMATION DESIGN HANDBOOK; INFORMATION DESIGN EXAMPLE: XEROX
XEROX: Before
Text is dense, with long, complicated sentences and paragraphs, ina hard-to-read, one-column format.page 5
Description of businesssegments is not prominent.Moreover, it is compli-cated and difficult tounderstand. Segmentinformation is not highlighted.
Typographic hierarchy is not clear, with little indication of relativeimportance of each section.
A clearer picture of Xerox’sproducts and services mix,and its organizationalstructure is needed.
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CHALLENGE: Describing Xerox’s business in words aloneleads to long, complicated sentences. Segment resultsare buried in the text and the reader has to search forimportant information.www.xerox.com
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XEROX: After
Key information is highlighted in bold, clear graphics.
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Two-column text, flushleft, ragged right, is easierto read.
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Contribution of each segment is easily identified.Important data is con -solidated into multiusecharts to allow efficientinterpretation of data.
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Descriptions of segmentsare written in plain English.
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“Whether you work at a company, law firm or the SEC, the shift to plain English requires a new style of thinking and writing.”
– Arthur Levitt, former Chairman, SEC
16 INFORMATION DESIGN HANDBOOK; INFORMATION DESIGN EXAMPLE: COMCAST
COMCAST: Before
Single columns are harderto read, and can increaseword-per-page count. A single-column formatcan result in a documentthat is up to 25% longer.With large print runs, this can significantly add tothe cost of paper, printingand shipping.
Hierarchies are not clearwhen only one typeface is used; two different typefaces improve read-ability. Large blocks of textare wordy and written incomplicated structures.
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Gray type is not alwayslegible when copying or faxing.
Important data is buriedin text. Numbers areincluded in the text, creating sentences that are redundant, dense anddifficult to read.
CHALLENGE: Long lines of type crowded on the page failto highlight any message. The Comcast report tells readersabout the company’s results, it doesn’t show them.www.cmcsk.com
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COMCAST: After
Clear folios and hierarchiesof section information.Black type ensures legibilitywhen copying or faxing.
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Section headers on everypage helps the reader navigate the documentwith ease. Each headershould refer to the Tableof Contents.
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Two-column, side- by-side, grid breaks up lines of copy into readable segments.
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The current year is clearlyhighlighted in charts andtables. Two or more datasets can be combined and charted together to givethe reader an in-depth view.
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“Information is that which reduces uncertainty. Informationdesign is clear thinking made visible.”
– Bill Lutz, Addison Plain Language Consultant
18 INFORMATION DESIGN HANDBOOK; INFORMATION DESIGN EXAMPLE: WILMINGTON TRUST
WILMINGTON TRUST: Before
Complex sentences arefilled with redundant data, making them difficult and tediousto read.
Important information and data are buried in dense text, with no prioritization.
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No clear hierarchy is usedto guide the reader andstructure the information.
Long paragraphs are difficult to read. Pages are not visually appealingto the reader.
CHALLENGE: For Wilmington Trust, which has a complex message to communicate, words alone are not enough.Thinking visually would help identify and convey thatmessage clearly, and not bury it in the text.www.wilmingtontrust.com
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WILMINGTON TRUST: After
Complex sentences arereplaced with bulleted listsand tables to better conveykey information.
Tables embedded in thetext are simple and concise. They alleviate the density of the layout and provide quick reference, directing thereader to important data.
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Heavy use of charts andcallouts tell the story in a multileveled way to the reader.
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A wide, delineated marginwas designed for callouts,charts and graphs.
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Out of all the companies I follow, you…are the best as far as disclosure details go.”
– S&P Credit Analyst“
20 INFORMATION DESIGN HANDBOOK: PLAIN LANGUAGE AND THE BOTTOM LINE
Plain language can save you money, asthese examples illustrate.
Using plain language can help the bottom line. This is the conclusion of the study by Professor Joseph Kimble of the Thomas Cooley Law School. In his study, ProfessorKimble documents many cases where companies, fromGeneral Electric to Federal Express, have seen significantsavings by using plain language.
General Electric and Federal ExpressBy rewriting a technical support manual in plain language,General Electric reduced the number of support calls itreceived each month so much that GE estimates savingsbetween $22,000 and $375,000 a year for each business.FedEx rewrote its ground operations manuals in plain language. Because workers could find the information they needed faster and they understood it better, FederalExpress conservatively estimates that it saved $400,000 in the first year that workers used the rewritten manuals.
Government and plain languageGovernments also are using plain language to save money: by rewriting just one letter in plain language, the U.S.Department of Veterans Affairs saved $400,000 in oneyear. The Federal Communications Commission rewroteone of its regulations in plain language. As a result, thenumber of questions about the regulation declined somuch that the FCC reassigned the five staff memberswhose full-time job had been to answer the questions. In England, the Royal Mail rewrote one form and saved£500,000 ($875,000) in just nine months.
Shareholder documentsWriting shareholder documents in plain language can alsohave good results. The Rand Merchant Bank, a SouthAfrican investment bank, wrote prospectuses and othershareholder documents in plain language. When theyinterviewed shareholders, analysts, stockbrokers andlawyers, the responses were overwhelmingly positive.While respondents thought traditional documents were “very difficult,” “not user-friendly,” and “just toocomplicated” to even bother to read, they had the opposite view of the new documents. They found plainlanguage “much easier to understand,” “just what I like,”and “the way to do it.” The bottom line? “If [the document]is in plain language, [shareholders] will probably readthrough even a thick prospectus.”
Communicate clearly and save moneyWhen you use information design in all your documents,you create documents that not only communicate clearlyand gain your readers’ trust, but you may also save money,perhaps a lot of money. And these savings can have adirect impact on the bottom line.
For a copy of Professor Kimble’s study, go to http://plainlanguagenetwork.org/kimble/Writing1.pdf
PLAIN LANGUAGE AND THE BOTTOM LINE
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1. Use clear, well-designed graphs andcharts to pre sent quantitative infor-mation visually.
2. Create a clear hierarchy of informa-tion in the text. Not everything is ofthe same level of importance.
3. Use lots of white space.
4. Use adequate leading in the text.
5. Design your columns of text with nofewer than 32 or more than 64 char-acters per line.
6. Don’t use a sans serif typeface, exceptfor heads and subheads. When insmall type, serif faces are morereadable.
7. Avoid justification of text. Rememberthese words: Flush Left, Rag Right!
8. Avoid long paragraphs.
9. Give an executive overview of key factors to provide a context forthe disclosure.
DISCLOSURE CHECKLIST
17 Ways to Create Clear FinancialDisclosure Documents, using the fundamentals of information design
10. Don’t provide an executive overviewthat is too long and contains extrane-ous information, or information thatbelongs elsewhere in the document.
11. Don’t repeat information such asaccounting practices and risk disclosure.
12. Don’t use year 1 versus year 2 andyear 2 versus year 3 comparisons.(Use instead year 1 versus year 2 versus year 3, to avoid repetition.)
13. Don’t repeat numbers from tables in the text. (Tables are for numbers; text is for explaining the numbers.)
14. Avoid repeated use of the words: “certain,” “respectively,” “and/or,”“pursuant to,” “with regard to,”“related to.”
15. Don’t have non-GAAP financial mea -sures that are not clearly, meaningvisually, presented as distinct fromGAAP measures.
16. Present clearly the differences betweenthe non-GAAP measures and the mostdirectly comparable financial measurescalculated according to GAAP.
17. Avoid an inadequate or unclear dis-cussion of the non-GAAP measuresand say why management believesthat the non-GAAP measures provideuseful information to investors.
22 INFORMATION DESIGN HANDBOOK: CHART DESIGN
ABOUT CHART DESIGN
Charts and diagrams represent a synthesis of art and science. Thedesigner’s opportunity is to endow them with elegance. Elegance is ameasure of the grace and simplicity of the designed product relative to thecomplexity of its functions. Given two charts, or tables, or maps, of equalsimplicity, we know that one conveying more information is the more elegant.Conversely, of two charts conveying the same information, the simpler is themore elegant. Even as non-physicists, we recognize the superlative eleganceof the formula E=mc2, expressing the physical nature of the universe inhardly more space than it requires to write a four-letter word.
In Annual Report Design, where charts are almost a mandatory element,there is a notorious lack of creative effort in chart design. One reason may be that in financial circles the very use of charts and graphs seems tobe considered sufficient virtue in itself: never mind the specific content, or the fact that ten charts on a page may discourage the reading of any oneof them. In certain minds, nondesign means “no nonsense,” and a lot ofcharts mean disclosure.
In art as in science, a deceptively elegant statement may have value as a technical exercise; but as a communication it is worse than no statement at all.
Leslie A. SegalGraphis Diagrams, 1974, Hasting House Press
Leslie is a renowned expert in chart design, and was the founder of Addisonmore than 40 years ago. He is its President.
In the pages which follow, you will find recent chart work done at Addison, withan index that allows you to compare chart designs, by type of chart.
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ITT AR 07
24 INFORMATION DESIGN HANDBOOK; CHART DESIGN EXAMPLE: CENTERLINE
CENTERLINE AR 07
CENTERLINE AR 07, PAGE 11
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CENTERLINE AR 07, PAGE 12
26 INFORMATION DESIGN HANDBOOK; CHART DESIGN EXAMPLE: SYNIVERSE
AIG CRR 07
VULCAN AR 07, PAGE 19
VULCAN AR 07
AIG CRR 07, PAGE 16
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A new standard for financial disclosuredocuments.
"Think how much better life will be when you can not onlyrely on the accuracy of the numbers, but you can instantlyslice 'em and dice 'em exactly as you please. The objective is to make it easier for ordinary investors, consumers, to make better financial decisions," said SEC ChairmanChristopher Cox.
In 2008, the Securities and Exchange Commission pro-posed a new rule mandating the use of extensible businessreporting language (XBRL) in public company financialstatement reporting. Using XBRL (a royalty-free softwarethat uses data tags to describe financial and business infor-mation) a company tags each financial data point such asrevenue, net income, and profit margins so investors are able to compare companies against each other and acrossindustry groups. Ultimately, the goal is to develop softwarethat will let anybody type in various stock symbols andparse data any way they want.
The Power of XBRLToday, if investors want to compare financial data in two or more companies, they have to download the financialstatement filings on the Internet and then do their owncomparison. However, if companies use XBRL tagging for their annual reports, 10Ks and other financial state-ments, investors could easily compare the companies’ financial results.
With XBRL, companies will adhere to a common set of reporting elements but will have the ability to addcompany-specific reporting elements (called extensions) to describe their own financial position and will be able to change the labels on elements without changing theunderlying definitions. “As-reported” data will be sub-stantially more comparable than it is today, making it easier for the investment community to analyze companyfinancial data. When your own corporate informationbecomes machine-readable, your ability to display it, create reports and distribute it to shareholders, analystsand even senior management will be enhanced.
Prepare for the Future of XBRLWhat can you do now to prepare for XBRL? Clearly youshould become familiar with XBRL and the related issuesin using this language to report your financial results.You should consider the effect XBRL will have on yourannual report, 10-K and other financial statements.
There will be challenges in writing and designing thefinancial section of these reports. More than ever you willneed to explain the numbers and present them clearlyand effectively using information design. Simply taggingyour data using the XBRL language will not present thecompany “through the eyes of management.”
How Will You Create Your Company’s FinancialStatements?The merging of XBRL and information design offers theopportunity to create a dynamic and completely newannual report, 10K or other financial statement. Whatthat report will look like no one knows, but it’s not toosoon to start thinking about what it should look like.
For more information on XBRL go to the SEC site on interactive datahttp://www.sec.gov/spotlight/xbrl.shtmlor the websites www.xbrl.us and/or www.xbrl.org.
XBRL
28 INFORMATION DESIGN HANDBOOK: UNIVERSITY OF MICHIGAN STUDY
A study conducted by the University ofMichigan’s Ross School of Business hasfound firms with hard-to-read annualreports have lower earnings
ANN ARBOR, Mich.–There’s a reason why some annualreports are difficult to read–they’re hiding something, saysa University of Michigan business professor.
A new study by Feng Li, assistant professor of accountingat the U-M’s Ross School of Business, shows that annualreports of firms with lower earnings are harder to read.
“Consistent with the motivation behind the plain Englishdisclosure regulation of the Securities and ExchangeCommission, managers may be opportunistically choosingthe readability of annual reports to hide adverse informationfrom investors,” Li said. “Firms with lower earnings notonly tend to file annual reports that are more difficult toread, but a decrease in earnings from the previous year alsoresults in annual reports that are harder to read, comparedwith the previous year’s reports.”
Using a sample of more than 55,000 firm-years since1994,Li measured annual report readability by examining syllablesper word and words per sentence in companies’10-K filings.He used two statistical readability measures: the Fog Index,which indicates the number of years of formal education areader of average intelligence would need to read andunderstand the text; and the Kincaid Index, which ratestext on a U.S. grade-school level.
According to the study, profits of firms with annual reportsthat are more difficult to read are less persistent in the nextone-to-four years. In fact, companies use more complexlanguage in their annual reports even when presentinggood news–if it is only fleeting.
On the other hand, Li found no significant evidence thatfirms make their annual reports harder to read to hide morepersistent bad news.
Li’s research also found that larger companies and growthfirms (those with higher market-to-book ratios) tend to have annual reports that are more difficult to read. In addition, annual reports with more negative special itemsare harder to read.
Industries with annual reports most difficult to read includeinsurance, health services and electric, gas and sanitary services. Those that are easier to read belong to the airlinesand the stone, clay, glass and concrete products industry.
Although the study found a correlation between earningsand annual report readability, Li says none exists betweenreadability and future stock returns.
“Contrary to the SEC’s concerns, small investors may not be affected by the lack of readability, since the stockmarket seems to impound the implication of annual report readability into prices,” he said.
Overall, annual reports of public companies, in general, aredifficult to read, Li says. The average Fog Index for allannual reports is19.4 (a score of12–14 is ideal and higherthan18 is unreadable). Likewise, the annual report read-ability score on the Kincaid Index is15.2 – about twice as high as the optimal score of 7–8.
“Interestingly, there is an obvious drop in the indices in the years immediately after1999, suggesting that the SEC’s plain English disclosure regulation of1998 did make companies take efforts to make their annual reportsmore readable,” Li said. “However, this trend reversed dramatically after 2002 and the annual reports filed bypublic firms seem to have become even more difficult toread, compared with the pre-1998 years.”
For more on the business school, visit:http://www.bus.umich.edu/
UNIVERSITY OF MICHIGAN STUDY
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The following list of web sites and booksis only a sample of the many works dealing with information design, plain language, and extensible businessreporting language (XBRL).
www.edwardtufte.comEdward Tufte’s web site offers not only resources on infor-mation design, but a place where you can ask Tufte ques-tions about information design and read his answers andthe comments of other information designers.
www.understandingusa.comA dazzling display of how information design can commu-nicate complex data clearly.
http://www.iiid.netThe web site for the International Institute forInformation Design.
http://loop.aiga.org/content.cfm?Alias=clearThe web site for CLEAR, the AIGA (American Instituteof Graphic Arts) Journal of Information Design.
www.clarity-international.netThe web site for Clarity, the worldwide lawyers’ groupdedicated to plain language.
www.juicystudio.com/services/readability.phpThis site includes the standard tests and formulas to gaugea document or web site’s readability.
www.plainlanguage.govThe site of the federal government’s Plain ActionNetwork. An excellent site with many resources, includingpublications and links to many other sites.
www.plainlanguagenetwork.orgThe web site of PLAIN, the Plain Language AssociationInternational organization. Many resources, includinglinks to many other sites.
http://www.xbrl.org/us/The U.S. web site for extensible business reporting language (XBRL), the language for the electronic com -munication of business and financial data.
Tufte, Edward. The Visual Display of QuantitativeInformation. Graphics Press, 1983.The basic book on how to (and how not to) present information visually by “the man who makes sense ofnumbers,” as Fortune magazine has said.
Richard Saul Wurman. Information Anxiety 2. QUE, 2001.In this sequel to his best-seller on information anxiety,Wurman shows ways to navigate the ever growing flood of information in a digitally connected world.
Sally Bigwood and Melissa Spore. Presenting Numbers,Tables, and Charts. Oxford, 2003.A solid introduction to how you can translate numbersinto charts, tables and graphs that communicate visuallyand effectively.
Karen A. Schriver. Dynamics of Document Design. Wiley,1997.The classic and indispensable book on creating texts forreaders. Especially good is Chapter 6, “The Interplay of Words and Pictures.”
Baldwin, Carol M. Plain Language and the DocumentRevolution. Lamp Lighter Press, 1998.A brief but thorough guide to designing and writing docu-ments in plain English. The section on the process ofcreating a plain English document is especially good.
Cutts, Martin. The Plain English Guide.Oxford University Press, 1995.Written by the cofounder of Britain’s Plain EnglishCampaign, this practical guide is based on his years of work with governments and businesses.
Garner, Bryan. Securities Disclosure in Plain English.CCH,1999.A complete guide to writing everything from the IPO to the mutual fund prospectus in clear language and how to present the text in a readable format.
RESOURCES
30 INFORMATION DESIGN HANDBOOK: NOTES
NOTES
Since the purpose here is to improvecommunications, the proposed rulesrequire that all of this disclosure be in plain English– the new official language of the SEC. That will be true,whether the information is in a proxystatement, an information statement,or an annual report…so that ulti-mately every communication aimed at retail investors is so free of jargonand legalese that it could passmuster with the editors of the Moneysection of USA Today.” – Christopher Cox, Chairman, SEC, April 25, 2006
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