Annual reports, 1864-1935
NatWest Group History 100 object 28: annual reports of the Royal Bank of Scotland, 1864-1935.
This book holds collated copies of all the Royal Bank of Scotland's printed annual reports from 1864 to 1935. In this picture, the book is open at 1878 - a particularly significant year. To the left, the earlier annual reports are smaller and briefer, but from here onwards, they get much longer and more detailed. They're even printed on bigger paper.
The event that provoked this new approach was the catastrophic collapse of one of the Royal Bank's rivals, City of Glasgow Bank. Revelations after the collapse about what had gone on inside that bank seriously shook shareholder faith. For the first time, brevity and reserve - previously seen as signs of unquestionable solidity - were not good enough. When the Royal Bank of Scotland published its own report for 1878, just seven weeks after the beginning of the City of Glasgow Bank crisis, it immediately switched to a more thorough, detailed style of reporting. This was the beginning of a permanent shift. From this point on, shareholders would require directors to describe their choices and actions in detail. It was a move towards more open reporting and the recognition that well-informed shareholders were vital to the healthy operation of a successful business.
the importance of communicating clearly with shareholders
Since 1844, companies had been legally required to publish annual balance sheets, but they preferred to keep them short. The older Royal Bank reports in this volume, for example, are printed on one side of a small sheet of paper, summarising the barest details of the bank's assets, liabilities and profits. Information beyond these basics was regarded as private.
The customary brevity gave City of Glasgow Bank's directors and managers every opportunity to conceal their frauds and failures. Few people outside that bank had any idea of the flaws that lay at its heart. Even its nearest rivals were shocked when it announced it was in trouble; even more so when the extent of criminal mismanagement came to light.
The new style of annual reports which came to prominence after the City of Glasgow Bank affair included more detailed numbers, but also written reports, in which company chairman and directors spoke directly to shareholders about their business and its progress. At around the same time, other important moves towards transparency were adopted. Most notably, independent auditing was introduced by many companies for the first time.
This shift was the beginning of an ongoing process. Annual reports have gone on growing with each passing decade, only ever shrinking temporarily in wartime, due to paper shortages. Legal developments have expanded the range of required information, but banks have also become more aware of the importance of communicating clearly with shareholders, producing more accessible, easy-to-follow documents, including annual reviews alongside the more formal statutory reports.
A modern printed Royal Bank of Scotland annual report is nearly an inch thick, and probably contains more words and numbers than all the bank's 19th century reports put together. Fortunately, most shareholders now receive their reports electronically, saving the cost and environmental impact of having to print them at all.