A case of distortion

Readers of corporate reports shoud beware of impression management and the many techniques used to distort corporate messages.

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Corporate managers like to portray their companies in the best possible light. Nothing wrong with that! Many managers tell it like it is. However, research has found systematic impression management in corporate reports.

Impression management in corporate reporting occurs when managers select the information to display and present in a manner that is intended to distort readers’ perceptions of corporate achievements.

Thus, readers need to remove their rose-tinted glasses and exercise scepticism when they read corporate reports. Much of what is included in corporate reports is what managers want to include – not necessarily what investors need to read. There are few regulations concerning narratives outside the audited financial statements. It is a complete free for all, a smorgasbord of choice, for company managers. Beware: if the text is from an annual report, it may not be covered by the auditor’s report whose scope is generally narrowly restricted to the audited financial statements.