Corporate Governance Reporting - Substance or form
A belated Happy New Year. I've been lucky enough to get away over Christmas and enjoy the sun and snow of the French Alps. So I feel refreshed and ready for all that 2009 has in store - well almost! Now I'm back I've realised that the greatest pleasure of being on holiday, other than the obvious ones, was the absence of the TV and newspapers. Suddenly the world looked a lot brighter. Sadly it was short lived and a few minutes perusing the Sunday newspapers left me exasperated about the amount of pontificating on what 2009 has in store. I wouldn't mind but the crystal balls being used all appear to have been made in the 1930s - not quite steam powered, but certainly unreliable.
Before I left for the Christmas break I had the pleasure of running some Non-Executive Director workshops on my favourite subject of reporting. You won't be surprised to know I had a captivated audience who were already ahead of the game and thinking through the challenges of the reporting season. The ‘top of mind’ challenges appeared to be: going concern, future funding and cash flow, asset impairments, risk reporting and for some, executive remuneration. What I found most sobering was the concern expressed by many NEDs of getting the balance right - being transparent but not so transparent as to create undue market concerns. After all, we are increasingly sensitised to the world of the self fulfilling prophecy.
What was also clear from our discussions is that effective corporate governance in all its facets is under the microscope again. Providing credible information to enhance shareholder and investor understanding and confidence about the way a company is managed must be a priority. So how does the board discharge its responsibilities, address difficult issues and critically, exercise judgement? Sadly today, too many inches of text on governance reflect a compliance mind-set. Is it surprising that many investors express the view that the last place to look for any valuable insights into the way a business is managed is in the governance section of the annual report? This cannot be right but it is certainly an opportunity I would encourage you to grasp.
So in this context, I thought it was timely to consider a publication we have recently issued that captures some of the best practice in corporate governance reporting. This does not focus on strategy, KPIs, risk and remuneration, but considers the nuts and bolts of the board's make up, its activity and decision making, its judgements on going concern and the control environment, through to its relations with shareholders. Bringing alive how a board operates is not easy but now is a smart time to move to something that reflects the real substance of what has gone on in the business rather than some ‘boiler plate’ platitudes that leave everyone cold.
David
Comments