The executive pay debate continues and ‘people reporting’ also begins to interest investors

29 November 2012

Last week over a hundred client representatives attended our annual Building Public Trust Award for Executive Remuneration in the FTSE100 and FTSE250 and People Reporting in the FTSE100.

Congratulations to the winners SSE and Lonmin for Executive Remuneration in the FTSE100 and FTSE250 respectively, and Wm Morrison Supermarkets for People Reporting in the FTSE100.

This is the third year in which we have presented these awards at a single, dedicated event. We originally made this change to reflect the growing importance and alignment between these two key areas of corporate reporting. The past year has seen this importance and alignment increase still further.

Take executive remuneration. It’s always been a major focus for investors- to the extent that it’s the only category of PwC’s Building Trust Awards that has remained completely unchanged since we launched the awards in 2003. Over the past 12 months, we’ve seen the scrutiny of executive remuneration intensify even further. Not just in the boardroom, but in the halls of Westminster and the media. This increased focus on executive remuneration emphasises the importance of organisations communicating openly and transparently about this highly sensitive issue.

What struck me in my discussions with a number of people at the lunch is that it's proving really difficult to know how far to go in adopting the BIS draft regulations on narrative reporting for companies’ 2012 accounts. Many companies want to use the 2012 report as a trial run under the new regime before the requirements come into force for 2013, but there is no guidance available to assist with interpretation of the proposals.  The revised ABI guidelines, released recently have provided some definition around investors' expectations of the new-style reports but this guidance is far from detailed.

It's very rewarding to see so much enthusiasm from companies for the BPTA and the opportunities that the new reporting environment will bring. We're working with a number of companies who are converting their reports to the new formula and look forward to seeing some examples of how the new BIS requirements promote greater transparency in our review for next year's BPTA.

While people reporting may rarely make the headlines, we have seen the importance and recognition of strategic disclosures of people strategy and performance grow year on year. Companies are reflecting in their external reporting the growing demand that chief executives are placing on their organisations for evidence of strategic alignment between HR activities and business goals. The investment community is also steadily increasing its level of attention on the people agenda, with engagement, talent management, productivity and people cost management now increasingly forming part of investment decisions, as well as transactions.

Based on PwC’s review of the FTSE100 this year, please find below some examples of what best performing companies are doing in the people reporting space.

  • Start as you mean to go on: focus on people from the Chairman’s statement onwards
  • Don’t hide your people information: publish it in the annual report and use supplementary reporting (eg. CSR, sustainability report) to build on the content, reinforce key messages and provide evidence of performance and activities through data and case studies
  • Be clear on what your people agenda is: what are the key drivers of people performance for your business and how are you addressing them?
  • Publish your people performance indicators and your progress against your targets – ensure the indicators are relevant to your industry and publish your performance against external benchmarks or internal targets, where appropriate
  • Show how you link your people strategy to overall business strategy & objectives
  • Structure your reporting clearly and make the information easy to find: Strategy – data – processes – risks

I would encourage you to take a few moments to review the executive remuneration and people reporting of this year’s winners and highly commended companies to see where you might make changes to your own reporting next year.

Do please keep in touch - I really value your responses to this blog.

BFN

Charles

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