Corporate governance reporting - major change is on the way
04 April 2018
The 2017 Building Public Trust Award for Corporate Governance Reporting showed there is some very good governance reporting in the FTSE 350, but it also confirmed that there is a relatively small group of companies that are consistently ahead of the pack – and not all of them FTSE 100 companies, it should be noted. However, there are still too many very similar looking governance reports where much of the content could apply to any company.
What the really good reporters have been doing for a number of years is to shift the focus of their reporting away from just describing the governance processes and procedures. Instead their priority is to show how those processes and procedures have been applied. So, for instance, if there has been a major corporate development in the year – like M&A activity or changes to strategy – the governance report gives an insight into how the board and its committees were involved. Good ways to do this include case studies or the chair’s introduction to the governance report. The governance process can also be discussed alongside the disclosures of the event itself, with appropriate cross-referencing from the governance report. The key is to show what outcomes were achieved through the governance processes and, therefore, what value they added.
Many of the leading reporters in the 2017 Building Public Trust Awards were also ahead of the curve in responding to the ongoing governance reform debate. Some dealt particularly well with how the company and board engage with the whole range of external stakeholders. This was very consistent with the overall focus of this year’s Awards on societal contribution and the impact businesses are making.
All of the above will put the leading reporters in a good position to respond to the revised UK Corporate Governance Code when it is issued in the summer. If the FRC’s proposals stay as they are, there will be strong encouragement in the Code to report in the way that the leading reporters are already doing. We’ll certainly be encouraging more companies to move in this direction for the 2018 reporting season, ahead of the Code applying for periods beginning on or after 1 January 2019.
If you’re interested in hearing more about how the three companies shortlisted in the Corporate Governance reporting category rose to the challenges posed by the evolving governance landscape, just click through and read the judges’ comments.
And if you’d like feedback on how your company scored in this year’s assessment, or how you might stack up against the revised Code, please feel free to get in touch by sending an email to [email protected]