Accountability in changing times

18 September 2017

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Last week we hosted over 50 NEDs and corporates for the launch of our annual FTSE 350 review of corporate reporting trends to debate the issues it provokes. Joined by an experienced and informed panel of Paul George from the FRC, Baroness Patience Wheatcroft, NED of St James’s Place Wealth Management and Andrew Ninian of the Investment Association we were pleased that the themes raised by our report resonated so well with our audience.


2017 sees the 15th year of our Building Public Trust Awards programme and it’s associated research. Over that time, the room agreed, we have seen a real step change in reporting. However, the year-on-year change from 2016 to 2017 hasn’t really given us much to get excited about, a view echoed by Paul and the FRC’s own research.

Our review focused on 4 key areas that we believe are central to good reporting:

  1. Forward-looking perspective
  2. Risk disclosures
  3. Integration
  4. The business model

In each of these areas we found leading companies who are embracing some of the elements of good practice that we look for. These include companies providing a clear medium to long-term strategic timeframe of actions, setting out a comprehensive business model disclosure detailing the value add and distinctiveness they bring, and who provide a specific and dynamic insight into principal risks that keep the board awake at night. These leading companies present these, and other key components, in an integrated way that tell the same clear and coherent story throughout their narrative.

But it would be fair to say that such strategic, comprehensive and integrated reporting remains the exception rather than the norm. A few argued that this reflected the fact that the annual report was an outdated model for the 21st century. However, Andrew was keen to emphasise that investors do read the annual report and that it’s an important document, a comment echoed by Paul who claimed the FRC’s research showed it was still seen as the most trusted form of communication.

Reporting in an age of accountability

It’s clear that the current period of relatively little regulatory change is coming to an end. With the non-financial regulations, amendments to Strategic Report Guidance, and debate around governance reform, change is in the air.

A central theme to these changes is the focus on whether boards have been properly accountable to a wide range of stakeholders, and whether they have considered the long-term consequences of their decisions. It’s clear from our discussions that companies are becoming more comfortable at answering questions relating to their purpose and impact on society and we’ve since seen signs of this emerging stakeholder agenda making its way into annual reports. But it would be fair to say that many companies find it difficult to know how to do justice to these themes in their annual report.

A step change is required and companies need to take the lead

In light of this dynamic we suggested the view that the net effect of years of steady progress in reporting wasn’t enough and that a step change in reporting was required if it was to reflect this new age of accountability. Now is the time to shake things up, a view recognised by our panel who pointed to the frustrations they have with risk reporting – when it isn’t clear why those risks that are reported are those that are keeping the Board awake at night because the detail given to explain them is often high level and generic.

However, the view was also expressed that companies frankly need to acknowledge that they are better off driving this change themselves than having it forced upon them. Paul highlighted this at our event, by saying that the FRC want to encourage companies to do the right thing without needing to add more regulations. It’s often the case that complying with requirements doesn’t mean a company is delivering meaningful information. Listening to the needs of their stakeholders and focusing on what is material to them and the business would be a much better starting point for an annual report.

Elaine Forrest | Corporate Reporting specialist
Profile | +44 (0)20 7804 2402


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