Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Wednesday, April 18, 2007

Regulation and best practice demands non financial metrics; why are boards not getting it?

In quiet moments, many IROs will admit that the most challenging part of their job is ‘managing’ the CEO and FD. Board involvement in IR is not only best practice; it’s
also common sense. And since a key component of the job is 2 way information flow with senior management, many will be concerned about a new report from Deloittes.

This report highlights that many board members and senior executives are still in the dark about the overall health of their organisations because they lack high-quality non-financial information.

According to the survey, four fifths of the CEOs surveyed say that financial indicators alone do not adequately capture their company’s strengths and weaknesses. Those surveyed admit they need, and are under increasing pressure, to measure these indicators information on non-financial performance indicators, but their ability to monitor these remains inadequate.

Where is the pressure coming from to communicate non financial information? Most respondents say that the market itself is increasingly emphasising non-financial performance measures. Also, a growing number of companies are creating significant value for their organisations by understanding their underlying performance drivers through the use of non-financial measurements. Customer satisfaction, innovation and employee commitment are identified as key drivers of performance among the companies interviewed by Deloittes.

Despite the growing recognition that non-financial performance data is important, tracking it remains a problem. CEOs and senior executives generally describe their ability to track financial performance as excellent or good, while only a third describe their non-financial communications record as excellent or good.

And with UK companies wrestling with the obligations of the Enhanced Business Review, managing non financial data both in terms of the needs of the market, and of senior management will be high on the agenda of IROs.

1 Comments:

  • At 10:33 am, Anonymous Bissen Jean-Paul said…

    Small world jp.bissen@thefuturealliance.com

     

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