Mark Hynes - thoughts on corporate disclosure

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

Thursday, December 10, 2009

Corporate disclosure – implications of the proposed Governance Code.

The last 4 weeks have seen a flurry of papers, guidance and consultations from the Financial Reporting Council. They have, it must be said, approached the task of upgrading our governance ‘rules’ with energy and clarity.

However as we discussed at a Radley Yeldar seminar yesterday evening, there are a number of areas that companies will want to think about in their disclosures. Between Walker, the ‘Louder than words’ paper, the Narrative Review, and now the new proposed revised (Combined) Governance Code, there lies a host of detail for IR and secretarial teams to handle.

For example, the definition of ‘business description’. The Companies Act has its interpretation, but the Narrative Review and the new Governance Code, both talk about presenting the ‘business model’ going beyond the ‘fair review’. By observation, very few companies explain in their disclosures how they actually make money.

Similarly, the Companies Act ‘financial review’ has been upgraded to discuss an understanding of off-balance sheet resources being crucial to understanding the position of a company, and an explanation of …its overall financial strategy.”.

There is also a nod to the changed role of the company’s website. The consultation discusses permitting companies to place a cut down version (summary) of the governance report in the annual report itself, with a greater amount of detail on the website.

This obviously begs the question that if this is OK for governance information, why doesn’t work just as well for other information in the annual report? The Louder than Words review wants to see smaller, more focused annual reports. That would be a heck of way to do it.

And by the way, the seminar attendees last night voted without exception that they will want to use the website option.

Have we finally seen the last of postmen struggling to deliver 500+ page annual reports? How’s that for a Christmas wish.