Mark Hynes - thoughts on corporate disclosure

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

Thursday, July 29, 2010

Post Cadbury review – changes to narrative reporting.

The Takeover Panel’s review of its rules closed earlier this week (you can see the IR Society response here). Now with serendipitous timing, HMG has published its reaction to the BIS Select Committee report on the takeover of Cadbury by Kraft : see here. This is an interesting and important document setting out in high level terms the coalition Government's position on many governance related matters and highlighting the direction of future policy.

The report also front runs some key issues on the Panel review, such as preference for an increase in merger fees and a requirement for pre-notification of some mergers.

Much clearly rests on the outcome of the Panel’s review, but from an IR perspective there is also interest right at the end where it notes states that the Government will shortly be consulting on how to improve the quality of narrative reporting, in order to strengthen engagement between quoted companies and their shareholders.

Obviously this has a connection to the government’s promise to restore the OFR. To quote from the report...

“It is important that company directors have long term strategic objectives which reflect a wider understanding of the environment in which the company operates and the principal risks and uncertainties which it faces. It is also important that the directors communicate these effectively to shareholders and investors so that there is a common understanding of the company’s strategy, and investors can take a long term view of the company’s prospects in meeting their own long term objectives.”

As someone who reads more annual reports than is good for him, I am not sure how different this is from the existing requirements, but HMG will no doubt tell us.

There is also important discussion about the extent of short termism in UK PLc investment, and of the ways in which institutional shareholders and their fund managers perform their role as "responsible owners" of UK quoted companies.

All in all, while not a candidate for the MAN Booker or your summer deckchair, its worth a look.


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