Mark Hynes - thoughts on corporate disclosure

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

Thursday, March 24, 2011

Narrative reporting - any nearer a conclusion?

When we will see any conclusions to the narrative reporting debate published by Government. I sometimes feel like we're Theseus in the labyrinth - but without Ariadne's help to find the way out.

1. The BIS / Narrative Reporting Consultation Paper, which noted “The Government will publish its conclusions at the end of the year” closed in October 2010. In it they asked some very detailed questions, including on technology. BIS then published Long Term Focus also highlighting narrative reporting. BIS published responses to the Narrative Reporting consultation in December – in which they noted “Corporate governance including narrative reporting is one of the Government’s priorities for action in that review. As part of this programme, we will be bringing forward policy proposals by Budget 2011.”

Yesterday, BIS published its Plan for Growth, in which they say “The Government will materially simplify narrative reporting for quoted companies to make it clearer and more focussed”. They promise that they will seek views from business by the end of July 2011 on the best ways to reduce burdens. Are we going round in circles?

2. FRC meanwhile had promised an outcome from its Cut the Clutter by yesterday, when Stephen Hadrill said they will provide it “shortly”. And of course there proposals on narrative reporting in the Effective Stewardship on narrative reporting.

Meantime, there is a consistent stream of information on which we are asked to concentrate. Environmental information, going concern, risk, governance...all described as being most important. And the choices on how and whether to harness ‘technology’ move around from CP to CP.

And in the middle of this, annual report preparers are trying to plan their reports, and decide where to publish them.

Now, where's that Minotaur.

Wednesday, March 16, 2011

And so to the ICSA Governance conference

A gathering of the great and good in this fast changing aspect of corporate reporting. I much appreciated the invitation to attend.

It was an excellent thematic discussion of many elements of the governance reporting debate, around the new guidance (developed by the ICSA for the FRC) on board effectiveness, including board decision making, composition, evaluation, and shareholder relations.

As I listened to the various contributions from the speakers, I was reminded of the 3 blind men in a room with an elephant. Each had hold of the tail, or the trunk, or a leg, and described what they thought an elephant was. Of course, none had the full perspective. However there were a number of takeaways for me.

The first was ‘how do you value the board as an asset?’ The board is almost always seen by the investors as the asset they ‘buy’, yet it is tough to assess the contribution it makes to the value of the company. Every one of the speakers agreed that a well run company was worth more than a poorly run one, but by how much? If valuing a company is about attaching a numerical value to each of the assets ultimately to create a share price, how to achieve that?

Second, much has been said about the need to defend the principle of comply or explain, against the depredations of the EU-level reviews of governance, with green papers due out soon. However, some speakers used other terms. We heard comply and explain, and explain and comply. These terms summed up a key theme for the conference –which was the avoidance of boilerplate. Telling the governance story.

And from the reporting perspective, there was some discussion around the frequent theme (in recent regulatory consultations) of technology in governance reporting. At its most basic, this implies putting ‘static’ data on the corporate website. But surely, it goes way beyond this to include interactive reporting, moving image and the use of social media? As IR Web Report highlights, a surprise YouTube hit today is Corning’s investor presentation with its amazing future vision. Whatever next; profiling the sum-of- the-parts contribution of the board through video?