CIMA - Chartered Institute of Management Accountants, England.
Study calls for governance reporting shake-up
November 29, 2011
A new study has proposed a radical shake-up of governance reporting to give investors a clear picture about the financial health of a company they have stakes in.
The “Report Leadership” study, which has been produced by PwC, CIMA and Radley Yeldar, says that companies are failing to communicate effectively with investors on how their organisations are governed, potentially raising questions about the quality of board oversight and the risks that companies might be exposed to in the current uncertain markets.
Reporting experts regard a governance statement as a compliance document that doesn’t help end-users of accounts differentiate one company from another and fails to communicate the impact of good corporate governance on the company’s performance and prospects, says the report.
The study proposes that a clear distinction be made between strategic messages on governance and compliance data, and shows how critical information on governance can be integrated with discussion of the market environment, the business model, strategic priorities and risk, instead of sitting in an unconnected section of the report.
The practical solutions put forward show how recent proposals from the department for Business Innovation and Skills (BIS) and the Financial Reporting Council (FRC) can be put into practice by companies.
Mark O’Sullivan, corporate reporting director, PwC said: “At a time when government, regulators and investors are shining a light on whether boards are doing their jobs, it is essential that companies step up their engagement, and we believe that the latest Report Leadership proposals will help companies do just that.
“Corporate governance needs to be brought to life so that it is part of an ‘integrated report’ that provides a holistic picture of the business, its strategy, performance and prospects.”