Practical advice on corporate reporting from across the pond

Did you clearly answer the following three questions during your latest round of corporate reports?

  • How does your company grow?
  • How does it address and manage risk?
  • How does it build the capability to compete?

Any hesitation? Then read on for some helpful advice. The questions come from a guide by the UK branch of the executive recruitment firm Heidrick & Struggles, who teamed up with asset managers Legal & General. We find it interesting to look at a British approach to corporate reporting and find much of it well-suited to companies listed in the US.

The authors note that most companies, despite communicating extensively about how they create value for stakeholders, “fail to convey a clear representation of the company’s performance, governance, composition, or prospects” when it comes to their corporate reports. Sound familiar?

They point out that corporate reports should go beyond legal and regulatory requirements and directly address the questions above, which are concerns shared by investors, management and boards alike.

Some Helpful Tips

Personal statements

We liked their advice on the chairman’s statement, which they say should be “an honest, personal appraisal of performance – discussing what went well and what did not” and look ahead to future prospects.

Here is an excerpt of what they cited as a good example, from Rijnhard van Tets, chairman of Petrofac: “What struck me when I attended a portion of [the 2014 leadership conference] was the clear, across-the-board determination to learn from any shortcomings…”

Link strategy to numbers…and the future

The company’s strategy needs to be illustrated by financial details. Also, explain how your company plans to position itself for the year to come. The guide cites page 2 of the annual report of Moneysupermarket.com that explains the company’s strategy simply and clearly.

Discuss risk appetite

Companies should discuss their risk appetites, the authors say, noting that investors understand that risk reporting cannot be perfect. Don’t forget to differentiate company-specific risks from those that apply to the entire industry.

Performance reviews

When it comes to reporting on board reviews, explain your methodology and how any issues will be addressed. Reviews help a company’s board evolve and explaining the process gives shareholders confidence that the board is “striving to be the best it can be,” the authors add.

Succession planning

Disclosing the current makeup of the board and the value the directors bring to the company help reassure investors that the board is properly addressing succession planning, the authors note. Explain to investors how the board ensures the company’s top executives are “first class, fit for purpose and possess skills well suited to the company’s strategic direction.”

By |2019-03-05T09:42:06-05:00June 2nd, 2016|Categories: Articles|Tags: , , |Comments Off on Practical advice on corporate reporting from across the pond
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