SESSION ONE MATERIAL SIMPLIFICATION At the heart of the Government’s proposals is the concern that, in its present form, “…the format and delivery channel for narrative corporate reporting is no longer fit for reporting is secondary to the quality of the purpose. Companies content and therefore it is the latter that have become locked companies should continue to focus on in order in the cyclical to build greater trust and confidence with production of extensive – sometimes investors…” exhaustive – and primarily hard copy in a concise and accessible format. We believe annual reports, and entrenched in the view this process will give companies the opportunity that this is the only way forward. These are to rethink their reporting, prioritise key habits and opinions the Government is keen messages and communicate core content with to challenge. greater clarity and focus. The thrust of the argument is that And we’re not alone in our views. The annual reports should say only what needs to Financial Reporting Council (FRC) is currently be said in a clear, concise and meaningful way. exploring ways to improve the accessibility of The Government wants companies to focus on communications in annual reports. The UK their key messages and to tell the story of the Government is also looking into the issue, and in business from the eyes of the directors. Corporate reports are getting longer. Seven years ago the average length of an annual report was 108 pages. Today it is 175 pages. Roughly 25% of FTSE companies have reports over 200 pages long, with some financial services companies producing documents in excess of 400 pages. This expansion of content is often a result of increasing demands for information from regulators, as well as investors and other stakeholders. But in most cases, the additional volume is not adding value – in fact, quantity is having a profoundly negative impact on the quality of annual reports. At Black Sun we also believe that ‘less is more’, and that the time has come to ‘cut the clutter’ in corporate reporting. We’re calling on companies to use good professional judgement to identify those issues which are most relevant and material and to leave out those which are not, so to communicate meaningful information its recent consultations, ‘Long-term Focus for Corporate Britain’ and ‘The Future of Narrative Reporting’, is pushing for a reduction of reported content to bare essentials and key messages. The Government’s main proposals include stripping annual reports back from 200-plus pages to strategic documents of 30 pages, with the rest transferred online. This sounds very neat and efficient, but the reality of reduction and migration will no doubt present many challenges. And in shifting the bulk of a report from print to online, are we simply shifting the problem? We need to proceed with caution to avoid the process of simplification merely complicating matters further. The elevation of essentials: the Government’s proposals 6 © Black Sun Plc 2011 www.blacksunplc.com
