Governance T he regulatory scrutiny which corporate governance has come under over the past year, along with the many proposed changes to the framework that are in the pipeline, has driven the quality of reporting in this area towards much more meaningful disclosure. The number of governance reports which appear as if the company is merely trying to ‘tick the box’ are on the decrease and reassuringly we are seeing growing numbers of preparers who have made real strides in bringing the section to life through personal reporting and innovations in presentation. Indeed, initiatives such as the ICSA Hermes Awards are helping to drive real progress in governance as companies strive to improve their disclosure and gain recognition for their efforts. Five-year trend analysis Quality of reporting Time • Box ticking approach was, for many companies, the way they reported on governance in the past. • The financial crisis and subsequent Government consultations have driven noticeable improvement in this area of reporting over the last few years, particularly in terms of presentation and communication. • Most recently, signs of greater insight into effectiveness and delivering value. Leading reporters: • Indicate the boardroom culture and how this contributes to a well-run company. • Provide meaningful insight and explanation into how the Board ensures it remains effective in challenging and monitoring executives. • Use graphics and diagrams to illustrate key processes and bring the governance section to life. What’s required? As companies begin to get to grips with the provisions of the new UK Corporate Governance Code, the demands for governance reporting are likely to shift further over the near-term as a number of Government consultations reach their conclusion and become a part of the regulatory landscape. Recommendations from the Davies Review, the FRC consultation on stewardship and the BIS review of long-termism will all be shaping the future of governance reporting and therefore companies should be prepared to adjust their disclosure as required. For the moment, the focus for companies is largely on addressing the ‘fungus of boilerplate’, as highlighted by the Financial Reporting Council, making their reporting more accessible, readable and relevant to the organisation in question. The idea of communicating the character of the company still provides a good basis for a governance report, explaining what the culture of the boardroom is and how the company is organised to deliver on its strategy. www.blacksunplc.com © Black Sun Plc 2011 9
