Vision and leadership Five-year trend analysis Quality of reporting A Time • The financial crisis acted as a catalyst for improvement in this area with more companies demonstrating leadership and accountability of management through the Annual Report. • Increasing stakeholder demands for insight into the long-term sustainability of strategy is driving disclosure. Leading reporters: • Demonstrate accountability and give confidence that the report is a reflection of the business as seen ‘through the eyes of management’. • Communicate the character and personality of the business, outlining what it stands for and what its purpose is. • Have honest and transparent narrative which discusses successes as well as failures and plans and challenges for the future. ccountability has been the buzz word for many stakeholders over the past year, with reporting being cited by regulators as one of the primary vehicles for Directors to demonstrate how they are discharging their duties. Director and management ‘ownership’ of Annual Report content has increased again this year across the FTSE 100 and continues to be one of the hallmarks of UK reporting. Whereas in the past, Chairmen and CEOs have been the main faces within the report, the impact of the financial crisis prompted many companies to include more of their senior executives throughout the narrative, presenting a unified team committed to the delivery of corporate objectives. What’s required? Following the codification of directors’ duties in the Companies Act 2006 and, in particular, the duty to promote the success of the company, there has been significant debate as to the role of companies in society, and the extent to which Directors should take into account wider stakeholder groups in reporting. The requirements of the Business Review in the Companies Act make specific reference to helping members of a company assess how Directors have performed in respect of this duty, thereby directly linking the fundamental role of Directors to reporting. The debate as to the purpose of companies will almost certainly run on for many years to come, though for the moment, the legislation strikes a fine balance between the interests of shareholders and other stakeholders; therefore it is important that company reporting reflects this situation. Specifically, the notion of accountability is one that has become ever more prevalent given the events of recent years – a fact that the regulatory regime is beginning to acknowledge. The new UK Corporate Governance Code for example, recommends ‘personal reporting’ by Chairmen on the application of the Code. In addition, the initial indications from Government following the BIS Review of Narrative Reporting are that board accountability for the narrative will be a key part of any changes to the regulatory framework. 6 © Black Sun Plc 2011 www.blacksunplc.com
