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The Bruce Column — Moving towards a broader picture of stakeholder reporting

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23 Nov 2016

Robert Bruce, our regular, resident columnist, reports on a recent debate on the issues surrounding transparent corporate reporting.

For Melanie McLaren’s three teenage children the idea of a symposium to discuss the concept of transparent corporate reporting was mystifying. McLaren is Executive Director, Audit at the Financial Reporting Council, and she was launching an event at the Deloitte Academy to try and help pin down the many issues surrounding corporate reporting in a complicated, volatile, and ever-changing business world. But for her children such complexity doesn’t exist. If they want to know a fact or find out about an issue they simply go to Wikipedia and the answer will be there. What on earth did anyone need to talk further about? And, as McLaren asked: ‘If everything is available to everyone all the time what does that mean for corporate reporting?’

What it probably means is that she is expecting a deep debate as a result of recent questions raised by politicians over the level of trust in business; the possibility of extending business representation to ordinary employees; a range of reporting, environmental and sustainability issues; and those of gender and pay. For her the reporting was what was important. ‘What gets reported drives behaviour’, she said. And she followed that up with the idea that the corporate governance code provision laid down by the Financial Reporting Council that company directors should sign off the annual report and accounts with an assurance that the contents were ‘fair, balanced, and understandable’ pretty much encapsulated most of what was needed in terms of building trust in business.

Nevertheless she expects a deep Government-led debate in the UK over corporate governance and over building public trust in business. Though she did point to the results of much work in the field over the last twenty years or so and the reputational dividend that had produced. ‘The current UK framework is well-regarded’, she said.

So future policy has a firm foundation to build upon and will come incrementally. It will be part of a gradual evolution towards broader stakeholder reporting which will come via many different routes. And this is where the Government’s concerns could be answered. The desire and the need for a broader picture is already being met with moves towards better narrative reporting, the strategic report, integrated reporting and the integrated thinking it brings. All of this makes the value created for all stakeholders in a business much clearer and more transparent.

And the multiplicity of means provides solutions for many users. Jessica Fries, Executive Chairman at The Prince’s Accounting for Sustainability Project, stressed the importance of the annual report as a means of reporting at a specific point in time. It was then important to ensure that it was well signposted and reasonably consistent year-on-year. The length of the report was less important than the clarity of the report, she said. ‘Length doesn’t always get in the way of understandability’.

It fell to Alan Teixeira, Deloitte’s Global Director, IFRS Research, to answer the poser raised by Melanie McLaren’s children. ‘My kids tell me every day about how they’re are doing at school’, he said, ‘but that doesn’t mean I don’t need to read their school report’. The rapidly-evolving annual report will remain at the heart of corporate communication in a multiplicity of ways.

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