Back in the news are plans to improve the way modern companies are governed, with management giving a more inclusive account of their stewardship of the business.
MODERN COMPANIES
The government has begun a major review of UK company law, to ensure that the legal framework within which they operate is updated for the modern global business environment. Covering the governance of companies, their rights and responsibilities and the need for rules to protect the interests of shareholders, creditors, employees and other participants, the review is not expected to report until March 2001, with resulting legislation in the next Parliament. The President of the Board of Trade, Margaret Beckett MP, started the process by issuing a consultation document, Modern Company Law for a Competitive Economy, on March 4.
Margaret Beckett has welcomed plans to develop a combined code on issues raised by Cadbury, Greenbury and Hampel, but has called for greater transparency and accountability. The CBI and the Industrial Society gave a broad welcome to the consultation paper, although the Institute of Directors expressed concern about any legal obligation for a separate vote on director’s remuneration at annual meetings. Contact Karen Hutchinson, DTI, on 0171 215 2529 (www.dti.gov.uk)
TOMORROW’S ANNUAL REPORT
The Centre for Tomorrow’s Company has set out its vision of the future of corporate reporting, with practical ways to improve corporate accountability. On March 2, the Centre published Sooner, Sharper, Simpler, a guide to preparing an ‘inclusive’ Annual Report, addressing the purpose of the report, its audience and key messages. In essence the Centre proposes a single ‘core’ document, aimed primarily at shareholders but going beyond finances to cover the company’s purpose and values, backed up by more detailed separate reports on specific topics. A seven point score-card allows reports to be assessed. The Centre is consulting on its ideas until September, when a model report and accounts will be issued. Contact Centre for Tomorrow’s Company on 0171 930 5150
RESPONSIBLE JOURNALISTS
One in five financial journalist now says that knowledge of a company’s community involvement greatly improves their image of that company, according to research conducted by MORI. The main perceived business benefits are raising the profile, building customer goodwill and enhancing employee morale. Fewer than one in twenty journalists say there is no business benefit from community involvement. MORI’s findings were released in March and are based on research conducted in November 1997 among a sample of 27 journalists.
Meanwhile MORI’s ninth annual Corporate Responsibility study is being run again this summer, looking in depth at public perceptions and expectations of individual companies and industries. Contact Charlotte Hines, MORI, on 0171 410 5505
GREEN GAPS
Only two thirds of top 350 UK companies (65%) currently make any sort of external report on environmental issues, whether a sentence in the annual report or a 30 page long special report. Reporting on social and community issues is less developed, with fewer than a third (30%) disclosing anything more than their charitable donations. These findings come in the UK’s most extensive survey of trends in corporate environmental and social reporting, published on March 19 by the research consultancy, PIRC. The 160 page report argues for a new set of common reporting standards and highlights the present ad hoc approach. It discusses disclosure in all reports, management systems, external verification and benchmarking and provides detailed sector comparisons. Contact PIRC on 0171 250 3311
REPORTING VALUES
The Body Shop issued its second highly detailed Values Report, subtitled “how we measures up to our social and environmental mission and the expectations of our stakeholders”, covering the 1997 year. Running to more than 200 pages, the report provides detailed evaluation of performance related to employees, franchisees, customers, suppliers, shareholders, local communities, campaigning and animal protection. Company giving at ?1.4 million was equivalent to 4.4% of pre-tax profit, excluding the costs of staff involvement. Contact The Body Shop Ethical Audit on 01903 731500 (www.the-body-shop.com)
INTERNATIONAL ACCOUNTABILITY
The OECD held a symposium in Paris on February 12-13 looking at how reporting can strengthen corporate governance and accountability. Around 120 people from 18 OECD member countries attended that debates which covered the kinds of information required, how best practice varies around the world, and the trends leading to greater scrutiny of corporate citizenship. Contact Joanna Shelton, OECD, on 00 33 1 45 24 82 00
COMMENT:
The review of UK company law provides a welcome opportunity, albeit not immediately, to replace the wholly inadequate requirement to report the total of UK charitable donations with a more meaningful account of community involvement
The review of UK company law provides a welcome opportunity, albeit not immediately, to replace the wholly inadequate requirement to report the total of UK charitable donations with a more meaningful account of community involvement. Just how dire the current position is, is confirmed by the PIRC survey. Meanwhile The Body Shop Values Report shows what can be done, given time, resources and commitment, though the level of detail is so great as to be almost indigestible.
The Centre for Tomorrow’s Company report is therefore a useful first step towards more broadly-based reporting and firmly establishes the principle that audiences other than shareholders need an annual account of the stewardship exercised by management. That more financial journalists accept the case for community involvement can only help to spread acceptance of this point.
What we lack is a check-list of the sort of community issues companies should be putting in the core annual report and the level of detail in a supplementary reports. A consistent approach will help understanding and spotlight the laggards. Here at Community Affairs Briefing we have a vested interest in better company reporting, so in future editions we will return to this issue with practical advice.
Corporate Citizenship Briefing, issue no: 39 – April, 1998
COMMENTS