Welcome to the wacky world of top level government decision-making, when careful deliberation since March 1998 by company law reform experts is torn up in a Friday afternoon brainstorm by speech writers and spin doctors.
When is a U-turn not a U-turn? When it’s a recalibration! Welcome to the wacky world of top level government decision-making, when careful deliberation since March 1998 by company law reform experts is torn up in a Friday afternoon brainstorm by speech writers and spin doctors, eager to grab a Monday morning headline and to throw a bone to pesky business leaders just before the pre-Budget report will increase ‘stealth’ taxes again.
This whole affair is rich in irony and double standards from which few escape with much credit, including the CBI not representing the stated views of its members and NGOs going to court to defend a measure they had previously criticised as wholly inadequate. At Briefing, we argued before that the OFR was not a revolution in corporate accountability, saying it would never live up to claims that it amounted to mandatory social reporting. So its demise is not the end of the world either.
The EU directive still requires a broader (and, crucially, balanced) review; employees and the environment must be explicitly addressed and non-financial KPIs used. Without ‘safe harbour’ provisions in the OFR, companies were not going to disclose any really difficult stuff. The accounting and reporting profession will still go on arguing for OFR-style reporting, recommended as best practice since 1993. Meanwhile (and little reported on), directors’ legal duties continue to be ‘clarified’ in the latest company law reform bill, explicitly to include social and community issues. Step back from this brouhaha, and there is a real issue at stake: what is most effective – state regulation to require mandatory disclosure or investor (and wider stakeholder) demands that drive voluntary action? As we go to press, news comes that America’s SEC is planning to relax reporting requirements on foreign companies and tone down Sarbanes-Oxley rules. There’s a case at least to argue that politicians should concentrate rather more on substantive issues like employee working conditions, climate change and indeed tariff barriers to world trade, and interfere rather less on generic issues like governance.
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