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Reflections on an elephant

Richard Young, a freelance writer and editor, worked with the research team on Tomorrow's Corporate Reporting in an editorial capacity. Here he shares his experience of working with the three organisations and opinion on the programme.

Reflections on an elephant

Producing Tomorrow’s Corporate Reporting was no easy task. The participants laboured long and hard to work out just what the “corporate reporting system” is, let alone describe it in ways that might help interested parties come to their own conclusions about reforming it.

The pachyderm on the front cover is a reference to the old parable about the “blind men and the elephant” – wherein people only able to feel different part of the beast not only fail to understand what the whole is like, but actually ascribe completely erroneous attributes to the creature based on their own experience. That, we felt, was a great way to describe the way the different participants in the system experienced it.

But in some ways, producing the report was a similar exercise. Tomorrow’s Company bought a critical eye to the outputs of the system; for CIMA, the preparers of accounts and their ability to relate what’s really going on was paramount; and PwC brought expertise in auditing and understanding the broader regulatory environment.

In fact, of course, by bringing these views together and consciously looking at how the different parts of the system work together – or, as is often the case, operate seemingly oblivious of the other parts – the team was able to come up with some much deeper insights into how the system might better serve all its constituents.

It’s good to talk

The joy of being a freelance editor is working with a wide variety of leading figures in the business world. Shortly after editing Tomorrow’s Corporate Reporting, I was lucky enough to interview Andy Halford, CFO of Vodafone and the chairman of the Hundred Group of Finance Directors – a lobbying organisation for the biggest British businesses.

The views of the Group, and of Halford personally, chimed beautifully with the view taken in the report. For example, it makes the point that investors and analysts rarely rely on one or another source of information about companies – and tend to be hugely varied in what they’re looking for, in any case.

As Halford put it “It’s very important that management use every forum possible to give a balance of views so people can understand why there are some actions that will deliver in the near term, and others that will be adverse in the short run, but are logical to stand the business in good stead over the longer term.” And he also agreed with the key danger flagged up in the report, that regulatory responses to events can skew the overall utility of the system “The big challenge is to make sure that the evolution of reporting isn’t purely additive,” he told me. “If we just add more and more requirements every time an observation is made on something that could have been done better, we’ll end up with longer reports and narratives. But I would question whether more is actually better. For the vast majority of the readers of accounts, actually less is probably better – just more focused on what the key issues are.”

Muddying the waters

One of the most interesting findings from the huge research project that sits behind Tomorrow’s Corporate Reporting is that a substantial number of people connected to the reporting system don’t really think there’s a problem with it.

In many cases, this view was seemingly derived from a desire to let the market work out the kinks. In others, it seemed more likely that the lack of concern was down to the fact that the system is opaque – it’s easy to be phlegmatic if you can only see your own part of the machine and it seems to be running smoothly.

But if there were any doubts about the timeliness of the TCR, a simple news search for “corporate reporting” should wake up even the most laid-back reader. Sustainability reporting, for example, is going through some difficult birth pains – there’s little agreement yet on what it means, how it adds value, how it might be regulated or by whom.

Integrated reporting, too, is a concept looking to bed down. Emissions and carbon standards are emerging. Governance rules are evolving. Remuneration disclosures are changing yet again. There are new accounting standards for smaller entities in the UK – and disagreements over the need for both audit competitiveness in mature economies and international auditing standards to be applied.

In short, even if you think the system is serving you and your organisation well right now, there’s a clear and present danger that imminent changes and future external shocks will leave us wondering why we didn’t look more closely at the system as a whole much earlier. Reading TCR is probably an hour well spent, in other words.

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