Following the publication of its third annual review of FTSE 350 annual reports and accounts (ARAs), Annual reporting in 2015: evolving communication in a changing world, EY’s Corporate Governance team ran a webcast on 5 October 2016 to discuss our key findings and help preparers think about how their next annual report may need to evolve.
The webcast was attended by 180 participants, largely from corporates, including representatives from 120 FTSE 350 companies, and a number of other stakeholders, including investors and regulators.
We conducted live opinion polls to gain an understanding of participant views. Here are some highlights:
It’s time to engage
We polled preparers on whether they either actively sought feedback from their investors, or whether they had voluntarily received feedback on their ARA.
A sizeable 52% reported no engagement – i.e. they had neither sought nor received feedback. We believe feedback is essential to enhance the quality of annual reports, and the information in them should provide a “hook” for investors to engage in dialogue and discussion with companies, which should drive better governance outcomes.
As companies start planning their 2016 ARAs, we recommend that both boards and investors proactively engage in how the ARA can be improved.
Does your annual report give a sense of your culture?
In our June 2016 Is your board yet to realise the true value of culture report 86% of respondents say culture is fundamental, or very important, to culture, yet we found in our third annual review of FTSE 350 ARAs that only 10% report on it meaningfully, and only 9% explain how the board monitors and gets assurance on culture.
We sought to understand this mis-match by polling participantsi at the webcast. An overwhelming 70% of preparers said that the biggest challenge in disclosing information on culture was an absence of well-understood metrics.
We recommend that preparers and boards take time to discuss the importance of culture (e.g. to strategy and business models), and start developing appropriate metrics which over time they can report on.
How are you going to achieve clear and concise reporting?
We asked participants who tuned into our recent webcast on annual reporting trends to think ahead to their next annual report and identify which aspect they were going to focus on improving the most. Encouragingly, 45% said they would focus on clear and concise reporting.
However, clear and concise reporting is not simply about reducing ARA length. Read EY’s publication for tips and case studies on how to make your next annual report clearer and more concise.
Want to know more? View the webcast and polling results and read the report.