The reporting tail wags the corporate dog
What gets measured gets done’ is a truism that drives the setting of many a key performance indicator. The new and intriguing twist on this is that what gets reported is gradually becoming the driver of corporate behaviour.
If ever we in the corporate reporting community wanted an incentive to produce even better Annual Reports, then there is a powerful one to be found in the feedback from at least one of the speakers at the ‘Evolution of the Annual Report’ conference earlier this month.
Jennifer Sundberg is Managing Director of Board Intelligence (BI), a business that specialises in Board reporting. BI produces briefing and reporting packs for Boards of companies to focus the conversation in Boardrooms. Board Intelligence must be good, as its clients include many top listed companies as well as leading government and public sector bodies. As Jennifer explains, information drives conversation in Boardrooms and what is typically in a board pack is financial and detailed, and all too often backward looking and introspective.
What Jen has observed in the last year or so has been a growing recognition by Boards that narrative is what matters in business – not just the numbers and performance. She has seen a shift in the emphasis of Board packs from past to future, from short-term to long-term and from numbers to value creation. In her opinion the corporate reporting community – and that surely includes the reporting companies and their advisors as well as policy makers and the regulator – must take some credit for helping to build this new focus.
To Jen the Strategic Report is fundamental to this shift. Others would perhaps claim that the new regulations on reporting of Directors’ remuneration have had an equal impact, making the link between strategy, executive remuneration and performance more transparent. But the unexpected overall outcome is the discovery that, while the intended primary beneficiaries of the new reporting may be the shareholders, the more powerful and immediate impact has been on Boards and their Executive teams.
The Annual Report as a whole is evidently becoming a more effective internal communications tool that influences Board conversation and drives behaviour. So, if recent reporting changes are successfully creating a window and, with that, transparency for investors, they are creating at the same time a mirror for Boards to examine themselves.
It has become a clear case of the reporting tail wagging the corporate dog, and to very good effect.