Perhaps the most interesting development in corporate reporting has been the demand for reports explaining a company’s impact on the world around it through non-financial statements. Friday at ICGN saw an expert panel explore the topic but perhaps the most telling element in the session came from the audience, largely investors, which asked, how do you compare non-financial reports?
The panel dealt with this in various ways but the audience returned to the subject displaying, perhaps, a broad belief that corporate and sustainability reporting might be all very well, but among shareholders, at least, comparability is the issue. Scepticism about using non-financial reports seemed present in ample supply.
Some of the most poignant comments on non-financial reporting came from Gary Buesser, a research analyst with Lazard Asset Management. Buesser observed that there are “thousands” of metrics in environmental, social and governance reporting, underlining the difficulty for information users in covering the sheer volume of data becoming available, and drawing meaningful conclusions from it.
Buesser also pointed out that CEOs in the US fear “forward-looking” statements, the sort of thing appearing in narrative reports. Why? Because company statements in the US are heavily legated, for fear of litigation, and forward-looking views present a significant risk. Buesser didn’t say it, but his point raised the prospect of US executives remaining way behind on expressing views about the future for some time to come.
Shareholders do not believe non-executive directors need extra pay to improve the way they do their jobs. That was the result of a straw poll during a session on the future of the board.
Intriguingly, the audience voted for non-executives to have better induction to their companies as a means of making them better participants in corporate decisions. This followed some concern from the audience, at least, that a significant issue for non-executives is knowledge about strategic issues.
What seemed surprising was that shareholders did not more wholeheartedly support the idea that non-executives need added resources for research and information gathering.
It was made plain as day. When asked about diversity during a discussion on the future of the board, panel member Barbara Lundberg, a director at Excels Technologies, said that boards do better with women as members. Enough said.
Lastly, during a conference which was, as you might anticipate, quite self-congratulatory for its delegates, came Martin Wolf, chief economics commentator for the Financial Times. Bluntly, he told a room full of shareholders that the current approach to governance—shareholder control—was unlikely to be the best model.
Wolf’s claim is that there are other parties (for example long-standing employees) who have a stake in their companies and, perhaps, more at risk than shareholders.
Wolf insisted that shareholders do not bear all residual risk, and that maximisation of shareholder value was an “incomplete” goal for corporate bodies.
Naturally, he met with no small amount of opposition. Shareholders dismissively shook their heads as he spoke.