Corporate reporting is no longer working

| July 19, 2010

Corporate reporting is no longer working – so what needs to be done to make it fit for purpose in the future?

Corporate reporting plays an essential role in the effective functioning of the market economy. It provides the building blocks of information necessary for effective decision-making by investors and other key stakeholders.

The financial crises of the last decade have demonstrated serious shortcomings in the understanding of corporate business models, the alignment of incentives, and the management of risk. The current corporate reporting model has not highlighted where these shortcomings exist.

This failing is exacerbated by the pace of change of business today, with a plethora of new challenges impacting long-term success, including a shift in the global balance of power, resource constraints and climate change. This landscape provides a compelling reason to review what the major barriers to effective reporting are and how these might be overcome.

Tomorrow’s Company, Chartered Institute of Management Accountants and PricewaterhouseCoopers have initiated a global study to explore what changes are needed to make corporate reporting fit for purpose for the future.

By corporate reporting we mean all the mechanisms by which companies communicate their performance and activity to their stakeholders, with a particular emphasis on the flow of information into the investment community.

To help us understand what aspects of the system are preventing or supporting the effective development of corporate reporting and what changes are needed to make the system fit for purpose for the future we invite comment on the following questions:

• What are the strengths and weaknesses in the current system?
• What are the barriers obstructing the evolution of corporate reporting?
• What solutions would you propose to rectify these weaknesses?

Common goals: To what extent is there a shared understanding about the purpose of corporate reporting and the overriding objective of reporting standards?

Incentive structures: To what degree are investors, accountants, standard setters and management incentivised to engage in any dialogue about changing the reporting model?

Competence of key stakeholders: Is the level of technical knowledge and understanding of financial and non-financial information and metrics a barrier?

Ability to deal with complexity and change: Are the transactional, regulatory, technological and other changes as a result of globalisation creating too much complexity and change for the system to deal with?

Ability to influence: Who is best placed to change the system and what is needed to help them do this?

We welcome comments on any or all of the above. Our deadline for submissions is 17 September 2010. Our email contact: evidence@tomorrowscompany.com

Web: http://www.tomorrowscompany.com

 

Les Pickett is an Ambassador for Tomorrow’s Company. Tomorrow’s Company is a UK based business led international think tank. Our vision is to create a business future that makes equal sense to staff, shareholders and society.

 

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