THREE-QUARTERS of FTSE 350 companies fail to make a direct link between business performance and how management is rewarded.
PwC’s survey of the UK’s biggest listed companies shows wide variances in corporate reporting quality.
Only a third (34%) use their governance report to explain clearly what the board and its committees have focused on during the year. Only 28% use strategy as the base for their reporting.
While 77% of companies refer to their business model in their report, 16% of those gave no further information on the issue. PwC found that only a half of the 350 reports gave what the firms described as “meaningful insight in what really makes their business tick”.
PwC corporate reporting partner Charles Bowman said: “For many companies, there may not seem to be any quick fixes to shortcomings in their reporting. We know many have found articulating their business model difficult. However, a start-up company lives or dies by how well they can articulate their business model and what they stand for – it seems that some larger companies have lost sight of this.
“The best reporters aren’t doing this out of a sense of altruism. They do it to communicate effectively with stakeholders and retain their trust.”
The firm also urged companies to better explain the role of the audit committee to its governance – a quarter of companies have addressed how the committees make key judgements and estimates involved in preparing the financials.
“Within companies, audit committees have the job of checking that the financial information that goes to investors, employees, customers and other stakeholders is reliable – and, under the revised [UK governance] code, there will be renewed focus on whether the overall picture painted by management is a fair, balanced and understandable one,” Bowman added.
“All of this is essential to building trust and confidence in UK businesses and we really urge boards to make sure that their reporting demonstrates the value of the work of the audit committee in particular.”
We discuss the Accountancy Age Top 50+50 supported by Sage; growth at Menzies; and the provision of value-added services
Audit committee chair is now very much the lynchpin of good company governance, and can consequently expect more public scrutiny
Accountancy Age reveals the firms that have reached our Best Employer grade for 2016 - and have made the shortlist for the overall Best Employer Award at the British Accountancy Awards
Company boards must pay more attention to instilling the right corporate culture in order to restore trust in business and deliver long-term sustainable growth, according to the FRC