The profession should be pushing the debate. For one thing, the review touches most of what we practice. For another, we can show that we are indeed business advisers. The several hundred pages of consultation can be simplified into three themes.
Amongst sound analysis of directors’ duties, the interest is in corporate responsibility to stakeholders (such as employees and the wider community). The suggested approach for directors to take account of relationships with stakeholders in creating shareholder value is sensible in 21st Century society. In our language, aren’t those relationships the company’s assets to be safeguarded and accounted for?
Another provocative proposal is a possible formal role for non-executives in monitoring management performance, with an eye to the US, regarded as tougher on non-performance. Is this a horrible thought of a two-tier board? Or a view of the unitary board of the future? As business advisers what do we think?Preferring the preliminary statements as the ‘main accounts’, as proposed, is sensible – today. But picture a future electronic continuum of information, which people can access for what they want, and the distinction between the prelims and full accounts pales. A new Operating and Financial Review would be a structured account of stakeholder relationships as well as the many other factors relevant to corporate value which cannot be found in the historical accounts.
Auditors would put their names to the OFR – surely needed to maintain our relevance to business and society. As part of the package, there would be reasonable limitation of liability. Without proportional liability, or a close surrogate, we risk conditioning our future partners and staff more as compliers than advisers. Yet the demand for more imaginative accountability by directors will need the auditors’ board level advice.
What a rare opportunity for some forward thinking by the profession!
Roger Davis, a PricewaterhouseCoopers senior partner, represents the ICAEW on the DTI company law consultative committee.
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