Department for Business, Innovation and Skills
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Simpler company reporting to focus on transparency and gender balance
Measures to improve the quality of narrative reporting by Britain’s largest companies were published yesterday by the Department for Business, Innovation and Skills (BIS). The draft regulations will help to increase corporate transparency and make it easier for shareholders to hold companies to account. They will also remove outdated and duplicated requirements to cut the clutter from reports.
Following recommendations from Lord Davies' review of Women on Boards, quoted companies will also in future be required to report on the number of women and men within the organisation, both overall and in senior executive positions. This will allow investors to identify gender imbalances and help companies address talent blockages.
A concise, stand-alone report focussed on strategy and the organisation’s business model will replace the existing business review. This will mean that shareholders can easily find out about a company’s strategy, the risks it faces, how it is performing and the direction in which it is heading.
Business Minister, Jo Swinson said:
“It’s widely acknowledged that the UK leads the world in standards of annual reporting, and that those standards are rising every year. However, over a period of years reports have become longer, more complex and increasingly difficult for shareholders to navigate.
“There are many examples of excellent reporting, but there is still room for improvement. Today’s reforms will encourage companies to produce innovative and engaging reports, in line with current business best practice. And requiring them to disclose the number of senior women in the organisation will persuade companies to pursue greater diversity and develop the pipeline of talent, helping drive a long-term culture change at the heart of business.”
The legislation will come into force in October 2013 at the same time as changes to voting and reporting on pay.
The Financial Reporting Council (FRC) will consult early next year on improved guidance to help companies follow the new regulations and produce succinct and meaningful reports.
Notes to editors:
1. The revised regulations and related documents are available at http://www.bis.gov.uk/Consultations/future-of-narrative-reporting-further-consultation
2. The regulations remove several reporting requirements that have either been superseded, are already required elsewhere or do not provide meaningful information, including detail on:
- Any essential contractual or other arrangements;
- The principal activities of the company in the course of the year;
- Asset values;
- Charitable donations;
- The acquisition of their own shares;
- The policy and practice of payment to creditors.
3. The Coalition Agreement included a commitment to change the narrative reporting framework. Two Government consultations and a programme of engagement with stakeholders subsequently revealed a consensus among companies and investors that reporting standards could be improved.
4. The changes to narrative reporting are part of the Government’s wider focus on improving the transparency and corporate governance of UK companies. In June the Business Secretary announced that shareholders will be given a binding vote on pay policy. Later that month, BIS published revised pay reporting regulations, which will make it easier for shareholders to understand exactly what directors are earning and how this supports company performance.
5. Later this year the Government will publish it’s response to the Kay review of UK Equity Markets and Long-Term Decision Making which called for reforms to ensure markets fulfil their core purposes.
6. The Government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries.' It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
· To create the most competitive tax system in the G20
· To make the UK the best place in Europe to start, finance and grow a business
· To encourage investment and exports as a route to a more balanced economy
· To create a more educated workforce that is the most flexible in Europe.
Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.
7. BIS's online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.