Global governance and reporting bodies convene business leaders to drive shift towards long-termism globally

Posted
6 December, 2016

Leaders in business, investment and standard setting will meet in London today for a global conference hosted in joint partnership – for the first time – by the International Integrated Reporting Council (IIRC) and International Corporate Governance Network (ICGN). The two-day conference, which convenes over 350 people from more than 30 markets, signals a call from major international business leaders and global investors for aligned systems of corporate governance and reporting that drive long-term value creation.

ICGN and the IIRC are partnering for this conference in a shared belief that better transparency through comprehensive reporting leads to more resilient companies. ICGN’s Executive Director, Kerrie Waring said, “ICGN has long advocated for reporting which puts historical performance into context while taking into account longer term growth drivers. This enables a wide range of stakeholders to understand the risks, opportunities and prospects of the company for the future. Informed investment decision-making is vital to ensuring shareholders can act as effective stewards in holding corporate boards to account. This is emphasised in the ICGN Global Stewardship Principles – our flagship document which is being emulated around the world.”

This view was shared by Richard Howitt, CEO, IIRC who said, “Capital markets moving towards the long term with a broader approach to value creation improves performance. The diverse international coalition which is the IIRC is committed to making this a reality. Integrated Reporting is a key vehicle for businesses and investors to have a better dialogue. It is my goal for Integrated Reporting to become a reference point for 21st century corporate governance, to create long-term value for businesses and investors together.”

In a joint statement, ICGN and the IIRC have suggested practical ways to encourage longer-term thinking and behaviours by capital market participants. This includes:

  • A focus on the long-term with strategy, performance, governance and prospects aligned to value creation over time
  • Investors as stewards, taking a proactive interest in all aspects of value creation
  • Reporting as a key pillar of 21st century governance, leading to transparency and information disclosures which help investors to better understand companies and make better investment decisions.

Research launched at the conference by CIMA, AICPA, Black Sun and the IIRC demonstrates the importance of these three goals. The survey of over 400 senior executives globally shows that:

  • 79% agree that a longer term perspective on strategic planning would improve value creation potential
  • 93% agree that corporate reporting is critical to capture the value creation story
  • 83% believe that adopting <IR> would help deliver success to their organisations
  • 79% believe that investors want future perspective.

The International <IR> Framework is a key means for achieving this, and over 1,000 companies around the world are using it to communicate their value creation story. Many organizations are working towards Integrated Reporting together via the <IR> Business Network which includes the likes of HSBC, PepsiCo and Fujitsu. At the conference ACCA and the IIRC will share preliminary findings of a review into 41 <IR> Business Network participants’ reports. It demonstrates that companies are using Integrated Reporting as a tool to support progressive reporting. Out of the reports reviewed:

  • 66% explained well how the organization creates value for itself and others
  • 88% provided information on the different resources or capitals they rely on beyond the purely financial
  • 71% shared good insights on their strategy for success.

ICGN draws from a global membership led by investors responsible for assets under management in excess of US$26 trillion and the IIRC is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. Organizations from their members and networks speaking at the conference include, from the investor perspective: Newton Asset Management, CalSTRS, Schroders, Florida State Board of Administration and BlackRock and from business: Itaú Unibanco (Brazil), Interserve (UK), SAP (Germany), Eisai (Japan), Tata Steel (India) and Microsoft (USA).

Speaking at the conference, Bertrand Badré, former-CFO, World Bank said, “As we continue to struggle in the aftermath of the global financial crisis it remains crucial to focus on tools and practices that can make a difference and contribute to restore trust in the market economy system. Proper corporate governance and integrated reporting can help to achieve this.”

Sir Win Bischoff, Chairman of the Financial Reporting Council, said, “Values, behaviours and a good governance structure are central to the way an organisation achieves its objectives. By weaving these attributes into your business model, you are not just contributing to the overall success of your business, but creating an environment on which all stakeholders can depend. In that way we all create sustained growth. This ICGN-IIRC conference is an ideal opportunity to consider for implementation strategies to achieve long-term value creation.”