Research & Strategy

By Dan - 14 Mar 2016

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It seems like every day I read a news story which concerns corporate governance. Whether it’s the proposed changes to the UK Corporate Governance Code, updates to the UK Stewardship Code or the publication of the QCA Corporate Governance Behaviour Review.

However, governance is not just making the news in the UK it also appears to be a hot topic across the pond. Recently, the world’s largest asset managers, including Jamie Dimon and Warren Buffett, have held a series of secret summits to hammer out proposals to improve corporate governance in the US. At a time of rising shareholder activism, the aim of these proposals is to encourage longer-term investment and reduce friction with investors through a list of governance best practices, which the leading asset managers will support in the companies they invest in.

Now more than ever we are seeing a debate on whether public markets demand short-term profits at the expense of long-term investment. Inspired by these secret summits, I have pondered best practice corporate governance reporting and how accountable and informative disclosure can gain the trust of long-term investors.

In Julie’s last blog, following our best practice corporate communications event “Size doesn’t matter but reporting does”, she mentioned the importance of building trust through engaging, transparent and personable corporate governance reporting.

Here are some of my quick tips on achieving this approach:

Keep it personal

A personal letter from the Chairman or an overview of the year delivered by the Committee Chair are really effective ways of demonstrating accountable and engaging leadership. A good example of this comes from Admiral’s corporate reporting where the leadership team provide a particularly personal statement and address key questions from investors.

Go beyond the legislation

Going beyond legislative requirements to provide real insight into key issues such as board evaluation, shareholder engagement and diversity is key to keeping the governance section insightful and engaging. At Design Portfolio, we encourage clients to go beyond simply explaining the board evaluation and shareholder engagement processes and actually detail the outcomes of the evaluation and any future objectives identified. Any outcomes from the annual general meeting or any other engagement with shareholders will also demonstrate effective corporate governance in action.

What’s the culture?

Addressing board culture is a relatively new initiative but a vital one. The FRC has gone so far as to launch a Culture Project to gather insight into corporate culture and the role of the board, to understand how boards can shape, embed and assess corporate culture and to identify and promote best practice. Offer captivating details into the culture of the board and how it contributes to a well-run company. For example, describe the experience and skills that each board member brings to the company and provide unique insights into governance activities, performance and priorities demonstrating the strength of the board.

Make it part of the front, not the back

Finally, it is important to treat the governance report like part of the narrative rather than part of the financials. Where companies provide enticing design and content initiatives in the Strategic Report, such as case studies, infographics and pull-out quotes, they should then continue to provide these in the Corporate Governance Report. Case studies demonstrating governance initiatives in action, infographics representing the board structure and pull-out quotes from new board members are all good examples of building an intriguing and informative Corporate Governance Report.

The board has a vital role to play in shaping and planting a healthy corporate culture which ensures the long-term sustainability of a company’s value creation activities. It is imperative that the Corporate Governance Report reflects the strength and commitment of the board in an engaging and transparent way to help build the trust of long-term investors.

If you would like to find out more about how we can help you with your corporate governance reporting, please email us at info@design-portfolio.co.uk.