Investor Communications – update
Published on Thursday 24th of November, 2016
(1) Viability statements – guidelines published by the Investment Association (IA)
The IA has published guidance to help companies with these disclosures going forward, by setting out the expectations of institutional investors.
Whilst a few companies reported under the new provisions early, the majority first adopted them in 2016 in respect of 2015 year ends. These guidelines have been developed with the benefit of one year’s experience and will be reviewed in the light of best practice as it evolves.
The IA’s corporate governance research service, IVIS, will continue to monitor companies’ viability statements and in so doing will have regard to these guidelines.
(2) Quarterly reporting and quarterly earnings guidance – Investment Association publishes its views
The IA has published a statement calling on companies to cease reporting quarterly and refocus reporting on a broader range of strategic issues.
This is in support its Productivity Action Plan, which was launched in March, to help boost UK productivity through long-term investment. A key focus is to improve company reporting by encouraging a greater focus on the company’s long-term strategic drivers. IA members widely refer to quarterly reporting as a “distraction” that shifts company resources away from long-term strategic considerations, with the risk of executives managing the market, rather than managing the business.
Should a company continue to report quarterly, the IA expects it to publicly explain this position, and how it is relevant to the achievement of long-term strategy.
(3) The Financial Reporting Council (FRC) tiers signatories to the Stewardship Code
The FRC has categorised signatories to the Stewardship Code into three tiers based on the quality of their Stewardship Code statements. Its intention is to improve the quality of reporting, encourage greater transparency in the market and maintain the credibility of the Stewardship Code.
Tiering distinguishes between signatories who report well and demonstrate their commitment to stewardship, and those where reporting improvements are necessary. Of nearly 300 signatories, more than 120 are in Tier 1, an increase from approximately 40 since the beginning of the exercise.
The FRC will continue to assess the overall quality of reporting on an annual basis, consider possible revisions to the Stewardship Code in the future and look at how it can better support international investors to meet the requirements of international Stewardship Codes.