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Reporting model is `failing its task': firms are not communicating properly with investors.

Document Cited in Related
Vincent
AuthorHayward, Cathy
PositionInvestor Relations

Companies are failing to give investors anywhere near enough information, according to investment experts. The facts that companies choose to report to the investment community are only about a quarter of what it wants from them.

"The reporting model is failing its underlying task," said Alison Thomas, director of global research at PwC, speaking at a briefing held last month by Citigate Technology. "It doesn't let investors differentiate between good and bad management and between luck and skill."

Both the content and dissemination of reporting had to change, argued Thomas, who called on firms to offer a market overview explaining their competitive and regulatory environment; a strategic overview focusing on objectives, organisation design and governance; as well as improved information about their customers, people, brand and supply chain.

"Only when the whole picture of the organisation has been painted should firms report on their financial performance," she said.

Paul Lee, shareholder engagement manager at Hermes Investment Management, agreed. "There is a communication breakdown between companies and their shareholders," he said. "This is causing companies to be cynical about the short-termism of the City and causing investors to be suspicious about companies' motivations"

Firms should follow 10 principles, including open and honest communication. They should set up systems to identify ways to maximise shareholder...

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