Say cheese! Why reporter and regulator should be friends
by Tamara O’Brien, TMIL’s roving reporter
There are many tricks of the report writer’s trade, but metaphor is one that’s sadly underused. So when writer Adrian likened the relationship between regulator and listed company to that of Cheese Standards Authority[1] and cheesemaker – we webinarians pricked up our ears. And we were not disappointed.
Imagine a cheese company, he posited, that only complied with the rules laid down by the Authority. Its operations would run impeccably, its surfaces would gleam with hygiene, its walls would be papered with certifications. But because the rules gave no guidance on taste, the cheese it produced would be inedible.
If only the Authority helped its members with the art as well as science of cheesemaking. How to make your hard cheese more flavoursome. How to give soft cheese the right texture.
In this regard (and I paraphrase), how much luckier is the corporate reporter than an imaginary cheesemaker. Because the regulators of the Financial Reporting Council (FRC) know that this unintended consequence of regulation is a problem. The issue in corporate reporting of course isn’t one of inedible cheese, but indigestible annual reports. That’s why the FRC takes an advisory as well as regulatory role. It coaches and consults with companies on how to achieve the ‘fair, balanced and understandable’ – and as champions of the audience, we’re particularly keen on understandable – gold standard of corporate reporting.
Ballooning regulation bad
The FRC is a key regulatory body for listed companies in the UK – but there’s also the Financial Conduct Authority, the Bank of England’s Prudential Regulation Authority, and many more. There are US and international regulators too, plus a growing number of non-financial reporting frameworks. All issuing demands for companies to report new data, or present existing data differently.
Claire pointed out that ‘ever-ballooning regulatory requirements’ for annual reports are driven by regulators’ desire to change corporate behaviour, rather than the needs of the AR audience. She made a plea for regulators to consider the point of reporting, ie to engender trust between a company and its stakeholders – and whether any proposed regulation supported or ran counter to that purpose.
Better information good
Miranda made a counter plea. Contrary to popular opinion, she said, the FRC isn’t out to make life hard for companies. In their reporting role, their job is to serve the public interest by promoting transparency and integrity in business. Recognising that changing corporate behaviour doesn’t happen by seeking ever more disclosure in the AR – but improving the quality of how companies present and communicate information just might – they offer a vast array of guidance and support, including:
The Financial Reporting Lab – the FRC’s research arm, which collaborates with companies to improve the effectiveness of corporate reporting
Thematics – published guidance on a wide range of topics; most recently, on how corporate reporting might look in the future, and how companies can best report on the impact of covid
Plus thought leadership, investor events, reports, surveys – well, go see the website. If you want to know what government is thinking, and have a chance of influencing it, these are your people.
In summary – companies and regulators can and should work together to make the world a better place. And there’s nothing cheesy about that.
[1] A hypothetical entity. There are indeed various bodies governing the manufacture and sale of cheese, but the author does not refer to any such organisation in this blog.