ThinkTWENTY20

Can corporate reporting be “more effective and engaging for all those with an interest” in an organization? Is technology a facilitator, and can it be a greater facilitator? And is a “feedback loop” between management and the stakeholders a necessary part of that process?

We are continuing a series of blog entries specifically about the FRC’s (UK’s Financial Reporting Council) A Matter of Principles: The Future of Corporate Reporting, a discussion paper published in October 2020 with comments requested by February 5, 2021. In this entry, we are focusing on one sentence within the principle-based document:

In our view, good corporate reporting should seek to create an active dialogue between a company and its stakeholders about issues that matter to them. Continuous reflection on how well corporate reporting facilitates meaningful engagement should, in turn, invite continuous improvement and practice-led innovation.

That statement may evoke many responses, including,

• Has it been common practice to develop reports meant to be provocative and promote a dialogue, rather than focus on being a one-way communication vehicle with sufficient, relevant information for decision making?
• While thought-leadership documents, such as “The Future of Corporate Reporting,” often come with guidance on questions seeking a response, are there any channels in place to promote, collect and provide responses to facilitate a dialogue?
• Can standards such as XBRL facilitate such a dialogue?
• Should the dialogue be only between the reporting organization and the stakeholder, or are there others in the business reporting/audit information supply chain who might be involved as well?

We begin by reminding our readers that these blog entries are themselves an effort not only to post an opinion or provide a one-way communication channel, but to be provocative enough to encourage responses in the form of questions and helpful opinions. You are invited to leave your questions and comments on the bottom of most blog pages or by clicking on “Contact Us.”

While stockholder meetings and investor relations pages offer an opportunity to ask questions, I do not normally think of the management-stakeholder relationship as one held up as a natural dialogue. Online financial statements do not lend themselves to digging in for more information or for alternative views.

I am reminded once again of the feedback cycle developed in conjunction with my colleague, Harm Jan van Burg, who initially masterminded what has become Standard Business Reporting. His goals with the Extensible Business Reporting Language (XBRL) were not focused on making end-reporting information more easily discoverable and consumable by stakeholders; indeed, XBRL was designed to facilitate the iterative processes leading up to those reports. His idea was to facilitate a standards-based feedback loop. Reporting-based pronouncements would use the standardized terms; instructions and interpretations would use them; reports would use them; software would use them; and questions and feedback could be sent with laser targeting to the right person to explain the rules, the guidance, the reporting, the assurance and so on.

Active and effective dialogues should leverage tools like XBRL metadata, and reporting should involve the entire supply chain, not just the reporter and the consumer.