Courtesy of Damien Wild, I stumbled across Anton Colella’s blog. For those that don’t know, Anton is president of ICAS. In a surprisingly candid post, he discusses the gap between perception and reality as it impacts reporting:
The discussion about the impact of current “thought leadership” compared to [Making Corporate Reports Valuable] MCRV was revealing. The audience felt that the proliferation of research in the past 20 years has not gone hand-in-hand with a rise in quality. Quite the opposite. It was also felt that the aim of advancing the profession was being poorly served because many of the proactive projects are at best piecemeal and at worst, self-serving.
Most significantly for me, the overwhelming view was that there is a disconnection between the needs of users of financial information – investors, analysts and the wider public – and the people who are shaping the research and recommendations. In other words, current “thought leadership” pays very little heed to what may actually be the big issues that require solutions and development. When a lot of effort is being put into work that is doing little to serve the needs of the market and the public interest, maybe it’s time to ask – what’s the point?
Part of the answer may lie in the fact there is no transparency in the report’s production or dissemination. Try a Google search and you’ll see what I mean. I see other issues.
- At the risk of sounding like a broken record, the continuing problems among the Big Four tax and audit practices do little to inspire confidence. I believe there is a direct connection between the profession’s ability to clean itself up and the confidence it earns among stakeholders.
- Corporations, especially Global 2000 companies, are so complex that it is impossible to know what’s going on without sophisticated reporting systems. The Big Four struggle to understand what these systems do. With the exception of Deloitte, the others divested themselves of their technical consultancies in the post-Enron fallout. They simply don’t have the skills. Without those skills, it is difficult to see how the profession can compete on the global stage in the development of world class reporting systems and techniques.
- The last year has seen a sea change in the visibility and importance of stakeholder interest in reporting around sustainability issues. Organizations as diverse as Business for Social Responsibility (BSR), Transparency International, World Wildlife Fund, the Global Reporting Initiative, Intel, HSBC and SAP are actively discussing issues around materiality in the reporting of sustainability measures. Much of that attention focuses on software but there are wider issues at stake that spill into those discussions. I know the Big Four want a piece of it as they see the assurance element as a natural part of their turf. The fact is, they are barely visible.
In short, the profession is increasingly marginalized around discussions on issues of importance that demand thought leadership.
Next week, I am privileged to be attending a BSR event in Boston where we will discuss issues that matter to stakeholders. Later in the week, I am participating in a panel discussion at an SAP sponsored event on similar issues as they relate to corporate social responsibility. As a former practitioner who has watched the erosion in confidence of professionals, I have plenty to say.
I see the potential for delivering value both to stakeholders and business. It is in understanding and navigating between the two different agendas that solutions will be found. It is necessarily a discussion that focuses on materiality, both financial and practical. Next week will see positive steps taken to move the agenda forward. I have been told that I am free to write about those meetings.
Endnote: The image at the top of this post shows the relationship between materiality from both stakeholder and business axes. It makes for interesting reading.
Disclosure: SAP and BSR are funding my T&E
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