As a same-day follow-up to our roundtable discussion with investors and auditors at the ICGN conference in March 2016, Jens Laue, an audit partner and Head of Governance & Assurance at KPMG in Germany, facilitated an afternoon panel discussion examining the role that investors have in ensuring that corporate reporting meets their needs.
The afternoon panel supported many of the lessons learned that morning, including the need for reporting to focus more on non-tangible assets. While income statements and balance sheets have been good indicators of value in the past, panelists said that they were no longer enough. Other facets of a company are gaining importance; facets such as corporate culture, governance and compliance.
Speakers in this video: Anne Molyneux (Director at CS International) and Angeli van Buren (Advisor to the Chief Investment Management, PGGM Investments)
When it came specifically to the role of investors in helping corporate reporting evolve, panelists raised three key suggestions:
One of the panelists recommended that investors should work together to write to companies in order to tell them what they want the reporting to focus on. Investor groups in the Netherlands have been doing this for a number of years, and have found that companies are following up on the questions being asked each year. Recently, BlackRock CEO Larry Fink wrote a letter to CEO’s (PDF 64 KB) of the S&P 500 companies challenging them to ‘lay out for shareholders each year a strategic framework for long-term value creation’. Long-termism is gaining ground among investors. Getting companies in the habit of recognizing the importance of listening to investors when it comes to reporting is critical for making change at a company by company level.
Boardroom diversity was given a significant amount of attention during the panel. The panelists agreed that diverse perspectives in the boardroom are required in order to evaluate non-tangible issues, like corporate culture. A diversity of perspectives also increases the likelihood of asking the right questions, questions that can help investors better understand what the culture and risk environment is like within a company. Investors have a role to play in encouraging the diversity required to make this a reality.
When it comes to making changes to reporting on a global or country scale, panelists recognized that investors need to become more vocal. It isn’t enough simply for auditors to put forward ideas and changes. If investors stand up and say, ‘This is what we, as investors, would like to have from companies in the report,’ or ‘That's the kind of assurance we would like to have over that reporting,’ – change is more likely to occur.
Given the distrust and uncertainty in the marketplace, the role of corporate reporting is more important than ever – especially for investors. But for reporting to continue to meet investors’ needs, investors themselves need to take a stronger role in making change happen. We look forward to continuing to discuss with investors how this can happen at the ICGN’s San Francisco Annual Conference in June.
See how the social media conversation unfolded at the ICGN conference in Frankfurt. To keep on top of the conversation as it evolves, following me on Twitter @KPMG #ValueofAudit, #ICGN16, LinkedIn, or by visiting us on kpmg.com/ValueofAudit.