Investors tell us: 4 ways they want to see disclosures improve

4 ways investors want to see disclosures improve

ICGN Conference San Francisco Panel Session


KPMG International


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At KPMG, we understand the importance of planning for the future today. That’s why we’ve been on a journey for the past 3 years to discuss the future of corporate reporting and the value of audit with a range of stakeholders, including audit committees, regulators, standard setters and management.

This year, we extended our conversation to the investor community by hosting events at conferences held by the International Corporate Governance Network (ICGN). Recently, we hosted a roundtable on the role of audit committees and auditors and a panel discussion on enhancing disclosures at the ICGN’s Annual Conference in San Francisco. From the panel session, I took away four key suggestions from investors:

Improve clarity and consistency

Success doesn’t just happen. It starts with a strategy that has defined performance metrics to get you there. Investors believe clarity and consistency are critical when it comes to metrics being reported — particularly when the metrics are outside of the financial statements, for example, non-GAAP measures like EBITDA or adjusted earnings, and non-financial performance measures such as operational performance measures and key environmental, social and governance key performance indicators (KPIs). One panelist, Michael Herskovich, Head of Corporate Governance for BNP Paribas Asset Management, explained, “It’s important for non-standard information to be consistent in both calculation and disclosure.” The logical extension of this is a need for better communication around why specific metrics matter and how they align with a company’s long-term strategic outcomes.

Align metrics with impacts

This is not about measurement for measurement’s sake. Investors are asking that disclosures of key metrics are associated with actual risks. If investors understand the risk implications associated with the key performance metrics against strategy, they can better incorporate this knowledge into their investment decisions. Panelist Mauro Rodrigues da Cunha, ‎CEO at AMEC, provided Brazil as a positive example. “The regulator came up with a new regulation for risk disclosure, which is having a profound effect on companies,” he suggested. “[Companies] were actually doing their homework and realizing that they had gaps in many aspects, including environmental and social.” 

Engage and educate stakeholders

Investors want companies to better engage with and educate stakeholders on the importance of non-financial metrics and how they can influence the sustainable growth of a company. In a one-on-one discussion following the panel, Robyn Bew, then Director of Strategic Content Development for the National Association of Corporate Directors (NACD), noted this is already happening in the boardroom. “I think now, directors are really asking management, ‘Are we producing investment grade information on the non-financial side?’” We heard a growing and consistent interest from investors in both Frankfurt and San Francisco for ‘investment grade’ information that extends to KPIs, including those operational performance metrics that are leading indicators for the longer term value of a business, and more forward-looking risk assessments. While this shift is promising, these discussions and their outcomes need to be better shared across all stakeholders, including investors.

Michael Herskovich, Head of Corporate Governance, BNP Paribas Asset Management; Robyn Bew, Director, Strategic Content Development, National Association of Corporate Directors (NACD); Scott Marcello, Vice Chair, Audit, KPMG in the US; Mark Vaessen, Global Head of IFRS, KPMG International

Expand governance and culture reporting

To enhance their decision-making processes, investors a also stressed the need for additional insights and clarity regarding corporate governance (e.g. board composition, diversity, key competencies). While financial information is important, information on the internal culture of a company and its governance processes is also invaluable to investment decision-making. Investors can use such information to better evaluate whether the company is set up to be successful over the long term. Governance has been a strong recurring theme from our discussions with investors to date. I discussed the desire for more reporting around culture in particular in a blog following the ICGN’s Frankfurt Conference back in March.

When it comes to enhancing disclosures, it is clear investors want more than stand-alone numbers. They want reporting of non-GAAP and non-financial metrics to be improved, and reporting extended to cover corporate culture and governance. We look forward to continuing discussions with investors in order to determine how we as a profession can facilitate these improvements and define a path forward that reflects the diverse needs of all stakeholders.

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