The key to improving shareholder engagement and market value could lie in the information that companies are not revealing in their annual reports, it has been claimed.
According to an article from the Harvard Business Review entitled What’s missing from annual reports, providing metrics that give leading indicators of future performance could help build strong relationships with key stakeholders as well as track how well the organisation is meeting their needs.
Instead, many annual reports are simply supplying financials that many shareholders can quickly dissect, when they should be providing a more holistic view of the company.
“We want assurance that our investments are secure, of course, but more than that, we want to know the health of the companies we’re investing in,” writes Dr Graham Kenny FAICD, managing director of Sydney-based consultancy, Strategic Factors.
Referring to the push toward greater disclosure in several countries such as the US, UK and South Africa, Kenny says annual reports should show what the company is doing for and getting from each group of key stakeholders.
He adds that numbers about customers are equally important such as information on margins and how the company is measuring customer satisfaction on issues such as service, product range and prices.
A similar approach can be taken with employees, he says, with data provided on productivity and employee retention numbers as well as employee satisfaction figures. This is a practice adopted by Whole Foods Market in the US which provides data on voluntary turnover of full-time staff.
“In industries such as mining, employee safety is now reported in detail, through an injury frequency rate. Companies are making some progress in their reporting, but we’re still missing those comprehensive scorecards,” Kenny concludes.
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