Archive for July 19th, 2011

Corporate reporting at risk

by Daniel Mather for CFO World, May 2011.

Corporate reporting structures as they stand amount to a system at risk and in need of significant change, a new report claims.

Unless evolution is properly achieved, corporate reporting might become unfit for purpose and fail to provide investors and other users with comprehensive information, say PwC, the Chartered Institute of Management Accountants (CIMA) and think tank Tomorrow’s Company.

Serious discussions and substantive change need to be achieved to save the system at what the report describes as a “critical point” for the future of corporate reporting. The risk of leaving the reporting framework, founded during the Industrial Revolution, largely unchanged means the whole system could redundant.

Tony Manwaring, CEO of Tomorrow’s Company, said: “We have come to terms with the short-term thinking and silo decision-making which did so much to cause the financial crisis. Corporate reporting must also come to terms with these challenges, to make the step-change needed so that it is fit for purpose during the global recovery and beyond.

“To be effective, reporting must not only provide an integrated account of what is material, drawing on financial and non-financial data – tomorrow’s corporate reporting must fully reflect the needs of the whole system of which it is part, and all the key players  and institutions who bring the system to life.” (continue reading… )


Why Does Corporate Governance Really Matter?

by Professor David Larcker and Brian Tayan for Stanford, July 19thm 2011.

New Book from Stanford Graduate School of Business Showcases Research into How Boards Can Govern Better.

“The debate on the role of boards in the wake of the financial crisis has created a lot of hype and rhetoric about corporate governance,” says David Larcker, who is James Irvin Miller Professor of Accounting and Director of the Corporate Governance Research Program at the Stanford Graduate School of Business and coauthor with Brian Tayan of the new book Corporate Governance Matters(FT Press). According to Larcker, many so-called experts are heavy on opinions about governance, but light on the facts.

“The FDA requires research on drug outcomes before approving a pharmaceutical,” he says. “Shouldn’t experts that prescribe ‘cures for bad governance’ be subject to a similar standard of review?”

In their book, Larcker and Tayan, a researcher at Stanford GSB, challenge the conventional wisdom of the many books, reports, and recommendations of blue-ribbon panels on what constitutes “good” governance. The authors researched hundreds of companies and interviewed many board directors to uncover the real-life consequences of corporate governance practices – from director independence to designing appropriate executive pay packages.

“A lot of people want to measure what’s measurable – we wanted to measure what’s informative,” says Tayan. “For example, certain lightning-rod issues, such as ‘excessive’ risk taking and CEO compensation, get a lot of attention from outside observers, while important issues that are considerably more difficult to assess – such as corporate strategy and succession planning – tend to get the short shrift.”

Trends Getting in the Way of Good Governance
“Our research shows that many emerging developments that were intended to improve governance – purportedly to avert the kind of financial disaster we just experienced – just don’t hold water,” Larcker explains.  (continue reading… )

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