CONFERENCE: Investors are no longer prepared to accept minimalist reporting from publicly quoted companies and are rewarding coherent, quality corporate communication with lower stock price volatility, according to PricewaterhouseCoopers partner Mr Bill Cunningham.
Launching a one-day conference hosted by PwC and the Smurfit Graduate School of Business entitled "Roadmap for Achieving Transparency in Corporate Reporting", Mr Cunningham said organisations were under more and more pressure in increasingly competitive financial markets to produce better and more understandable results.
PwC research has shown that higher quality reporting can help increase a company's share price and lower its cost of capital, Dr Alison Thomas told the conference. Dr Thomas, who is head of research at the PwC value reporting team in London, said research had shown a relationship between the credibility and consistency of company reports, market uncertainty and share price volatility. Companies who are not proactive in producing quality reports generally will have more volatile share prices than those who are, she suggested.
Because gathering and presenting the extra information required to produce a high-quality report carries an additional cost, it is important that companies are able to see the benefits this can bring, she explained.
In her presentation - "Analysing the Economic Value of Corporate Communications Strategy" - she outlined some of the advantages of producing high-quality reports. These included "improved employment brand" - increased ability to attract and retain the best employees; "customer metrics" - retaining customers and getting new customers through recommendations; enhanced relationships with governments and regulators; and superior access to capital markets.
PwC has developed a methodology that allows companies to make a cost-benefit analysis of the cost of gathering the information against the benefits that arise, so they can make informed judgements, she said.
Dr Eamonn Walsh, professor of accounting at the UCD Business School, referred to shareholder fatigue with the extent of information companies are required to produce.
"Twenty years ago a Proctor & Gamble filing would have been about 80 pages, whereas today it is about 240 pages, while it is not uncommon today to have a 1,000-page annual filing," he said. While a large volume of information is required, its value to the shareholder is unclear, he said.
Companies should have transparent, well-articulated business models so that shareholders can see where income is coming from and standardised non-financial information should be developed for different industries, he suggested. Industry specific non-financial information - such as revenue per user for mobile telephone companies or sales of products developed in the last two to five years for pharmaceutical companies - would allow shareholders to make relevant and meaningful comparisons within industry sectors.
