The 2018 Financial Reporting Outlook conference focused on the theme of reconnecting businesses with their customers. Since the global financial crisis, there had been problems faced by much of the companies. Why does business still suffer a trust deficit? Whose interests should come first? Are boards aligned with the creation of long-term value? And, ultimately, what is business for?
Grasping the nettle
In today’s failures of corporate reporting and stewardship, Baroness Martha Lane-Fox, the co-founder of pioneering travel website lastminute.com and now (among other things) a non-executive director of Twitter and the head of technology advocacy shared her opinion that customer and stakeholder should be their utmost priority. “Companies need to grasp the nettle of change,” she said. “It is important to be open to criticism and challenge.”
As she worked with Doteveryone and elsewhere, Baroness Lane-Fox has pointed out the most arcane approaches in the run to improve technology and get more fair terms in recruitment, investment and the dealing of the employees.
Technology is an amazing thing, but it has to remain conscious of the need to behave responsibly – that would make a huge difference in restoring trust,” she said. It is, in turn, a message to mostly all the companies that without the trust and support of the stakeholders they cant grow and their future will be in danger. This may be because technology may be the most disruptive source yet it is overlapping some of the old tactics of the past businesses.
Considering gender diversity: 95% of the world’s software engineers are men, as are 90%
“Companies need to face up to some of the structural issues that are holding them back. Consider gender diversity; 95% of the world’s software engineers are men, as are 90% of venture capitalists.”
Another speaker from the world of technology picked up on this theme. Lou Hughes, current director of Nokia, can look back on 24 years sitting on the board of directors of 13 companies in eight countries. He has more experience in audit committees than most of the people, and in his talk, he mentioned what successful people have in common.
“You need people of different backgrounds and skills,” said Hughes. “While regulators want to see financial experts on the audit committee, a broad range of experience is critical. In fact, in my experience, a lot of the best contributions come from operational management.”
The audit committee has a key role to play in creating and reinforcing trust in the organization, and Hughes believes that in this regard, the need for open engagement from all sides – boards, management, internal and external auditors – is now greater than ever. In particular, he emphasized the need for the external auditor to act as an engaged partner.
“They are the most important part of the chain,” he said. “The auditor has to understand the business virtually as well as the management does. It’s a collaborative role focused on solving problems, mitigating risk and taking the right action.”Companies need to face up to some of the structural issues that are holding them back.
Adjusting to change
Sue Lloyd, Vice Chair of the International Accounting Standards Board (IASB), spoke on Baroness Lane-Fox’s findings that, mostly, a business must be seen to placing its house in the arrangement.
Lloyd was present to outline the IASB’s determination to focus on working as a partner with business. “We are adjusting our work to adapt to the changing financial reporting environment, and to the feedback from companies,” she said. “They want a period of calm, and they want us to stop generating new standards and focus on providing support for the standards we already have.”
Lastly, she made it clear that regulators and business must collaborate to make certain that the terms meet the need of both the players i.e. preparers ad the users of accounts. “A number of things that we’re working on are taking us beyond our traditional debits and credits,” she said, citing the efforts to look at non-GAAP measures and to bring some of them into the audit process. As part of that, the IASB requires all the companies to show a note of their financial report displaying their performance and how they communicate with their investors.
While the board would prefer to see an IFRS-related measure, she said for deeper understanding alternatives could be prepared. At last again its the same question of what ways will the business explain what they are doing and why to have the trust of their shareholders.