The ICSA has published a guidance note on good practice for annual reports which may be a useful reference. According to the ICSA, the best annual reports that they have reviewed demonstrate the following:
- an understanding of the links between governance, shareholder value creation, and the avoidance of value destruction;
- responding to the opportunities created by reporting requirements rather than seeing them as obligations;
- innovative and creative forms of disclosure, which move away from ‘boilerplate’ reporting that repeat the language of the Code and explain how the board and company is run;
- explanations of the way the board runs itself and its committees, and how decisions are taken;
- a governance report that demonstrates clear ownership by the chairman and a real desire to use governance to enhance the business rather than as a ‘box-ticking’ exercise;
- comprehensive explanations of departures from the provisions of the Code;
- a full description, and explanation, of the business model and the strategy, with key performance indicators ,performance against targets, and important information cross referenced to elsewhere in the report;
- discussion of the principal risks to the strategy, the company’s risk appetite and culture, how the risk profile is changing, and how the risks are being managed;
- joined-up thinking that links strategy, pay, performance and risk;
- evidence of directors having satisfied their statutory duties, including the duty to promote the success of the company over the longer term; and
- recognition and balancing of the needs and expectations of different shareholder and stakeholder priorities.
Other features of award winning reports include an understanding of the drive towards integrated reporting, which requires a different way of thinking and behaving. They also use online platforms to communicate the company’s story and offer improved access, whilst also recognising that this has limitations; and have a deeper understanding and appreciation of wider stakeholder interests.