The Institute of Chartered Secretaries and Administrators in the UK (ICSA) has published a guidance note on what it considers to be best practice for annual reports and explaining the benefits of reporting excellence for both companies and their members.
The guidance stresses the business benefit of viewing the annual report as a means of communication with members and prospective investors, rather than merely as a compliance requirement. It is an opportunity to demonstrate that good corporate governance is present throughout the company and to showcase the company’s attributes in a clear, concise manner. However, while it is important to emphasise the successes enjoyed by the company, in the interests of transparency and confidence building, the report should also be honest about the challenges and risks the company faces and how it intends to manage them.
ICSA considers the best annual reports to have the following characteristics:
- Easy to read and providing an honest appraisal of the company
- Responding to the opportunities created by reporting requirements rather than seeing them as obligations
- Demonstrating a real desire to use corporate governance to enhance the business rather than as a ‘box-ticking’ exercise
- Presenting relevant information in an innovative and creative way, avoiding the use of boilerplate language
- Providing real insight into the company, its strategy, the board, and how it manages risk
- Explaining the manner in which the board and its committees are run, and how decisions are taken
- Demonstrating understanding of stakeholder interests and how these interests are balanced to ensure the company’s sustainability
The guidance note sets out in brief what is expected for each section of the annual report and also names the winners of the ICSA Excellence in Governance awards for each part of the report.