Lobbying for policy change rises

You can tell an election is on the way in the UK because the lobbying for preferred policies goes into a kind of overdrive even in the staid world of corporate reporting.

Campaigning at this stage comes from cynicism and hope. Cynics try to persuade the current government to push through their favoured reforms before it’s ousted from power. Hopefuls attempt to influence the incoming government with their long-nurtured ideas in the hope they end up on a post-election legislative agenda.

Back in October we saw the cynics win out when they persuaded the government to cancel new reporting regulations, key among them disclosures on risk, resilience and assurance. But recent weeks have seen the influence game beginning to intensify, much of it focused on persuading government to take a fresh look at existing reporting requirements.

Investors speak out

One indirect attempt at influence was a report resulting from a ‘dialogue’ between investors and boardroom leaders. (There has been a belief in high finance that investors and boards were increasingly at odds over governance issues.)

The Investor Forum, a club for fund managers, hosted talks and issued a report highlighting issues where all parties were agreed. This stand-out item was included: ‘The focus on reporting is distracting market participants, both companies and investors. Action is needed to create decision-useful information to inform dialogue rather than a compliance driven approach to increasing disclosures. Dialogue builds relationships that data alone cannot – information is necessary but not sufficient to build trust.’

This was not the only complaint about reporting to emerge. March saw the Institute of Directors (IoD) issue its own manifesto, a kind of wishlist for election contenders to consider. Understandably, the IoD wants government to get on with the statutory elements of unfinished audit reforms. But it also called for a ‘fundamental review of the corporate reporting framework’.

IoD members are concerned about the ‘burden’ of reporting, especially because the ‘purpose’ is shifting from historical financial information to an ‘emphasis’ on environmental and stakeholder reports.

That use of the word ‘burden’ echoed a letter published last year by the Capital Markets Industry Taskforce, a lobby group set up by London Stock Exchange chiefs, calling for a governance ‘reset’.

Deliberate roadblocks

To put it bluntly, pressure is building for politicians to throw up roadblocks to more governance reforms and potentially give reporting a thorough makeover. The big implication being that an easier governance burden is essential for UK competitiveness. Or, as the IoD puts it, the UK’s ‘growth engine’.

Whether politicians rush to carve these issues into their election manifestos remains to be seen. For some governance might seem a low priority. For others, more inclined to an ‘anti-red-tape’ point of view, it might glow more brightly.

Of course, there is no harm in a review of reporting in itself. There’s no avoiding the fact that some measures become spare parts over time; markets evolve, public priorities change. But politicians should be careful not to engage in a race to the bottom, lightening the weight of governance for its own sake.

What marks the UK out is the stability and reliability of its governance approach. Investors like it; it gives them confidence. Undermine that and the UK may have bigger problems than its reporting responsibilities.