Transparency, trust and the benefits of good reporting
Corporate governance review 2019
Good governance drives success. It’s a fact. We can prove it.
Companies that consistently invest in their decision-making infrastructure outperform those that don’t. It’s that simple.
So if you’re still approaching the UK Corporate Governance Code (the Code) as tickbox exercise then two things are true. One, you’re being left behind and two, you need to read this report.
This year's review saw the COVID-19 situation demand a great deal from businesses, proving to be a catalyst for change.
To help you strengthen your governance practices, we've analysed the FTSE 350's annual reports from this turbulent period and uncovered the trends for best-practice governance reporting.
Strong governance helps create sustainable value. It builds resilience, agility and trust. Effective reporting, that emphasises quality and clarity over quantity is the best way to nurture robust relationships with your stakeholders and help you set the agenda in an emerging world.
Ten years of data
Across ten industries
FTSE 350 businesses
Result
£8.2 million in growth capital raised
Production
Increased by 300%
Far from seeing it as a necessary evil our research shows that the most successful companies are using the corporate governance code as a blueprint to build environments that foster growth. They are aligning resource to clearly articulated goals and the results speak for themselves.
Companies consistently investing in governance best practice:
Turnover
106% growth since 2014/15
Turnover
106% growth since 2014/15
Sector
Leisure and consumer
Just 6% measure the impact of their corporate purpose
49% give good or detailed accounts of company culture
30% state how they mitigate emerging risks
1. The impact of purpose
Companies are beginning to embrace their purpose with 82% clearly articulating a reason for their existence beyond profit. However, only 6% are measuring the impact of their purpose. Businesses must now tie their purpose statements back to real action.
2. Not just talking culture
As the conversation around how culture contributes to value creation continues to grow, we see the number of companies providing good or detailed accounts of their company culture rise to 49%. Yet less than half explain how they assess culture and only 3% use three or more metrics to assess how embedded it is into the heart of the business.
3. Don't get complacent about risk
Eighty-nine percent of companies now report assessing emerging risks, coupled with the 84% providing high-quality risk disclosures paints a promising picture. However, if this year has proved anything it's that we can’t afford to get complacent. There's more work to be done with only a quarter of companies identifying a COVID-like event as a threat to business, and just 30% talking about how they mitigate emerging risks.
4. Business playing a role beyond section 172
Driven by section 172 and the wider societal pressures COVID-19 has provoked, there is a growing emphasis on the role business plays with regard to the individual, society, and government. Seventy-seven percent provide section 172 statements of varying detail and yet only 4% indicate how such considerations impact long-term decision-making.
5. Green for go - but is it really?
Reporting on environmental, social and governance issues is growing, but. there’s a misalignment between the risks identified, the metrics set and long-term incentive plans. A good example is climate change. Despite 18% identifying it as a principal threat, only 4% use climate change metrics in executive bonus planning, signalling a disconnect between what companies say they value and what they believe drives value.
6. Board effectiveness - how does it all connect?
Boards need to understand how these various elements of governance connect, not just in the way a board functions but how they assess their own effectiveness for the future. And yet 63% of companies still give little or no indication of the skills and experience on board and 83% no insight as to their succession plans below executive board level.
Turnover
106% growth since 2014/15
Turnover
106% growth since 2014/15
Sector
Leisure and consumer
Just 38% provide detailed section 172 statements
18% consider climate change a principal risk to their strategy
83% no insight as to their succession plans below executive board level
Turnover
106% growth since 2014/15
Turnover
106% growth since 2014/15
Sector
Leisure and consumer
Turnover
106% growth since 2014/15
Sector
Leisure and consumer
Team
Employs 55 people
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Making the only non-viable course of action ‘business as usual’.
Download the report. Not only will it outline the benefits of putting good governance at the heart of your business model, but also the six key areas of investment you should be focussing on to start transforming your business.
Beyond that we are ready to help you in any way we can. From helping get the board on board, to developing a plan, to delivering change, we can assist you every step of the way.
Governance is the key to success. Used correctly the corporate governance code becomes a blueprint for growth. These are proven facts. The only real question is what you will do with them.
Simon Lowe
Chair, Grant Thornton Corporate Governance Institute
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London
