Financial misconduct has been widely exposed after a series of bombshells, causing many to question the ethics of big institutions. Can IR (integrated reporting) restore trust?, wonders Tony Kaye.
Scandals have rocked Australia’s corporate landscape throughout 2018, seriously shaking the confidence of many investors.
Revelations of widespread corporate law breaches, fraud and other unconscionable behaviour by the Financial Services Royal Commission have been prominent.
There has also been plenty of other high-profile cases outside the financial arena concerning breaches of Australian Securities Exchange listing rules and continuous disclosure regulations under corporations law.
The breaches have not only triggered sharp share price falls and, in some cases, director resignations, but led to an explosion of shareholder activist campaigns and a record number of class actions initiated by legal firms backed by litigation funders.
Investor trust has been severely eroded, despite the best efforts of governments, regulators and other bodies to further strengthen regulatory frameworks designed explicitly to instil investor confidence in capital markets.
Australia is not alone, of course. The trends are worldwide and the pressure is well and truly on. Corporations and directors are under greater investor scrutiny than ever before; not just in terms of their financial scorecard, but records around setting and practising strong environmental, social and corporate governance policies.
Investors at all levels – from fund managers to “mum and dad” shareholders – are demanding greater corporate transparency to assess a company’s current position and to better understand its long-term vision and investment value proposition.
Factoring in various capitals to its broader reporting will necessarily provide greater clarity around an organisation’s value creation processes and objectives, and importantly, build trust.
“More and more companies around the world are embracing the concepts of integrated thinking and reporting, because they fully understand the wider benefits of doing so,” says London-based IIRC chief executive Richard Howitt.
“When we first published the International Integrated Reporting Framework in 2013, we had 160 companies on board,” Howitt reveals. “Today we have 10 times that number, 1600 companies in 62 countries, including 20 of the 28 European Union countries.
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