Investors seek link between performance metrics reporting and strategy

Investors are calling on companies to reassess how they report their performance metrics, providing clarity about how the measures link with their business strategy, according to a new report from the Financial Reporting Council’s (FRC) Financial Reporting Lab

The research found the metrics chosen by companies to report their performance should be clearly aligned to the company’s strategic goals, be transparent on how they are calculated and provide sufficient information that allows comparisons to be made to previous years’ performance.

Investors find it important to be given insight into how management links its metrics to its business model and strategy, including why metrics ‘make sense’ for the company and what it is trying to achieve.

The report is the outcome of the first phase of the Lab’s project on performance metrics.  It includes a framework and set of questions for companies and their boards to consider when deciding on how they report their performance.

The report supplements the current regulatory focus on the reporting of performance following the guidance on alternative performance measures issued by the European Securities and Markets Authority and the FRC’s reviews on the application of that guidance.

The next phase of the project will seek to identify examples of how these principles can be put into practice. Investors and the Lab is looking for companies to take part.

Phil Fitz-Gerald, director of the Financial Reporting Lab, said: ‘The Lab’s report highlights the importance of ensuring that there is a clear link between the metrics reported by a company and what the company is trying to achieve. The Lab’s report sets out the questions that companies should ask themselves to ensure that the metrics they choose are of most help to investors.’

The Lab’s report ‘Performance metrics – an investor perspective’ is here.

Investor advisory group

The FRC has announced the membership of its new Investor Advisory Group (IAG).  The IAG will provide a regular forum for the FRC to engage with representatives from across the investment chain on various issues, including our strategy and plan and new policies and standards, on governance, stewardship, reporting and audit matters.

The members are: 

  • Amra Balic, managing director, EMEA investment stewardship team, BlackRock
  • Andrew Cave, head of governance & sustainability, Baillie Gifford
  • Ben Yeoh, senior portfolio manager of global equities at Royal Bank of Canada Global Asset Management
  • Carine Smith Ihenacho , chief corporate governance officer at Norges Bank Investment Management
  • Daniel Summerfield, who co-heads the responsible investment team of USS Investment Management
  • David Gorman, head of research at Castlefield Partners
  • Faith Ward, chief responsible investment officer, Brunel Pension Partnership
  • Janice Turner, founding co-chair of the Association of Member Nominated Trustees
  • Kazim Razvi, a director at Fitch Ratings
  • Laurie Fitzjohn-Sykes, who leads on corporate governance in HSBC Global Research.
  • Leon Kamhi, head of responsibility, Hermes Investment Management
  • Michael Marshall, director of responsible investment & engagement at LGPS Central Limited
  • Mohammed Amin, representing UKSA and ShareSoc
  • Natasha Landell-Mills, head of stewardship, Sarasin & Partners
  • Nathan Leclercq, head of UK research, Institutional Shareholder Services
  • Paul Marsland, senior analyst in the ESG Team at pan European broker Kepler Cheuvreux
  • Simon Siu, principal and deputy head of finance, BT Pension Scheme

Report by Pat Sweet

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