John Pierce, chief executive,
Quoted Companies Alliance
Arguing against OFRs is like arguing against motherhood and apple pie
The introduction of these OFRs comes on the back of pressure on the government from NGOs who are trying to push the corporate social responsibility agenda, which is starting to get a bit prescriptive.
There is very little pressure from investors requiring this information and therefore it is a politically-driven requirement, and we would prefer things like this to be market led. But, of course, arguing against OFRs is like arguing against motherhood and apple pie, because all the review issues are worthy things to cover. At the end of the day, it is a company's job to enhance shareholder value and make money. I know there is a strong argument that in terms of long term sustainability these issues are important, but I would argue whether a company should have to report on them or not.
OFR also comes at a frightful time as everyone is wrestling with new accounting standards and it is the first year of the Combined Code requirements.
This is just one more thing for principally the finance director to have to cope with and co-ordinate.
You'd hope that all the information could be wrapped up in one comprehensive review of the business by the chief executive and signed off by the board.
But instead, these OFRs are going to add to annual reports that are getting bigger and bigger.
Eric Anstee, chief executive, ICAEW
Smaller quoted companies in particular will suffer as they expected to be outside the scope of the statutory OFR
Some companies have been preparing an OFR, or disclosing equivalent information, on a voluntary basis for some years, but compliance with the existing voluntary code has been patchy. In general, companies have not risen to the challenge of providing high-quality, forward-looking information in their annual reports. The proposed requirement should help achieve this.
The ICAEW does, however, have concerns about the timing of statutory OFR, which will come into effect for accounting periods starting on or after 1 January 2005. This would limit the time available for the Accounting Standards Board (ASB) to consult on the new standards it will have to develop and also for companies to prepare. Smaller quoted companies in particular will suffer as they expected to be outside the scope of the statutory OFR.
Alun Bowen, senior partner, KPMG
A stick to beat business with
The concern with these reviews must be for companies who are not so well prepared in terms of internal processes. After all, it has been well flagged in the media that various stakeholder groups, NGOs and lobbyists will look to use the OFR as a stick to beat big business with.
Social and ethical issues could become the next major focus of external stakeholders in much the same way that pensions and executive pay were previously.
Mary Francis, director general, Association of British Insurers
Light touch welcome
We welcome the government's light touch approach, which appears hugely preferable to one that makes detailed reporting on a broad range of issues mandatory, regardless of their relevance to the company concerned.
In the hotseat, p42
Patricia Peter, corporate governance executive, Institute of Directors
Who is going to read it all anyway?
I have a fear that because of the involvement of the auditors and the penalty structure for misleading information, there's a risk that these reviews will become a standardised and boilerplate set of words that really don't convey what they are supposed to.
If you take into account both the costs of producing it and distributing it, and then the extra audit burden, it is going to be very onerous for companies. And who is going to read it all anyway?
OFRs could even have the effect of driving smaller quoted companies away from the main listing.
John Cridland, deputy director general, CBI
DTI has inadvertently gone too far
Business supports OFRs in principle, but the standards of compliance must not be over the top and at the moment it looks as if the Department of Trade and Industry has inadvertently gone too far. Our concerns centre on draft regulations that would impose a requirement that the auditors report on whether the OFR has been prepared by the directors 'after due and careful inquiry'.
This is one of the highest legal standards, which would impose excessive liability burdens on directors and lead to significant additional costs for companies in audit fees and professional advice.
We must get this right or we will expose companies to unnecessary and excessive reporting burdens, not to mention damaging litigation.
Adrian Henriques, director of assurance provider, justassurance
Potentially a good framework for those companies intending to report on their wider impacts The regulation is potentially a good framework for those companies intending to report on their wider impacts, but it also offers a hiding place for those with no such intention. The OFR will be the director's view of the relevant and significant issues that may be of interest to shareholders, and thus falls short of accountability in its broadest sense. The accompanying practical guidance is similarly open to broad interpretation.
In our experience, organisations that are not already engaged in the corporate social responsibility and accountability debate are likely to require education and support at all levels of the company if they are to review adequately risks and opportunities. This makes the timetable a particular concern: quality engagement with external stakeholders takes time, yet the regulation will be in force from January 2005.
John Davies, head of business law, ACCA
Government has missed chance The draft rules are likely to give some directors ample opportunity to decide that it is unnecessary for them to disclose any meaningful information on the impact of their companies' activities on stakeholders and the environment in particular. We consider that the government has missed the chance to make the OFR into a comprehensive tool of stakeholder engagement.
David Phillips, European value reporting partner, PricewaterhouseCoopers
Vital ingredient in investor communication
These reviews have come at a defining moment for corporate reporting.
Financial numbers alone are insufficient to report on the overall health of a business.
Communicating information on non-financial performance measures is no longer a 'nice-to-have' but a vital ingredient in investor communication.
Steve Jones, finance director, Rugby Estates, a listed company
I'm sure there'll be some hare-brained things in there
To some extent it shouldn't be a great problem for listed companies, although I'm sure there'll be some hare-brained things in there to talk about. Every year there is another half page on something to do with corporate governance. I guess you may not be able to skate over the risky areas in favour of the glossy stuff as one is inclined to do now.
I suspect it is not going to be as major a thing as the other new corporate governance initiatives, such as the Higgs Combined Code where we have got to go and do bald performance evaluations and somehow report on it, which for small companies like us we are still scratching our heads.
As an FD of a smaller listed company I tend to deal with these things once they are there - life's too short to go around reading all this stuff too far in advance.