FTSE 100 companies told 'to stop' quarterly reporting
A report released today by the Investment Association (IA) will detail plans to stop companies producing quarterly reports.
The 'action plan' aims tackle what the IA – the industry group which represents institutional investors – sees as the UK's productivity problem by setting more long-term goals in an effort to end "short-termism".
The report states that quarterly reporting is a "distraction" that pulls "company resources away from longer-term strategic considerations". It is these long term goals that investors are looking at during their research process. The IA believes that quarterly reporting detracts from the quality and scope of annual reports, which they state are the "building blocks" of any investment decision.
The UK-backed European Commission proposal to remove mandatory quarterly reporting was enacted into UK law in May 2014. Companies including Legal & General, Unilever and the National Grid have already removed interim reports. However, many companies have continued to report quarterly.
Companies who continue to report interims will now be asked to explain why they have done so and how it fits into their long-term strategy.
“Long-term investment is crucial to our plans to boost productivity," said Lord O’Neill, Commercial Secretary to the Treasury.
“That is why today’s report is a significant step in the right direction because it shows that investors are taking action to encourage the kind of long-term investment that we need."
Melanie Mclaren, Executive Director Codes & Standards at the Financial Reporting Council (FRC), also welcomed the report, saying that “improving the UK’s productivity is a key challenge for the nation’s future prosperity".
The proposed action has been generally well received by the industry, however some feel that scrapping interims is not enough.
In an article featured on the Management Today website, Adam Gale said that the measures will not bring about “a serious cultural shift in Britain’s board rooms” but that the best way for CEOs to look at the long term is “to get their big investors on board for the long haul”.