UK Requirements for Board Reporting
We review some of the most sensitive and complex areas for which reporting is required. Modern governance tools can help boards to manage reporting efficiently and effectively, with the help of the company secretary and board management software.
Financial reporting for quarterly and annual reports is a critical responsibility of the board. Much of this is managed by the auditors and the Audit Committee, but the board as a whole must review and approve the final report. Particular attention must be given to the narrative reporting that goes with the financial accounting, to ensure that the story told correlates with the numbers provided.
The board chair should report personally on the current state of the organisation, presenting a fair, balanced and easily understandable assessment of the company’s position and prospects.
If there are uncertainties about a company’s continued existence, then a statement should be made about whether it is appropriate to adopt a “going concern” basis of accounting, explains Deloitte in a note. “The annual and half-yearly financial statements should address whether directors consider it appropriate to adopt the going concern basis of accounting, and identify any material uncertainties to the company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements.” If there is any doubt that the company will be able to meet liabilities, it must be stated in the reporting.
It is up to the company secretary to gather all of the data required for these reports. Modern Governance tools like board management software make this efficient with secure messaging to Audit Committee members, external auditors, etc., as well as databases to structure the reporting.
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Risk Management Reporting
“The directors are responsible for making a robust assessment of the principal risks facing the company,” the note continues, “and have a specific responsibility for monitoring the company’s risk management and internal control systems, and ensuring they are sound whilst also maintaining an appropriate relationship with the company’s auditors.”
Risks evolve, so the controls intended to manage risks must change as well. As a company grows, the amount of risk it is exposed to grows with it. And cyber risk is now an area all its own, one that the board is responsible for managing and for which reporting is mandated by the Corporate Governance Code and by the Data Protection Act of 2018.
The company secretary should manage this complex reporting effort, using board management software with secure communications and messaging channels to hold the necessary discussions with management. Data collection can be managed in a secure environment as well.
Decisions on director and executive remuneration must now be reported in detail. At larger organisations, where there is a remuneration committee, the committee chair’s statement constitutes the first part of this reporting.
The annual remuneration report should explain the logic behind the decisions made with regard to new appointees as well as for the existing board members. Detail should be sufficient for shareholders to get a full understanding of how these decisions were made.
And, finally, there should be a remuneration policy statement that lays down the principles behind the remunerations decisions. This policy should explain the underlying philosophy of the choices made by the committee and the board as a whole.
The company secretary should use board software to pull together all the elements of this complex reporting task. First, working closely with the chair and with the committee, part of the role of the company secretary includes collecting all the policy choices, the logic behind decision-making and any discretion exercised – all this can be structured using tools that are part of the boardroom software.
As regards remuneration policy, the company secretary should compile a document based on discussions with the board, and then make it available to board members for comment – all of this can be done easily using meeting management software.
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Strategy and Stakeholder Relations
The board must also report on what is called a “Section 172” report, named for that section of the Companies Act. This is reporting on how a director’s actions serve to promote the best interests of the company in terms of strategy.
“In exercising that duty, there is a non-exhaustive list of matters to which the director must have regard. These include the interests of the company’s employees and the need to foster the company’s business relationships with suppliers, customers and others,” writes the London-based law firm Ashurst.
The Government believes that requiring companies to disclose how directors have had regard to these interests will encourage directors to think more carefully about how they are taking these matters into account and will encourage better boardroom engagement with employees and other stakeholders. It will also give shareholders more information with which to hold boards to account.
For the company secretary, this involves a great deal of communication and messaging so as to get the views of all involved. The board portal software will be invaluable in secure communications, recording and transcribing conversations, and in compiling the report. It will also facilitate director review and discussion of the draft report.
Diligent Board Management Software – the only Modern Governance Solution
Good governance isn’t just one thing – so why buy software that only manages your board documents? Diligent boards empower leading organisations around the world to turn good governance into a competitive advantage for their business. In the ever-changing landscape of the world, corporate governance hasn’t kept up with the fast pace of business. Quarterly board meetings, paper board books and not using secure communication tools for sensitive data have opened up numerous companies to risk.
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