Investment Association calls for end to quarterly reporting

22 March 2016 -

The recommendation is just one of a suite of proposals aimed at improving British productivity

Matt Scott

The Investment Association (IA) is calling for an end to quarterly financial reporting as part of a set of sweeping reforms aimed at boosting productivity among British businesses.

Other key recommendations in the report include improved reporting of intangible assets, easier access to funding for small to medium-sized start-ups and a more long-term approach to incentives and investment strategies.

Commercial Secretary to the Treasury, Lord O’Neill who delivered the keynote speech at today’s launch, said: “Long-term investment is crucial to our plans to boost productivity. We need investors who are willing to back businesses that take this approach, whether it’s building a new factory or creating an exciting new product.

“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.”

The move will be a welcome one for Unilever chief executive and CMI Gold Medal Winner Paul Polman, who famously dropped quarterly reporting as one of his first acts when he took over as CEO.

“When Unilever stopped giving quarterly reporting, people asked how I did it,” he said in an interview with Professional Manager. “I just did it. In fact, I did it on my first day as I figured ‘they can’t fire me on the first day they hire me.’ That worked out well… you need to give a lot of people the courage, the permission, to do it. We want businesspeople that have deeper purposes that guide them long-term.”

The Productivity Action Plan revealed 12 key recommendations for improving the country’s productivity, chief among these are:

• Improve reporting and research on productivity and re-focus on longer-term strategic drivers – the IA wants to end quarterly reporting for listed companies, and instead focus on ‘reporting on a broader range of strategic issues’ by developing a suite of key performance indicators in conjunction with businesses
• Improve reporting on culture, human capital and accounting for intangibles – the profile of human capital management needs to be promoted as a ‘material investment consideration’ and the IA wants to engage with the IASB to advance its research into reporting on intangible assets
• Ensure that executive remuneration structures are aligned to long-term decision making – executive remuneration strategies should be reviewed, the report says, alongside an ‘extensive programme of engagement with listed companies’
• Encourage Equity Investment and Improve the Equity Offering Process – the report says the raising of capital should be made easier for small businesses by developing ‘earlier engagement between institutional investors and small and mid-size early-stage IPO companies’.

Andrew Ninian, director of corporate governance at the Investment Association, said the proposals demonstrated how committed the investment community was to helping business in its aim to improve productivity.

“Productivity improvements can help drive economic growth and require UK businesses to invest for the long term,” he said. “The Action Plan the Investment Association launched today, outlines how we as investors can play a fundamental role to help improve UK productivity and support long-term investment. The Action Plan seeks to deliver ambitious and achievable remedies to the ills of some of the most serious causes of short-term thinking in the British economy. The investment industry remains steadfast in its commitment to play its part in fixing the UK productivity puzzle and help fix the challenge of our generation.

“Fixing the UK’s productivity puzzle is a difficult task and the solutions are far from simple. This is a challenge that affects every corner of society and calls for a multifaceted response from the UK’s leading business and economic stakeholders. We hope this Action Plan plays a part in improving UK productivity.”