UK: the future of narrative reporting - BIS consultation paper published

The Department for Business, Innovation and Skills has today published a consultation paper on the future of narrative reporting: see here (pdf). To quote from the paper:

This consultation is looking at how the narrative reporting framework is working in practice. How well are companies complying with the existing requirements? Are they focusing on their strategy, their principal risks and uncertainties and providing the right quality of relevant information on these matters to enable their members to hold them to account? Are shareholders actually using the information that companies provide? Do narrative reports generally reflect the intentions and spirit underlying the statutory framework? Are there ways to improve the narrative reporting framework as a whole?

The consultation focuses in particular on the business review provisions. In this context, the Coalition commitment to reinstate an Operating and Financial Review to ensure that directors’ social and environmental duties have to be covered in company reporting and investigate further ways of improving corporate accountability and transparency is particularly relevant. It also considers issues relating to remuneration, and in particular to the link between performance criteria for payment to directors and the company’s objectives and performance".

A consultation response form is available here (Word) and further background information is available here.

UK: BIS Committee report on Kraft's takeover of Cadbury - Government response

The Government's response to the House of Commons BIS Select Committee report Mergers, acquisitions and takeovers: the takeover of Cadbury by Kraft has been published: see here (pdf). This is an interesting and important document setting out, albeit briefly, the (new) Government's position on many governance related matters and highlighting the direction of future policy.

Much clearly rests on the outcome of the Takeover Panel's recent review of takeover regulation (see here, pdf) but the response states that the Government will shortly be consulting on how to improve the quality of narrative reporting, in order to strengthen engagement between quoted companies and their shareholders (this is, presumably, the context in which the Government will say more about its intention to restore the Operating and Financial Review). The manner in which institutional shareholders and their fund managers perform their role as "responsible owners" of UK quoted companies is another area identified for consideration.

UK: election 2010 - the Lib Dem manifesto

The Liberal Democrats published their election manifesto today: see here (pdf). The manifesto pledges that the party will work at the European level for "stricter international regulation of financial services and banking". It also pledges to "break up the banks" by requiring the separation of retail banking and investment banking.

With regard to those banks in which the Government has invested through UK Financial Investments Ltd., the manifesto states that the "taxpayers’ representatives on the boards of the banks the public own or part-own should insist banks lend to viable businesses on fair terms again" but offers no detail on how this would be achieved.

With regard to corporate governance broadly defined, the manifesto states that public companies will be required "to declare in full all remunerations of £200,000 per year or more". This is somewhat vague. Does this mean that individuals' names will be disclosed or just the number of directors and employees earning £200,000 or more? The manifesto also contains these pledges:

We will restore a public interest test so that a broader range of factors than just competition can be considered by regulators when takeovers are proposed and we will ensure that the outcome of takeover bids is determined by the long-term shareholder base. We will reintroduce the Operating and Financial Review, dropped in November 2005, to ensure that directors’ social and environmental duties will have to be covered in company reporting".

Some questions: which shareholders constitute the long-term shareholder base? To which companies will the requirement to publish an OFR apply and what will the reprised OFR contain that is not currently required in the business review under Section 417 of the Companies Act (2006)? What is a social duty?