Despite calls for greater transparency since the start of the financial crisis, a UK study of the chairman and chief executive officer (CEO) statements from FTSE 100 companies suggests that the value of shareholder information actually declined over a recent five year period.
Business analyst Metapraxis reports that its analysis of chairman and CEO statements from the top 100 UK blue chips between 2006 and 2011 found that, on average, 7% less financial data and 8% less forward-looking financial statements were being provided at the end of the period compared with the start.
The firm said that the fall in the quantity of financial data was largely a result of significant reductions in the information provided by FTSE 100 companies in the technology sector (down by 74%) and utilities industry (down 47%). The amount of forward-looking data in annual statements also decreased by 81% in the healthcare industry and 52% in the telecommunication sector. Technology was the only sector not to include any forward-looking financial information in annual statements.
“It is reasonable for shareholders to expect clear, forward-looking information from the directors responsible for managing the business,” said Simon Bittlestone, managing director at Metapraxis. “Only then can stakeholders can gain a strong understanding of how the business has fared and how it is likely to progress in the future.
“At Metapraxis we are tasked with helping companies improve management information to support decision making. Those companies that are not comfortable providing their shareholders with forward-looking financial information often have poor internal management information and little visibility of future performance, creating a lack of transparency and also an underlying anxiety amongst shareholders that management may not be in control.”
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