Navigating outcomes-based corporate governance reporting: UK Corporate Governance Code 2024

Published: 26 November 2024

6 minute read

In this In Conversation podcast episode, Ian Stephens, Senior Corporate Affairs Manager, sits down with Maureen Beresford, Acting Director of Corporate Governance and Stewardship, to discuss the updates to the 2024 Corporate Governance Code outcomes-based reporting. Ian and Maureen discuss how companies can move beyond boilerplate statements to provide meaningful insights about the impact of their governance decisions, breaking down the practical implications of these changes and shares examples of effective reporting practices.

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Transcript

0:13
Hi all and welcome to another FRC.

0:16
In conversation today we're going to be looking at the annual review of corporate governance code reporting and in particular a focus on outcomes-based reporting.

0:26
I'm joined here today by Maureen Beresford, Director of Corporate Governance and Stewardship.

0:30
Hi Ian and let's get into it.

0:32
So Maureen, what in the code has changed in relation to outcomes?

0:38
Obviously at the beginning of this year we introduced the new corporate governance code and, in the discussions, we've had over last year's consultation.

0:46
And during the publication of the new code, there's a lot of interest and outcomes.

0:50
So what's really changed?

0:51
Yeah, thanks Ian and hi everybody.

0:53
So the 2024 code which will become effective next year has put a real emphasis on the importance of outcomes-based reporting.

1:01
And this is what we're trying to do is to move from some boilerplate reporting to more insightful reporting and actually by doing so reduce the length of the annual report.

1:13
For those of you that read the code cover to cover, you'll know that we don't talk about outcomes-based reporting in the body of the 2018 report under the principles, it's in the introduction.

1:24
But what the 2024 code does, it includes within principle C the word in governance reporting should focus on board decisions and their outcomes in the context of the company's strategy and objectives.

1:37
And I just, I emphasise the word focus on because that doesn't mean to the of everything else.

1:43
There is some really good reporting on policies and practises of governance, but we want to shift the dial a little bit and to look for a focus on the.

1:52
So what I started saying outcomes-based reporting is the So what?

1:56
So you've got a policy, you've got a practise, you've made a decision, what's that impact been?

2:01
And that's what we're trying to achieve in the reporting.

2:03
Thanks, Maureen.

2:04
And are we expecting companies to report on every outcome?

2:07
I mean, presumably there will be certain activities that might not have an outcome which could be observed in the same financial year as the report.

2:15
Great question, Ian.

2:17
And the answer is absolutely no.

2:19
We don't want to see reporting that has 55 policies and 55 outcomes listed against it.

2:24
I don't think that's insightful.

2:26
That's not helping anybody that's reading it now.

2:28
And even and those people that maybe want to make some decisions based on the reporting and we want companies to think about what's important, what's related to their strategy and what impact that will have for the reader.

2:40
So there'll be some that are more important.

2:42
And also, we're very aware that outcomes quite often don't have an immediate observable issue, an outcome, they don't have an outcome each year.

2:52
So you know, you there might be an outcome three years down the line, there might be some key milestones to something that you want to report about.

3:00
There might just be a general trajectory that's useful to talk about in your annual reporting.

3:05
So I don't want companies and those that are writing annual reports to think that they need to write an outcome against everything.

3:12
And I think that's a really important message from today's podcast.

3:15
Equally, we don't want people to be worried about commercially sensitive issues.

3:20
You know, we that's the last thing that we want companies to be to be reporting.

3:23
It's really important that we get a balance here.

3:25
So yeah, look at the policies, the practises and what would be insightful and useful for the reader and particularly what's a board decision or a significant decision.

3:36
And I think you touched upon it slightly in your answer there, but just maybe be helpful if, if we expand a little bit on why it is important that companies do report on their outcomes and also the position on this.

3:50
That's what I was saying earlier about policies and practises.

3:52
We talk a lot about governance policies and practises and what's good and you might have a diversity policy, you might have a policy on engagement with your stakeholders, etcetera and which is great, but what does that mean?

4:05
What is the impact of those policies?

4:08
What are the objectives of policies and do the policies actually achieve those objectives?

4:13
So it's that achievement of, you know, the objective that the policy or the piece of work was trying to get to.

4:19
What we see in reporting quite often is the declaratory statements.

4:24
All, you know, we've termed them boilerplate statements, which might say something along the lines of the chair was available to engage with stakeholders during the year.

4:35
Well, that's not actually telling the reader anything.

4:38
You know, you think about that.

4:39
Did that person engage with them?

4:41
Was their engagement asked for and it didn't occur?

4:44
What were the issues maybe that we're engaged of and maybe what were the outcomes of such engagement?

4:48
So we're trying to move from that declaratory type of statement.

4:52
Equally, you might have those, and this might be picked up in the podcast later on diversity, but there might be a declaratory statement that says we support diversity in the boardroom, but that again, that doesn't tell you anything.

5:04
You know, do you have a policy on diversity in the boardroom and senior management, etcetera, etcetera.

5:09
And have you achieved what you set out to achieve?

5:12
And so the 2024 code places great emphasis on the importance of outcomes-based reporting and alongside the code we published guidance to help support firms.

5:23
So I wondered if we could dig a little bit deeper into how that guidance supports firms and companies consider reporting on their outcomes.

5:32
Yeah, that's great question, Ian.

5:34
The guidance is there to support companies.

5:37
And I just want to make it clear in this podcast that the guidance isn't there to add to reporting.

5:42
We want the guidance to help boards or managers or company secretaries, etcetera, think about the reporting and how they might deliver effective reporting.

5:52
It's not there to add additional burdens.

5:54
We want reporting always to be proportionate for the company.

5:57
So what the guidance does, it encourages companies to consider reporting on their objectives, their decisions, their actions and their impacts.

6:05
And again, as I said, in a way that doesn't mean you have to report on every single outcome.

6:11
You know, I mentioned policies and practises before and how that doesn't give you the outcome, but it might be useful to set some context on the policies and practises and maybe some appropriate signpost into a website.

6:22
So some other reporting just to reduce the length of the reporting.

6:26
We really don't want pages and pages.

6:27
We're really keen that annual reports in the governance sector should really be given the information that is useful to the stakeholders and it's insightful.

6:37
And I also add that the guidance talks about case studies being an effective way to deep dive into a specific decision.

6:43
And we've seen some of those case studies this year in our reporting.

6:47
Some companies have kind of said we engage, for example, with our shareholders on a remuneration policy.

6:53
These are the things that we discovered.

6:54
And as a result, we've amended our pay policy to include the following issues and the following targets, etc.

7:01
So that's a very simple way of reporting an outcome.

7:04
We've engaged, and the outcome was X or Y.

7:06
And I know the current code doesn't require outcomes-based reporting, but have there been any good reporting examples that you have seen so far?

7:15
Yes, Ian, you know we have been talking about outcomes-based reporting for a little while, as I said at the top of this discussion, but we've actually seen a slight increase in outcomes-based reporting this year.

7:27
So more and more companies are thinking about it and we're seeing it actually set out in a different way.

7:32
We're seeing some companies set out what their policy is, a little column on what they've done and then an outcome in a third column.

7:40
So that might be one way that some companies want to approach that.

7:43
There'll be more information on that in our annual report.

7:46
And but we've also seen reporting on outcomes not only in relation to engagement and we expected that's where many of the outcomes-based reporting will be because that's what the consultation told us.

7:59
It's much to report on how you've engaged with either the workforce or a shareholder or a supplier, for example, and what the outcomes is there.

8:10
But we've also seen some outcomes-based reporting on culture, for example, one company gave a good explanation of how they'd engaged on culture and what the outcome was along with the example that I gave earlier on remuneration, for example.

8:25
So there are lots of different ways to talk about outcomes space reporting, right?

8:30
Thank you, Maureen.

8:30
That's been a really interesting conversation on outcome space reporting and how exploring the areas in outcome space reporting to help companies prepare for reporting under the new code.

8:43
Is there anything further you would want to add?

8:45
I think we've covered quite a lot of ground there.

8:46
Ian.

8:47
My main message is just to reiterate are don't think you've got to report and everything outcomes may take a little while to actually come to fruition and keep it sinful and proportionate.

8:58
Great.

8:58
Thank you, everybody.

8:59
Thank you, Ian.