CONTENTS OF CORPORATE GOVERNANCE REPORT

Best practice Corporate Governance report

Several corporate governance codes of practice prescribe the content for a report as part of an annual report. Although these vary slightly, the following are prominent in all cases.

1. Information on the board and its functioning. Usually seen as the most important corporate governance disclosure, this concerns the details of all directors including brief biographies and the career information that makes them suitable for their appointment. Information on how the board operates, such as frequency of meetings and how performance evaluation is undertaken is also included in this section. This section is particularly important whenever unexpected or unanticipated changes have taken place on the board. Investors, valuing transparency in reporting, would always expect a clear explanation of any sudden departures of senior management or any significant changes in personnel at the top of the company. Providing investor confidence in the board is always important and this extends to a high level of disclosure in board roles and changes in those roles.

2. The committee reports provide the important non-executive input into the report. Specifically, a ‘best practice’ disclosure  includes reports from the non-executive-led remuneration, audit, risk and nominations committees. In normal circumstances, greatest interest is shown in the remuneration committee report because this gives the rewards awarded to each director including pension and bonuses. The report on the effectiveness of internal controls is provided based in part on evidence from the audit committee and provides important information for investors.

3. There is a section on accounting and audit issues with specific content on who is responsible for the accounts and any issues that arose in their preparation. Again, usually a matter of routine reporting, this section can be of interest if there have been issues of accounting or auditor failure in the recent past. It is often necessary to signal changes in accounting standards that may cause changes in reporting, or other changes such as a change in a year-end date or the cause of a restatement of the previous accounts. These are all necessary to provide maximum transparency for the users of the accounts.

4. Finally there is usually a section containing other papers and related matters which, whilst appearing to be trivial, can be a vital part of the accountability of directors to the shareholders. This section typically contains committee terms of reference, AGM matters, NED contract issues, etc.