VOLUNTARY DISCLOSURES - ENHANCE ACCOUNTABILITY?

Explain why the disclosure of voluntary information in annual reports can enhance the company’s accountability to equity investors

Voluntary disclosures are an effective way of redressing the information asymmetry that exists between management and investors. In adding to mandatory content, voluntary disclosures give a fuller picture of the state of the company.

1. More information helps investors decide whether the company matches their risk, strategic and ethical criteria, and expectations.

2. Makes the annual report more forward looking (predictive) whereas the majority of the numerical content is backward facing on what has been.

3. Helps transparency in communicating more fully thereby better meeting the agency accountability to investors, particularly shareholders.

4. There is a considerable amount of qualitative information that cannot be conveyed using statutory numbers (such as strategy, ethical content, social reporting, etc).

5. Voluntary disclosure gives a more rounded and more complete view of the company, its activities, strategies, purposes and values.

6. Voluntary disclosure enables the company to address specific shareholder concerns as they arise (such as responding to negative publicity).