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Lengthy annual reports and board packs create a poverty of attention

30 January 2018 by Henry Ker

Lengthy annual reports and board packs create a poverty of attention - Read more

Having too much information on an organisation is as bad as having too little

Nobel-prize winning economist Herbert A. Simon once said ‘a wealth of information creates a poverty of attention’, arguing that as the data available to us increases, our ability to digest and understand it becomes strained. Never is that more true than with company information.

In this month’s Governance and Compliance we explore this maxim on two fronts: the annual report and board packs.

While other companies’ annual reports continue to grow with each passing cycle, HSBC recently cut theirs by an impressive 44%.

I spoke to Ben Mathews, group company secretary at the bank and the man behind this project, who gave some insight into the problems facing corporate reporting and how to tackle them – not least because ‘at one point, the Royal Mail was limiting the number of HSBC annual reports that its delivery people could carry at any one time.’

‘There is still a problem where … the annual report is seen as the entry and exit point for any information regarding a company,’ Mathews says. With each new regulation comes additional requirements for disclosure, pushing the volume of information beyond a manageable level.

One of the main purposes of the report, to satisfy various stakeholders about the company’s performance, is becoming buried in minutiae that could easily, and more effectively, be disclosed in another way.

Hopefully HSBC will be the start of a movement in reporting which actually prioritises comprehension over obfuscation.

ICSA, in tandem with Board Intelligence, have begun a project examining the current state of board packs. Chris Hodge, ICSA policy advisor, outlines the initial findings: ‘Nearly three-quarters of all respondents believe that their board packs were currently too long … large organisations are producing an average of 2,000 pages of information for their board members to absorb every year.’

Not only is the cost in terms of staff resource an unnecessary burden on companies, but as Simon Osborne explains: ‘If the board pack does not provide board members with a clear, truthful perspective of the company’s recent history and foreseeable future, then the directors have little or no chance of discharging their duties effectively.’

That is a serious problem. A dramatic rethink is needed on the amount of information that is actually necessary, before our attention is killed off all together.

Henry Ker is editor of Governance and Compliance

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