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Communicating company information

ALAN UNWIN

Industrial and Commercial Training

ISSN: 0019-7858

Article publication date: 1 September 1978

276

Abstract

Author's introduction Financial disclosure is nothing new. The Companies Acts and their associated regulations have long enforced the reporting of accounts and specified within fine limits the objectives, matter and manner of such reporting. The objectives are implied in the 1948 Act's instructions to directors to ‘deal with the state of the company's affairs and indicate the dividend they recommend and the amount they propose to carry to reserves.’ Shareholders must be interested in both the income they get from their shares and the safety of their money; hence they will want to know about dividends and the amount the company is reinvesting to ensure its stability and progress in the future. So disclosure, as traditionally enforced, is recognised as having the primary aim of satisfying the information needs of shareholders. But the law looks after the public interest too: in insisting that accounts should be available for public inspection, the state is implying that companies should demonstrate, through their accounts, that they are properly run. Already, then, we have three groups which are traditionally and legally held to have an interest in company reports and accounts: the shareholders, the state and the public. The idea that other groups should have a right to company financial information came late and gradually. The Industrial Relations Code of Practice made the first breakthrough in calling on companies to provide the same information to employees as they provided to shareholders, but it could only call; it could not enforce. With the Labour administration of 1974 came the first of the new requirements for disclosure, affecting both the information required and the groups to whom it should be disclosed. The Health and Safety at Work Act, for example, required companies to report arrangements for securing the health, safety and welfare at work of employees, and risks to others. The Employment Protection Act of 1975 went further and added trades unions to the list of those with a legal right to company financial information. This was information for a purpose: to improve the effectiveness of wage negotiation. This Act is now made more explicit by the ACAS Code of Practice. Pay and benefits, conditions of service, manpower, company performance and financial data are mentioned, but the Code does not have the full force of law. The one group which has aroused most interest, yet which has received least formal, legal attention is the employees (in general, as distinct from union members). Yet the background to all the legislation and discussion has always been the dream of worker participation, which with a more open style of management will, the idealists hope, lead to a new industrial climate in our country. Whatever the motives, the days when accounts were the concern of the shareholders alone are long gone. Shareholders, loan creditors, financial analysts and advisors, government, the public, the local community, business contacts, unions and employees are all freely mentioned as having a right, accepted in practice if not in law, to company financial information. It is daunting to reflect that until very recently all these diverse groups, each with its own aims and interests, have had to make do with a presentation of facts designed expressly for the financially‐sophisticated shareholder. The one group which has received most special treatment over the past few years is employees. The expectation of legislation rather than the legislation itself, coupled with a progressive thrust for a more open management style, has spurred managements to communicate more and better than the law demanded, and the result has been a truly remarkable flowering of designs, styles, presentations and packaging. Some companies have even extended their reporting to customers and the local community, suggesting a feeling for good neighbourliness and social accountability. The conclusions that can be drawn from all these movements will be discussed in the sections that follow. It is, however, already clear that with such diverse audiences, aims and interests, the development of methods of communication has been seriously lacking. Not that methods of communication will be sufficient in themselves, even when coupled with the most finely‐judged selection of material for each group: where complex organisations such as companies are concerned, understanding of one fact is often impossible without prior knowledge of another, and background knowledge varies widely between the groups we have to deal with. The sections that follow argue that we shall only stand a chance of success when company, employees, subject matter, method of communication and context are all brought together with the aim of communication; we shall also only succeed if we ask and answer the basic question: what are we trying to communicate? It is the author's contention that to communicate financial information is a secondary objective only. The primary aim is to tell people about the company; and there is far more to any company than its accounts will ever show.

Citation

UNWIN, A. (1978), "Communicating company information", Industrial and Commercial Training, Vol. 10 No. 9, pp. 363-369. https://doi.org/10.1108/eb003693

Publisher

:

MCB UP Ltd

Copyright © 1978, MCB UP Limited

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