Company reporting needs to look past earnings and towards values

BROUGHT TO BOOK: The ValueReporting Revolution (Moving Beyond The Earnings Game) By Robert G. Eccles, Robert H. Herz, E. Mary Keegan, David M.H. Phillips Wiley, $29.95 ($44.95 Can)

Many companies find themselves locked into the earnings game - the strategy focused on short-term earnings, which, in reality, tells little about future stock market performance.

The consequences of this reporting model can be excessive: price volatility, inaccurate valuations and over-reliance on market gossip.

In recent times there has been an upsurge in investor involvement and a change in the way enterprises compete and create value.

The value of many firms is measured in clicks rather than bricks, and many companies possess intangible assets such as brand recognition and market share.

However, we may be going backwards rather than forwards. After the bursting of the dotcom bubble, the markets have veered from valuations of promising ideas to focusing with a vengeance on earnings.

The ValueReporting Revolution is a manifesto. According to the PricewaterhouseCoopers authors, it is a wake-up call for managers to commit to transparency - reporting information on all the performance measures used internally, including what other stakeholders think is important, such as social and environmental responsibility.

For example, companies in the mining, oil and gas fields are under the spotlight.

The strength of feeling at World Trade Organisation summits in Seattle and Genoa is not going to go away; corporate spin-doctors can't have it all their own way any more.

Shell started a re-evaluation process in the mid-1990s but it was too late. Before executives could say Greenpeace, the multinational got clobbered in the PR nightmares of the disposal of the Brent Spar oil installation and the execution of Ken Saro-Wiwa and other human rights assaults in Nigeria.

Shell has changed tack and adopted a decision-making approach that attempts to be open and accountable.

A successful business responds to the concerns of stakeholders and not just shareholders.

There is now an emphasis on eco-efficiency, sustainability, customer loyalty and responsibility.

Accountants and analysts must become part of the solution rather than part of the problem. The authors argue regulation, technology and enterprise combined are the catalysts for giving the markets the information they need.

The ValueReporting Revolution is an extensive and ambitious argument about corporate reporting and is aimed at investors as much as executives.

Those who want to do more than talk about a revolution can log on at www.valuereporting .com.