Which piece of regulation about annual reports do you like the most when it comes towards being both investor friendly, and crucial? Could you also explain why?
An Annual Report is the most comprehensive corporate document that is prepared for and disseminated to the shareholders. Every single part of this financial document, I feel, is essential and gives the shareholders a detailed insight into the workings and also the future of their company. It is not just a compilation of the company's financial achievements and strengths, but today covers larger issues and special initiatives taken during the year towards the environment and for the community.
It's a work in progress and we see newer regulations being added to the scope every passing year. In recent years, I feel the inclusion of various Capitals in the scope of the Annual Report as also the detailed Business Responsibility and Sustainability Reporting (BRSR) are some interesting regulations. This gives investors, particularly retail shareholders, an insight into the company's long-term objectives and sustainability goals, which are beyond hard numbers. The BRSR, which covers the Environmental, Social and Governance (ESG) and Sustainability aspects of the company's performance, also allows them to better understand the environmental impact, social responsibility, and governance practices of companies.
Which piece of regulation do you like the least, and which possibly could be done away with? Why?
Mandating the sharing of employee remuneration information, I feel, is unnecessary. This is confidential information and should not be put in public domain. In case the regulator or authorities require such information, they can always seek the same from the companies and the companies would be more than willing to provide these details. This is one regulation that I feel should be done away with.
Can you suggest at least a couple of ways in which compliances could become more meaningful without impairing investor friendliness? The idea is to make the annual report less cluttered with details but more relevant to investors.
Duplication of information should be avoided. Today, regulations require companies to provide information related to technology absorption and risk management, among others, to be shared as part of the various Capitals and also in the BRSR and Corporate Governance sections of the Annual Report. This has made the document bulky with a lot of information being duplicated. Discontinuing this duplication will go a long way in reducing the size of the report while not impairing its investor friendliness and making it more meaningful for investors.
Would you like a forward looking statement in annual reports? If yes, what would such statements include? If no, please explain why?
I personally feel that forward-looking statements should be avoided in the annual report. The annual report is a statement of the events of the previous year. As per regulations, any forward-looking statement that may have an impact on the company’s stock price needs to be first disclosed with the stock exchanges and only then can it be shared with the public. Also, given the fact that the annual report has today become a bulky document that runs into 300-plus pages, the forward-looking statements would get lost in the report.
Should penalties for company secretaries be compulsory and more severe, for allowing untrue statements creeping into annual reports? We would like you views on this because the CS is the nodal officer for all matters relating to corporate governance.
Penalties are already provided under different acts like the Companies Act and SEBI LODR. The fact remains that all statements and disclosures in the annual reports are first approved by the Board, and companies will always ensure that only factually correct information and true statements are presented in this document.
