The proposal is that all UK quoted companies (around 1,290) should make an annual narrative report to shareholders, setting out the main drivers of their performance both in the past and for the future. This will include a description of the main risks faced by shareholders as well as information on the environment, employees, customers, social issues and community impacts, where they are relevant. In the words of Secretary of State for Trade & Industry, Patricia Hewitt, 'The OFR will... complete the corporate jigsaw to give investors a clearer picture. It will also help the owners of the business better understand their organisations and how people perceive them.'
The regulations have now gone into another consultation phase. There are already some criticisms. The CBI has warned that the new requirements 'will expose companies to excessive reporting burdens and damaging litigation,' because draft regulations impose a requirement that auditors report on whether the OFR has been prepared by the directors 'after due and careful inquiry'. However, the CBI says that, in principle, business supports OFRs. And certainly OFRs will give those companies that are managed well, and that take their corporate, social and risk management responsibilities seriously, the opportunity to demonstrate the fact - in a format that allows comparison with those who do not.