How I learned to stop worrying and love the governance report

Richard Costa

A different mindset would transform governance reporting into something more akin to the annual report’s singing and dancing front end. It’s down to what you want your audience to think or do after reading it.

It’s been a long time coming. A new principle in the FRC’s Corporate Governance Code (the Code) asks governance reports to emphasise board decisions and outcomes in the context of strategy and objectives. Of course, the FRC has encouraged companies to do so for years but has been mainly rewarded with boilerplate statements and lists of topics discussed that provide little insight.

The typical appearance of the governance report reveals the status quo. Beyond the photos of the directors’ younger selves lies dull text that makes little effort to tell us what the board has been up to. If mystery is attractive in show business, it isn’t here. Shareholders – no, all stakeholders – value transparency. Moreover, they want to see strategic stewardship in action. Governance reporting should exemplify it.

Such an approach is taken for granted in the strategic report. The glossy earns its moniker in the ‘front section’, where straplines, feature panels, and information graphics appear in relentless succession. If the cumulative effect can leave the reader scratching their head rather than stroking their chin, it also demonstrates the double standards being applied.

The governance report has always been the poor relation of its glamorous strategic counterpart. The reasons are historic. Annual reports were conceived to provide financial updates and operational reviews. Demonstrating good governance just wasn’t a thing. The modern-day exhortation – familiar to this readership – to align with stakeholder capitalism, reveals the cultural aftermath of corporate governance disasters like Carillion, Parmalat and Enron.

Today, society calls upon businesses to be good citizens, create prosperity, and protect people and the planet. Audiences dig deep into companies’ governance and sustainability. These expectations drive the Government’s “Restoring Trust in Audit and Corporate Governance” agenda enshrined in regulation. Boards must colour financial results with non-financial accomplishments and balance short-term gains with long-term ambition. Corporate governance reporting has never mattered more.

This backdrop necessitates a new approach to governance reporting, bringing it up to par with strategic reporting. The Code nudges us in the right direction, but a reactionary mindset is hard to spot when it is pervasive. It is accepted unquestioned, and it is the total of many little things.

Take, for example, the Chair’s letter at the beginning of the strategic report. It’s a legacy of days before the strategic report was introduced in 2014. When you are unconsciously biased to perceive the governance report as playing second fiddle, continuing to appear front in the book seems sensible, even if the strategic report’s disclosures are more pertinent to the CEO.

But the strategic and governance reports are equally important in the cold light of day. They focus on distinct aspects and play complementary roles. Appearing here or there doesn’t reflect status but remit. You may choose to sequence the governance report before the strategic report. Heresy? Disconnect the report from its traditional print-based medium; there is no linear arrangement in a digital environment.

“ The governance report has always been the poor relation of its glamorous strategic counterpart.”

My recommendation is to:

1. Feature one letter by the Chair and one letter by the CEO. Showing up is good, but don’t overstay your welcome.

2. Elevate governance reporting to a standing equal to strategic reporting. The governance report is where the one letter by the Chair should find its pride of place.

3. Use the letters to highlight clear roles and responsibilities; demonstrate ownership and accountability.

The Code update confirms governance reporting must become more comprehensive and analytical, akin to strategic reporting. As stakeholders demand more meaningful information, governance reports must shift from compliance to communication to engagement. It’s down to what you want your audience to think or do after reading them.

This article first appeared in the Spring 2024 IR Society bulletin “Informed”.

If you’d like to discuss this, or any other subject, please get in touch with Richard Costa, Senior Corporate Communications and Reporting Consultant at

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Richard Costa

How I learned to stop worrying and love the governance report

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