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OFR: Keep Up the Good Work: Read how opinion formers reacted to the recent Government announcement.
The Chancellor, Gordon Brown stunned British business during his speech to the CBI on Monday, 28th November 2005, announcing that the Operating and Financial Review (OFR) would be withdrawn despite election promises. Reaction from the City has been mixed. Sir Digby Jones, President of the CBI welcomed the reforms, describing the Government's about-turn over the OFR as a "tangible deregulation move".
Support for the decision was not shared by the Association of British Insurers (ABI). "We have seen the OFR as an opportunity for boards to lay out material issues in a way that improves the understanding of shareholders of a company's approach to longer term issues and thereby creates a framework for improving the quality of shareholder engagement. This is a good antidote to short termism, and we were happy with the compromise reached between the DTI and all consultees on a light touch regulatory approach.
The Chartered Institute of Management Accountants (CIMA) said that OFRs would have improved the quality of non-financial information provided to shareholders and other stakeholders. "We think this is a fundamentally bad decision," said Charles Tilley, CIMA Chief Executive
The Association of Chartered Certified Accountants was dismayed that this would no longer be part of a new package of reforms being introduced. "We query what has caused the Government to change its mind so dramatically on the OFR, particularly since provisions dealing with the new statement appeared in the long-awaited company law reform bill when it was published earlier this month," said John Davies, head of business law at ACCA.
Major investors expressed their disappointment at the abandonment of the statutory backing for an OFR. Karina Litvack, head of governance and socially responsible investment at F&C, said: "We hope companies will continue to work towards implementing OFRs, albeit on a voluntary basis." Anita Skipper, head of corporate governance at Morley Fund Management, which invests £148 billion on behalf of Norwich Union policyholders, said: "We were surprised and disappointed. The OFR would have given companies the opportunity to educate, explain and persuade."
Responding to criticisms of the OFR announcement, a Treasury spokesman said: "It is, of course, best practice for companies to report on social and environmental strategies relevant to their business and the government welcomes the moves of many companies to do just that."
Jason Perks, Director of Sd3 said; "The Chancellor appears to have
taken a rash decision to please one faction of UK Plc. The lack
of welcome from the City speaks volumes. This is a short-sighted
gesture that will do nothing to move capital markets from value-draining
short-termism. Companies that want to be rewarded for their long-term
value creation will need to continue to provide more strategic information
to shareholders and stakeholders."
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"The Chancellor appears to have
taken a rash decision to please one faction of UK Plc. The lack
of welcome from the City speaks volumes."
Jason Perks, Sd3 Director
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