Financial Times – Exchange acts to end burden of governance

- Financial Times – Exchange acts to end burden of governance

The London Stock Exchange is launching a service designed to wipe out “survey fatigue”, in response to complaints that companies are being swamped with polls and questionnaires about their corporate governance and social responsibility policies.

Increasing demands of investors, rating agencies and consultancies for non-financial information have resulted in some companies answering more than 200 questionnaires a year about governance and ethical matters.

The LSE hopes to end the onerous burden next month with the launch of an online disclosure tool called the Corporate Responsibility Exchange.

The single survey – designed to fulfil the requirements of all the main ratings systems and remove the need for companies to complete multiple questionnaires – will include questions ranging from the independence of board members to the company’s record on carbon emissions, health and safety and dealing with suppliers.

The launch follows the recommendations of an industry-wide working party, set up in April, which concluded that the duplication involved in replying to myriad surveys was “inefficient”.

Heightened concern about the risks posed by poor governance, ethical lapses or environmental mismanagement has swelled requests for detailed information about whether companies are meeting acceptable standards. GlaxoSmithKline said that about 15 new agencies had requested information from it in the past year, with questions that often covered similar ground.

The LSE said that its new product should wipe out existing duplication.

We want to reduce the reporting burden for listed companies. We are already in dialogue with half of the FTSE-350, which reflects the size of the burden of current reporting methods for corporate social responsibility and corporate governance.

Simon Wilkinson, Head of Regulatory News Service, London Stock Exchange

“Companies invest a lot of time and effort in this field and any service that makes it easier to report information is a good thing. But there should never be a statutory obligation to do so.”

CBI, the business lobby organisation

The LSE said the process was voluntary.

Research this year by the LSE and the UK Social Investment Forum, a lobby group promoting social, environmental and ethical issues, found listed companies devote an average of seven working days of an employee’s time each month to form-filling on corporate responsibility. In one in five companies, a senior official spends more than half their time gathering such data.

The working party, led by the LSE and UKSIF, included executives of three leading social responsibility rating agencies, representatives from 11 companies including Royal Bank of Scotland and GlaxoSmithKline and six asset management firms including Jupiter and Insight.

Craig Mackenzie of Insight said the new service would reduce costs for all involved and increase the quality of information available to shareholders.

Using the Corporate Responsibility Exchange will cost companies between £800 and £3,000 a year while interested parties will be charged £20,000 a year to access the database. That compares with the £25,000 that BT Group says it costs every year to respond to the surveys.

By Sundeep Tucker, Investment Correspondent
© Copyright The Financial Times Ltd 2004.