5.6.3 Board accountability, disclosure and communication

The G20/OECD Principles of Corporate Governance state that “The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, sustainability, ownership, and governance of the company.”¹

Timely and proper accountability strengthens the company’s transparency, which improves its relationships with stakeholders and increases trust.

The Board is responsible for overseeing the company’s performance, ensuring effective control of operations and being accountable to shareholders and other stakeholders for the company’s activities, disclosing a true, timely and understandable picture of the company’s position and prospects.

The annual report is the primary document for which the Board is accountable; it is described in the section “Disclosure and communication” below.

To give the Board, shareholders and other stakeholders external and objective assurance that the financial statements present fairly, in all material respects, the financial position and performance of the company, the financial statements must be audited by an independent, competent and qualified auditor in accordance with high-quality international auditing standards (see sub-chapter 5.2.6).

The G20/OECD Principles of Corporate Governance stipulate that the following information should be disclosed:²

1. The financial and operating results of the company
2. Company objectives and non-financial sustainability information
3. Capital structures, group structures and their control arrangements
4. Major share ownership, including beneficial owners, and voting rights
5. Remuneration of members of the Board and key executives
6. Information about Board members, including their qualifications, the selection process, their composition, other company directorships and whether they are regarded as independent by the Board
7. Related party transactions
8. Foreseeable risk factors
9. Governance structures and policies, including the extent of compliance with the applicable corporate governance code and how it is implemented
10. Debt contracts, including the risk of non-compliance with covenants

To improve the quality of corporate disclosures, companies should move away from generic, declaratory statements in favour of concise, company-specific reporting that explicitly links initiatives to the company’s purpose, strategy and values. This is best achieved by highlighting measurable outcomes and impacts rather than merely describing policies, while ensuring that all reporting on stakeholder engagement demonstrates how external views have directly influenced Board decisions. Furthermore, disclosures must provide transparency into governance practices, specifically detailing how the Board reviews the effectiveness of risk management systems and how executive remuneration is aligned with long-term cultural and strategic goals.

As the risk profile of the business changes constantly, accountability needs to be ingrained in the culture of the company and subject to regular review. A strong sense of accountability and the application of best practice help to safeguard the reputation of the company and of its Board members. Stakeholders scrutinise companies and their Boards ever more closely, and accountability procedures should be an important part of the Board’s duties.

All relevant regulations and EU directives, in particular the Corporate Sustainability Reporting Directive (CSRD) and the accounting and transparency rules, should be taken into account when setting up the framework for the company’s disclosures and reporting.³

The Board must ensure that all material information is disclosed in a timely manner and through the channels most suitable for the company’s stakeholders.

Disclosure and communication

The significance of a company’s disclosure and communication cannot be overstated: transparency fosters trust and is a crucial component of sound business practice.

Each stakeholder group has distinct interests in the company. For instance:

• shareholders and investors are interested in the company’s performance, prospects, governance practices and Board composition;
• regulators and authorities are concerned with the company’s compliance with laws and regulations;
• customers focus on the safety and sustainability of products and on warranties;
• employees are interested in the company’s performance, remuneration practices and workplace safety.

Further details on stakeholder groups and their interests can be found in sub-chapter 5.6.2.

The Board should ensure that the communication strategy is grounded in stakeholder mapping and prioritisation. In this way the Board helps the company to build robust relationships with its stakeholders, manage risks more effectively and achieve its objectives, with better outcomes for all parties.

The Board should formulate and approve a disclosure and communication policy that sets out how the company communicates and discloses information and how the Board oversees this. All other internal documents on the subject should be developed on the basis of this policy and approved by the CEO. The information disseminated by the company should be timely, accurate and relevant.

The primary sources of disclosure and communication are the following.

The company’s annual report is a fundamental document of its accountability, and the Board should be actively involved in its preparation. A well-crafted annual report should be comprehensible to a broad audience, not only to experts. Besides information about the company’s past performance and current position, it should include the latest developments and a view of the future. The annual report should contain the following key sections:

• letters from the Chair of the Board and the CEO;
• the company’s purpose, vision, mission and values;
• brief highlights of the strategy (the full strategy document should remain confidential);
• the major risks that could prevent the company from achieving its objectives, how they are managed and how risk management is organised;
• analysis of external factors and trends and of the internal situation of the company;
• a description of the company’s operations, its business model and how value is created;
• the governance of the company, including the Board and its committees, their performance and remuneration, governance practices and policies and performance against them;
• the company’s financial and non-financial (including sustainability) performance against the targets set.

The Board should lead the preparation of the annual report, with management preparing the information. It is good practice to divide the preparation into steps:

1. discussion and agreement of the topics (the table of contents);
2. preparation by management, and review by the Board, of the first draft of the non-financial part;
3. final review of the full document, including the financial information;
4. endorsement of the annual report and its submission for approval by the general meeting of shareholders. The annual report should be communicated both internally and externally and be accessible on the company’s website.

In recent decades companies have adopted a broader form of accountability, integrated reporting: a process that results in communication by the company, most visibly a periodic integrated report, about how it creates value over time. The Integrated Reporting Framework is now maintained by the IFRS Foundation.⁴

The Board should be aware of recent and forthcoming EU rules on corporate reporting, in particular the CSRD, the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Due Diligence Directive (CSDDD), and ensure that the company complies with them.

The company’s website is another vital, easily accessible and widely used source of information. It should be user-friendly, allowing easy navigation and access to up-to-date and relevant information, and offer interactive communication.

The website should contain comprehensive information about the major owners, the Board, management and the internal auditor. All relevant documents, such as the articles of association, the charters of the Board and its committees, policies, codes and annual reports, should be readily accessible.

If the company operates beyond its country of registration, it should provide information in other languages, ensuring that the scope of information is consistent across all languages. A whistleblowing section (see sub-chapter 5.3.3) should be prominently placed on the home page for easy access. Given the risk of hacking, robust security measures and regular back-ups of the website are essential.

To ensure effective corporate communication, the Board must take a proactive approach to overseeing communication practices, processes and monitoring mechanisms. This helps to safeguard and enhance the company’s reputation, foster stakeholder trust and promote the company’s success. To this end, the Board should:

1. approve a comprehensive communication strategy;
2. formulate and approve a disclosure and communication policy;
3. ensure that a dedicated person, such as a communication manager, is responsible for corporate communication;
4. regularly assess the CEO’s communication;
5. regularly review and approve key communication materials, such as the financial statements and the annual report;
6. ensure that a crisis communication plan is in place, regularly reviewed and updated and supported by training (see sub-chapter 5.2.4);
7. ensure effective internal communication.

The primary communicator should be the CEO, with the Chair or other Board members stepping in only when the CEO is unable to communicate, for instance because of misconduct or absence.

The Board must remember that it is the ultimate guardian of the company’s reputation.

Reputation management

In creating and maintaining reputation, the Board’s role is to ensure that all the factors contributing to the company’s reputation are coordinated, including the reward and incentive systems. If these systems reward individual action, communication about teamwork will be ineffective, since people behave in line with how they are measured rather than with what they are told.

With social networks, customer service has become part of public communication, since customers often express their dissatisfaction on these platforms. The Board must therefore ensure that customer service systems and standards are aligned with the communication strategy and that practical solutions are implemented when issues become public.

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