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On the money?

Should publicly held companies reveal to shareholders non-financial measures of performance such as employee turnover, customer loyalty, and results of quality-control and waste-reduction efforts?
Are the company’s disagreements with its auditors something that should be aired? Are details of the CEO’s treatment for a serious illness information to be disclosed in the annual report?
Those are the kinds of questions that will be studied over the next two years by researchers for the Financial Accounting Standards Board. However, the FASB appears to already know its answer: yes.
“This is very relevant information,” the FASB chairman told the New York Times recently. The organization’s board voted unanimously to conduct the research.
Corporate executives would agree it’s need-to-know information. But they have a much shorter list of who needs to know.
A primary concern is the advantage that competitors might gain should such insider information be disclosed publicly. Critics also question the cost of compiling this material, and the negative effect of weighing down annual reports with yet more data.
The last two points sound like quibbling. Few companies could survive without following such data closely, and shareholders are fully capable of deciding what to read and what to skip over.
The first concern has more to it, especially because the FASB would not require disclosure. If only some companies open up, it could tilt the playing field against them.
Corporate executives also question why the FASB, which makes the rules for accounting, is thinking of pushing its oversight responsibilities into the realm of non-financial information. The Times article suggested one reason: It could generate more audit work for accountants.
Opposition is unlikely to dissuade the FASB, however. That certainly was not the case last year when it decided to require companies to report changes in the value of derivatives.
The FASB is right to give this proposal careful study. But that should mean waiting for completion of the research before deciding it should venture into the realm of non-financial disclosure.
–Rochester Business Journal


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