Handbook of Corporate Communication and Public ... - Blogs Unpad

pany loyalty, the exhortations of senior executives,
philosophical principles, or religious
reflection (Badaracco and Webb, 1995).
The National Investor Relations Institute
(NIRI) has taken an active role in suggesting
methods of improving how financial information
should be communicated. This action by
NIRI is most welcome as they as an organization
have recognized the importance of the
ethical reporting of financial data. They have
taken the courageous position of making the
following recommendations.
Companies should help investors understand
how a company makes money and it
should be communicated in plain English.
Investors should know what the company’s
GAAP (generally accepted accounting principles)
earnings are before being told that the
adjusted earnings are on a pro forma basis.
GAAP may not provide investors with a completely
accurate picture of a company’s
performance, but it is the best thing we have
until a better system is created.
The SEC has recently called for an expansion
of the MD&A (management disclosures
and announcements). NIRI agrees with this.
Companies should explain in plain English
what are the key factors that drive the company’s
business, what significant trends exist
that could impact the company’s performance
going forward, and other key factors that
affect the company’s business both on a historical
and prospective basis. When companies
notice a significant change in one or
more or these factors, they should consider,
on a current basis, disclosing that information
broadly to investors.
The SEC should examine whether the
‘Management Responsibility for Financial
Reporting’ section of the annual report (Form
10-K) should cover all written disclosures.
Whether it should be required instead of
optional as it currently is, and whether to
require management to formally affirm quarterly,
instead of annually, that its disclosure is
complete and current.
They recommend that companies that have
off-balance sheet businesses disclose that
information to investors in an aggregated
form. Companies should consider broadly
disseminating that information, preferably in
a company news release and posted on the
company’s website. The disclosure should
include the business purpose of the investment,
what current or special charges were
recorded to set up the entity, contingent liabilities,
if any, and what the impact would be
on the earnings if they were consolidated.
As recently proposed by the SEC, companies
should report insider transactions on a
current basis and there should also be current
reporting of material compensation actions,
such as annual option grants, instead of waiting
for the annual proxy to be published.
Companies should have formal ‘window
periods’ that govern when insiders may buy
and sell securities and the dates of those windows
should be published so investors know
when they are.
Companies should be more aggressive in
educating employees regarding the benefits
and risks of owning the company’s stock
(Thompson, 2002).
NIRI is a professional association of corporate
officers and investor relations consultants
responsible for communication among corporate
management, the investing public and
the financial community. With over 5,000
members in 35 chapters around the United
States, NIRI sets the highest standards in education
designed to advance the practice of
investor relations and meeting the growing
professional development needs of those
engaged in the field.
Based upon the material available and the
pressures being applied by regulatory processes
© 2004 Sandra Oliver for editorial matter and selection;
individual chapters, the contributors