Disclosure and Transparency


Disclosure and transparency should be the cornerstone of corporate governance laws and codes. Business organizations should disclose their financial and operating results, ensuring that their shareholders and other stakeholders understand the nature of the organization’s operations, current state of affairs and future direction in terms of developments.

For financial reporting, most countries now require that listed companies use the International Financial Reporting Standards (IFRS) as a reporting framework/ guideline.

The board of directors should also disclose the inherent risks and estimates used in preparing the financial and operating results in order to give investors a clear understanding of the board and management’s business judgment.

Benefits of Disclosure

By disclosing and making transparent corporate governance policies and structures, the company gives stakeholders, the regulators and the public at large a glimpse of how the company operates and the state of its finances. This increases public trust in the organization and improves its credibility.

Public Disclosure

Most countries require, by law, that listed companies disclose their financial and operational results on an annual, semi-annual or quarterly basis.

In case there is a material development that affects the operation of a company, this has to be disclosed immediately so that stakeholders are given full information on the same.

Content of Disclosures

The OECD Principles of Corporate Governance recommend that disclosures include, but should not be limited to, material information on the following:

The financial and operating results of the company

Audited financial statements showing the financial performance and the financial situation of the company should usually include:

  • The balance sheet
  • Profit and loss statement
  • Cash flow statement
  • Notes to the financial statement

Company objectives
Besides commercial statements and objectives, public companies should ideally disclose policies relating to business ethics, the environment and other public policy commitments.

Major share ownership and voting rights

An investor has the right to know the ownership structure of the company in which he or she has a stake. He or she should also be made aware of his or her rights in relation to the rights of other owners.

These disclosures make the objectives, nature and structure of ownership and shareholder composition transparent. Various countries require companies to disclose ownership data once a certain ownership threshold is crossed.

Remuneration policy

The remuneration policy for board and key executives should be disclosed. Executive pay is becoming an increasingly contentious topic across the world and various governments are in the process on instituting laws that may limit the amount of remuneration executives are entitled to.

Information about board members, their qualifications, selection process, other company directorships and whether they have independent status on the board should also be disclosed.

Related party transactions

The company should disclose fully any material related party transactions to the market, either individually, or on a grouped basis, including whether they have been executed at arms-length and on normal market terms. This is necessary as the market should know whether a company is being run keeping in mind the interests of all its investors.

Foreseeable risk factors

Stakeholders and the market at large need to know the risk factors taken into account while preparing financial statements and operational reports. These risk factors or material risks may include:

  • Risks specific to the industry or geographies in which the company operates
  • Dependence on commodities
  • Financial market risks including interest rate or currency risk
  • Risk related to derivatives and off-balance sheet transactions
  • Risks related to environmental liabilities

Issues regarding employees/stakeholders

In some countries, companies are required by law to disclose information on key issues relevant to employees and other stakeholders who may be affected by the company’s performance.

This information may include:

  • Management-employee relations
  • Relations with stakeholders such as creditors, suppliers and local communities

Governance structure and policies

Companies should disclose information on their governance structure and any corporate governance policy or code such as an ethics code. The process by which this code or policy is implemented should also be disclosed.

ComplianceOnline Training on Corporate Governance

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Preparing for the UK Bribery Act
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Foreign Corrupt Practices Act - How Your Institution Can Comply
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Constructing an Effective “Whistleblower” System
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The SEC’s New Whistleblower Rules: Implications for your Company’s Compliance and Fraud Program
This webinar on SEC's revised Whistleblower Rules will outline key changes and focus on the effects these new rules will have on your organization's internal compliance and fraud investigations.

Internal Control and Sarbanes-Oxley Section 404
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The Fundamentals of Internal Auditing
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Governance, Risk & Compliance: Developing a holistic approach to governance
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Ethics in Your Organization
This webinar will examine trends and requirements for good corporate governance and social responsibility.

Auditing your Compliance and Ethics program
This Webinar will show you how to audit your compliance and ethics program by evaluating the design and operating effectiveness.