You might not know it, but there’s a big deadline looming and it
could have a serious affect on your career prospects. Concerned? So you
should be. Failure to act will be a missed opportunity for PR to be
taken more seriously at board level.
That’s the view of the IPR, which is busy putting together a response to
the Company Law Reform proposals because it believes that the
legislative changes being discussed could - and should - open up massive
opportunities for PR professionals. On the other hand, the door could be
firmly slammed in the industry’s face as other disciplines grab hold of
work which would seem to be a natural fit for the communications
function. The deadline for submissions on the consultancy document is at
the end of July and the IPR is actively soliciting input from PR
professionals by 18 July in order to collate an industry-wide
The reforms propose that listed companies should report on their
policies and performance on community, social, ethical and reputation
issues. These will be encompassed in a broader Operating and Financial
Review (OFR) section in company annual reports .
’That is exactly what PR is about,’ says Nigel O’Connor, policy officer
at the IPR. ’The effect that reputation and stakeholder relationships
are having on risk management is beginning to be recognised more widely
across the boardroom. This represents a great opportunity for the PR
Many of the proposed reforms emanate from last year’s Turnbull report on
business risk. These have since been incorporated into the London Stock
Exchange’s combined code on corporate governance and require companies
to ensure that they have internal control and risk management processes
in place. Boards of directors must review the effectiveness of these
structures and report on their consideration of the issues. Companies
were supposed to have implemented the necessary procedures last year so
that they can fully report on them for year-ends after this December but
many are not yet up to speed.
The proposals to bring elements of the Turnbull report into company law
should force company directors to pay greater attention to these issues
- at the very least they will be required to report on the structures
they have in place.
Jonathan Barber is managing director of the Safety and Environmental
Risk Management (SERM) Rating Agency. Barber believes the proposals will
force boards into quantifying risk levels - for example, how likely are
we to fall victim to pressure group action? - and their effect on
reputational costs. ’Specialists in communication should definitely be
part of the process,’ he adds.
And, according to Elizabeth Forbes, an independent consultant who has
reviewed the proposals for the IPR, that’s where the opportunity for the
PR industry lies. As it stands, though, the legislation does not stress
the need for PR people to become involved. However, the consultancy
document does suggest that the role of auditors is enhanced to encompass
a review of company reporting on stakeholder and reputational
Forbes is concerned that auditors will increase their skill sets in this
field and edge PR practitioners out of the equation. She believes it is
fine if auditors are just asked to review consistency, the danger is
that they could be called upon to do more, threatening the standing of
There is also a possibility of management consultants staking their
claim in providing the relevant reporting services for companies.
Many senior PR practitioners who are au fait with the proposals don’t
seem too phased by auditors being called upon to review the report.
That’s a natural part of the reporting process. But some do echo Forbes’
fear about other professions jumping in and stealing a communications
’Because of the words used in the proposals it could be very easy for
companies just to pass the whole of this over to KPMG, Arthur Andersen,
PricewaterhouseCoopers or whoever else does the audit,’ says Peter
Walker, executive chairman of Pielle Consulting Group.
But he adds: ’Their business is hard outcomes whereas this is about soft
outcomes. The corporate communications head is inevitably going to have
to be involved in this area.’
Those thoughts are partly backed up by Philip Dewhurst, UK Group CEO at
Shandwick International and vice-president of the IPR, but he stresses
that the proposals should be seen as an opportunity for the PR
’I think we (as an industry) can work side by side with auditors - they
have a very valid role in auditing and measuring,’ he says. ’Any
third-party review is great but the results still have to be
communicated. The fact that social and reputational performance will
have to be reported on is a real breakthrough.’
The opportunity may well be there but what should PR practitioners be
doing about it? First and foremost they should show that they know about
the proposals and their implications, says Forbes. She suggests that
consultants should mention Turnbull and the company law reform proposals
when they are pitching for business, showing a real understanding of
what the proposals mean from a communications perspective. Practitioners
should also show ways of improving the reporting process on these issues
which will appeal to a wider corporate governance trend of transparency
and accountability, with both traditional and internet media.
’Communications people who are aware of what’s going on will be able to
offer better advice on these issues,’ says Neil Mainland, a partner at
Financial Dynamics and chair of the IPR’s City and Financial Group.
He is also pleased with the recognition of communications issues by a
wider audience. ’It’s interesting that people outside the communications
business are saying that reputation is important and can affect the
balance sheet. We should take heart from that.’ Mainland believes PR
professionals should build their own understanding of reputation
management and demonstrate that awareness within their companies or to
Seizing the opportunity of higher level recognition for PR by the
boardroom may be easier said than done. Speaking at a recent PRCA
seminar, management consultant William Stancer pointed out how much more
rapidly his profession had been growing over the last five years
compared to PR.
Stancer, who is based in Andersen Consulting’s Prague office, attributes
some of this disparity to the failure of the PR industry to show an
understanding of wider business matters. ’If you’re going to operate at
chief executive level then you need a broader perspective. For example,
you need to be able to talk about globalisation, leadership development,
customer relationship management or sales force effectiveness.’
He also adds that communications directors will have to put in the time
in order to gain adequate understanding of the latest theory and
practice in these areas, and to be able to demonstrate a real knowledge
which senior management cannot ignore.
Peter Walker agrees that the PR industry needs to be ready to learn new
skills. And that could mean a willingness to hire in fresh business
’We’ve got to get better at promoting and polishing our abilities to
work in these areas,’ says Walker. ’We need to be able to provide and
present information in a sufficiently robust format that satisfies the
criteria of people used to judging a business on hard numbers.’
Copies of the full consultation document are available on-line at
www.dti.gov.uk/cld/review.htm The IPR policy briefing is available at:
www.ipr.org.uk/News/Newsrameset. htm. Submissions should be made to
Nigel O’Connor at the IPR by 18 July (NigelO@ipr.org.uk).
HOW THE OPERATING AND FINANCIAL REVIEW MAY EVOLVE
The Operating and Financial Review has been a recommended section for
inclusion in UK annual reports for several years and many larger
companies already include it in their annual reports. These proposals
would widen its remit and make it mandatory.
The consultation paper talks about current accounting and reporting
guidelines failing to ’provide adequate transparency of qualitative and
forward looking information’ to stakeholders. ’This is particularly
so ... with the growing importance of ’soft’ or intangible assets,
brands, know-how and business relationships,’ says the paper.
The content of the new OFR would include wide-ranging discussion of a
host of communication issues, focusing around a company’s reputation
management and the risks facing its brand. It requires information on
projects and programmes to maintain and enhance those brands as well as
an explanation of corporate governance values and structures.
The proposals suggest ’an account of the company’s key relationships,
with employees, customers, suppliers and others, on which its success
depends.’ Community, social, ethical and reputational issues are
referred to throughout as likely topics for discussion. There is also a
request for coverage of the ongoing dynamics of the business, the
trends, uncertainties and other factors which may substantially affect
its future performance.