FTSE 100 Companies are Failing in Providing Detailed Information with Regards to their Ethical Performance

Monday, May 22, 2017 Print Email

As per a research conducted by the Chartered Institute of Internal Auditors (the institute), the shareholders of the FTSE 100 companies are not being provided with detailed information with regards to ethics. 

The research also highlighted that only about 22% of the FTSE 100 companies incorporated ethical performance metrics within their latest reports. This shows a decrease of 1% this term when compared with last year.

The research conducted by the institute also indicated that the companies are pretty aware with regards to the importance of ethical issues as 94% of the companies provided references to ethical values and issues in their latest annual reports, but in most cases the information relating to ethical values was lacking in detail.

As a result of their research, the institute provided recommendation of introducing ethical performance targets to address the problem and also to provide the shareholders with a measure to track the progress of the entity in this regard.

The research also revealed that many Shareholders want ethical performance of an entity to be monitored properly and also want the information regarding it to be reported in more detail in the entity’s annual report. Shareholders also feel that the information regarding entity’s ethical performance is very important as it provides insight to the key risks that are being faced by the entity and also provides information as to how committed the entity is with regards to corporate social responsibility. Many of the stakeholders are being increasingly interested in seeing greater transparency with regards to corporate ethics.

According to Dr Ian Peters, the Chief Executive at the Chartered Institute of Internal Auditors, FTSE 100 companies are clearly aware of the need to recognize and address ethics as an issue but still very little is being done practically by the entities in this regard.

Most of the shareholders and other stakeholders of an entity are likely to be unimpressed if the entity is just paying lip-service to ethical values and is taking little to no steps with regards to addressing the ethical issues. In case of an ethical failing, all this can have an adverse effect on the reputation and financial performance of the entity.

The voices with regards to having greater level of transparency over large corporates in relation to their ethical performance are going to get louder with each passing day. Large corporates, particularly the ones with global supply chains and multinational interests need to be seen taking the lead in reducing risks and addressing issues such as modern slavery, fair trade, working conditions environmental concerns and corruption.

Source: ReadyRatios

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