British reporting rule change exposes transatlantic cultural gap

Sun Jan 5, 2014 3:24am EST
 
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By Jemima Kelly

LONDON (Reuters) - As investors prepare to digest the latest round of company earnings figures, Britain's move to scrap the quarterly reporting requirement has revealed a divergence of opinion between the domestic and U.S. investment communities.

While British investors endorse what they perceive as a measure against short-termism, their counterparts across the Atlantic are concerned that less frequent company reports will mean less transparency.

In a world of increasing financial regulation, Britain is bucking the trend by accelerating EU plans to relax the current reporting rules, which are especially onerous for small firms.

"A desire to not disappoint the markets, when you are speaking to the markets every three months, will inevitably lead to the business making short-term decisions to the detriment of long-term shareholders," said Kevin Murphy, a fund manager at Schroders, one of Britain's biggest asset management companies.

All eight British fund managers interviewed by Reuters for this article supported the rule change.

Some corporate heavyweights have already made moves away from the treadmill of quarterly reporting.

Germany's Porsche (PSHG_p.DE: Quote) was involved in a high-profile dispute between 2001 and 2008 with Deutsche Boerse, operator of the Frankfurt Stock Exchange, after refusing to comply with the requirement to issue quarterly reports.

Paul Polman, CEO since 2009 of Anglo-Dutch consumer goods giant Unilever (ULVR.L: Quote) (UNc.AS: Quote), the seventh biggest firm on the London Stock Exchange, is a critic of what he calls "quarterly capitalism". He has changed Unilever's reporting so that full bottom-line figures are given just twice per year.   Continued...

 
A man walks past the London Stock Exchange in the City of London October 11, 2013. REUTERS/Stefan Wermuth