Executives risk being punished under new guidelines for simply failing to have perfect knowledge of the future, the Institute of Directors (IoD) warned this morning.
The Financial Reporting Council (FRC) wants bosses to give investors a fuller account of possible risks facing their company over the years ahead.
The aim is to promote long-term thinking.
“This is about a better quality of reporting and better dialogue with investors about risks, and how they affect the company, and its long-term viability,” the FRC’s David Styles told City A.M. “We do not want it to become a vast boiler-plate where executives just write everything down.”
The IoD backs the FRC’s changes to promote longer-term pay and bonus policies, but fears asking bosses to outline long-term risks may be unfeasible.
“The future is inherently uncertain and companies do not have crystal balls,” said the IoD’s Roger Barker.
“Although investors would like companies to provide them with certainty about their future prospects, this is often not realistic.”