Embracing financial transparency: the new era for Financial Executives.

• Author: Sayther, Colleen
• Position: President'sPage

The Dark Ages of corporate scandal--still casting their fetid shadows over corporate America--can be characterized in many ways. Overweening greed and self-interest. Flagrant disregard for the common good. And, corporate environments that led to dishonesty.

Companies that succumbed to scandal were awash in lethal brews of overly aggressive financial targets, coupled with a tone at the top that not reaching those targets was unforgivable.

How do we get the culture right? We make transparency the objective--not merely meeting analyst expectations. We foster intellectual honesty, allowing existing problems to be resolved with integrity and clarity--rather than deceit and obfuscation.

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Improving the transparency of financial reporting means going beyond what is required, and disclosing what is meaningful. Vital to the rebuilding of investor confidence and protection of our capital markets, it could not be more important.

What steps should companies take to embrace transparency? Essentially, we need to provide the reader of our financial statements with information as though he or she were internal to our business.

Through the Eyes of Management

In its interpretive guidance on Management's Discussion and Analysis, the Securities and Exchange Commission (SEC) opines that MD & A should present a company's business as seen through the eyes of that business's managers, who should:

* Present the disclosure with the most important information the most prominently.

* Avoid unnecessary duplicative disclosure that can overwhelm readers.

* Start with an executive-level overview, providing context for the remainder of the discussion.

Financial reporting must always aim to shed light on all aspects of a business that contribute to its success or failure: competition, market position/share, operations, results, future prospects. Proper financial disclosure needs to be much more than simply the five-year data the SEC requires ... going beyond what is required to what is needed. While this guidance is meant to apply to SEC registrants, it is relevant to private companies who provide disclosure to stakeholders as well.

Transparent financial disclosure is relevant and timely information that lets users make informed decisions. It is an unbiased, reliable and verifiable representation of events, comparable to previous periods and other companies. It is understandable, presented in an organized manner, and without jargon. It has a powerful...