The Coloplast Experiment

Here is one of my favorite examples of the value of greater transparency around intangibles.

This experiment was performed by PriceWaterhouseCoopers’ (PwC) Corporate Reporting practice a number of years ago. It used involved creating two versions of an annual report of Coloplast, a Danish company recognized as a  leader in corporate reporting.

• The first was an original version of the Coloplast annual report. In addition to the normal information in an average annual report (financial statements, narrative, and a few key metrics), this report included extensive  quantified non-financial indicators to make a clear link between its strategy and its financial performance.
• The second version of the annual report stripped out the quantified non-financial data. The stripped-down report was still richer in detail than the annual reports provided by most companies in the market. But the  critical non-financial metrics were missing.

Two groups of analysts reviewed the different reports. The conclusions were striking.  Read more

Accounting Standards and Real Value

I just reviewed here The New Capitalists: How Citizen Investors Are Reshaping the Corporate Agenda by Stephen Davis, Jon Lukomnik and David Pitt-Watson. It’s a great book about how ownership of stocks is now dominated by funds (whose money comes from ordinary people). These players have different goals–they value stability of the system over success of an individual company. Read more