Building Public Trust: The Future of Corporate Reporting

Overview

From the World's Leading Accounting Firm, A Blueprint for the Future of Corporate Reporting

"PricewaterhouseCoopers should be commended for its forward thinking on this subject. They have been promoting the benefits of greater corporate transparency long before Enron. We are impressed with their refreshingly candid views on the obligations of corporations, accountants, standard setters, and regulators. Their three-tier model of corporate transparency for building investor confidence in corporate reporting is yet ...

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Overview

From the World's Leading Accounting Firm, A Blueprint for the Future of Corporate Reporting

"PricewaterhouseCoopers should be commended for its forward thinking on this subject. They have been promoting the benefits of greater corporate transparency long before Enron. We are impressed with their refreshingly candid views on the obligations of corporations, accountants, standard setters, and regulators. Their three-tier model of corporate transparency for building investor confidence in corporate reporting is yet another contribution for how to make this happen."
-John Connors
Senior Vice President and Chief Financial Officer
Microsoft

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Editorial Reviews

From the Publisher
"Building Public Trust was written as the Enron scandal was breaking ... but the book's lessons apply to what has happened since as well." (The Wall Street Journal, August 22, 2002)

"...propose a new vision of corporate transparency as a means to restore investor confidence..." (Oil & Gas Journal, 28 October 2002)

"They frame the discussion very well in this interesting, educational book." (Journal of Accountancy, December 2002)

"...a blueprint for action has recently been set out in a new book, Building Public Trust..." (Accountancy Age, 19 February 2003)

"...a blueprint for action has recently been set out in a new book, Building Public Trust..." (Financial Director, 19 February 2003)

"...sensible and forward thinking suggestions to encourage investors back into equities by having standardized and transparent company reporting procedures globally." (Financial Adviser, 27 march 2003)

Soundview Executive Book Summaries
The trust of the general public in the capital markets - which is recognized as the foundation of value creation all over the world - has been shaken. The straw that broke the camel's back was the Enron scandal - a fiasco that forced the largest market cap company to declare bankruptcy. The authors of Building Public Trust write that the signs of serious flaws in the capital markets were already present - from well-publicized business failures to the collapse of the Internet bubble to the decline and volatility of the equity markets.

Enron and other scandals have focused the public's attention on the institutions and people responsible for the information on which investors (as well as lenders, trading partners, customers and employees) depend. Samuel DiPiazza, the CEO of PricewaterhouseCoopers, and Robert Eccles, a former professor at Harvard Business School and president of Advisory Capital Partners, write that public trust must be restored in this information - and in the purveyors of that information.

Building Public Trust offers a model of corporate reporting that works to restore that public trust and confidence. The authors write that the goal of this model is to ensure a spirit of transparency, a culture of accountability and the participation of people of integrity in the corporate reporting process.

The Corporate Reporting Supply Chain
The authors explain that the Corporate Reporting Supply Chain is responsible for supplying the information on which investors (as well as lenders, trading partners, customers and employees) depend to make their financial decisions. The Corporate Reporting Supply Chain begins with the company executives who prepare the financial statements that are reported to investors and stakeholders. These financial statements are approved by a board of directors, attested to by an independent auditing firm, analyzed by sell-side analysts and broadcast by information distributors, including data vendors and the news media. The entire chain is supported by standard setters, market regulators and enabling technologies.

The authors write that the time has come to reexamine how the Corporate Reporting Supply Chain works and offer ways it can be improved. They write that trust in the capital markets depends on faith in the Corporate Reporting Supply Chain - and that faith has been broken. To restore that faith, the authors write that corporate reporting reforms must rebuild the three key elements that create public trust in the markets: a spirit of transparency, a culture of accountability and people of integrity.

A Spirit of Transparency
The authors write that the first key element of trust is a spirit of transparency. Corporations - that is, the people who work in corporations supported by the corporation's board of directors - have an obligation to provide the information that investors need to make the right investment decisions. Unfortunately, the authors explain, management and boards are not making the information that they know investors need readily available.

The second key element of trust that the authors delve into is a culture of accountability. They write that the members of the Corporate Reporting Supply Chain must feel a sense of accountability to the other members of the chain. Management, they explain, must hold itself accountable to shareholders. The authors write that boards must see that this accountability is recognized and maintained.

People of Integrity
The authors explain that the third key element needed for public trust is people of integrity. Despite rules and regulations, processes and best practices, the authors write that the entire structure of corporate reporting collapses if it is not supported by people of integrity trying to do the right thing.

The vision of corporate reporting presented in Building Public Trust is based on a new model of corporate disclosure and a fresh view of the responsibility of each link in the Corporate Reporting Supply Chain. The first tier of this model is global generally accepted accounting principles. The authors explain that companies today use a variety of generally accepted accounting principles (or global GAAP), but most of these principles are country-based. They write that even the best country-based GAAP standards are based on the historical cost model that many consider obsolete or, at best, irrelevant in the complex global environment of today's business.

The second tier of the model the authors present is industry-based standards. The standards they discuss are global standards. How industries create value for shareholders and the knowledge that industries need to create that value vary widely from industry to industry. Therefore, the authors explain, country-based accounting standards are less relevant and helpful than international industry-based standards. A fundamental key to the success of tier-two standards, the authors write, is that the standards should be developed by the industry participants themselves and should be voluntary, not regulated. The authors write that companies, as well as accounting firms, analysts and investors, should be involved in the development of these standards.

Why Soundview Likes This Book
The authors of Building Public Trust are able to offer clear, timely advice to their readers by advocating openness and consistency throughout good and bad economic times. They also introduce a new model of corporate reporting that offers new hope for investors, as well as new technology that aims to support responsible, transparent corporate reporting and renew public confidence and trust. Copyright (c) 2002 Soundview Executive Book Summaries

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Product Details

  • ISBN-13: 9780471261513
  • Publisher: Wiley
  • Publication date: 7/10/2002
  • Edition number: 1
  • Pages: 208
  • Product dimensions: 8.50 (w) x 5.50 (h) x 0.63 (d)

Meet the Author

SAMUEL A. DiPIAZZA jr. is the CEO of PricewaterhouseCoopers, the global professional services firm with some 150,000 employees, operating in virtually every country worldwide. Mr. DiPiazza has enjoyed a long career with PricewaterhouseCoopers, which he joined in 1973. He most recently served as Senior Partner and Chairman of the U.S. firm with executive responsibility for U.S. operations.

ROBERT G. ECCLES is founder and president of Advisory Capital Partners, Inc. (ACP), and a Senior Fellow of PricewaterhouseCoopers. Since 1993, ACP has provided strategic, financial, and organizational advisory services to both large companies and fast-growing small and medium-sized ones. Prior to founding ACP, Dr. Eccles was a full professor at Harvard Business School, where he was a faculty member for fourteen years, receiving tenure in 1989.

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Table of Contents

Foreword.

Preface.

Subject Matter Experts.

Acknowledgments.

Prologue.

Three Tiers.

Accounting Standards.

Industry Standards.

Good Management.

Corporate Reporting.

The Internet.

Future Audits.

Epilogue.

Index.

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  • Anonymous

    Posted July 6, 2002

    A Must Read

    The public trust in the corporate America has been shaken in the wake of several recent accounting scandals and, as a result, the capital markets are in upheaval. There is, rightfully so, a public outcry for reform - the government has cranked up its regulatory machine and members the class-action plaintiff bar are sharpening their litigation pencils. Many question, justifiably so, whether such attempts at reform are the legal equivalent of putting a bandage on a gunshot wound. In addition, investors and other stakeholders query whether there can be any meaningful reform to the extent that special-interests and their representatives (lawyers and accountants) are successful in jockeying for position in these efforts. Messrs. DiPiazza and Eccles present a compelling blueprint for wholesale restructuring of corporate reporting and the concomitant rebuilding of public trust in the capital markets. The foundation for their model is built on the values of transparency, accountability and integrity. Their model -- development of a global GAAP, development and application of industry-specific standards, and establishment of guidelines for disclosure of company specific information -- makes sense given the expansion of capital markets across country-specific boundaries, but also is timely given the wide-availability of enabling technology (i.e., the Internet and XBRL). Meaningful reform cannot be had solely through governmental reform, the lobbying of special interest groups, self-regulation or lawsuits by regulators and disgruntled investors. The end results will likely be half-baked attempts to address the symptoms of the breakdown in corporate reporting and the capital markets, rather than development of a cure. Accordingly, DiPiazza and Eccles stress that meaningful reform through development of their three-tiered model must be had through open dialogue and lines of communication with all members of what they term as the 'Corporate Reporting Supply Chain' which, in a nutshell, includes all stakeholders in the capital markets. 'Building Public Trust: The Future of Corporate Reporting' provides, in plain English, a detailed description of the problems plaguing corporate reporting and roadmap to a meaningful solution. The road to reform, however, is long and, as DiPiazza and Eccles suggest, requires that the journey (read: participation) be undertaken by ALL members of the Corporate Reporting Supply Chain. The book is a must read for corporate directors and officers, regulators, lawyers, accountants, analysts, the investing public and all other persons who (or whose clients) have a stake in the smooth functioning of the capital markets. The time for open debate on reform is now. It is up to members of the 'Corporate Reporting Supply Chain' whether they want such reform to take the form of a lecture leading to mandates by the few, or an open dialogue leading to a consensus by the majority. This book provides its readers with a grounding for developing the tools to accomplish the latter. Michael Petrizzo Attorney New York City

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