Disclosure of Financial Information to Employees
| Date | 01 February 1979 |
| Published date | 01 February 1979 |
| DOI | https://doi.org/10.1108/eb054930 |
| Pages | 19-21 |
| Author | P.J. Hancock |
| Subject Matter | HR & organizational behaviour |
Disclosure of Financial
Information to Employees
by P. J. Hancock
Lecturer, Department of Accounting and Finance
University of Western Australia
It has long been recognised that one of the rights of
owning shares in a company is to receive a written
annual report on the current state of health of the com-
pany and its performance over the preceding 12 months.
Should this same right extend to employees? Many
would argue that it should because the employee un-
like the shareholder is normally dependent entirely on
one company's ability to survive and pay, amongst other
items,
wages and salaries. Also, in many cases, an em-
ployee has invested many years of his working life with
one company and therefore has a substantial vested in-
terest in the performance and future survival of the
company.
This article therefore summarises issues raised at a
conference on the same topic organised recently in Lon-
don by the Institute of Personnel Management and the
Institute of Cost and Management Accountants. It pro-
vides an introduction to current thinking on the dis-
closure of financial information as a prelude to the GKN
Steel Stock special case study.
This type of thinking on disclosure would appear to
be consistent with the general trend in society towards
more rights for the workers and it is not therefore all
that surprising to find companies providing employees
with written information about the company. In fact,
many companies in the UK currently issue their em-
ployees with an "Employee Report" which normally con-
sists of a statement by the Chairman, a simplified profit
and loss and/or value added statement, a simplified
balance sheet and coloured pictures related to the com-
panies activities. A recent survey [1] of the Financial
Times 30 Index found that 27 of the 30 companies pre-
pared "Employee Reports", one company provided group
financial affairs in its divisional newspapers and one of
the remaining two companies was currently consider-
ing the matter.
An examination of the current legislation in this area,
which was in fact provided by Cory Roberts, Senior
Consultant, PE Consulting Group and Chairman of the
first session at the Conference, shows that while it is
not as yet a legal requirement for companies to provide
"Employee Reports", it has certainly created a favour-
able environment for the appearance of such reports.
The most important pieces of legislation in this area
in the UK are the 1975 Industry Act and the 1975 Em-
ployment Protection Act. The Industry Act makes pro-
visions for companies to disclose certain information (in-
cluding forecast information) to trade unions within
three months, following a request from the trade union.
Should the company fail to comply, then the Secretary
of State for Industry can demand such information as
listed under the Act and then the Secretary has the
power to decide what, if any, information he obtains
from companies, shall be disclosed to trade unions. Mr
Roberts was quick to point out that while the implica-
tions of the Industry Act were far reaching, in practice,
the Act has as yet, had very little effect.
The Employment Protection Act requires an employer
to provide information without which the unions would
be,
to a material extent, impeded in carrying on collec-
tive bargaining. Of course there are certain restrictions
as to what an employer can be forced to disclose and
these mainly relate to disclosing information which
could be used to advantage by the employers' competi-
tors.
If an employer fails to disclose information as re-
quested by a trade union, then the matter can be
ref-
erred to a Central Arbitration Committee. The com-
mittee can then decide whether the information should
be disclosed to the trade union, after hearing from both
the trade union and the employer.
Finally, Mr Roberts mentioned the Labour Govern-
ment's Green Paper, The Future of Company Reports,
and the White Paper, The Conduct of Company Direc-
tors.
These Papers, if enacted by Parliament, would
make it mandatory for companies with more than 500
... many of these "Employee Reports" ...
would appear more an exercise in
public relations
employees to supply them with a report containing
amongst other things, an added value statement, a funds
statement, and a more detailed disaggregation of the
companies activities.
After an examination of the current and proposed
legislation one is left with the impression that perhaps
the current practice of many companies to provide "Em-
ployee Reports" has been heavily influenced by this,
rather than due to a recognition of employee rights to
information. This is reinforced by the fact that many
of these "Employee Reports" are very patronising and
would appear more an exercise in public relations. If
there is to be an improvement in industrial relations,
then employers must lose this patronising attitude and
make a genuine attempt, where possible, to provide the
relevant and useful information to employees and trade
unions.
The question as to what information to disclose for
collective bargaining and the employees generally was
then discussed by the first speaker, Ron Owen, Employee
Relations Adviser, National Personnel Department, Uni-
lever Ltd and a member of the Central Arbitration Com-
mittee. He believed there should be no distinction be-
tween disclosing information for collective bargaining
and to employees generally. In fact where employees
were not represented by trade unions, they were still
morally entitled to receive all relevant information.
Employee Relations 1,2 1979 19
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