About This Checklist

Best Practice Checklist 2013

Updated April 2013

About this checklist

We list below the criteria which we use in assessing entries to our best practice awards. We think that these checklists will also be helpful to companies when preparing the relevant sections of their business review.

ContentsPage

1. Best communication of strategy, performance and KPIs*2

2. Best communication of governance and risk*5

3. Best communication of sustainability*7

4. Best use of social media tools to support investor relations communications 8

5. Most effective use of innovative online technology within a corporate website10

6.Best corporate website for investors11

7. Award for the most effective overall Annual Report (printed and online)14

* Through Annual Reports, websites and investor presentations

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Best Practice Checklist 2013

1. Best communication of strategy, performance and KPIs

We will be looking for those who have successfully incorporated the requirements of the Companies Act 2006 and best practice guidance into their reporting.Companies will also be expected to give a fuller discussion of the business model in line with the requirements of The UK Corporate Governance Code.

The judges will be looking for the evidence which you supply to show how you have developed the IR Society Key Reporting Principles such as targeted, connectivity, simplicity, consistency and concise in an effective way.

Please also see the ‘Best Practice Guidelines for Annual Report and Accounts: printed and online’ published on our website.

Business Model and Strategy

What’s required? / Best practice / Comments
Companies Act 2006
‘a fair review of the company’s business’
The UK Corporate Governance Code
C.1.2: The directors should include in the Annual Report an explanation of the basis on which the company generates or preserves value over the longer term (business model) and the strategy for delivering the objectives of the company / Content

• Highlight how the company generates and sustains value over the short, medium and long term
• Provide a clear statement of the company’s strategy
• Identify any changes in overall strategy or strategic priorities in the year
• Clearly set out strategic priorities
• Explanation of how the strategic priorities will be achieved
• Commentary that shows how the company’s strategy is delivering performance
• Provide a clear understanding of how key performance indicators, both financial and non-financial, are used to measure strategic progress
• Set out priorities for the coming year
• Clear ownership by management of the key issues/commitment of board
• Highlight key resources utilised to achieve
  strategic goals

/ Communication

• Support qualitative statements with quantitative evidence, using third party data where possible
• Use graphics to express the strategy and business model simply and highlight key linkages

Market Review

What’s required? / Best practice / Comments
Companies Act 2006
‘the main trends and factors likely to affectthe future development, performance and position of the company’s business’ / Content

• Clearly highlight the key trends (e.g. cyclicality, seasonal factors) that have and will influence performance
• Highlight both macro-economic and industry specific trends and how these justify the company’s performance
• Identify any unique features of the company within its market, distinguishing it from peers
• Describe the strategic steps that are or have been taken to mitigate the impact of market trends/link to risk section if and where appropriate

/ Communication

• Provide third party data/views to support trends
• Provide a balanced commentary on the risks etc. presented by these trends
• Use graphics where appropriate (e.g. to demonstrate size of market, company’s market share, position of the company in the market etc)

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Best Practice Checklist 2013

1. Best communication of strategy, performance
and KPIs continued

Performance

What’s required? / Best practice / Comments
Companies Act 2006
‘analysis using financial key performance indicators’
‘analysis using other key performance indicators including information relating to environmental matters and employees matters’ (where appropriate) / Content

• Clearly define each KPI – what may be common terminology to one sector may not be to others
• Clearly identify how the KPIs selected measure the strategic success of the business
• KPIs should include future targets to demonstrate direction of travel
• Explain what risks could have an impact on particular indicators
• Detail linkages between KPIs and executive remuneration
• Clearly show improvement or decline in performance
• Explain positive and negative trends in KPIs
• Provide industry benchmarks where possible to give wider context to performance

/ Communication

• ‘Key’ means key – don’t include every Key Performance Indicator you can think of and obscure the ones that are most important
• KPIs should have longevity, i.e. can be used consistently from year to year
• Ensure consistency in messaging in relation to other sustainability reporting online or in other publications
• Highlight any new KPIs clearly

Segmental Analysis

What’s required? / Best practice / Comments
Companies Act 2006
‘the development and performance of the company’s business during the financial year’
‘the position of the company’s business at the end of that year, consistent with the size and complexity of the business’ / Content

• Include a personal comment from divisional leaders to demonstrate a sense of accountability
• If multi-year trends are available use them to present underlying performance
• Provide understandable analyses of the key balance sheet measures
• Appropriate review of trading trends and prospects
• Include detail on the drivers of operational performance at the divisional, product and regional level
• Clearly link the narrative report to the financial results as disclosed (i.e. not adjusted for non statutory items which are not reconciled in the accounts)
• Provide a clear outlook specific to that segment, referencing market trends/key risks and uncertainties as appropriate

/ Communication

• A balanced review
  of the financial performance for
  the year which does not hide poor performance andprovides adequate discussion of
  both positive and negative events
  or developments
• Present figure-heavy sections in tabular format for ease of reference
• Provide a commentary which links performance to the strategy and which is consistent with other communications. Avoid bland statements of the obvious
• Reference key trends identified in
  the market review
  to support/explain performance

Supply Chain

What’s required? / Best practice / Comments
Companies Act 2006
‘information about persons with whom
the company has contractual or other arrangements which are essential to the business of the company’ / Content

• Outline the critical elements of the company’s supply chain and cover important suppliers, partners and joint ventures
• Describe the processes used to manage risk and sustainability in the supply chain

/ Communication

• Provide the reader with information about the company’s third party relationships that have a real impact
  on performance

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Best Practice Checklist 2013

2. Best communication of governance and risk

Please also see the ‘Best Practice Guidelines for Annual Report and Accounts: printed and online’ published on our website.

Governance

What’s required? / Best practice / Comments
The UK Corporate Governance Code
The Listing Rules require companies to apply the Main Principles of The UK Corporate Governance Code and report to shareholders how they have done so / Content

• Provide a clear summary of the company’s corporate governance framework
• Evidence the integration of corporate governance standards throughout the business
• Explanation of the skills and experience of the Board members. Explanation of what relevant skills the Non-Executive board members bring to the company
• Clearly identify any Board changes in the period and the effective timings
• Evidence that the Board has communicated effectively with shareholders
• Provide a description of the Board’s policy on diversity, including gender, and any future targets
• Clearly link between directors’ remuneration targets and the company’s financial objectives and discussion of actual remuneration awarded compared to financial performance
• Clearly explain the reasons for payments made to former directors
• Demonstrate link between business strategy and corporate governance

/ Communication

• Use graphs and charts to supplement explanations
• Provide personal reporting from the Board Chairman and Committee Chairmen to demonstrate accountability
• Provide an honest reflection of weaknesses, uncertainties, missed targets and the lessons learned
• Present an IR calendar detailing
  key shareholder events throughout the year

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Best Practice Checklist 2013

2. Best communication of governance and risk
continued

Risk

What’s required? / Best practice / Comments
Companies Act 2006
‘a description of the principal risks and uncertainties facing the company’
The UK Corporate Governance Code
C.2.1 The board should, at least annually, conduct a review of the effectiveness of the company’s risk management and internal control systems and should report to shareholders that they have done so / Content

• Discuss the key risks and uncertainties and how the management have addressed them in order to minimise their impact on performance, or to exploit them to gain competitive advantage
• Identify external risks (which may not be controllable by management) and internal risks which should be controllable
• Explain risks which may be unique to the business or sector
• Outline the risk profile and risk appetite of
  the company
• Acknowledge opportunities as well as threats
• Discuss changes to risks from previous year
• Identify the top 2/3 key risks for the reporting period, to direct the reader’s focus to the most topical issues

/ Communication

• Avoid a legalistic approach to narrative and explanation, and ‘boilerplate’ disclosure of
  generic risks
• Diagrams/charts should be included to illustrate the overarching governance structure, risk process etc
• Quantitative data can also help articulate clearly the materiality of certain risk factors
• Consider categorising risks by type (e.g. financial, operational etc)
• Use visual aids (e.g. arrows to indicate the change in risk in
  the year)

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Best Practice Checklist 2013

3. Best communication of sustainability

The scope of sustainability reporting has expanded significantly. Many companies have now built up a record of achievement against which their performance can be measured. We are looking particularly for those companies that have integrated sustainability into their business model and management targets. This award will cover sustainability reporting in the Annual Report, website and other CR reports. Please reference your checklist to the appropriate source.

Sustainability

What’s required? / Best practice / Comments
Companies Act 2006
‘information about environmental matters (including the impact of the company’s business on the environment)’
‘information about the company’s employees’
‘information about social and community issues’ / Content

• Provide a clear description of the company’s role in society
• Provide details of stakeholder engagement processes and identification of the key stakeholders
• Indicate those areas of sustainability which are material to the company’s operations with an indication of KPIs that are used to measure progress
• Address how sustainability links into risk management, executive remuneration, group strategy and the business model
• Include information about any policies of the company in relation to material issues and their effectiveness
• Identify how the company measures the impact of its operations in the environment
• Explain how the organisation sets out to recruit, train, motivate and reward and retain talent etc.
• Describe the contribution of employees to company performance – provide case studies and examples rather than platitudes
• Explain how the company integrates with the communities in which it operates and ensures that operations have a positive impact
  on them
• Make reference to external standards or codes as relevant (e.g. GRI, UN Global Compact, FTSE4Good)
• Identify the relevant Board/committee member who owns/takes overall responsibility for sustainability in the company
• Demonstrate Board commitment to sustainability

/ Communication

• Include important aspects of the company’s activities which impact
  on its corporate reputation
• Use qualitative and quantitative data/non-financial KPIs whilst providing clear targets
  for future performance
• Provide comprehensive geographic coverage (e.g. not just data from the country where HQ is based)
• Ensure consistency with standalone reporting, online reporting and the corporate website
• The management statements
  should include a discussion of the organisation’s commitment to and governance of Board-level responsibility
• Demonstrate ownership of sustainability from the governance team.
• Provide a clear indication of where targets have been missed, remedial action taken, policies changed and lessons learned
• Reference where external assurance has been provided
• Provide name and contact details and commitment to response for group, countries, business units and divisions
• Use case studies to illustrate sustainability
  in practice

4. Best use of social media tools to support investor relations communications

For these awards we are looking for companies that are using social media tools in a resourceful and appropriate way to improve their investor communications.

The judges will be looking for the evidence which you supply to show how you have developed your strategy, targeted appropriate channels and controlled the dissemination of information in a cost effective and timely way.

Please also see the ‘Best Practice Guidelines for using social media in an IR context’ published on our website.

Key elements / Best practice / Comments
Strategy /

• What is the objective of your social media strategy?
• How have you decided which communities you want to develop a
  relationship with?
• Have you set KPIs against which the success of your engagement can be measured?
• How have you decided on the appropriate channels to use?
• How have you decided on the information to make available on social websites?
• Who is authorised to engage on social media platforms on behalf of
  the company?
• How is engagement controlled?
• How do you ensure that information is updated in a regular and timely manner?
• Have you developed a strategy to counteract the rumour mill – when to respond through social media and when to take no action

Control and governance /

• Advocate for a senior person to focus on and coordinate the company’s social media presence
• Develop an explicit social media policy
• Evidence that you provide clear guidance explaining what usage is acceptable both at and away from the work place (e.g. use of social media at work / discussion of work-sensitive information, etc)
• Evidence that you provide employees who are authorised to use social media on the company’s behalf with guidelines as to how and when to engage and/or respond
• Evidence that authorised employees have been made aware of the concept of inside information and the requirements not to disclose any such information that has not already been made public through authorised channels
• Evidence proactive use of the company Twitter following
• Develop a procedure to deal with offensive or inappropriate content being posted by third parties

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Best Practice Checklist 2013

4. Best use of social media tools to support investor
relations communications continued

Key elements / Best practice / Comments
Integration / Ensure your corporate website is updated to improve the link to any social media accounts and to facilitate the sharing of website content with other social media platforms. For example:

• Incorporating links to social media accounts on key pages in the site
• Adding ‘sharing’ functionality across the site to encourage the distribution of links back to the website across social media platforms
• Adding ‘sharing’ functionality for specific elements (e.g. documents, images, video), to encourage distribution and usage of these across social media platforms
• Dedicated social media pages to act as a hub within the website
• Ensure consistent messaging across channels, ensure disclosure complianceand timeliness of communications
• Consider making strategic content available on YouTube
• Ensure your social media presence is promoted on other digital and printed collateral, at events, etc

Results /

• Provide details of the social media channels on which you are active
• Provide examples of successful engagement through social media
• Provide examples of innovation in your use of social media
• How do you measure the success of your social media engagement?
• How has usage of your social media channels changed over time?

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Best Practice Checklist 2013

5. Most effective use of innovative online technology within a corporate website

In this award we are looking for those companies which have constructively embraced new technology to help them get their investor relations message across. We will be looking for tools and technology that enhance or support the messages; we’re not interested in technology for the sake of it. It must have a valid purpose, such as helping web users to gain a greater depth of understanding.

e.g. using interactive data charts enabling the user to manipulate the data as they wish and produce bespoken, downloadable reports.

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Best Practice Checklist 2013