The abandoned mandatory OFR: a lost opportunity for SER?

Purpose - An important outcome of the UK Company Law Review (CLR) involved draft regulations for a mandatory operating and financial review (OFR). The unprecedented abandonment of this mandatory OFR in November 2005 threw debate about the genuine motivations underlying the CLR into disarray. This pa...

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Bibliographic Details
Published in:Social responsibility journal 2008-08, Vol.4 (3), p.324-348
Main Authors: Solomon, Jill Frances, Rhianon Pel Edgley, Carla
Format: Article
Language:English
Subjects:
Annual reports
Company law
Corporate social responsibility
Decision making
Directors
Disclosure
Employees
Endorsements
Environmental accounting
Environmental management
Financial systems
Interviews
Materiality
Regulation
Reporting requirements
Social responsibility
Stakeholders
Stockholders
United Kingdom
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Summary:Purpose - An important outcome of the UK Company Law Review (CLR) involved draft regulations for a mandatory operating and financial review (OFR). The unprecedented abandonment of this mandatory OFR in November 2005 threw debate about the genuine motivations underlying the CLR into disarray. This paper seeks to reinterpret the abandonment of a mandatory OFR using interview research.Design methodology approach - The authors conducted a series of 24 interviews with companies from the FTSE100 between May and August 2004, prior to the abandonment.Findings - The interviews showed that the OFR was perceived as an appropriate vehicle for social and environmental reporting (SER). The interviewees considered that a mandatory OFR would provide a means of forcing SER into the mainstream and making it mandatory at a basic level. The interviews revealed that processes for the identification of material SER differ widely between organisations, ranging from embryonic to highly structured. Further, interviewees believed that directors had the final veto on inclusion of information. Despite directors' inclination to hide behind materiality as a means of avoiding SER, interviewees did not view the proposed mandatory OFR as "greenwash" but as a vehicle that would increase stakeholder confidence, as processes underlying the proposed OFR would be audited.Practical implications - The research implies that abandoning the mandatory OFR represented a lost opportunity for SER.Originality value - The paper provides new evidence on the processes of materiality decision making in the SER area as well as strong endorsement of the mandatory OFR, contrary to the government turn-around.
ISSN:1747-1117
1758-857X
DOI:10.1108/17471110810892848