Disclosure is not a pile of paperwork; it is the right information reaching, in time, whoever will base a decision on it, in language they understand. Anything else is noise.
1 What is disclosed?
| Type of disclosure | Examples | Timing |
|---|---|---|
| Periodic financial | Quarterly and annual financial statements | Within the statutory deadlines |
| Material developments | A major contract, a significant loss, a change in leadership, an important lawsuit | As soon as the company becomes aware, without delay |
| Governance | Composition of the board and committees, meetings and attendance, policies | In the annual report |
| Remuneration | Remuneration of members and senior executives | In the annual report |
| Related parties | Business and contracts with related parties | On approval and in the annual report |
The materiality test
Information is material if, were it known, it would change the decision of a reasonable investor. That test is the dividing line between what must be disclosed and what need not be.
2 The board’s annual report
This is the document in which the board presents the year to the shareholders. It usually covers:
- Business results, the main developments and future plans.
- The composition of the board and its committees, the number of meetings and each member’s attendance.
- Remuneration of board members and senior executives.
- The results of the annual review of the effectiveness of internal control.
- Business and contracts with related parties.
- Which governance provisions were applied and which were not, with the reasons.
“Comply or explain”
Some governance provisions are guiding rather than mandatory: a company may choose not to apply them, but it must disclose that and explain why. Silence about non-application is the breach, not the non-application itself.
3 Evaluating the board’s performance
Criteria set in advance
What will be measured and who measures it
Collecting assessments
Self, peer, or an external party
Gap analysis
Missing skills or weak attendance
Improvement plan
Training, a change of composition, or amending the charter
Evaluation is not about holding individuals to account; it is about improving the board’s ability to do its job
Board performance is usually measured with indicators such as: meeting attendance rates, the quality of the papers provided beforehand, the diversity of members’ experience, the speed of decision-making, follow-up on what was decided, and the effectiveness of the committees.
4 Markers of effective governance
| Indicator | What it signals |
|---|---|
| Proportion of independent members on the oversight committees | The committee’s ability to object independently |
| Number of audit findings closed on time | Serious follow-up, not mere detection |
| Time taken to disclose material events | Discipline in transparency |
| Number of whistleblowing reports handled | The existence of a safe reporting culture |
| Periodic updating of policies and authorities | Living governance rather than dated documents |
A company lost a contract representing 30% of its revenue. Management wanted to postpone the announcement until it had signed a replacement, “so the share price is not affected”.
The correct treatment: the news is material and affects investors’ decisions, so it is disclosed immediately along with the expected impact and the alternative plans. Delay is a breach, and it costs the company its credibility when it comes out — the market punishes concealment more harshly than it punishes the bad news itself.
Chapter 1 summary
- Disclosure: correct information, in time, in understandable language, to everyone at once.
- The materiality test decides what must be disclosed.
- The board’s annual report brings together performance, governance, remuneration and related parties.
- “Comply or explain”: not applying a provision is acceptable; concealing that is not.
- Board performance evaluation is an improvement tool, and governance indicators reveal whether it is alive or merely formal.
5 Test your understanding
Three quick questions
Pick the answer you believe is correct and you will see the result immediately.
1. When is information considered material?
Materiality is measured by the information’s effect on a decision — not by whether it is good news, and not by a fixed amount.
2. The company did not apply a guiding provision of the governance regulations. What must it do?
Under “comply or explain”, not applying is accepted, but it must be disclosed and justified.
3. Which indicator points to living rather than formal governance?
Substance, not form: closing findings on time proves that oversight is genuinely following up and correcting.