A discussion paper, 'Inside Out: Reporting on Shareholder Value', says companies should be more open in the external disclosure of information used internally to manage the business.It calls for companies to set out in their annual reports their strategy for creating value and the progress they are making towards achieving that strategy, as shown by key internal performance indicators.The paper's recommendations were welcomed by David Gould of the National Association of Pension Funds (NAPF). He said: 'Pension fund managers are concerned that boards of directors should develop medium-term corporate strategies and regularly assess what has to be done to achieve those strategic aims. Both these key drivers are recognised by the institute's paper as matters on which companies should report to shareholders in a detailed and meaningful way.'The paper provides examples of the indicators companies should consider including in their external financial reporting. As well as recognised financial indicators such as revenue growth, economic profit and return on capital, non-financial measures such as market share, market growth, customer retention and customer satisfaction are proposed. Other indicators relating to specific drivers of value are also suggested, in such areas as process quality, productivity, customer acquisition, customer response time, innovation, and employee turnover and satisfaction.
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