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Forming the EBR Consortium

Forming the EBR Consortium. Better markets through better information. What is Enhanced Business Reporting (EBR)?.

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Forming the EBR Consortium

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  1. Forming the EBR Consortium Better markets through better information

  2. What is Enhanced Business Reporting (EBR)? • EBR is comprised of voluntary, internationally recognized guidelines for providing more transparent disclosure of business information, allowing companies to better communicate current and expected performance • EBR includes key performance indicators based on industry-specific definitions and company-specific information about strategy, plans, opportunities and risks

  3. Why is Enhanced Business Reporting needed? • More transparency and quality in business reporting will help restore investor confidence by providing information needed for informed decision-making • EBR builds on the current reporting model by encouraging disclosure of more nonfinancial information that could help investors and their analysts indirectly appraise the value of intangibles and shed far more light on the future ability of a company to generate earnings and sustainable cash flows

  4. Is anything else driving the need for EBR? • Regulatory initiatives • US SEC MD&A release, December 2003 • UK Operating & Financial Review (OFR) legislation • US SEC focus on the definition and measurement of key performance indicators (KPIs) in the telecom and cable industries • S-O Act requires the SEC to make public the dialogue between a registrant and SEC that occurs as part of periodic reviews of SEC filings

  5. What is the Enhanced Business Reporting Consortium? • The Consortium is an independent, market-driven, international collaboration of investors, creditors, analysts, management, boards of directors, regulatory agencies, standards setters, members of academia, and all other stakeholders • Consortium members are charged with developing and maintaining EBR guidelines and definitions

  6. What are the Consortium's objectives? • Improve the quality and transparency of information used for decision-making • Develop, maintain and improve an EBR framework and agreed-upon guidelines and definitions • Develop a plan for market-driven implementation of EBR

  7. What are the envisioned deliverables? • Consensus on an internationally recognized framework and voluntary guidelines for enhanced business reporting • Generally accepted definitions, measurements, and voluntary disclosure guidelines for industry-specific, process-oriented value drivers and key performance indicators • Generally accepted, voluntary disclosure guidelines for information about opportunities, risks, strategies and plans, and about the quality, sustainability and variability of cash flows and earnings

  8. What are the barriers to delivering the envisioned framework and voluntary guidelines? • Concerns about the long-term effects on business resulting from legislative- and regulatory-driven focus on compliance, rather than on strategy and execution • Decades of ever-increasing and more complex disclosure requirements, which leads to… • Concerns about whether some older disclosure requirements that may no longer be useful actually get in the way of consumer focus on relevant and useful information

  9. What are the implications for Consortium working groups? • Industry-specific working groups would • Identify (1) existing requirements that are of marginal use to consumers and (2) redundancies in GAAP and regulatory reporting requirements • Propose voluntary practices helpful to everyone, i.e., point the way to eliminate costly overlap and duplication and streamline business processes • However… are consumers willing to trade long-time requirements for more relevant and useful information?

  10. Are there any alternatives to the EBR Consortium? • Do nothing and… • Live with uncertainty in the markets about strategic intent and future performance, but remember, uncertainty breeds market volatility • Fail to demonstrate that users and providers of market capital are committed to hold themselves accountable for the quality of the information provided to the capital markets • Fumble an opportunity to build upon the SEC's informal expressions of interest in a market-led effort • One thing is certain… • Failure of the business community to develop and present constructive proposals will result in future regulatory mandates

  11. Jump-starting the EBR Consortium – a strawman 10-12 Strategic partners 20-30 Charter members Luminaries Observers

  12. Strategic partners would be asked to make introductions to a specific number of key members • Producers (users of capital) • Business Roundtable, Confederation of British Industry, Financial Executives International, National Association of Corporate Directors, US & International Chambers of Commerce • Consumers (providers of capital) • Council of Institutional Investors, Investment Company Institute • Enablers (facilitators of capital formation) • AICPA, CFA Institute (formerly AIMR), London Stock Exchange, NASDAQ, New York Stock Exchange, Securities Industry Association

  13. Charter members – Building the foundation • 6-8 big names to achieve critical mass in the US • 2-3 corporations • 2-3 institutional investors • 2-3 enablers (sell-side analysts, rating agencies, etc.) • After the foundation is in place • Complete US representation • Accelerate international outreach

  14. Charter members will be diverse… • Geography • US, UK, India, Australia and Netherlands • Stakeholder community • Producers – 50% • Consumers – 25% • Enablers – 25%

  15. Charter members will be asked to… • Make a significant financial contribution • Provide resources to drive the initiative forward • Exercise significant influence over… • Consortium governance • Development of the EBR framework • Prioritization of industry sectors for development of guidelines • Identification and selection of consortium members • Fee structure for members

  16. Luminaries will be individuals who can contribute intellectual capital and speak and write as advocates • Nominated by charter members • Academics • Think tank fellows • Thought leaders and authors • Public policy and opinion leaders • Others…

  17. Observers will have a working role and be fully engaged in the Consortium development effort • Securities regulators • Standards setters • Government agencies • Industry sector regulators

  18. Project plan • Final business plan – July 31 • Strategic partners in place – July 31 • US charter members identified – July 31 • Meet with potential charter members – Aug-Oct • Consortium launch – mid-Nov • 1st meeting of EBR Consortium – Jan 2005

  19. For more information… www.ebrconsortium.org Better markets through better information

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