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Forming the EBR Consortium

Forming the EBR Consortium. “ Better Markets through Better Information”.

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Forming the EBR Consortium

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  1. Forming the EBR Consortium “Better Markets through Better Information”

  2. “Greater transparency in business reporting is needed to help strengthen our economy and protect investors. The Enhanced Business Reporting Consortium is working to develop the tools that companies can use to communicate the information that is most important to their stakeholders” …David Walker Comptroller, General of United States General Accountability Office

  3. What is the “Problem”? The current business reporting model has not evolved with changing market demands and key stakeholder requirements, for example: • Importance of intangibles as key value drivers • Growing democratization of capital markets • Increasing pension assets & future dependency • Focuses on short term not long term value • Globalization & outsourcing benchmarks

  4. Immediate alternatives to consider are… • Do Nothing • Allow regulatory forces to mandate change • Drive positive change, through a collaborative solution, by establishing an Enhanced Business Reporting Consortium (EBR) of diverse stakeholders of international prominence to improve the quality and transparency of information used in decision-making

  5. Who is the Enhanced Business Reporting Consortium? • The Consortium is a market-driven, independent NFP entity, international collaboration of investors, creditors, analysts, management, directors, regulatory agencies, standards setters, members of academia, and all other stakeholders • Consortium members are charged with developing, maintaining, and continuously improving the EBR framework

  6. What is the Enhanced Business Reporting (EBR) Framework? EBR is a framework comprised of voluntary, internationally recognized disclosure guidelines for: • Standardizing industry-specific value drivers and key performance indicators • Structuring disclosure on company-specific strategies, plans, opportunities and risks • Focusing key stakeholders on long term value creation and away from strictly earnings • Promoting Quality in Reporting Recognition Program

  7. What is the purpose of Enhanced Business Reporting? EBR builds on the current reporting model by: • Encouraging disclosure of more qualitative, non-financial information, and KPI metrics • Allowing companies to better communicate current and expected performance • Giving the investment community and other stakeholders the information they need to assess intangible value and sustainable cash flows

  8. The EBR filter concept

  9. Why is Enhanced Business Reporting needed? • The current financial reporting model has value, but fails to meet needs of global investors • Little progress has been made in moving toward a more comprehensive reporting model that includes both financial and nonfinancial information

  10. Is anything else driving this initiative? • Regulatory agencies are focusing on key performance indicators and business risks and opportunities • US SEC MD&A release, December 2003 • UK Operating & Financial Review (OFR) legislation • Sarbanes-Oxley 2002, Public Comments Fall 2004 • The US SEC has informally expressed interest in a market-led effort in this area

  11. The EBR Consortium will provide an opportunity for the users and providers of market capital to… • Demonstrate a commitment to hold themselves responsible and accountable for the quality of the information provided to the capital markets • Develop and present constructive proposals as a viable alternative to further regulation

  12. Consortium Mission “A consortium of stakeholders collaborating to improve the quality, integrity, and transparency of information used for decision-making in a cost-effective, time efficient manner”

  13. What are the Consortium's objectives? • Facilitate a transformation of the business reporting supply chain- focused on efficiency • Improve the relevance and comparability of reported business information for decision-making • Develop and execute a plan for market-driven implementation of EBR

  14. What are the envisioned deliverables? Consensus on an internationally recognized framework for: • 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

  15. Are there any short-term deliverables? • Industry working groups would • Identify information that is of marginal use to the investment community and redundancies in reporting requirements • Point the way to eliminate costly overlap and duplication • Streamline the current business reporting process

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

  17. Strategic partnerswould be asked to make introductions to a specific number of key members • Producers (users of capital) • Business Roundtable, Confederation of British Industry, Edison Electric Institute, Financial Executives International, National Association of Corporate Directors, National Investor Relations Institute, 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

  18. 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

  19. Charter memberswill be diverse… • Geography • US, UK, Europe, India, Asia-Pacific • Stakeholder community • Producers – 50% • Consumers – 25% • Enablers – 25%

  20. Charter memberswill be asked to… • Make a 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 Microsoft is our first Charter Member

  21. Luminarieswill 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…

  22. Observerswill have a working role & fully engaged in the Consortium development effort • Securities regulators • Standards setters • Government agencies • Industry sector regulators

  23. Project Plan • Final business plan – July 31 • Strategic partners in place – Sept 30 • US charter members identified – Sept 30 • Meet with potential charter members – Aug-Nov • Consortium launch- November MIT CFO Forum • 1st meeting of EBR Consortium – Jan 2005

  24. In Summary “Better Information Leads to Better Management… Better Governance… Better Markets”

  25. For more information… www.ebrconsortium.org “Better Markets through Better Information”

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