Building Public Trust: The Future of Corporate Reporting (DiPiazza, Eccles, 2002)

Building Public Trust, by Samuel A. DiPiazza Jr. and Robert G. Eccles, couldn't be more timely or necessary. Arriving in the wake of a seemingly endless stream of corporate accounting scandals--which in a matter of months have bankrupted Enron and brought WorldCom and Global Crossing down to earth--this book offers a bona fide framework for a new, open form of transparent financial reporting that should prove more palatable to businesses and their stakeholders, and more effective than any of those in misuse today. DiPiazza, CEO of PricewaterhouseCoopers, and Eccles, president of Advisory Capital Partners, certainly know of which they speak, and they lay out a highly informed and quite feasible system that actively involves every member of the so-called corporate reporting supply chain: executives, boards of directors, independent auditors, information distributors, third-party analysts, investors, and various other stakeholders. They propose specific ways to develop three key elements (a spirit of transparency, a culture of accountability, and people of integrity) that work together to "create public trust in markets." Based on their extensive firsthand experiences, they further show how using these principles can lead to a scenario where "capital is being allocated more efficiently all over the world." The timeliness of this book is one thing, the content within its pages another, and on both counts Building Public Trust definitely delivers. --Howard Rothman

Review
"Building Public Trust was written as the Enron scandal was breaking ... but the book's lessons apply to what has happened since as well." (The Wall Street Journal, August 22, 2002)
"...propose a new vision of corporate transparency as a means to restore investor confidence..." (Oil & Gas Journal, 28 October 2002)

"They frame the discussion very well in this interesting, educational book." (Journal of Accountancy, December 2002)

"...a blueprint for action has recently been set out in a new book, Building Public Trust..." (Accountancy Age, 19 February 2003)

"...sensible and forward thinking suggestions to encourage investors back into equities by having standardized and transparent company reporting procedures globally." (Financial Adviser, 27 march 2003)

p.81-82 new strategic and operational concepts can make a huge difference. But there is another meaning to good management: identifying, measuring, using internally, and reporting externally on the real value drivers of a company... companies are so complex today that management can easily underestimate the importance of certain value drivers or simply fail to give them any importance at all... Internal information about the real value drivers of a company serves as the basis for effective management and for appropriately transparent external reporting.

p.83 By demonstrating to stakeholders the links between marketplace opportunities and strategy, between value drivers and measured results, and between management decisions and value creation, the company will deserve the confidence of investors and all stakeholders in its performance.

p.83 A truism: Management should measure and manage those things that create value... Doing so requires clear articulation of... strategy... It also requires identifying the value drivers that must be measured and managed. The concept of value drivers is still fresh; it remains compelling and challenging.

p.84 Measurement plays a dual role: it focuses attention on what is important, as determined by the company's strategy, and it monitors the level of performance along those dimensions in the effort to turn strategy into results. Although measurement is inherently based on information about events that have already happened, certain measures can be predictive in nature when the relationships among the value drivers are well understood. If management has identified its key value drivers and developed reliable means of measuring them, effective use of those measures as a management tool will inevitably create value for shareholders and other stakeholders (or more effectively preserve value in difficult times)."

p.87 Therefore, the question is: "Does management have all the information it needs?"

p.97 In the end, creating value and managing risk are one and the same.

p.99 Consider what board members should do:

Satisfy themselves that the company's strategy will deliver value to shareholders.
Determine whether the right value drivers have been identified, and that the business model makes clear their interactions.
Evaluate the measures that monitor progress on value drivers and the quality of the information, both internal and external, used in producing those measures.

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