Disclosure of Human Resources Information by Australian Companies in Annual Reports

Abstract

A nnual reports are prepared by companies to report to shareholders and other interested parties on the financial affairs of the company. Although much of the information is provided to satisfy legal requirements, companies also use the Annual Report as a vehicle for communicating with shareholders about the companies' performance over the previous year and their prospects for the future.

This paper is about the amount of human resources information disclosed by companies in such reports. In Australia as in other countries, there are legal and institutional requirements of company reporting. For Australia, in the area of human resources, these are limited to a rather narrow range of statistics relating to provision for retirement and (over more recent times) information about the remuneration of top income earners employed by the company. Reporting requirements on human resources are more extensive both in Europe and other overseas countries where they extend to a wide range of information about labour and labour costs.

Whilst limited disclosure may be required of companies, there are other intrinsically attractive reasons why they might be interested in providing additional information or more information than is required to shareholders, about the human resource aspects. Labour is a very important input to the production process and therefore a key determinant of the organisation's performance.

Consequently, there is a strong case for management to address human resources issues in the same manner as they would other strategic issues. Further, in so far as it is becoming common for employees to hold shares in public companies, it could be argued that the annual report to shareholders is also a vehicle for communicating with such employees.

This study presents an analysis of the kind of information contained in the reports of the top 150 Australian companies for the financial year 1986-87. It finds, using the evidence of a range of independent variables, that there is considerable diversity in the approach taken by companies to the reporting of human resource factors.

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