Gordon Brown has deepened the uncertainty surrounding controversial new corporate reporting laws after agreeing to consult on rules he promised to scrap only last November.
Experts expressed bewilderment at the move, claiming the possibility that firms could still be asked to produce detailed operating and financial reviews (OFR) just months after the requirement was axed was making it difficult for directors to develop strategies for their corporate reporting systems and processes.
The latest U-turn was made under pressure from Friends of the Earth, after the environmental group launched legal action claiming the government behaved unlawfully by failing to consult all stakeholders when it originally axed the legislation.
The government will now extend its consultation period on proposed rules to replace OFRs to cover many of the issues incorporated in the discarded law.
Critics had claimed the decision to terminate the original law, which included requirements for firms to report on environmental, social and employee activities, had been unfairly influenced by lobbying from anti-regulation business groups such as the Confederation of British Industry (CBI).
Friends of the Earth welcomed the latest U-turn, which also saw the government agree to pay the group's legal costs. Friends of the Earth's lawyer, Phil Michaels said in a statement that the chancellor had been guilty of breaching his own consultation policies by "carrying out an entirely one-sided, informal and unfair consultation".
However, John Taylor of business performance management (BPM) vendor Cartesis said the current confusion will frustrate firms unsure whether they need to develop new reporting systems and processes to help generate OFRs. "The one thing you need on compliance projects is certainty over the regulations' content and timetable," he said. "Anything that changes that causes a problem."
He added that firms should be preparing OFRs regardless of the outcome of the latest consultation as they demonstrate strong corporate governance and boost shareholder confidence. "This [level of transparency] represents best practice and sensible companies will have carried on developing OFR's even after the requirement was originally axed," he said.
