A soundbite from Australian comedy film, The Castle, resonates with Vanessa Richards when it comes down to the debate between rules-based and principles-based reports
This article was first published in the October 2019 International edition of Accounting and Business magazine.
For as long as people have made laws, we have tried to strike a balance between specificity and generality. For example, in third-century China, the approach labelled ‘legalism’ set out absolute rules, with harsh penalties such as amputation or execution to be applied without exception if these were broken.
The contemporary competing philosophy of Confucianism, however, took the view that people will always find a way around rules: it is principle that matters most.
To paraphrase Confucius: guide them with policies and align them with punishments and the people will evade them and have no shame. Guide them with virtue and align them with [standards of behaviour and routines] and the people will have a sense of shame and fulfil their roles. As I work my way through this year’s reporting season, I have been considering these opposing viewpoints.
There’s no question that both approaches have their drawbacks: applying principles-based requirements can sometimes feel worryingly imprecise, but exact requirements too often result in a report that is full of irrelevant detail and difficult to follow. Not to mention the frustration of spending a great deal of time and resource on work that ultimately adds little value to the organisation or its stakeholders.
On balance, my sympathies lie with the principles-based approach. It is a preference I share with Australians in general: we tend to like to see ourselves as relaxed, adaptable, able to live the ‘right’ way without undue direction from authority.
The classic example of this archetype is set out in the 1997 comedy film The Castle (which incidentally is required viewing for anyone wishing to understand the Australian self-image). The hero, Darryl Kerrigan, challenges a compulsory acquisition order on his family home made by the local airport authority which is keen to expand its operations.
Many, many quotes from the film have become part of the Australian repertoire, but one in particular comes to mind when dealing with corporate reporting reviewers.
In the film, Kerrigan asks his hapless friend and local solicitor to help and, when asked by the judge to sum up his argument as to why Kerrigan’s home should not be taken from him, the solicitor responds: ‘It’s the vibe of it.’
In my professional life I have found ‘the vibe of it’ to be a good litmus test when considering what should be included in a report and how.
The burden of reporting is rapidly reaching a critical point (some would argue it has already gone well beyond this point). In an increasingly complex and fast-moving world, we cannot afford to be grappling with the irrelevant, or constantly adapting detailed requirements.
In the words of these two wise counsellors, we must ‘guide with virtue’ and trust in ‘the vibe’.
Vanessa Richards is a corporate communications and governance consultant in Australia.
"My sympathies lie with the principles-based approach. It is a preference I share with Australians in general"