Intellectual Capital Management and Disclosure

Steve Pike
Anna Rylander
Goran Roos

Intellectual Capital Services Ltd
London, UK


The change in the key characteristics of companies in the knowledge era leads to one of the principal distinctions in the approaches to measurement and management. The most obvious approach is to try to retain as much of the rigour of conventional accounting by adjusting its traditional instruments. The alternative to this is to abandon traditional accounting completely and base measurement and management on the attributes of the value generating processes of individual companies.

In both methodologies, the aim is to allow managers to manage effectively internally and increase the performance and competitive position of the company and also to communicate the performance, position and potential of the company externally to shareholders and the investing community at large. The issue is whether either of these approaches can meet the need in an auditable, useful and secure way. Internally, this means a measurement regime that gives managers the levers necessary to guide the business while not instilling bad behaviours through measuring the wrong things nor imposing a heavy burden of measurement of people who have better things to do. Externally it means providing stakeholders and potential investors with the often long-term information they need but without disclosing sensitive strategic intentions to competitors.

The chapter examines current thinking on the issue of disclosure and determine the nature of the barriers to be crossed if company information disclosure on value creation is to be meaningful and commonplace. The evidence presented suggests that in principle, there is little to prevent real progress to be made in improving the information asymmetry between companies and stakeholders. The evidence suggests that there are many benefits to be gained by a more extensive disclosure of information. There would be beneficial effects both in terms of the effects on external reputation, market valuation and the ability to raise capital and internally in the esteem that internal stakeholders (staff) will have in the company and its management.

To appear in "Strategic Management of Intellectual Capital and Organizational Knowledge" edited by Nick Bontis & Chun Wei Choo (Oxford University Press).