Is your company ready for the new SEC disclosure?| Is your company ready for the new SEC disclosure? |
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Corporate governance is longer an activity taking place behind closed doors in the revered boardroom. It has become a top priority for companies, their boards, their investors, and inadvertently, their investor relations professionals.
In mid December of 2009, the Securities and Exchange Commission adopted new disclosure regulations that apply to the 2010 annual report and proxy statement season.
Like the MD&A in a company’s 10K, the SEC is now requiring companies to furnish full disclosure on a range of practices including its compensation policies and practices, the experience, skills and background of its directors, and how the nominating committee of the board considers diversity in director nominations Those companies that have these policies in place can stop reading here and accept my sincere congratulations. Now all you need is a good writer to include this in your 2010 public materials. For those companies that have not conceptualized these policies, you may want to get started now as the clock is ticking. I would consider this urgent. Not only is the proxy season fast approaching but this is an excellent opportunity to assess your board effectiveness and open the door for discussion on how it can better function.Where to start? A company’s human resources department normally has all kinds of data on salaries, grades, and requirements. For the compensation part, the best place to start is here. For the governance requirements, a quick and efficient assessment of the board, the qualifications of its directors, practices, and diversity position, whatever that is defined as being, is called for.
Whether or not you’ve started thinking about these issues but haven’t acted, or if you are starting from scratch, appoint a task force. If internal resources are limited, hire an external consultant to get the ball rolling and to bring the project to completion. Keep in mind there will be many revisions going back and forth before the final document is approved.
Although the IR team typically is not involved in helping the board set its governance practices, they are usually involved in crafting the message to the investment community, (who reads company 10Ks and proxies line by line). They will also be on the front line in communicating a company’s’ governance practices to external constituencies, so it’s best to include them from the beginning. Also, don’t forget the Corporate Communications department either. As a result of the new disclosure rules and the current state of the economy, activist investors, proxy advisory services, pension funds, unions, regulators and the press will be looking for those companies perceived as being lacking in their practices and which are likely to be publicly taken to task.
Charlotte Laurent-Ottomane
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