Improving public company disclosures

March 2016

On January 14–15, 2016, members of the Audit Committee Leadership Network in North America (ACLN) met in New York for their 31st stand-alone meeting. Members addressed the issue of public company disclosures from two different perspectives:   

  • Members discussed the investor perspective on disclosures, especially governance disclosures, with Glenn Booraem, Fund Treasurer at Vanguard Group; Drew Hambly, Executive Director of Corporate Governance at Morgan Stanley Investment Management; Zach Oleksiuk, Americas Head of Corporate Governance and Responsible Investment at BlackRock; and Ann Yerger, Executive Director, Center for Board Matters at EY and former Executive Director of the Council of Institutional Investors.

  • Members discussed company innovation in disclosures, focusing on General Electric’s (GE) proxy statement and 10-K in a session with Jan Hauser, Vice President – Controller and Chief Accounting Officer at GE; Christoph Pereira, Chief Corporate, Securities, and Finance Counsel at GE; and Chris Holmes, National Director of SEC Regulatory Matters at EY.  

In their discussions with investors and the guests from GE, ACLN members explored both the needs of investors in terms of disclosures and engagement and the challenges companies face in improving disclosures:

  • Institutional investors’ perspectives on public company disclosures
    Institutional investors are a key constituency for company disclosures, and one of the areas that interest these investors is governance, including information about audit committees and information about board composition, board effectiveness, and evaluation of board performance. Formal disclosures, especially the proxy statement, are an important source of information, providing scalability of communications, but they may be supplemented by direct engagement with the company, including – when necessary – engagement with board members. Effective communication between investors and the company is vital in helping companies deal with activist investors and explain major initiatives such as share buy-back programs.

  • Innovation in public company reporting
    GE’s initiatives to revamp its proxy statement and then its annual report were driven by the sparse usage of these documents by investors. By introducing more charts and graphs, direct communications from the board, layered content, and more detail in key areas, GE was able to benefit internal stakeholders as well as investors and analysts. To achieve these changes, however, GE needed the support and approval of both internal and external players, including senior management, the audit committee and external auditor, the company’s lawyers, and the Securities and Exchange Commission (SEC). It also needed the dedication of an inspired staff that was willing to work the many hours required to implement the changes.