New research reveals how US public companies have been leveraging disclosure committees to address ever-evolving disclosure requirements.
This new report, Disclosure committee report: practices and trends, was released today and completed jointly by Ernst & Young LLP (EY), the Society for Corporate Governance (Society), and the Financial Education & Research Foundation (FERF) — the independent nonprofit research affiliate of Financial Executives International.
It is an update to the 2014 report, Unlocking the potential of disclosure committees: leading practices and trends, and provides current insights on how practices have evolved in this ever-important area of disclosure oversight. The 2014 report, which has remained a leading reference on disclosure committees, addresses their purpose, composition and operations, and illustrates how they can facilitate meeting regulatory requirements while mitigating risk and delivering real value to public company investors, stakeholders, management and boards.
“We initially released our perspective on disclosure committees seven years ago. We felt it was time to revisit the analysis to see if the themes changed and where new areas of value may have come to light. We’ve seen some meaningful progress for the better. Disclosure committees are evolving in responsibility, addressing additional areas, and providing valuable business impact as corporations become more intelligent on how to build and leverage them,” said Andrej Suskavcevic, CAE, President and CEO of Financial Executives International and FERF.
The findings highlight common and trending practices regarding disclosure committees’ structure, composition and activities. The report offers insight into how companies have been leveraging their committees to address the ever-evolving disclosure requirements and facilitate more effective disclosures.
“As our survey shows, disclosure committee members have key roles across a range of critical corporate functions. Disclosure committees are reviewing not only SEC reports and filings, but also other types of corporate communications and disclosures that are viewed as significant components of a company’s overall story and value proposition. These include annual letters to shareholders, corporate website disclosures and investor presentations, as well as cybersecurity, climate and sustainability disclosures, wherever they appear,” said Randi Morrison, Senior Vice President – Communications, Member Engagement and General Counsel, Society for Corporate Governance.
“Disclosure committees can facilitate effective public company disclosures, enhance the confidence of the CEO and CFO in executing their quarterly SOX certifications, and support the audit committee and board in overseeing financial reporting and other important public disclosures,” said Rani Doyle, Managing Director, Ernst & Young LLP, Center for Board Matters.
The report is the result of a survey of Society members, primarily corporate secretaries, in-house counsel and other in-house governance professionals, and FEI members, who are finance professionals and executives. The respondents represented companies of different sizes and across multiple industries.
- Formal disclosure committees are a corporate norm, with nearly all respondents indicating they have one in place.
- Staffing of committees is fairly consistent, with members generally being appointed by senior executives.
- Written disclosure committee protocols, such as charters, reporting and minutes, have become more prevalent.
- Member roles are diverse, spanning, on average, more than 10 different job functions.
- Most disclosure committees meet at least quarterly and approximately 60% maintain formal minutes.
- Approximately one-third of disclosure committee representatives regularly report to audit committees.
- Disclosure committees may have subcommittees and multilayered structures.
- While disclosure committees’ focus continues to be primarily on SEC financial reporting and related disclosures, many also review other types of documents, such as proxy statements, sustainability reports and website content.
The report, Disclosure committee report: practices and trends, is available at www.financialexecutives.org/Research and https://www.societycorpgov.org/currenttopiclandingpages/disclosure-committee-practices.
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Financial Executives International (FEI) is the leading advocate for the views of corporate financial management. Its more than 10,000 members hold policy-making positions as chief financial officers, treasurers and controllers at companies from every major industry. FEI enhances member professional development through peer networking, career management services, conferences, research and publications. Members participate in the activities of more than 65 Chapters in the U.S. FEI is located in Morristown, NJ. Visit www.financialexecutives.org for more information.
About the Society for Corporate Governance
Founded in 1946, the Society for Corporate Governance, Inc. is a non-profit professional membership association of more than 3,400 corporate and assistant secretaries, in-house counsel, outside counsel, and other governance professionals who serve approximately 1,600 entities, including 1,000 public companies of almost every size and industry. Members are responsible for supporting their boards of directors and executive management in matters such as board practices, compliance, regulation and legal matters, shareholder relations, subsidiary management, and sustainability. Visit www.societycorpgov.org for more information.