In a recent speech, SEC Commissioner Michael S. Piwowar discussed the future role of international financial reporting standards (“IFRS”) for documents filed with the SEC. He also talked about improving the quality of interactive data in reports filed with the SEC, the SEC’s efforts to improve corporate disclosures, and his fear that “special interests have corrupted the disclosure process to the detriment of investors.”
Commissioner Piwowar made the following recommendations:
- IFRS “should be investor-driven, not regulator-driven”;
- regulators should consider an “incremental approach” to IFRS that would “allow, but not mandate, IFRS reporting as a supplement without reconciliation” to Generally Accepted Accounting Principles;
- the SEC should address problems with the accuracy of interactive data filings by moving “away from the current model of filing the interactive data as a separate exhibit” and moving toward inline eXtensible Business Reporting Language; and
- the SEC should stop allowing itself to be “used as a pawn of the union and social justice power brokers” and instead focus on “making sure that material information, with a substantial likelihood of being considered important to reasonable investors, is quickly and efficiently distributed to the market.”
Commissioner Piwowar delivered his remarks at the 34th Annual Current Financial Reporting Issues Conference.
Lofchie Comment: One approach to disclosure that might be interesting for the SEC to consider is this: (i) making various social disclosures (e.g., compensation ratios and political contributions) optional, but (ii) requiring issuers to allow proxy voting periodically on the topics. If proponents of these disclosures are correct in asserting that shareholders want them, too, then the shareholders will support them. If the critics are correct, then shareholders will reject them. Such an approach would be consistent with Commissioner Piwowar’s suggestion that the use of IFRS standards should be driven by investors instead of regulators.
Commissioner Piwowar’s passing remark that an accountant might (or should) become an SEC Commissioner one day is also worth noting. The bigger question posed by Commissioner Piwowar’s comment is whether SEC Commissioners should be drawn almost exclusively from the ranks of lawyers. Having lived so long among them, I find it obvious that we possess a limited skill set collectively. Frequently, our expertise lies in answering narrow questions and not in asking big ones.
Why shouldn’t SEC Commissioners be accountants, or economists, or perhaps actual business people or investors? In fact, the first Chair of the SEC was a rather slick business operator.