SEC Chair White Outlines SEC Disclosure Developments

SEC Chair Mary Jo White reviewed the development of SEC disclosure in corporate governance. She focused on board diversity, non-Generally Accepted Accounting Principles and sustainability reporting.

Chair White reported that the SEC staff is preparing recommendations to the Commission to amend the rule requiring companies’ proxy statements to include “more meaningful board diversity disclosures on their board members and nominees where that information is voluntarily self-reported by directors.” She emphasized that the SEC’s “lens on board diversity disclosure needs to be refocused in order to better serve and inform investors.”

Chair White discussed the reporting of non-GAAP financial measures, voicing “significant concern” over companies that take the flexibility of non-GAAP information “far and beyond what is intended and allowed.” She cautioned that “the non-GAAP information, which is meant to supplement the GAAP information, has become the key message to investors, crowding out and effectively supplanting the GAAP presentation.” Chair White urged companies to review SEC guidance on non-GAAP disclosures carefully.

Chair White reported that the SEC is addressing disclosure of sustainability information through a “materiality-based approach to disclosure, guidance on certain issues,” and through “shareholder engagement on a range of sustainability topics.” She noted that the disclosure of sustainability matters has increased, but affirmed that the SEC is taking a “more focused look at such disclosures, particularly [those that are] related to climate change, in [its] annual filings reviews.”

Chair White delivered her remarks at the International Corporate Governance Network Annual Conference in San Francisco, California.

Lofchie Comment: How much of the SEC’s focus on “disclosure” is driven by the interests of investors? Is it really true that corporations would better serve their investors if their disclosures spotlighted the risks of climate change, or does that proposed requirement reflect a political preference? If it is the latter, wouldn’t most investors be more concerned about the risks that might arise from Brexit, Zika and other pandemics, governmental defaults on both national and municipal levels, aging populations, regulatory burdens, and so on? How can the need for disclosure on global warming possibly take precedence over disclosure concerning other kinds of risks?

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