Tag: DIsclosures

SEC Tracking Covid-19 Disclosures on Human Capital

Boards should expect pressure from investors and regulators to disclose more information on workforce health and safety measures in light of the Covid-19 pandemic, experts say.

Major investors say the current disclosures aren’t detailed enough, and a large group is pressuring the SEC to ramp up disclosure requirements on the effectiveness of companies’ human capital–related measures. The commission appears to be hearing some of those demands as SEC officials say disclosures related to human capital are being integrated into rulemaking.

This comes on the heels of an SEC roundtable with prominent investors, who called for more transparency on remote working costs, protective equipment for employees and specific forward-looking guidance on liquidity plans.

Covid-19: The Impact on Guidance, Buybacks and Dividends in the S&P 1500

Covid-19 has led to widespread changes to financial guidance, buyback programs and dividend payments across the whole of the US equity market, although notable differences exist between different market-cap segments, according to new research.

IR Magazine has worked with MyLogIQ, a provider of intelligence tools focused on compliance and disclosure, to understand how companies on the S&P Composite 1500 Index have responded to disruption caused by the pandemic.

To gather the data, MyLogIQ analyzed SEC filings of companies included in the S&P 1500, which accounts for around 90 percent of US market capitalization, between March 1 and June 12. The firm used its AI-based platform to search for concepts such as ‘withdrawing guidance’, ‘dividend suspension’ and ‘share-buyback pause’.

According to the analysis, 39 percent of S&P 1500 companies withdrew financial guidance during this period. Looking at the main market-cap segments of the S&P 1500, guidance was withdrawn by 47 percent of companies on the S&P 500, 35 percent of the S&P MidCap 400 Index and 34 percent of the S&P SmallCap 600 Index.

Clock Ticking on Virtual Annual Meeting Decisions

Hundreds of companies say they will transition to a virtual annual shareholder meeting this year while others plan to but are working out the kinks. Yet many companies are still waiting to determine what to do.

According to public company intelligence provider MyLogIQ, so far 49 Russell 3000 companies have announced in recent weeks that they have converted their annual meeting to a virtual meeting, while 181 companies disclosed in their proxy statements that annual meetings would be held virtually this year. Another 30 companies have adopted bylaw amendments that would allow for virtual meetings but have not yet announced new meeting dates or details.

MyLogIQ found that 400 Russell 3000 companies will hold annual meetings this month, while 363 are slated to hold them in May.

COVID-19: SEC Filings Are a Communication Platform

On March 25, the US Securities and Exchange Commission (SEC) issued another round of relief for public companies with regard to financial filings in light of the Coronavirus Disease 2019 (COVID-19) outbreak. The Commission provided public companies with a 45-day extension to file reports originally due between March 1 and July 1, 2020. This new order is an extension of the SEC’s earlier March relief order. As companies prepare their 10-Q and 10-K filings, boards need to ensure that their companies’ filings not only accurately identify and reflect the impact of the pandemic on their businesses, but also effectively communicate with investors.

A recent NACD poll on board responses to the COVID-19 crisis found that only 34 percent of boards at the time the survey was conducted in mid-March had reviewed their company’s external communications strategy, but this number is bound to grow as the crisis continues. As the SEC states in its recent order, “we encourage public companies to provide current and forward-looking information to their investors,” adding an important reminder about safe-harbor rules for such statements.

In speaking about future developments, companies can deprioritize issues and engagement not related to COVID-19, which is the topic most important to investors in this moment. As stated by one major investor group, such engagement “should be postponed where not related to COVID-19 to allow management and boards the ability to focus on crisis management.”

Cyber Disclosures Raise Flurry of New Concerns

The largest companies are gradually telling investors more about the pains they’re taking to protect their own information as well as customers’ privacy. Yet some industries are reporting those efforts better than others, according to new studies.

A growing number of firms have fallen into step with last year’s guidance from the Securities and Exchange Commission to disclose their cyber-security risks and what management and the board are doing to address them. For instance, according to a report from the EY Center for Board Matters, more than half of Fortune 100 companies reported in 2019 proxy statements and annual reports that they sought to recruit new board members with cyber skills versus only 40% the year before.

Also, more companies have decided to place oversight of cyber risk in non-audit committees. It was 28% of the Fortune 100 this year compared to 21% in 2018. (Please see chart at the bottom.)