Please Fill Out These Forms...The SEC Will See You Now

Chris McClean

Is regulatory oversight more or less invasive than oral surgery? Sure, both are necessary sometimes. But however you feel about the current level of corporate scrutiny, it’s clearly increasing, and that means the jobs of corporate governance, risk management, and compliance professionals are going to get even tougher.

The last month has seen some dramatic news related to corporate disclosure, most notably a bill approved by the House Financial Services committee that would require public companies to explain executive and employee compensation packages, and to write rules that would prohibit any compensation that could have a substantial, negative effect on financial markets. Lawmakers expect that this bill, if approved, will be rolled up with other legislation.

In a more bizarre story, the SEC was found investigating Apple for the company’s disclosure of the nature of Steve Job’s illness. The issue is that, considering Jobs’ importance to the company strategy and vision, his health is a material concern for investors. If the SEC looks to make the rules for this type of disclosure mandatory, expect some very interesting discussions about privacy versus disclosure.

Finally, if the SEC doesn’t already have its hands full, the Commission is currently considering a mandate that corporations must practice better climate change disclosure. The language being used is a bit confusing however, in that climate risk and climate change are being used somewhat interchangeably. Climate change disclosure seems to be a confusing combination of some risks (resource scarcity or extreme weather events) and some impacts (emissions and waste). And at the risk of sounding cynical, I’m guessing the SEC won’t require the disclosure of any potential benefits that might be gained from climate change (access to better farmland, more oil reserves, longer work days, etc.). I would recommend sticking with environmental risks and environmental impacts.

These ongoing and somewhat confusing regulatory challenges will require substantially more documentation and content management. Many organizations will turn to consulting firms to stay abreast of requirements and set up better governance structures. Regulatory content providers are getting more involved as well, with plans to provide both regulatory guidance and the software platform to facilitate compliance. For example, earlier this month, Wolters Kluwer acquired GRC platform leader AXENTIS, echoing Thomson Reuters’ similar acquisition of Paisley last winter.

We are still far from seeing the same kind of market-generating legislation that we saw with SOX, but many of the vendors focusing on governance, risk, and compliance are starting to see the first signs of a healthy upturn. Stay tuned...

Posted by Chris McClean