Maria Castañón Moats is Leader, Paul DeNicola is Principal, and Matt DiGuiseppe is Managing Director at the Governance Insights Center at PricewaterhouseCoopers LLP. This post is based on their PwC memorandum.
When done right, director-shareholder engagement can pay dividends for both the investor and the company. We identify the key steps for directors—and investors—to get the most out of these exchanges.
Years ago, “shareholder engagement” was an earnings call led by the company’s CEO and CFO, or a
meeting with the investor relations team. Any contact was handled by company management.
Today, the picture is quite different. In PwC’s 2021 Annual Corporate Directors Survey, more than half (53%) of directors say that board members (other than the CEO) engaged directly with the company’s shareholders during the prior year.
Part of this shift in engagement relates to investors’ recent focus on environmental, social and governance (ESG) concerns, and the desire to hear from directors about how the company is approaching those issues. In 2021, ESG topped strategy as the most common discussion topic, it was raised in 43% of discussions, up from 23% in 2020. [1] Directors can be well-positioned to give investors a long-term view of the company’s plans.
The SEC Revolving Door and Comment Letters
More from: Michael Shen, Samuel Tan
Michael Shen is an Assistant Professor of Accounting at NUS Business School, National University of Singapore, and Samuel T. Tan is an Assistant Professor of Accounting at the School of Accountancy, Singapore Management University. This post is based on their recent paper, forthcoming in The Journal of Accounting and Public Policy.
The revolving door between the Securities and Exchange Commission (SEC) and the private sector has been the subject of a great deal of scrutiny in recent years. The SEC regulates, and enforces laws concerning, public companies, with a mission that includes “protecting investors, maintaining fair, orderly, and efficient markets, and facilitating capital formation“. However, SEC employees who leave the agency regularly find themselves aiding the very corporations the SEC is regulating, and working against the SEC’s regulatory activities. Between 2001 and 2010, over 400 former SEC employees filed statements that they intended to represent an external party before the SEC.
In our study, forthcoming at the Journal of Accountancy and Public Policy and available at SSRN, we examine the impact of the revolving door on the SEC’s comment letter process, a crucial process by which the SEC exercises its regulatory mission.
The Sarbanes-Oxley Act of 2002 requires the SEC to review companies’ filings at least once every three years, and the SEC sends comments to the company when SEC staff believe that the disclosures in its filings can or should be improved. This review process leads to a dialogue between the firm and SEC staff, in which the SEC may make requests of the firm, for example to amend one or more past filings, and in which the firm may negotiate for more desirable outcomes, for example to simply revise future filings. Firms often involve external lawyers in this conversation with the SEC, and these lawyers may have formerly been employed by the SEC.
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