Mark Gordon, Igor Kirman, and Sabastian Niles are partners at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell memorandum by Messrs. Gordon, Kirman, and Niles, Wayne M. Carlin, David B. Anders, and Lauren M. Kofke.
Upcoming first quarter earnings calls may be the most scrutinized in modern corporate history. How to handle these calls in light of the unprecedented social and economic impacts of COVID-19 is a question confronting every company that has not yet announced. Investors, the SEC and other stakeholders are clamoring for insight into what this extraordinary pandemic means for individual businesses, the private sector and the Nation at large. We believe that these upcoming earnings calls provide an opportunity for companies to show leadership and purpose by providing the critical insights that will help investors, analysts and other stakeholders grasp where the company stands today and what the future may hold for the business and the industry.
We previously discussed the groundbreaking April 8th statement made by the Chairman of the Securities and Exchange Commission and the Director of the SEC’s Division of Corporation Finance, which urged companies to be more forthcoming about the impact of COVID-19, actions taken in response and future plans. But for the upcoming earnings season, public companies are being asked to speak at a moment of maximal uncertainty—no one can predict with any certainty the scale or length of disruption from COVID-19 or how deep and severe the economic and health impacts will be. The many unknowns include the scope and effect of further governmental, regulatory, fiscal, monetary and public health responses. The crisis has also brought to the fore critical incident and systemic risk management concerns, including traditional ESG concerns such as human capital issues, business model and supply chain resilience, and consumer welfare and social impact.