This is a tricky time for public companies. From battles over short-termism to confusion over disclosure rules that give investors needed transparency without smothering companies and adding volatility to shares, there’s no shortage of topics for directors, regulators and investors to wrangle over.
Yesterday, SEC Chairman Jay Clayton announced he’d host a forum to do just that, a roundtable (date and agenda TBD) that would tackle some of the most pressing topics of the day, especially the touchy subject of disclosure.
“Our public capital markets have a thirst for high-quality, timely and material information regarding company performance and corporate events,” Clayton writes. “Our disclosure rules reflect that thirst for information and, in turn, the confidence of market participants in the quality and timeliness of public company disclosure fosters liquidity. But we should ask ourselves whether our disclosure framework and other regulations have encouraged a focus by companies—and not just securities traders—on the short-term over the long-term.”
He’s invited members of the public to participate in the event by emailing the SEC at firstname.lastname@example.org. The full text of the announcement is available here: https://www.sec.gov/news/public-statement/clayton-announcement-short-long-term-management-roundtable
Potential topics for discussion, he writes, include:
• “The role, if any, that short-termism plays in the declining number of public companies. In particular, examining how the pressure on public companies to take a short-term focus in our markets may discourage private companies from going public could provide valuable insight into how to make our public markets more attractive and increase investment options for Main Street investors.
• “Our ability to reduce burdens for companies while facilitating better disclosure for long-term Main Street investors. For example, I am interested in exploring whether the information typically included by companies in earnings releases could be allowed to satisfy certain quarterly reporting obligations and whether there are ways that quarterly disclosures could be streamlined. This is particularly the case in the first fiscal quarter when the the quarterly report often comes closely on the heels of the annual report.
• “The potential for certain categories of reporting companies, such as smaller reporting companies, to be given flexibility to determine the frequency of their periodic reporting.
• “Market practices that could be oriented to encourage longer-term thinking and investment at public companies. For example, it would be informative to explore the extent to which certain activist practices, such as “empty voting” (e.g., acquiring voting rights over shares but having little or no economic interest in the shares), are factors that drive short-term focus.”
The roundtable is part of a series of moves the SEC has taken under Clayton’s watch aimed at reexamining corporate reporting and regulation. Over the last few months, the SEC sponsored sessions delving into proxy advisory firms, the proxy process, market data and market access as well as small business.