The Center for Audit Quality and the Institute for Corporate Responsibility at the George Washington University School of Business are teaming on a new initiative on rethinking financial disclosures in response to recent comments from Securities and Exchange Commission chair Mary Jo White to streamline the existing Form 10-K disclosure requirements.
Last October, White gave a speech at a conference of the National Association of Corporate Directors in which she discussed ways to make the disclosure process more useful and timely for investors and companies.
“One question that I think we have to ask is whether there are specific disclosure requirements that are simply not necessary for investors or that investors do not want,” she said. “After all, the fundamental purpose of disclosure is to provide a reasonable investor with the information that he or she would need to make an informed investment or voting decision. We need to consider whether the disclosure regime as a whole is generating the information that a reasonable investor would need to make decisions. As part of this effort, we need to look at requirements that may not be providing relevant information to investors in the most efficient manner. Some of our requirements may have been appropriate in the past, but may no longer reflect the reality of how businesses operate now or how investors use information today. For example, there was a time when a prospectus or an annual report was the most reliable and efficient way for an investor to obtain high and low historical closing price information about a company’s common stock.”
As a part of the CAQ and GWU Initiative on Rethinking Financial Disclosure, multiple teams of graduate students at the GWU School of Business will study the issues driving concerns over effective corporate disclosure. The students will then make specific recommendations to reduce unnecessary or redundant reporting requirements, while maintaining the integrity and value of the information for investors.
“This is a tremendous opportunity for our students to develop solutions to a significant business challenge facing investors, markets, and policymakers,” said Cynthia Glassman, a senior research scholar at GWU’s Institute for Corporate Responsibility, in a statement.
The associate director of the Institute for Corporate Responsibility, John Forrer, and faculty adviser Susan Kulp, along with an advisory committee co-chaired by Glassman and Fornelli and made up of leading academics, practitioners and others, will provide guidance to the student teams throughout a series of interactive sessions.
“Effective disclosure is a key component of world-class capital markets,” said CAQ executive director Cindy Fornelli. “These students, working with an expert advisory committee, will have the chance to make a positive contribution to this important public policy dialogue.”
Each student team will review several Form 10-K reports from randomly selected Fortune 500 companies to help inform their recommendations. The final projects will be presented for judging this September. Then, the most effective recommendations will be compiled into a report that will be submitted to the SEC in October 2014.
In addition to the co-chairs, the Advisory Committee currently comprises the following governance experts:
James Glassman, chairman and CEO of Public Affairs Engagement and visiting fellow, American Enterprise Institute
J. Richard Knop, GWU trustee and managing member, FedCap Partners
David Martin, partner, Covington & Burling
Aeisha Mastagni, investment officer, corporate governance, CalSTRS
Susan Phillips, professor of finance emeritus and former dean, GWU School of Business
Troy Paredes, senior strategy and policy advisor, PwC
Harvey Pitt, founder, CEO and managing director, Kalorama Partners and Kalorama Legal Services
Jason Polun, director of U.S. Equity Research, T. Rowe Price Associates
Neila Radin, senior vice president and associate general counsel, JPMorgan Chase
Amar Sarwal, vice president and chief legal strategist, Association of Corporate Counsel