SASB reconfigures board structure

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The Sustainability Accounting Standards Board has overhauled its board structure, adding a nine-member SASB Standards Board, overseen by the SASB Foundation board of directors.

The SASB Standards Board includes representatives from corporate America, investor groups, regulators and academia. SASB founder and former CEO Jean Rogers will now serve full-time as chair of the SASB Standards Board. Jeff Hales, chair of the former SASB Standards Council and a professor of accounting at the Georgia Institute of Technology, will be vice chair.

“We’ve always been structured as a 501(c)3, a typical nonprofit with a governance board,” said Rogers. “We’ve never had a standards board. We had a Standards Council that was doing our oversight work and they were a wonderful group of volunteers over the past five years that reviewed our provisional standards, but they did not have authority delegated to them to issue standards, and they weren’t accountable for the outcomes within the standards. In an effort to strengthen our governance as well as strengthen our accountability, we’re now appointing a standards board. This particular structure is very similar to the structure of the IASB and the FASB with an oversight foundation, which does the governance and has a fiduciary duty and then a technical board that does the standard-setting work.”

The other members include Verity Chegar, a vice president at the investment management firm BlackRock; Robert Hirth, Jr., chairman of the Committee of Sponsoring Organizations of the Treadway Commission (COSO); Kurt Kuehn, a former CFO at the delivery company UPS; Lloyd Kurtz, CFA, senior portfolio manager and head of social impact investing at Wells Fargo Private Bank; Daniel L. Goelzer, senior counsel at Baker & McKenzie LLP and a former chairman of the Public Company Accounting Oversight Board; Elizabeth Seeger, a director at the private equity firm KKR; and Stephanie Tang, senior corporate counsel and assistant corporate secretary at the Clorox Company.

“We have a range of diverse perspectives on the board that span regulatory and policymaking, but also the investment community,” said Rogers. “Jeff Hales, who is our vice chair, is an accounting professor and serves on FASAC, the advisory committee to the FASB. He’s our accounting guru. Then we have the corporate community, which is very important to us, to have a corporate perspective on the standards, in terms of the cost effectiveness and the controls that are needed for implementation of the standards. That is balanced with the investor view, which looks at the decision usefulness of the standards and how well they’re meeting investor needs for this information. Then we have Bob Hirth, who was on our governance board and has now moved to the standards board, so he knows SASB well. He’s the president of COSO, and he really understands internal controls and what companies are going through in order to use the standards and make this information investor grade and ready for incorporation into a 10-K. Dan [Goelzer] brings the legal perspective and the suitability of this information for inclusion in an SEC filing. So we’ve got the legal, the accounting, the investor and the corporate views, which is really the essence of SASB. We really do bring those four professions together to make it happen.”

SASB is also getting the corporate perspective with the involvement of representatives from companies like Clorox, even if they might not be known as champions of environmentalism.

“I would say there are some unlikely names, but Stephanie Tang, who is from the Clorox Company, has been involved in SASB’s standard-setting process since the development of the provisional standards,” said Rogers. “We ran industry working groups for several years to provide input and Clorox has been involved in that process. As of late they’ve been giving us feedback on the provisional standards and looking at their own disclosures to make sure that they’re addressing material issues, not only in their sustainability report, but also in their 10-K. Clorox has been a great advocate and participant in our process, and we’re delighted to have Stephanie now on the standards board.”

The investment perspective comes from BlackRock, which manages assets for groups such as CalPERS, the California Public Employees’ Retirement System. “BlackRock, as such a large asset manager, is managing money for many of the large institutional investors,” said Roger. “Those owners have a mandate to address sustainability issues in their long-term investment strategies. That puts pressure on the asset managers to incorporate this into how they are managing money for those clients.”

BlackRock is part of an investor advisory group that offers feedback to the standards board. It includes 27 asset owners and managers with more than $20 trillion in total assets.

The SASB Foundation board of directors will oversee the overall process. It includes former New York City Mayor and Bloomberg LP founder Michael Bloomberg as chairman of the board. Other members include former SEC chairs Mary Schapiro and Elisse Walter, along with former FASB chair Robert Herz.

“All of them and more are now the governance board, so they are now the trustees of the foundation,” said Rogers. “It’s the same people, but they never had anything to do with the standard setting because that was done with the Standards Council. They were always our governance and oversight board, but now it’s official. They are separate and distinct from the standard setting. They will continue to do governance and fiduciary oversight. Michael Bloomberg is still the chair. Mary Schapiro and [former New York City Deputy Mayor] Bob Steel are the co-vice chairs of that board. All the same board members are now the trustees of the foundation, which is the oversight body. There is also a very important committee on that board, which is called the Standards Oversight Committee, and that committee is led by Elisse Walter and Bob Herz, the former head of FASB, and Alan Beller [former director of the SEC’s Division of Corporate Finance]. They sit on the ultimate committee, which oversees the standard-setting boards’ activities and makes sure that due process is happening. They take any appeals and complaints with respect to the process, so they’re really critical. That is a similar structure to how the FASB and the IASB work. They each have a standards oversight committee on the foundation.”

SASB is pushing to finalize its provisional standards by the first quarter of next year in time for the 2018 round of financial filings. “Next year when we codify the standards, which will be the primary work of the standards board throughout this year to get to the first year of the standards that are suitable for use, we’re aiming for Q1 of 2018,” said Rogers. “Once we do that we will then form sector advisory groups, and those will be our window onto the world long-term from the issuer perspective. We’ll have our Investor Advisory Group for the investor perspective, and we’ll have formed standing working groups sector by sector, and they will do the ongoing work of looking at these standards and their implementability, their cost effectiveness, emerging issues that are coming up in the industry, and they will then advise the board on the technical agenda that the board adopts going forward. So we’re going to go through a round of finalization and then put in place sector advisory groups for the long-term maintenance of the standards.”

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