Disclosure Busywork - Yes, It Can Make Your Board Better

(Edited from the October Boardroom INSIDER...)

Corporate disclosures has long been one of the more dry, legalistic aspects of governance.? Counsel kept track of what needed to be filed with whom, when, the board approved with a quick “aye” vote, and moved on to whatever was next on the agenda.

Across the world, that now seems like the Good Old Days of governance. Recent headlines include a $10 million fine for Lyft’s failure to disclose a board member’s interest in a transaction and anti-money laundering disclosure failures; India’s SEBI hitting Shaoorji Pallonji with a Rs 7 lakh fine for “flouting disclosure norms.”?

Here in the U.S., the SEC approved sweeping new cybersecurity disclosure rules over the summer, and Congress passed a Corporate Transparency Act with broad new disclosure demands for anti-money laundering enforcement (the latter will also hit private companies).

Environmental, social and governance; diversity; financial regulations; cybersecurity; compensation; risk; regulatory matters; legal compliance… the list is multiplying as I write this.? The rules are so arcane, and the penalties so stiff, that the board has to invest serious time and effort into vetting both the accuracy of the disclosures themselves, and the internal processes used to develop them.

Corporate boardwork divides into two major spheres.? There’s a mentoring aspect -- guiding management, coming up with good ideas and strategic insight, and making connections.? Then there is the monitoring part – compliance, review, checking out the numbers and filings, and ticking boxes.? A first thought is that the latter busywork is crowding out the high-quality mentoring time, and that’s definitely the case.

But we shouldn’t just dismiss board disclosure oversight as a bureaucratic time suck.? Yes, it distracts from the fun wisdom-sharing of being on a board, but it also requires digging in to a level that directors too often don’t.? While parsing every word of a disclosure statement may be scut work, but boards now must also examine the company structures, procedures and assumptions used in shaping that disclosure.? You are responsible for these as a fiduciary, and can’t sign off on the final statement until you know the quality of the mechanisms used in shaping them.? Assuring yourself on this demands building deeper knowledge of the company.? Good! ?