Last Thursday, November 19, the SEC adopted amendments to “Modernize and Enhance Management’s Discussion and Analysis and other Financial Disclosures.” Nothing about compensation in this. However, the two Democratic Commissioners released a Joint Statement on Amendments to Regulation S-K: Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, which strongly expressed their disagreement with the omission of climate change disclosure requirement in the amended rules, and concluded: “While we are disappointed that the modernization of Regulation S-K did not address these vital issues, there is a silver lining. We have an opportunity going forward to address climate, human capital, and other ESG risks, in a comprehensive fashion with new rulemaking specific to these topics.” I interpret this as a harbinger of likely future action when the majority shifts to Democratic control next year.
Also last week, I attended a webinar on The Future of the SEC: From Disclosure Policy to Enforcement, sponsored by Cornerstone and featuring Former SEC Chair Mary Jo White, Professor Robert Jackson, and Professor Joe Grundfest (each also a former SEC Commissioner). The three all-star panelists more or less agreed that four of the top five issues on which the next SEC Chair will likely focus are:
Corporate Penalties Increase. All agree that, for symbolic reasons, this will be the first priority, but will play out over the course of the year.
Amend Proxy Solicitation Provisions to Make it Easier for Shareholders to Nominate Candidates and Solicit Votes for Their Nominees. Some think this too is among the highest priorities
Climate Change Disclosure. Paraphrasing the words of one of the panelists, these rules may not be necessary in light of current trends and the fact that this information already is available, but it would be highly symbolic of the new administration’s focus on this issue.
Human Capital Management Disclosure. One of the panelists specifically referred to Starbucks’ disclosure as a model. Although I have seen many other companies with more detailed disclosure on this topic (as I have posted previously), Starbucks is among the most recent (November 12).
Apart from the HCM item noted above, the only compensation-related topic ranked by the panelists in the top ten was amendments of the new requirements for proxy voting advisory businesses to disclose conflicts and provide companies time to review proxy voting advice.
-Mike Melbinger, CompensationStandards.com November 23, 2020
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