SEC filings should be clearer and more detailed

Securities and Exchange Commission Chairman Christopher Cox yesterday announced the launch of an effort to “examine fundamental questions about the way the SEC acquires information from public companies, mutual funds, brokers, and other regulated entities, and the way it makes that information available to investors and the markets.”

Surprisingly, the grandly named 21st Century Disclosure Initiative is to be headed by William D. Lutz, an emeritus professor of English at Rutgers University-Camden. True, Lutz has a law degree and is said to be familiar with securities law, but he is known mainly as a critic of corporate and bureaucratic doublespeak.

There is plenty of gobbledygook in SEC filings that could be made more intelligible, but the bigger disclosure problem is the failure to require companies to divulge more on certain aspects of their operations. For years, initiatives such as Corporate Sunshine Working Group have been pressing for fuller reporting on a corporation’s social and environmental impact. The group’s website contains a six-page expanded disclosure schedule, including items such as:

* lists of major customers and suppliers (beyond the current limited requirements);

* detailed information on violations of labor laws, anti- discrimination laws, etc.; and

* more detailed reporting on actual environmental violations and potential environmental liabilities.

There’s more that could be added to the list. For example, it would be very helpful to analysts of state corporate tax compliance to know how much a company paid in taxes in each state. Although the information may be available (with some difficulty) from other sources, it would also be useful to know how much a company has received in tax abatements, tax credits and other subsidies from each state and from the federal government.

Another type of data that can be found elsewhere (usually for a price) but should be in filings such as 10-K annual reports or proxies is a list of a company’s largest institutional shareholders with information on whether they or their money managers vote their shares. The names of a company’s major creditors can sometimes be found by looking at revolving credit agreements included as exhibits, but they should be presented clearly in the debt section of the financial statements.

In short, there is a lot of vital information about publicly traded companies that should be made readily available to investors and other stakeholders. Presenting that data in plain English would be even better.

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