Sarbanes-Oxley is the most significant piece of reform legislation since Reg FD, with the ultimate goal of helping to restore investor confidence, the sustainability of business enterprises and greater transparency of corporate transactions.
An investor’s criteria for buying a stock have changed dramatically, now comprising far more qualitative, intangible factors than ever before. As a result, the role of IR is rising to the challenge of providing full, fair, accurate, timely, understandable and easily accessible information to investors.
One great way to provide this information to investors is through the web. Although most corporate web sites have not typically included a corporate governance section, it is quickly becoming a requirement that many companies need to meet. Companies like Pfizer and GE have been praised for the prompt posting of their corporate governance guidelines and codes of ethics and have stood out for their leadership as a result.
This can’t be a one-off initiative for your IR team. The rules and regulations may change or even be updated over the coming year so the site will need to be updated on a regular basis. Such a tool is only meaningful to the extent that you maintain the latest news, events and filings – not only in the corporate governance section but the entire IR section of the site. But don’t take a wait-and-see attitude; there are plenty of resources now available that allow your company to create a strong corporate governance section which will prove it acts on its stated policies and procedures.
A good governance section must include all the necessary elements addressing the recent regulations and be tailored specifically to your company. Here are the key factors to consider.
Include corporate governance as a prominent part of your IR site. Make tabs easily accessible and navigable with the capability to download or print the entire document. Avoid typical legalese and be sure the information posted is detailed in easy-to-follow segments relating to the regulations and the company.
Provide a detailed overview of company board members as well as committee charters under the board’s responsibility. Too many companies think a corporate governance site simply consists of bios of their managers and directors, but that is only one necessary element of the section. It should also detail each board member’s committee involvement, whether they’re independent, tenure with the company, biography, any ownership information, compensation and other boards they serve on. You could use a table with the appropriate links providing more detailed information about that individual or committee. Although some of this information will be available in the proxy, provide the key highlights within the corporate governance section so investors don’t have to dig for it.
Along with these key documents, you should also consider posting your corporate by-laws, articles of incorporation and proxy. By providing these documents, you are furthering your efforts to be more transparent to your investors and to assist in their search for broader, more complete information.
Section 16 forms need to be filed within two business days for all insider transactions and will soon need to be simultaneously posted on your company’s web site. Although it’s acceptable to provide a link to the SEC site, it’s recommended that you post this information on your own site – as long as it will be maintained concurrently with the filings.
Despite the many costs and the amount of time associated with compliance, Sarbanes-Oxley is designed to win back what investors lost as a result of its absence – their confidence and corporate transparency. The issue is not about whether it will work, but about how companies will comply with the new rules and to what extent they will provide more information.
Like it or not, corporate governance has become a key component of investment decisions, thereby elevating the role of IR in every company. So, take the extra steps now to ensure the investment community has proper access to your corporate governance documents, remembering the web is an extremely useful tool for making information timely and readily accessible.
Leanne Sievers is vice president of investor relations at communications firm Shelton in Dallas, Texas
