Recently, I asked Freshfields’ Pam Marcogliese, DLA Piper’s Sanjay Shirodkar, and Compensia’s Mark Borges the question of “What do you consider to be good disclosure?” Here’s a summary of their answers from those videos:
Pam Marcogliese notes that good disclosure often contains these characteristics:
- Short and clear. If it feels rambling, it probably is.
- Specific. Vague language invites negative assumptions.
- Concrete. Real examples help readers understand.
- Effective disclosure isn’t for the SEC—it’s for the market. It’s a business tool to convey real company information.
For Mark Borges, it is disclosure that’s:
- Should be clear, understandable, and not overly repetitive.
- Must reflect engagement with shareholders, especially in response to say-on-pay feedback.
- Should use graphics where helpful, especially for complex timing or incentive plan structures.
- Needs to clearly explain metrics, targets, and how they support business goals.
And for Sanjay Shirodkar, it’s a balancing act that stands the test of time. It must be transparent and balanced between legal and investor relations needs. The need to think ahead to anticipate and preempt issues before they become disclosure topics.
Example of good disclosure’s benefit: When facing complex accounting issues (e.g., impairments), use financial statement footnotes to leave “breadcrumbs” in current filings. This way, if an impairment happens a year later, there’s already a foundation to explain it. That helps to turn potential events into non-events, reducing litigation or scrutiny.
