By James A. Kaplan and Lev Janashvili “In the long run managements stressing accounting appearance over economic substance usually achieve little of either.” ― Warren Buffett In the current issue of Forbes magazine, Francine McKenna’s thoughtful article (Lying with Numbers) provides a timely reminder that bogus accounting remains a widespread practice at public companies. Enabled in [...]
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Bogus Accounting Hides Real Risks
November 12, 2012 in Corporate Governance, Daily Viewpoint, Disclosure
“We told you so, didn’t we?”
May 21, 2012 in Daily Viewpoint, Disclosure, News and Opinions
Normally we’re saying this about the latest collapsed company, that we have typically been rating poorly for at least the last 24 months. This time, however, it’s about SEC disclosure regulations. In this letter that I wrote on 27 March 2006, I indicated that companies should be disclosing realized compensation, not estimated future values for [...]
“Shaping the Future” with the Council of Institutional Investors
April 2, 2012 in Boards, Corporate Governance, Disclosure, Environmental Issues, Financial Crisis, Shareholder Activism
The Washington D.C. spring meeting of the Council of Institutional Investors missed the cherry blossoms this year — they were unseasonably early this year and bloomed mid-March. But it did not miss much else, with a full, illuminating, sometimes galvanizing series of presentations and meetings. I was honored to be invited to speak to a [...]
The Risk Disclosures We’d Like to See
April 2, 2012 in Disclosure
By Kimberly Gladman, Director of Research and Risk Analytics At GMI Ratings, we see risk management as a crucial governance indicator, and we collect data on the existence of risk committees as well as directors’ risk management expertise. So we were interested to see the report ValueBridge Advisors recently published on risk management disclosures at a [...]
Interview: Alfred Rappaport of Saving Capitalism from Short-Termism
September 27, 2011 in CEO Pay, Corporate Governance, Disclosure, Financial Crisis
Alfred Rappaport's important new book, Saving Capitalism From Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future, has a penetrating diagnosis of the disruptive forces in our markets and powerful prescriptions for addressing them. He generously took time to answer my questions. How does the current structure of incentive compensation at the [...]
PCAOB calls for more commentary from auditors
August 22, 2011 in Disclosure
By Paul Hodgson, CCO and Senior Research Associate At a recent open board meeting, the PCAOB proposed a concept release to increase the amount of information provided by a company’s outside auditor. The alternatives presented in the concept release were: Auditor's Discussion and Analysis, Required and expanded use of emphasis paragraphs, Auditor assurance on other [...]
HRH in Support of Integrated Reporting
May 27, 2011 in Disclosure
By Michelle Lamb – Research Associate A perhaps unlikely spokesperson for “integrated reporting”, HRH The Prince of Wales delivered a speech earlier this month to the International Integrated Reporting Committee (IIRC) in New York – a meeting which our own Bob Monks attended. I “daresay” the prince makes some important points about this accounting effort: [...]
Sustainability Reporting: Take the Quiz
May 20, 2010 in Disclosure
Securities analysts and issuers are typically well-versed in financial reporting. Many, however, still don't know much about sustainability reporting, which provides information on environmental, social, and governance-related investment risks. To test your knowledge, see whether you think the following are true or false: Sustainability reporting is only for dirty industries. There is a worldwide trend [...]
Did Lehman Hide $200 million in CEO Pay?
May 5, 2010 in Disclosure
Bloomberg Business Week has a shocking story by James Sterngold about allegations from a former Lehman insider that the company's disclosures omitted as much as $200 million paid to then-CEO Richard Fuld. In a hearing before the House Committee on Financial Services chaired by Henry Waxman, Fuld, now 64, said his total compensation from 2000 [...]
Apples to Apples: Stock Options to Stock Options
April 1, 2010 in Disclosure
You may have noticed something a little wonky going on in summary compensation tables this month. The end of February marked a switch in the SEC reporting of stock option and restricted stock awards from a company recognized expense figure to the grant date fair value of equity grants. The change designed to enhance clarity, [...]
Climate Change? Look out your window
February 9, 2010 in Disclosure
At the end of January, when I wrote about the SEC’s initial moves to introduce climate risk disclosures into company filings, I noted that two of the commissioners opposed the release – Kathleen Casey and Troy Paredes –indicated that they felt the science around global climate change was far from settled. As readers of my [...]