January 29, 2008
Sound Disclosure Practices for Annual Reports
I heard Professor Bob Howell do his thing a few weeks back and he is quite the entertainer. In this podcast, the Professor explains how to best approach drafting disclosure for proxy materials, including:
– What are desired practices for MD&A?
– How should companies draft their risk factors?
– What is the best way that companies can get their message across in the “letter to shareholders” in the annual report?
– How should companies be disclosing “economic (e.g. cash) performance”?
More 10-K Practice Pointers
We had a nice response to our recent competition: “The Main Event: Vote for Your Favorite 10-K Practice Pointers.” My good friend Doug Chia of Johnson & Johnson now chimes in with his own – “tongue in cheek” – set of pointers:
1. Start with a blank sheet of paper – Uh, yeah, OK. No one ever does this. It’s just something SEC staffers like to say because it sounds good in theory. I guess they have visions of us sitting down with our CEOs, CFOs, GCs and Controllers at off-site locations with nothing on the agenda except for brainstorming about what story we want to tell this year. But in reality, unlike Richard Nelson Bolles, the author of “What Color Is Your Parachute,” none of us has time to completely re-write our disclosures every year. Our senior officers’ calendars are too packed to get everyone to be in the same room for more than 10 minutes (particularly if they know lawyers will be in the room). That’s not what they are getting paid those “Holy Cow” numbers to do. Plus, none of us in the in-house world are paid enough to put ourselves through that exercise every year!
2. Consider filing under XBRL – Again, not something many of us are going to do unless we’re forced to, but I thought I’d throw it in to receive “brownie” points from Chairman Cox in case he reads this!
3. Start early – Ha! Another one that sounds good, but no one ever does it. It’s just like the papers we were assigned to write in high school and college–we started doing all of the research and writing the papers the night before the due date (and after “Late Night with David Letterman”). I guess life would be too boring without last minute fire drills.
8. Analysis, analysis, analysis – As they say in New Jersey, “Puh-leeze!” Ever notice that the words “analysis” and “analyst” start with the letters A-N-A-L.
5. “All” means all – NOT! All means everything you are required to disclosed based on the rules. Anything over and above that is just voluntary stuff that could potentially lead to a post on one of those blogs like Footnoted.org whose only real goal is to embarrass you and your executives, or worse, could get you fired!
265. Don’t use generic risk factors that don’t apply to your company’s business – Are you kidding me? If risk factors constitute your insurance policy, as we are all so fond of saying, and it only costs whatever the printer charges for your document to be a couple of pages longer, throw in the kitchen sink! Too many risk factors can’t possibly get you in trouble. No one ever got sued for having too many risk fators.
7. Check the numbering on your exhibits list – Seriously, misnumbering is a tell-tale sign of sloppy lawyering! (Note the misnumbering of this list!)
Jan-Feb Issue of The Corporate Counsel
We recently mailed the Jan-Feb issue of The Corporate Counsel. For those that haven’t tried a no-risk trial, here is a blurred version of the issue so you can get a sense of it. This issue includes analysis of:
– The Commission’s Useful Integration (Rule 152, etc.) Guidance in August’s Reg D Proposing Release
– Yet Another Statutory Basis for a Reg D Offering: Section 28
– This Year, Preliminary Proxy Filing Can Lead to Real-Time Review of 402/404 Disclosures
– S-K Item 404(a) Follow-Up—More on Which In-Laws are Related Persons
– Audit Committee Involvement in Drafting the CD&A—Why Pile On?
– “Proxy Access”
– Bebchuk Shareholder Proposal Follow-Up
– Google’s TSOs—S-3 Registration Rather Than S-8—Follow-Up
– Enforcement Staff Busy Advising Backdaters and Others When Investigation Has Closed
– Bulletin Board Companies Left Out of S-3 Expansion
– Cheap Stock—IPO Disclosure Overkill
– Management Blogs—Reg FD Dissemination?
– 8-K Amendment Coming to Clarify that 4.02 Reporting Cannot Be (Buried) in 10-Q/K
– FASB Re-Examining FAS 5 Disclosure Criteria—Eventual Impact on the Audit Letter Process
– Fixed 1934 Act Fees?
– Annual Salary Survey
– New Staff 144 Positions on Gifts and Pledges by Affiliates—and Blockbuster Position On Hedging
– Broc Romanek