TheCorporateCounsel.net

A few weeks ago, I blogged about shareholders overwhelmingly voting to approve Veeva Systems recent conversion to public benefit corporation. For more on that story, Liz talks with Meaghan Nelson, Veeva Systems’ Associate General Counsel and Assistant Corporate Secretary in a new 19-minute podcast.

In this podcast, Meaghan discusses Veeva Systems’ journey to PBC conversion.  Conversation topics include:

1. How the possibility of a PBC conversion to be on the board’s agenda – and what advantages were identified

2. What type of shareholder outreach Veeva conducted before the special meeting – and what type of reaction it received from outside shareholders when it told them it was considering this as a possibility

3. What Veeva did under state corporate law to effect the conversion – and whether it’s planning many changes to its board committees and SEC disclosures to reflect the broader “stakeholder” focus

4. Whether PBC conversions will become a trend

5. Meaghan’s advice for in-house lawyers or outside counsel who might be advising clients on whether to convert to a PBC

The CEO of Veeva Systems posted this op-ed yesterday saying there’s a need for companies to evolve and he urges other CEOs and directors to take action by considering a PBC conversion.

Investor Tips for Enhancing ESG Reporting

EY recently issued a report outlining investor expectations for the 2021 proxy season based on conversations with more than 60 institutional investors representing $38 trillion in assets under management. One topic that’s sure to be top of mind for many investors this proxy season is portfolio company ESG reporting and the report provides tips for how companies can enhance ESG reporting.

When assessing a company’s ESG practices and performance, the report found investors place the most value on direct company engagement, which is reassuring since direct engagement can help ensure investors receive a fulsome picture of company ESG initiatives and progress. Third-party ratings aren’t as high on the list in terms of perceived value but 40% of investors still ranked them as a medium or high-value information source.  This excerpt describes how investors want companies to help ensure their disclosures are picked up by third-party data aggregators:

Some large asset managers rely on third-party data providers to aggregate and structure company disclosures in a way that is more scalable and efficient to their processes, allowing raw ESG data across thousands of companies to be uploaded into their internal platforms for assessment.  While investors generally acknowledged limitations of third-party data (e.g., gaps, data quality issues) they stressed their need to have data at scale. To make these processes successful, investors encouraged companies to take a more proactive role in confirming that their data is being picked up correctly by leading third-party providers.

The report says other ESG reporting enhancements investors would like to see align with one or more of the following: focus on what is material and the connection to strategy, align disclosures with external frameworks, disclose metrics, performance and goals, consider integrating material ESG disclosures alongside traditional frameworks and enhance data credibility through assurance.

PCAOB Conversations with Audit Committee Chairs: Year 2

Following the launch of an engagement program in 2019, the PCAOB recently issued a report summarizing information gathered from conversations with nearly 300 audit committee chairs. The conversations addressed several topics, with the report saying the overarching theme of conversations involved effects of the pandemic on the audit.  Other conversation topics included the auditor and communications with the audit committee, new auditing and accounting standards and emerging technologies.  With respect to emerging technologies, here’s an excerpt about what audit committees say works well:

– Discussing how use of technology will impact the audit team’s time and resource allocation

– As new technologies are implemented, discussing with management if/how the underlying controls will change and discussing with the auditors how they will evaluate and test any changes to the new controls

– Holding deep dive sessions on specific topics related to emerging technologies, new technology tools used in the audit and cybersecurity

– Discussing whether third-party software or data processing is used in the company’s financial reporting processes and if so, how risks and controls are considered and addressed

Audit committee chairs also identified several areas for improvement including guidance around auditing of certain controls for third-party vendors. So, as much as discussion of use of third-party software is among the emerging tech items identified as working well, it can be a challenging topic and one that auditors and audit committees each grapple with amid heightened attention on risk oversight responsibilities.

– Lynn Jokela