TheCorporateCounsel.net

We recently passed a significant milestone, the two-year anniversary of when the World Health Organization first characterized COVID-19 as a pandemic. We all no doubt recall those early March 2020 days when we optimistically thought that things would be back to normal in a couple of weeks once we could successfully “bend the curve,” but shortly after that things were anything but normal for the next two years. Today, we are now stuck in the “new normal,” whatever that is. For public companies, there have been a few lessons from the pandemic worth reflecting on:

The benefits of current disclosure. I am always a staunch defender of our current and periodic reporting system in the United States, often noting that public companies do not have to disclose all material information all of the time – companies need only make disclosures when they have an affirmative disclosure obligation. However, in a crisis situation like the onset of the COVID-19 pandemic, there are benefits to utilizing current disclosure to keep the market informed about developments, even when the future outcome may be uncertain. Former SEC Chair Jay Clayton and former Director of Corp Fin Bill Hinman issued a statement in April 2020 calling for companies to provide detailed real-time disclosure about the impact of the pandemic, even when the future was very hard to predict.

A little help from the SEC. Over the years, the SEC has been pretty good about putting out guidance and making accommodations when a crisis hits. I can recall sitting in Marty Dunn’s office many years ago coming up with relief for public companies affected by Hurricane Katrina, which came to serve as a model for future crisis situations. In the case of COVID-19, the SEC was quick to act, putting out a series of statements and orders which recognized the challenges of dealing with a shift to a work-from-home environment, the ability to meet filing deadlines, the need to quickly pivot to virtual annual meetings, the need for more disclosure about the impact of the pandemic, etc. The SEC and the Staff were proactive, and that is always a positive thing for public companies and the markets.

The triumph of risk factors. It is hard to fathom that we still have COVID-19 risk factors in most public company filings. References to the impact of a global pandemic in risk factor disclosure prior to 2020 were often in the context of a vague laundry list of the “parade of horribles,” e.g., war, natural disasters, earthquakes. But very quickly in 2020, the COVID-19 risk factor became something of an art form, laying out what was generally known and unknown about the pandemic and providing some very important context to the COVID-19 disclosures included elsewhere in the filing. I think that the COVID-19 pandemic resulted in a greater appreciation for the value of risk factor disclosure as a means of dealing with significant uncertainty.

The triumph of technology. If you had told me in 2019 that my kids would soon be attending school virtually and that I would be working from home 100% of the time, I would have thought you were engaged in some sort of Jetsons-style futuristic fantasy. As it turned out, those things were entirely possible with the technology that we had readily at hand. Of course none of it was perfect and we all have our gripes about the setup to this day, but we should be grateful that we had the ability to “move on” quickly after the onset of the pandemic and continue the important functions of education and commerce. This certainly applies to public company annual meetings – thanks to the efforts of the industry and with a little help from the SEC, companies were able to pivot quickly to virtual annual meetings en masse, allowing directors to be elected and business to be conducted at a time when it would have been impossible to have traditional in-person annual meetings.

Above all else, today I am eternally grateful to all of the “front line” workers who have been out there during the pandemic keeping us alive and keeping the wheels of commerce moving. At the same time, I grieve for all of the lives lost from this disease. I sincerely hope that brighter days are ahead for all of us.

– Dave Lynn