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Even though we are already one full week into the new year, I thought it was still appropriate to share some of my reflections for what we can expect for 2023.

As John pointed out in the blog on Friday, we are in for a “bomb cyclone” of SEC rulemaking in 2023, so it is time to batten down the hatches. Given the complexity of the rules that were adopted during 2022 and the significant reach of the rules that may potentially be adopted in just the next few months, it is a good time now to set some priorities on how you are going to approach these developments over the coming months. It is also a good time to consider whether you have the right resources on hand to quickly get up to speed on any new requirements that will be coming from the SEC. Many of the rule proposals that are expected to be adopted in the near term require multi-disciplinary teams (e.g., climate change, cybersecurity risk governance, share repurchase modernization), so having the team fully briefed and ready to go when the rules are adopted will be important. Finally, don’t forget all of the resources that we make available to you here on TheCorporateCounsel.net and through our other websites and publications – we will be providing you with the practical guidance that you will need as these rules are adopted.

It is also worth noting that the SEC staff will be looking very closely at your Form 10-K (and other) disclosures this year. Over the course of the past two years, we have been seeing an uptick in the extent to which the Staff has been issuing comments on filings, with a noticeable lowering of the level of materiality applied in determining whether to comment on disclosure in SEC filings, earnings releases, etc. As John noted in the blog back in December, the Staff issued updated and new Non-GAAP Financial Measure Compliance and Disclosure Interpretations, which could mean more scrutiny of non-GAAP financial measure disclosures in the coming months. Further, with new rules such as pay versus performance disclosure coming into effect this proxy season, the Staff will most likely undertake to monitor compliance with those new requirements. The Staff has also been focused on the impact of external events, such as COVID-19, the war in Ukraine and inflation, on company operations and liquidity. Given these developments, it is a good time take a fresh look at your disclosures going into the annual reporting and proxy season. Be sure to check out our “Annual Season Items” article in the November-December 2022 issue of The Corporate Counsel for guidance on this year’s disclosures.

Also in 2023, it is time to get ready for another dynamic proxy season. As we have now emerged from the lingering pandemic considerations, the proxy advisory firms, institutional investors and activist investors are going to be more focused than ever on the compensation and ESG issues that they care about, and companies will be feeling that pressure at their annual meetings. For the first time in a quite a while, we have experienced a prolonged negative trajectory in stock prices during 2022, so investors and proxy advisory firms are going to be laser-focused on how that change in direction has been reflected in executive compensation. When we had a pandemic-induced market correction back in 2020, the proxy advisory firms and investors were in a forgiving mood – now, things are very different. Be sure to check out our highlights of the 2022 Proxy Disclosure Conference and the 19th Annual Executive Compensation Conference in the November-December 2022 issue of The Corporate Executive for a discussion of the topics that are likely to dominate this year’s proxy season.

Finally, many indicators seem to point toward the strong possibility of a rough economic situation in the coming months. While it is impossible to say how bad things might get or how long a downturn may last, I encourage you to try to keep things in perspective as much as possible. We were fortunate to have experienced a prolonged period of growth and prosperity for about a decade, so a downturn at some point is all but inevitable. As we have done in past downturns, we just muddle through as best we can, telling ourselves “this too shall pass.”

– Dave Lynn