TheCorporateCounsel.net

A recently released CFA Institute study reveals significant investor concerns about current standard-setter initiatives (see FASB’s Private Company Council and Simplication Initiative) to create differential or reduced financial reporting requirements for nonpublic companies; extend certain alternative private company reporting requirements to public companies; and simplify certain public company reporting requirements. The proposed changes are purportedly driven by a desire to reduce companies’ compliance costs which, although certainly a laudable objective, presumably shouldn’t be pursued single-mindedly at the expense of impeding investors’ understanding and utility of companies’ financial performance and prospects.

The CFA Institute’s 2014 member survey found that:

– 82% of respondents believe differential standards will decrease comparability – so, create comparability challenges for those investing across public and private companies
– 73% believe differential standards will increase complexity rather than reduce it (by, e.g., prompting investors to seek alternate ways to obtain information including accessing management on a one-on-one basis; substantially raising the burdens and costs associated with going public or acquiring a private company)
– 65% believe differential standards will result in the loss of information useful to their financial analyses (e.g., reduced disaggregation of information; substituting presentation of items on the face of the financial statements by disclosure)

The report also notes that FASB is currently considering whether to extend certain private company accounting alternatives to public companies – a move favored by only 6% of CFA Institute members.

See CFA Institute’s Mohini Singh’s blog summarizing the study. For additional information, you may contact Mohini at Mohini.Singh@cfainstitute.org.

Identifying Opportunities for Nonprofit and For-Profit Boards to Learn From Each Other

In this Columbia Law School blog, Stanford Graduate School of Business Nicholas Donatiello, David Larcker and Brian Tayan discuss their  recently published paper, “What Can For-Profit and Nonprofit Boards Learn from Each Other About Improving Governance?“. The thought-worthy  paper focuses on lessons that for-profit and nonprofit directors can learn from each other to improve their respective governance (based in part on this recent nonprofit governance survey) including:

Lessons for Nonprofits:

– Formal governance processes
– Focus on fiduciary obligations
– Expertise and stability

Lessons for Corporate Boards:

– Balanced power with CEO
– CEO compensation
– Gender balance

Lessons for Both:

– Nonfinancial performance measurement
– CEO succession planning
– Racial diversity

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Vanguard Discloses Engagement/Voting Specifics
– FCPA Compliance: Third Party Diligence Framework
– Study: Investor Holding Periods Have Not Shrunk
– Germany Moves on Board Gender Diversity
– Should Directors Take a “Gap” Year?

– by Randi Val Morrison