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Jan 12, 2023

Five disclosure trends to watch for this proxy season

Corporate Secretary speaks to experts about their experiences with proposals and disclosure requirements

With the 2023 proxy season approaching, governance professionals this week shared insights on emerging disclosure trends amid regulatory and investor pressures. Here are five developments discussed during the Corporate Secretary webinar.

  1. Human capital management

‘With changes in [SEC] rules either proposed or implemented, you're seeing beefed-up human capital disclosure,’ said Micheal Dobbs, senior vice president and general counsel of Texas Pacific Land Corporation. ‘Different companies have different levels of human capital risk associated with them. Companies that haven't been looking ahead and tracking those human capital-related risks could have a much more difficult time [getting onboard] with the changes. It's a lot of data, a lot of information and a lot of different business areas.’

  1. Climate change

Ensuring companies are disclosing projects related to climate change in a timely manner will be important to note this year, said Andrea Reed, partner with Sidley Austin. Companies need to make sure they are ‘adequately disclosing compliance costs with the materials in the company and the physical risks of climate change,’ she advised.

  1. ESG skills

‘Many companies are issuing corporate responsibility reports on websites for the first time,’ Reed noted. ‘You might see more pressure on boards to illustrate their strengths and skills related to environmental and social matters. We're also going to see enhanced disclosure of risk oversight, which has also been a focus of SEC comment letters… and oversight… of cyber-security, which has been a trend in recent years.’

  1. Cyber-security

‘The SEC wants disclosures about who's responsible inside the company for dealing with [cyber-security] at the board level,’ said Neil McCarthy, senior director of sales enablement and business development at Morrow Sodali.

‘What's happening now is a lot of companies are being clear about what part of the board process oversees cyber-security risk. For most companies, they're using the audit committee. In response to having to designate an expert, what a lot of companies are doing is they're using their board skills matrix to identify which people on the board know about cyber-security.’

  1. Board skills matrix

‘I think that we're going to see even more board matrixes this year, as well as enhancement of board bios,’ Reed said. ‘Given the advent of [the] universal proxy and more pressure on boards to illustrate their strengths and show investors a clearer picture, I think we'll see more extended disclosure about how those pressures are managed at a board and committee level.’

Click here to watch the Corporate Secretary Webinar - Insight from early filers on trending disclosure issues and 14a-8 shareholder proposals