Too Much Disclosure, Not Enough Information

by Louis M. Thompson, Jr., for Compliance Week, October 19th, 2010.

U.S. corporations are growing more concerned that federal lawmakers and regulators have hijacked the traditional corporate disclosure process to fulfill a social agenda. Investors, meanwhile, are being smothered with volumes of data, much of it virtually useless for making investment decisions. How did we get here?

In no way am I arguing that companies should be excused from fulfilling their obligation to provide truthful, complete information—in plain English—so shareholders can make sound investment decisions. Instead, I simply raise the question: What kind of information is relevant to investors, and what isn’t?

For example, the Dodd-Frank Act will require companies to provide the ratio of the CEO’s total compensation to the median salary of all other employees in executive compensation disclosures. Called the “internal pay equity ratio,” the Securities and Exchange Commission is expected to publish this rule for comment sometime next April. OK—but what does that number really tell investors? (continue reading… )

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