Proxy season — typically spanning from late February through early June with a peak in April and May — is a critical period for publicly traded companies as they hold annual shareholder meetings and file proxy statements with the SEC. Organizations with a fiscal year ending on December 31 generally submit their proxy statements in March or April in preparation for meetings scheduled later in the spring or early summer. This article covers several ways to ensure compliance, enhance transparency, and strengthen investor confidence.

Addressing New Disclosure Requirements

A key aspect of proxy season preparation is reviewing recent regulatory changes to ensure compliance and avoid any last-minute complications.

New SEC regulations on cybersecurity, clawbacks, and pay versus performance have introduced significant updates to corporate filings:

• Cybersecurity Disclosure: Companies are required to disclose board oversight of cyber risks within proxy statements and report material security breaches in 10-Ks and 8-Ks.
• Clawback Rule: Listed companies must include clawback policies as exhibits in the 10-K, specify incentive-based compensation subject to recovery, and indicate whether financial restatements necessitate a clawback analysis.
• Pay vs. Performance: Organizations must present executive compensation data in a structured table, incorporate narrative or graphical disclosures linking pay to financial performance, and report multiple years of data. Inline XBRL tagging is mandatory for most filers.

Preparing for Future Regulatory Developments

Anticipated SEC proposals will further impact disclosures. Proactively addressing these changes demonstrates preparedness and a commitment to transparency. Companies should assess potential reporting gaps, implement internal controls, and establish data collection processes to ensure compliance with upcoming requirements. By aligning current reporting frameworks with emerging regulatory expectations, organizations can streamline future filings and minimize the risk of non-compliance. Additionally, engaging with stakeholders, including investors and regulatory advisors, will help firms stay ahead of evolving disclosure expectations and reinforce their commitment to governance and transparency.

• Climate-Related Disclosures: Companies should outline governance structures for climate risk and identify climate-related risks or greenhouse gas emissions within the 10-K.
• Human Capital Disclosure: Firms should prepare to report workforce metrics such as employee count, turnover rates, workforce costs, and demographic data. The MD&A section of the 10-K should include narrative disclosures on workforce strategy, retention, and the impact of emerging technologies.

Enhancing the Quality of Proxy Statements

Organizations can improve their disclosures by adopting best practices that enhance clarity, engagement, and accessibility. Effective proxy statements not only meet compliance requirements but also serve as a strategic communication tool to strengthen investor confidence and highlight corporate governance strengths.

• Board Skills Matrix: A comprehensive board skills matrix provides stakeholders with a clear overview of directors’ expertise, industry background, and diversity. This tool enhances transparency and demonstrates how board composition aligns with the company’s strategic direction and regulatory preparedness.
• Board Oversight and ESG Reporting: Companies should articulate the board’s role in ESG governance, including committee oversight, meeting frequency, and key responsibilities. Providing clear examples of sustainability initiatives and milestones can reinforce investor confidence and showcase a long-term commitment to ESG priorities.
• Readability and Consistency: Proxy statements should be structured for clarity, incorporating plain language, well-organized sections, and visually engaging elements such as charts and tables. Maintaining consistency across proxy filings, CSR reports, and ESG disclosures enhances credibility and ensures a cohesive narrative across all investor communications.

Final Thoughts

With increasing scrutiny from regulators and investors, companies must carefully craft proxy reports and 10-K filings. Beyond meeting disclosure obligations, organizations that proactively address evolving expectations with well-structured and transparent reporting will demonstrate their commitment to accountability and investor confidence.

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