Boards missing a SOX audit disclosure opportunity


September 4, 2018
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The Rules of Reporting

SOX's Financial Expert Requirement 15 Years Later

By Ann C. Mulé

In the 15 years since the Sarbanes-Oxley Act of 2002 (SOX) was passed, large institutional investors have been “finding their voice” and sharing their views of board expectations with regard to composition, accountability and transparency.

One of the most important aspects of the legislation was that it added additional requirements for the audit committee — the board’s financial-oversight lynchpin — in an effort to strengthen it.

SOX required an annual disclosure of whether or not the board of directors had at least one audit committee financial expert (ACFE) on its audit committee, and if so, the expert’s name and whether or not they were independent of management.

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Top of Mind

What Directors Are Thinking

By Eve Tahmincioglu

Kapila Anand, director of WomenCorporateDirectors, Extended Stay America, ESH Hospitality and Omega Healthcare Investors, Inc.: Board diversity has been on the minds of many nominating and governance (N&G) committees, but the last year has brought a new level of urgency to the topic. Investor and other stakeholder interest, proxy advisory firm commentary and the spotlight on cultural issues (from #MeToo to gender pay parity) have certainly contributed to this heightened focus. 

Robert Herz, director of Fannie Mae, Morgan Stanley, Paxos, Workiva: There’s an old axiom in the world of corporate reporting that says, “What you measure and report matters.” The very important corollary to this is, “So measure and report what matters.” That’s what many investors are now increasingly asking of companies when it comes to ESG [environmental, social & governance issues] and other sustainability matters.



Big Changes Ahead for Whistleblower Standards

The thorny issue of whistleblower retaliation may be getting thornier.

Evolving standards affecting the treatment of whistleblowers, including the U.S. Supreme Court's decision in Digital Realty Trust, Inc. v. Somers, and the U.S. Securities and Exchange Commission’s (SEC) recently proposed amendments to its whistleblower program, are changing the nature of the relationship between putative whistleblowers and companies.

As a result, directors cannot afford to adopt a laissez-faire attitude about such programs once they are implemented because employees are now heavily incentivized to report directly to the SEC. Directors must be vigilant in cultivating a culture of internal reporting so that employees will report internally as well as to the SEC. This is crucial to protect the company from being blind-sided if an SEC investigation arises out of the whistleblower’s complaint.

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