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Honest and clear communication with investors is always important. However, in the last year, a global pandemic coupled with economic distress have made transparency more critical than ever. It is essential to securing and maintaining investors’ confidence, ensuring that they know what is happening at a company, what is coming next and, importantly, what the company may not know yet.

The tools of corporate disclosure – the proxy statement, Form 10K, corporate code of conduct, and IR website – are no longer tick-the-box exercises. Instead, they have become major initiatives incorporating IR and governance teams to share the company’s message and maintain relationships with shareholders.

In a recent webinar, Labrador’s director of advisory and design services Molly Doran and communication strategist Lois Yurow joined Caitlin Kobialka, senior corporate counsel for Booking Holdings, and Nancy Wright, deputy general counsel, and assistant corporate secretary for Duke Energy, to share best practices around these key documents in light of the current climate. Moderated by Corporate Secretary’s editor-at-large Ben Maiden, the panel discussed how investors’ appetites for transparency have been affected by the crisis and economic uncertainty, and how companies should adapt. Read on for a summary of the conversation below:


Ben:  How have you used shareholder engagement this year? What kind of information are shareholders seeking, what are they interested in?


Caitlin:  Shareholders are as eager as ever to discuss what’s going on given all the unease in the current climate. COVID has affected the topics we’re covering in our disclosure documents, so we’ve asked our shareholders for input on what they want to see from the company. For example, human capital management is a new disclosure for Booking Holdings as the business goes through restructuring, and hearing shareholder insights has been helpful. We’ve asked what types of principles to consider as we look at compensation changes, and what we’ve heard is that shareholders would like even more disclosure to help understand our approach and decision-making process. They want to know what we’ve considered and what metrics we’re prioritizing to understand the justification for these changes.

Nancy:  Between COVID and racial unrest in the U.S., [Duke Energy has] been talking about human capital management for many years but the importance has grown even more so recently. Diversity and inclusion have been very important, shareholders want to know what we’re doing to keep our employees safe on the job and what are we doing to support them. Further, they want to know what we’re doing for our communities, particularly for customers struggling to pay bills. Our shareholders offer great insights as we consider how we will frame our proxy and other future disclosures.

Molly:  Not all stakeholders have a chance to communicate with the companies they invest in throughout the year, making comprehensive, clear disclosure even more critical. Through the annual Transparency Awards, Labrador recognizes the quality and completeness of information that top U.S. companies make available to investors. We review annual proxy statements, annual reports on Form 10-K, investor relations websites, and, for the first time in 2020, codes of conduct, using 129 discrete criteria to access four pillars of transparency: accessibility, precision, comparability and availability. This year, the number of companies including a graphic in the proxy doubled from 2019, which is impressive.


Ben: What challenges are governance teams facing and how have they adapted?


Caitlin: As the state of the industry has changed so much, we’ve had to start our disclosure documents from scratch and rethink how we’re framing information. Instinct tells you to use what has been successful in the past, but today’s changes have been so drastic starting fresh is the better move – you’ll get a better product in the end. We’ve also set new expectations for the future. Going forward, describing all assumptions and unknowns that go into the decision process is appreciated by shareholders. They like the transparency, and it helps foster trust.


Ben:  What has Labrador seen around human capital management in disclosure documents?


Molly:  Today, many companies clearly ID a corporate responsibility message on the IR website or homepage, moving towards greater transparency. Specific to human capital management, it’s a hot topic among investors. 62% of companies mention it in the proxy, a 58% increase from 2019. 31% define it as a company risk or board responsibility, and 18% discuss it with shareholders during engagement activities. 14% of companies include human capital management in the ESG section – where we see information on diversity, inclusion and gender. Finally, 19% include it as Board area of expertise.


Ben: Let’s talk about plain language, why is it important for transparency?


Lois: There are a few keys to plain language. The first is that the reader can find what she’s looking for, and she can understand it when she gets there. A table of contents is low-hanging fruit – it’s easy, it doesn’t mess up anything, and it really helps. Next, is the information presented in a logical order? If readers have to flip back and forth between pages, it’s not as transparent. Ask yourself what can you condense and streamline? Are you adding fluff or unimportant details? Another important element of transparency is Infographics – they help communicate information through making the page aesthetically pleasing, and helping organize information. Look for paragraphs with a bunch of numbers – these are great opportunities for infographics.  Numbers are much more affective when presented in a graphic form as the reader can better internalize the information


Ben: Any thoughts or advice for 2021 amid continued uncertainty?


Caitlin: Old timelines just won’t work this year – they need to be pushed back to allow more time and input from all parties. Flexibility is key – world will look very different [in 2021], so even though we’re starting to draft now, we recognize that changes will be needed before filing to facilitate whatever comes our way next.


Ben: What is being added to the Transparency Awards next year?


Molly: We’ll see a deeper dive into environmental numbers. Within the Form 10-k, we’re looking at the risk section for greater clarity. Every year we take a wholesale look at the Awards and adjust the importance of each criteria based on new developments.