In preparation for the 2020 U.S. Transparency Awards, Labrador has been busy analyzing how the top 250 companies (by market cap) in the S&P communicate with the market. For the past several months, a team of researchers armed with a list of 129 discrete criteria have pored over proxy statements, annual reports on Form 10-K, investor relations websites, and codes of conduct. By the time award winners are announced, Labrador will have collected over 32,000 data points.
This is the second year Labrador has organized the Transparency Awards in the United States, and the 11th year of the awards (evaluating 220 analogous criteria) in France. Our goal is to enable companies to assess the efficiency of their corporate disclosure—both from one year to the next and against their peers.
What is document transparency?
We believe the following attributes are non-negotiable for regulatory disclosure to be considered “transparent”:
- readers can easily find the document(s) they want in the format and language they need;
- readers can quickly find pertinent information within a document;
- a document includes all of the required information, as well as supplemental information that provides context; and
- information is presented in a way that makes it possible to compare companies.
What criteria does Labrador use to identify transparent documents?
The criteria we developed (with the help of a committee of independent experts) all probe some aspect of transparency. Some criteria are technical. For example, we check whether every page of a proxy statement or 10-K has a footer showing the company name, the title of the document, and the year. Other criteria are substantive. For example, we look at whether a proxy statement clearly outlines governance changes and the results of the most recent board evaluation. Each individual criterion is assigned a weight, from one point to three, to reflect their relative importance.
Our review is entirely objective. In the example above, we don’t consider whether a company made the governance changes we would have recommended; we just ask whether any changes were adequately disclosed.
The transparency criteria—all of which are publicly available on a website for the awards—are updated every year to reflect evolving stakeholder concerns and best practices. New items in 2020 include whether companies identify environmental issues as a risk in their 10-Ks and whether investor relations websites feature dedicated annual meeting pages. All told, we added nine new criteria in 2020 for proxy statements, 10-Ks, and IR websites, and expanded the awards to include 26 discrete criteria for Codes of Conduct (or Ethics). If markets are to count on companies to conduct business ethically, it stands to reason that employees must be able to understand the Codes of Conduct that govern their behavior.
More information about the U.S. Transparency Awards
All of the top 250 companies in the S&P are evaluated for the Transparency Awards, and each receives a confidential summary of their score. There is no fee, and Labrador clients do not have any priority. Finally, consistent with our philosophy of “nudging for good” rather than “naming and shaming,” we publicize only the top twenty plus the top three companies in each category—not the entire ranking.
Awards will be announced in October 2020 for Most Transparent Proxy Statement, Most Transparent 10-K, Most Transparent IR Website, Most Transparent Code of Conduct, and Best Overall Transparency.