With the second annual U.S. Transparency Awards behind us, we want to share some disclosure trends that we saw in 2020 annual reports and proxy statements.
Strategy disclosure in 10-K’s
Companies in the U.K. regularly discuss business model and strategy in their public reports, often using infographics to emphasize key points. This practice is far less common in the United States, no doubt because it isn’t required. Instead, U.S. companies provide details—what their principal products and services are, how many employees they have, and where their plants are located.
Still, this year some U.S. companies offered a more expansive presentation of the strategy behind the details. Even better, 9% of the annual reports that discuss strategy also included infographics. Labrador firmly believes that well-designed infographics, working in tandem with plain language, can make complex information easier to understand.
Proxy summaries remain a priority
Proxy statements contain a wealth of decision-useful information. Smart companies use a proxy summary to give readers a road map so they can find that information. We were happy that 79% of the 2020 proxy statements we reviewed contain a proxy summary, up from 71% in 2018.
There are differing views about what should go into a proxy summary, but most (74%) included both governance and compensation highlights. Only 20% included strategic or company highlights, which may be a missed opportunity to provide context for compensation decisions. Whatever topics it covers, a proxy summary should include specific cross-references to help readers locate more detailed information later in the document.
Shareholder engagement makes several proxy statement appearances
Investors and proxy advisors care whether companies have active shareholder engagement programs, so it is no surprise that 71% of the 2020 proxies we reviewed mention shareholder outreach. The location of this discussion varies, generally reflecting the substance of the conversations that occurred. For example, 39% of the proxies cover shareholder engagement in the proxy summary, and 24% discuss engagement twice: once under “governance” and once under “compensation.”
Overall, 31% of the proxies we reviewed include a graphic to highlight the engagement process, up from 16% in 2019. Graphics might lay out the timing for engagement activities, trumpet the number of shareholders reached, and—perhaps most important—summarize the topics discussed and the company’s response. This information demonstrates that a company is receptive to shareholder views, and is useful for readers who don’t have access to engagement opportunities.
Looking for more?
For more information about disclosure trends from the recent Transparency Awards, visit transparencyawards.com. And stay tuned for our annual proxy statement benchmark study, which will be published in December.