Council of Institutional Investors

Corporate Disclosure

CII generally supports required disclosure of:

  • Climate change risk metrics
  • Diversity of the boards and executive officers 
  • Key workforce metrics
  • Political spending
Investors need useful and timely information on company performance and policies relevant to long-term shareholder value. This critical component of capital market efficiency extends to both financial information and “non-financial” information that plausibly can influence long-term financial performance. CII supports efforts by independent third-parties and regulators to ensure that the data investors use to make portfolio allocation and proxy voting decisions is reliable, comparable and widely accessible. Our approach to corporate disclosure of environmental and social factors is guided by our member-approved policy, Statement on Corporate Disclosure of Sustainability Performance.

CII seeks improved transparency across a range of areas. These include the reconciliation to GAAP of non-GAAP metrics used to determine executive compensation, information to enhance investors’ understanding of audit quality, climate change risk metrics, board and executive officer diversity, key workforce metrics and the use of shareholder capital for political purposes.
 

Transparency and safeguards around executive trading in company stock

Under SEC Rule 10b5-1, executives, directors and other top company insiders are able to establish a written plan that details when they will be able to buy or sell shares at a predetermined time on a scheduled basis. But press reports and empirical research suggest that corporate insiders may have used 10b5-1 trading plans as cover for improper stock trades. Insiders can adopt, amend and cancel these plans easily and without disclosure, a recipe for fortuitously timed trades while in possession of material, non-public information. In 2012, CII submitted a rulemaking petition to the SEC recommending improvements to Rule 10b5-1 and we have urged the commission repeatedly to close the loopholes that invite plan abuse. 
 

Enhanced transparency of share buybacks

CII believes that executives should have discretion to allocate capital as they think best. This may include returning capital via dividends or buybacks. Legislation or regulation tying companies’ hands on capital allocation could lead executives to invest in businesses that falter or fail to create jobs, harming the company and the economy in the long-run.

But CII also believes some buybacks are not appropriate. Companies should not repurchase their own shares to boost the stock price in the short term—especially if executive pay is linked to earnings per share or measures of capital efficiency, such as return on equity or return on assets, which are lifted when equity is reduced

Under current rules, companies that adopt a share repurchase program are not required to describe how the program will affect executive compensation, or elements used to determine that compensation. CII has supported legislation to change that. Additionally, companies are only required to disclose the actual repurchases on a quarterly basis. CII supports more rapid disclosure, on par with disclosure of trades by insiders. This would give the market a better understanding of the relationship between stock buybacks, executive compensation and capital allocation decisions.