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"The Stage, the Audience and the Players" - SEC Commissioner speaks on disclosure

  • Speech — gray Image

Jun 29, 2013

Commissioner Elisse B. Walter of the US Securities and Exchange Commission (SEC) spoke at the 19th annual Stanford Directors College about disclosure. As IASB Chairman Hans Hoogervorst had done earlier this week, she reminded her audience that disclosure is not merely an obligation - it needs to be an honest dialogue.

In his speech given at the IFRS Foundation conference in Amsterdam, Mr. Hoogervorst had spoken of the necessity to "break the boilerplate"; Ms. Walter called disclosures "a chance to tell your story." She focused mainly on disclosure in the management’s discussion and analysis and did so by taking the audience into the world of the playwright William Shakespeare, whose plays were and still are successful because he knew three things: the stage, the audience, and the players.


The Stage

Commissioner Walter introduced her audience to the idea that regulations set the stage for an entity's disclosures but they do not tell the story. They form the backdrop and the floor and maybe the wings through which the player enters, but depending on them to tell the story would make them do more than they are intended for. It is on this stage that the company needs to tell its story and identify the objects and props that will help it to bring the story across. She also admitted that "a good story may not always be a happy story. Shakespeare was a master of both tragedy and comedy. But the real story — and by that I mean the whole story — is the one that needs to be told."


The Audience

To Commissioner Walter, the audience in the case of disclosures should always be the investors. This would give the company two responsibilities: knowing the audience and accepting them as equals. Knowing the audience will help an entity to identify the questions that will be asked and should not go unanswered. As Commissioner Walter reminded her audience: "Disclosure isn’t driven by what the company wants to disclose but by what the investors want to know." She also believes the audience needs to be accepted as business partners, the paying guests that determine not only the success of the play but also of the company in the long run. This, Commissioner Walter believes, should set the tone for the communication with the investors: "You wouldn’t address a business partner with boilerplate. Your investors deserve the same respect. They also deserve the whole story."


The Players

Carrying her analogy on to the players involved, Commissioner Walter encouraged directors to get know the people and the processes involved in putting disclosures together, including behind the scene. Only then they would see the full picture and could understand the music the disclosures play to. "I believe directors can influence that tone by being engaged, by reading the disclosure with a critical eye and by holding management’s feet to the fire when they believe there is more to the story that ought to be told."


The full text of the speech is available on the SEC's Web site.

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