As part of our blog series based on this great panel of in-house practitioners (here’s our prior one) – featuring Leidos’ Henrique Canarim, Etsy’s Jennifer Card and Intel’s Alex Shukhman – here’s a blog that addresses the question of: “When you do look at peer disclosures, what type of “peers” do you look at? And how many peer disclosures?”
- Etsy’s Jennifer Card – I typically look at peer company disclosure when creating new disclosure. The compensation peer group can be a great starting point, as well as comparable companies in your company’s industry. There are also a lot of external resources – such as RealTransparentDisclosure.com, for example – that highlight a number of companies that have good disclosure.
I find that four to five good examples can be sufficient. There are times when you might need more than that if you’re conducting a very comprehensive review. But that said, it’s important to choose carefully, so I often think about what other companies in my industry are known for having good disclosure and use those as models. Another practice point is to consider where your own executive officers or directors may serve on boards of other companies. That can be great as a frame of reference at least to keep in mind and consider as you’re working through your drafting process. - Leidos’ Henrique Canarim – I like to focus on the known user-friendliness of the peer disclosures I consider and make sure that information is easy to find. There are a number of resources out there where you can find data in an easy-to-look format as firms like Labrador and others have guides where they call out good practices and provide good examples.
That makes the research process more efficient. Obviously, I look at my industry peers but I also look outside our industry. I particularly like to look at a couple of very large companies as their disclosures tend to be closely scrutinized. They are more likely than not to incorporate lessons learned over time.
I would also note in terms of benchmarking is the notion of really going back to making sure that whenever you’re adding a disclosure based on something that you’re looking at from someone else, you need to consider fully building out the internal controls for it. And make sure that you’re going to be able to repeat that disclosure year after year.
Consider whether you really have the right folks bought in so they understand what you’re considering doing and they’re letting you know whether you’re going to be able to replicate that in a way that is consistent. That you can have a good story to tell year over year so it’s not just copying what someone else is doing out there – but making sure that it’s tailored and appropriate for your own circumstances. - Intel’s Alex Shukhman – This question of benchmarking kind of reminds me of my teenager – nobody wants to stand out, they want to just fit in so they can be part of the cool group. I think obviously everyone in this field really wants to make sure you have a sense of or a pulse on what everybody else is doing.
Different companies have different philosophies. You have to be mindful when you’re looking at other companies as to where do you slot in because your company’s culture may not be one where they feel comfortable necessarily being at the forefront.
So we do the benchmarking exactly as Jennifer and Henrique have mentioned – we look at the compensation committee peer group (for us, it’s anywhere between 15-20 companies). Typically, the board member affiliations are critical to us because we don’t want to be surprised when we’re throwing the stuff up to our board members and they’re dealing with these issues at other companies in a different way. Because the last thing you want is to propose something and then at all the other companies they’re affiliated with, they’re doing something completely different.
We will look at gold standard companies as well. For us, there’s is probably about 5-10 companies for which I’m always going to review their proxy statements or their 10-Ks. Whether they’re within our industry or they’re in the broader universe. I think it is critical to look outside your industry as it’s helpful to see how someone else does it.
Lastly, it’s helpful for specific issues to look at specific places, like Labrador’s guidance and the Center for Audit Quality for audit committee disclosures. It’s helpful to review compilations of particular types of sample disclosures.
