IR Web Report > Trends in Online Governance Disclosure

DESPITE scrutiny from regulators and shareholders, most public companies still fail to provide basic corporate governance information on their websites.

This is according to a new international study by Blunn & Company Inc. that looked at the websites of 250 US, Canadian, British and European public companies.

The window of opportunity to be a leader instead of a laggard is rapidly closing.

The study found that only 34% provided such basic information as director biographies. Only 24% published their boards' corporate governance policies online. Just 10% posted information on their websites about insider transactions. And none of the study participants identified which members of their audit committees are considered financial experts.

It appears from these findings that most companies, particularly smaller ones, are still in compliance mode, busy working behind-the-scenes to get their corporate governance houses in order. At some point, however, they will have to put more emphasis on communication because simply improving your governance policies and practices won't be enough, you have to tell people about them, too.

Governance Website Guidelines

We have produced a detailed report on online governance disclosure standards and best practices. This 120 page report includes 70 guidelines and over 80 screenshots of best practices and common mistakes.

Investors won't feel better about investing in companies until they start getting the information and hard evidence they need to feel more confident. Retail investors especially are still fearful of living to regret putting their trust in companies, and they likely will continue to be that way for some time to come.

The onus is on the corporate community, and investor relations departments in particular, to get their governance stories out to investors. Those who fail to do so may well find their stock undervalued relative to their competitors. The window of opportunity for companies to show that they are leaders rather than laggards is rapidly closing.

Large-cap US and European companies lead improvements
Large-cap US and European companies seem to be getting the message. Many have been adding special corporate governance sections to their websites containing an array of corporate governance information.

We found that 44% of US large-caps and 75% of big European companies have added corporate governance sections to their websites. For large-cap US companies this is a big improvement from six months earlier when an earlier study we did showed that only 10% of them had governance sections.

Six months after SOX, smaller firms have done little or nothing to improve governance disclosure.

Still, the efforts of a few big companies are overshadowed by the tardiness of the majority. The study was done more than six months after Sarbanes-Oxley ushered in the most significant corporate securities and accounting reforms, and still more than half of company's we looked at had done little or nothing to improve their governance disclosure.

To be fair, I expect that we'll quickly see 75% of large-cap companies with corporate governance sections on their sites by the time the year is out. This is based on my conversations with clients, web vendors and others who all indicate that there's a strong move afoot by companies to get their acts together.

Mid- and small-caps, Canadian and British companies lag
However, US mid- and small-cap companies are trailing so far behind their bigger corporate cousins that it's hard to imagine how they will catch up. Only 8% of these companies in the study had separate corporate governance sections on their sites, 6% posted codes of conduct and 8% published corporate governance guidelines online.

Canadian and British companies were also poor performers in the study. Ironically, both these countries have seen strong domestic lobbies against new US-style governance regulations, including opposition from some regulators. Only 13% of Canadian and 20% British firms in the study provided codes of ethics on their sites, while 17% of Canadian and 10% of British companies posted their corporate governance policies online.

However, Canadian companies (70%) were most likely to include their proxy statements on their websites, a traditional model of annual governance disclosure which reflects the fact that regulators there haven't encourage companies to use the Internet to provide more current and regular communications with investors, as their US and European counterparts have done.

In the United States, for example, regulators will require all public companies with websites to post insider-trading reports on their sites before June 30, 2003. However, even though the SEC has encouraged companies to do so ahead of that date, only 13% of US large-cap and 8% of mid- and small-cap companies are doing so. German companies are required under that country's new corporate governance code to post details of insider reporting. We found that all German companies posted insider trading information prominently on their sites.

The message from this seems to be that without regulatory action and mandatory requirements, companies are unlikely to make voluntary disclosures.

Important information missing from most sites
Beyond regional and market cap differences, another significant finding is the extensive inconsistencies in the breadth of disclosure by companies in the study.

Of those companies with governance sections, only 33% (or 9% of all companies in the study) included at least their corporate governance policies, key committee charters and a code of conduct applicable to senior officers.

Only 4% highlighted their complaint reporting procedures for people with concerns about accounting issues, while just 12% posted their articles of incorporation, 10% their bylaws.

The Blunn & Company study surveyed the corporate websites of 250 public companies in several countries to assess the breadth of corporate governance information these firms disclose online. The survey was conducted from March 5 to March 26, 2003.

The study companies included 100 US large-cap, 45 US mid-cap, 35 US small-cap, 30 Canadian large-cap, 20 British large-cap and 20 European large-cap companies.

We have produced a 120-page report containing 70 design guidelines and examples of best practice to help companies improve their online governance disclosures and make them easier to find, read and understand.