It’s not for nothing that I’m a securities lawyer. I sincerely believe in the need for and efficacy of full and fair disclosure, both professionally and personally. That’s one of the many reasons why I have been advocating disclosure reform – or, as we now call it, “effective disclosure” – to assure that important matters are disclosed, and that unimportant matters need not be.
So it’s not surprising that I’m upset about something that happened recently. I attended a program at which a representative of a major institutional investor said that his firm just doesn’t have time to read the proxy statements of the companies in which the firm has invested. I’ve heard this song before in various guises – for example, one major institution told me a few years ago that the most they’d ever spend reading a 100-page proxy statement was 15-20 minutes – but for some reason the statement I heard recently really bothered me.
Why do securities lawyers spend most of their waking hours, and many of the hours when they should be sleeping, trying to provide investors with the information they need to make important decisions? (And, for the cynics out there, I’ve never heard a securities lawyer say anything like “How can we hide this?”) Why do companies spend untold amounts of money paying their lawyers to do that? More important, why is it acceptable for major investors to say that they don’t read their investees’ disclosures? Does it ever occur to them that they may be in violation of their legal and ethical obligations to their clients by blowing off the obligation to read those disclosures and voting on significant matters without reading those disclosures?
Which brings me back to “effective disclosure.” I’m passionate about the topic, and I’ve put my time (which is, after all, money) where my mouth is. But I’d be crazy not to think about whether it’s really worth the time and effort it will take to overhaul our approach to disclosure if, at the end of the proverbial day, few if any people will benefit from it or even care about it.
Years ago I commented on an SEC rule proposal by saying, among other things, that it would result in more disclosure that no one would read. I was told by the then-Director of the SEC Division of Corporation Finance that rulemaking isn’t based on whether anyone reads the disclosures in question. At the time, I thought he was probably right, but now I’m not so sure.