Corporate Disclosure Policy

Corporate Disclosure Policy: More important for IR than ever

Mr. Musc from Tesla cost his tweets a few million. And the chairmanship of the board. This was triggered by, among other things, a withdrawal of Tesla from the stock market, hinted at by Musk. Other companies had to pay fines because they had passed on insider information to a small circle of analysts during an analyst conference. This cost some IROs their jobs. The reason: They had not sufficiently sensitized the CEOs to this issue.

In general, information can be expensive for listed companies. IROs, supervisory boards & boards of directors can cost them their jobs. Namely if the information is untrue, incorrect, imprecise or misleading. Or if the information is insider information. What measures can a company take to avoid high penalties from regulatory authorities? What can supervisory boards, boards of directors or IROs do to ensure the correct handling of information? Many companies sensitize their employees within the framework of a capital market compliance guideline. It is about insider information and how dangerous it is to divulge it or act on the basis of this information. But does this regulate, for example, the use of Internet forums? What can be posted on Facebook or Twitter? How do you deal with rumours? And who may say what to whom?

For many companies, a capital market compliance directive is therefore not sufficient. The handling of information needs to be developed more decisively: A “Corporate Disclosure Policy” is needed!

Goals & key points of a Corporate Disclosure Policy

What are the main objectives and key points of a Corporate Disclosure Policy (CDP)? A CDP should:

  • Quality of information: ensure the quality of information: All company information must be informative, timely, factual and accurate.
  • Information dissemination: ensure that information is disseminated in accordance with the relevant national provisions and that all shareholders are informed simultaneously
  • Handling of information by employees: guarantee that all employees of a company know what they may, may not or should not do when dealing with company information. Are employees allowed to post in forums? How are Facebook, Twitter and LinkedIn handled? How does IR deal with rumours on the capital market? How does it deal with incorrectly published information? How does IR deal with false reports on the capital market? What information may the CEO disclose at an analyst conference? What about “Forward-Looking Information”?
  • Effectiveness of communicating information: ensure effective communication. This means that responsibilities, procedures, processes and structures must be defined and recorded within the framework of a CDP with the aim of ensuring that all corporate communications can be handled quickly and in compliance with the law.
  • Establish control systems: ensure compliance with the measures relating to information. What controls can be established? How is compliance with all release processes, procedures and documentation ensured?

Corporate Disclosure Committee

Any company wishing to write a CDP should establish a Corporate Disclosure Committee. The task: to define and organize the responsibility, the development, the control systems of the CDP.  In practice, such a disclosure committee usually consists of 2-5 persons, typically the CEO, CFO, General Counsel and Head of IR. Some companies appoint a chairman of the committee, a deputy chairman and another person who is responsible for all organizational matters related to the committee. Guests are often welcome, especially when technical issues from other departments are involved.

Typical responsibilities and tasks of the committee.

Typically, the committee regularly reviews all material information: To what extent does information fulfil the status of inside information and thus may have to be published? The processes for publishing corporate information such as press releases, communication with shareholders, stakeholders, investors, rating agencies, analysts and the media are defined. Also important: Company information in the market: What information about the company is available in the market and how is it collected? The committee determines how to deal with emerging rumors, false reports by third parties or incorrect reports by the company. Should “Forward-Looking Information” be published? If so, to what extent? Particularly in larger corporate structures, it is important to organize the flow of information within the company so that important information within the company and in the close environment of the company is brought to the attention of the Corporate Disclosure Committee. Finally, the committee establishes control and supervisory processes for compliance with the provisions of the CDP and determines the reporting and disclosure system.

Company spokespersons & selective groups on the capital market

When the Committee develops the CDP, the different types of corporate information and the different target groups in the communication must be taken into account.  Dealing with inside information requires stricter processes and control systems than corporate news.  How are the roles of the corporate spokesperson(s) defined? Is IR allowed to hold a press conference with a financial magazine? Or does this fall under PR? Which contents may be mentioned? Is sales at a trade fair allowed to give an interview to a trade reporter? Who is entitled to speak to the supervisory authorities? Who is allowed to talk to private investors and who is allowed to talk to institutional investors and answer questions? How to deal with analyst reports and their models? Many companies do not comment on analyst reports and the underlying assumptions, but correct obviously incorrect information in the reports.

Continuous development of the CDP
The Corporate Disclosure Policy should be regularly reviewed and adjusted. Defined processes may not prove as useful as originally intended. Controls may be too complex and their results may not be reasonably related. Capital market regulations or the interpretations by the supervisory authorities change.

And last but not least, the following must be taken into account: At the heart of the Corporate Disclosure Policy is always the management of employee conduct ….