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Are required SEC proxy disclosures about the board’s role in risk oversight substantive? |
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| Authors: | Mark Beasley Bruce Branson Don Pagach Silvia Panfilo |
| Institution: | 1. Department of Accounting, Box 8113, North Carolina State University, Raleigh, NC 27695-8113, United States;2. Department of Management, Ca’ Foscari University, Cannaregio 873, 30121 Venice, Italy;1. Oregon State University, United States;2. Purdue University, United States;1. University of Colorado Denver, 1475 Lawrence Street, Denver, CO 80202, USA;2. Bentley University, 175 Forest Street, Waltham, MA 02452, USA;3. Northeastern University, 404 Hayden Hall, 360 Huntington Avenue, Boston, MA 02115, USA;1. Texas Christian University, United States;2. University of California at Riverside, United States;3. City University of Hong Kong, Hong Kong;4. West Virginia University, United States;1. D’Amore-McKim School of Business Northeastern University, United States;2. College of Business Administration University of Nebraska – Lincoln, United States;3. Farmer School of Business Miami University, United States;1. University of Bologna, Department of Management, Via Capo di Lucca 34, 40126 Bologna, Italy;2. University of Udine, Economics and Statistics Department, Via Palladio 8, 33100 Udine, Italy |
| Abstract: | The U.S. Securities and Exchange Commission (SEC) requires companies it regulates to include disclosures about the board’s role in risk oversight in the annual proxy statement to shareholders. The SEC does not mandate specific content or actions that boards should perform as part of their risk oversight responsibilities, leaving the nature of activities and extent of those disclosures to the discretion of the reporting entity. This study examines whether these disclosures contain substantive information reflective of the effectiveness of the organization’s risk oversight. We find that organizations disclosing more specific information (but not simply more information) about board risk oversight practices are associated with firms independently assessed as having the strongest management and governance processes. These findings suggest that these firms use the discretion provided by the SEC’s disclosure rule to provide substantive and potentially value-relevant information for stakeholders about the entity’s risk management processes and board risk oversight activities. |
| Keywords: | Board risk oversight Enterprise risk management Risk governance Risk management |
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