Study finds big gaps in online governance disclosure

• Only 34% provide director bios
• 24% publish corporate governance policies
• 10% post insider trading reports
• None identify audit committee experts
• Large-cap U.S. and European companies lead improvements
  
• U.S. mid- and small-caps lagging behind
  
• Canadian, British companies trail peers
  

April 24, 2003 -- Despite increased scrutiny from regulators and shareholders, most public companies still fail to provide basic corporate governance information on their corporate websites, according to a new international study by investor relations consulting firm Blunn & Company Inc.

The study of 250 U.S., Canadian, British and European public company websites found that only 34% provided such basic information as biographies for members of their board of directors. Even fewer (24%) published their boards' corporate governance policies online, while only 10% posted information on their websites about trading in company shares by insiders. None of the study participants identified which members of their audit committees are considered financial experts.

"It's clear from this survey that public companies need to do more to communicate the corporate governance and internal control changes they've been making in the wake of corporate scandals and new regulations. They may be making important improvements, but they're largely doing so behind closed doors and not keeping the investment public informed," says Blunn & Company's Dominic Jones, the study's author.

Large-cap U.S. and European companies lead improvements.
Mr. Jones said large-cap U.S. and European companies are the only bright spot in the survey. Many of these firms have been adding special corporate governance sections to their websites containing an array of corporate governance information. Putting corporate governance information in it own section makes it easier to find than forcing people to consult several documents in different sections of the website or in regulatory databases.

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

Mid- and small-caps, Canadian and British companies lag.
However, U.S. mid- and small-cap companies are trailing far behind their bigger corporate cousins. 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 U.S.-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 have moved much less than their U.S. and European counterparts to encourage companies to use the Internet to provide more current and regular communications with investors.

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 U.S. 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.' said Mr. Jones.

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 U.S. large-cap, 45 U.S. mid-cap, 35 U.S. small-cap, 30 Canadian large-cap, 20 British large-cap and 20 European (Germany, France, Switzerland, Sweden, Netherlands) large-cap companies.

About Blunn & Company
Blunn & Company Inc. is a leader in investor relations communications best practices and research. The company conducts extensive research of online investor relations practices and produces IRWebReport.com, a free online resource dedicated to promoting best practices in online corporate reporting. It also is the publisher of the Annual Report and IR Website IDEA BOOK, which has sold around the world.

Recognized internationally for its expertise in the field, Blunn & Company provides consulting services to a range of well-known public corporations, and its senior consultants are regular speakers at industry events.

For more information, please contact us.