The Materiality of Social Media Attacks

VEA Vice Chair Nell Minow is quoted:

Still, consumer-facing companies, which are particularly vulnerable to social controversies, should outline such risks and response strategies in financial filings, said Nell Minow, vice chair of corporate governance consulting firm ValueEdge Advisors. “They need to let their investors know that they’re prepared to deal with it promptly and effectively to prevent a material deterioration of the stock price,” Ms. Minow said. “It’s very much like cyberattacks—it’s a relatively recent phenomenon that every company has to be prepared to deal with.”

Source: United, Pepsi Outcry Unlikely to Hurt Financial Results – WSJ

To Disclose or Not to Disclose? Wells Fargo Woes Shine Light on a Knotty Problem – WSJ

Wells Fargo didn’t disclose anything publicly about its “cross-selling” abuses or looming settlement with regulators before the pact was announced Sept. 8—including in its second-quarter Securities and Exchange Commission filing weeks earlier, on Aug. 3. Three Democratic senators who grilled the bank’s chief executive last week now have asked the SEC to investigate whether Wells Fargo misled investors by failing to disclose the issue sooner.

While the bank’s management had known since 2013 that some employees had created deposit and credit-card accounts for customers without their knowledge, the accounts were a tiny portion of Wells Fargo’s business. The settlement, which included a $185 million fine, was less than 1% of last year’s earnings. The matter was “not a material event,” Chief Executive John Stumpf told a Senate panel last week.

That is true in terms of the bank’s income statement. Not so its reputation or share price. The bank and Mr. Stumpf have faced a political and public furor and the stock has lost nearly 10% since the settlement, or about $23 billion.

Source: To Disclose or Not to Disclose? Wells Fargo Woes Shine Light on a Knotty Problem – WSJ

FASB Proposes to Curb What Companies Must Disclose – The New York Times

[W]ith a new proposal, the Financial Accounting Standards Board has lobbed a miniature Molotov cocktail into the usually staid world of audit standards, upsetting investor groups and experts in the field.

The proposal would effectively change the definition of materiality, a mainstay of corporate financial disclosure that determines what a company must tell investors about its operations and results.

Parse the following, which is near-oxymoronic in its absurdity:

In materials describing how its proposal came about, FASB suggested that it was intended to improve the effectiveness of financial statements by reducing the amount of immaterial information in them.

via FASB Proposes to Curb What Companies Must Disclose – The New York Times.

For more information: FASB