Let's end knee-jerk disclosure

What's my daughter's black T-shirt got to do with what information listed companies must continuously disclose to the Australian Securities Exchange (ASX)? Oddly, quite a bit.

Alison was checking in for a Virgin Blue flight to Hobart when the wary attendant said, "Can you wait over there, please?”

My daughter did as she was asked, but when the plane started boarding she stepped forward to check what was happening.

"So, you killed Richard Branson?” the attendant said, her eyes scanning widely for security.

"Ah, no...,” said Alison, feeling this was getting a little weird. She didn't know for sure, but was fairly confident the celebrity businessman was still alive, and absolutely certain she'd not killed him, though perhaps she'd start considering it if they caused her to miss her flight. She was to present to a national booksellers' conference at 9am so getting bumped off the flight was certainly not on her to-do list.

It got more bizarre. "Step aside,” said the security guy who had now arrived. "You can't make threats like that in an airport.”

Alison was dumbfounded.

"Your shirt,” he pointed. "It says, 'I killed Richard Branson'.”

But her T-shirt said no such thing. Its caption was "I killed Richard Dawson”, not Richard Branson. She explained that she hadn't killed Richard Dawson either, but how the T-shirt was a nod to a new crime novel that Pantera Press had just published. She even pulled the book – I Killed Richard Dawson – out of her bag to show them. Eventually, they laughed, though a little uncomfortably, and let her through, but as she walked on, she kept getting stares and quizzical looks from Virgin staff, even on the plane.

Here's the thing. Eagle-eyed, highly-trained security people and friendly, alert attendants completely mistook a Richard Dawson (the debut author) for a Richard Branson (the mega-businessman), and my daughter almost missed her flight, or worse.

When we designed the T-shirt as a promo for the book, Richard Branson was nowhere on our minds. But the Virgin staff saw what they expected to see, not what we intended. Clearly to them, there's only one Richard.

This is where we get to continuous disclosure. As publisher, my daughter had obviously thought deeply about this T-shirt, but still got a totally unexpected and scary response.

But how much riskier is it when you are forced to make hasty, ill-considered decisions? Which regrettably is precisely what the corporate regulators expect of listed company boards.

When ASIC requires listed companies to make market disclosures "immediately” after they learn something that might be material, the corporate cops are pressing boards to make half-baked yet potentially critical decisions on the run. These are not T-shirt decisions. They can cost shareholders dearly, far more than their shirts, if boards get it wrong ... and it's far easier to get it wrong if you're under the extraordinary pressure of truly 'immediate' disclosure.

Personally, I have for decades been, and remain, a fan of continuous disclosure. The disinfectant of sunlight, and all that.

But it is ludicrous when a regulator interprets "immediately” so strictly, with no regard to the real world... directors scattered all around the globe, or just not reachable... more information being needed so as not to release ill-informed statements.

It is plain wrong to expect boards, especially of large and complex companies, to make billion-dollar announcements in minutes or even hours, without giving them an opportunity for careful contemplation, more information, advice, and so on.

It's not as if non-executive directors (NEDs) are sitting around twiddling their thumbs just waiting for the next bit of material information to pop up so they can contemplate a speedy announcement before lunch.

Most NEDs worth their position are busy people and may just not be around the micro-second that the regulators demand them to be. Heavens – they might be in another board meeting... or on a plane.

Justice Ian Gzell's decision on James Hardie, currently on appeal, suggests that for any major announcements, all directors must sign off. On that, he makes some sense, but how practical is that, especially if the regulator insists the company makes its announcement "immediately”? Clearly, it isn't. Instead, companies are expected to shoot first and aim later.

The only sensible way to resolve the conflict is to view the requirement 'immediately' in a less strict manner, ie 'as soon as practicable'. That would give boards reasonable leeway to do what they are paid to do, namely to give careful – not knee-jerk – consideration to the company's circumstances.

Shareholders will not be worse off. In my view, it's to the contrary; announcements will have the benefit of superior consideration and contemplation.

But there is some hope for boards worried about this right now. They should just move their company's listing to Hong Kong, where the regulators are considering a new continuous disclosure regime. There, they are not proposing to use the breathless 'immediacy' of the Australian regulatory requirements. No, their proposed requirement is for companies to disclose price sensitive information "as soon as reasonably practicable”. Gosh – the Chinese are trusting boards to take time to give deep thought to important issues. Hmm ... why don't we do that?

We can learn from Hong Kong. I will ask my daughter to fly there and find out more, but I'll tell her to wear a different T-shirt this time.

John M Green is a company director, a writer and also co-founder of Pantera Press. He was previously an investment banker and a lawyer. He is a director of two publicly-listed companies, but this article reflects his personal views. His first novel, Nowhere Man, one of the first thrillers set in the midst and aftermath of the GFC, is being released in July. The above article is an edited version of an article published in the current issue of Company Director, the Australian Institute of Company Directors' monthly magazine, and reproduced with permission.