Boards and the Art of Disclosure

A conversation with Laura Clayton McDonnell, Board Member at Zuora and SVP of Sales at ServiceNow.

Put simply, the role of a company’s board of directors is to look after the interests of investors. but how the board does this is beginning to shift.

We sat down with Laura Clayton McDonnell, ServiceNow’s Senior Vice President of Sales (East, Canada and Latin America) and current Zuora Board Member, to talk about the value of transparency and accountability and how this is affecting investor behavior.

Q: You have moved from a securities law role to a sales role. How do you think your legal background has influenced your views on how a board can or should function?

A: My legal background is helpful in that securities laws regulate securities markets and protect investors. Boards of Directors fulfill important legal duties of care, loyalty and obedience to serve the interests of investors. And ideally, the result is that investors are protected and have the information they need to make informed investments.

Q: So ideally you’re kind of a link between the people who run a company and the people who invest in a company.

A: Right. The managers of a company run the business; They are the operators – they hire talent, develop products, drive go-to-market strategies, provide administrative services such as finance, IT, etc. Boards play an oversight role, overseeing company activities, evaluating performance and sharing appropriate information with investors.

At ServiceNow, for example, I am the operator of a large sales territory and generate income from selling our solutions and supporting our customers. At Zuora, I am at the other end of the exchange evaluating financial performance, which includes revenue generated, representing shareholder perspectives and complying with required disclosures.

Q: Would you say that role is changing?

A: The role of a board of directors is still to govern companies in a way that protects investors. However, what is definitely changing is that the general public cares more how the money is made.

People still want their investments to be profitable, but they increasingly want reassurance that their investments aren’t subsidizing, for example, environmental or social degradation – and they are showing a renewed willingness to divest when a company cannot demonstrate responsible social engagement.

As such, boards are under increased pressure to drive ESG and DEI efforts and ensure transparent disclosure of operations.

Q: How are boardrooms responding to increasing calls for ESG and DEI initiatives?

A: Well, the boardrooms themselves aren’t exactly kicking ass when it comes to diversity and inclusion. But boards are under increasing pressure to assess and disclose a company’s activities related to ESG and DEI. Investors are more willing to walk away when companies can’t hold themselves accountable on these fronts. Today, the public expects companies to do it Wellalong with doing well.

Q: And what does this mandate mean for people who serve on the boards of public companies??

A: I am confident that the ServiceNow Board of Directors has played an active role in the development of our ESG policies. Businesses must be accountable for their greenhouse gas footprint, sourcing and labor practices. Finding out how a company is managing physical and social impacts, whether it is waste in its supply chain or a poor inclusion record, and making recommendations accordingly is increasingly a matter for the board of directors.

This corresponds to the supervisory function of a board member. When the company’s managers produce a report on their DEI strategy, the board is responsible for ensuring that this is consistent with company policies.

Q: Do you think the SEC will eventually make corporate governance rules?

A: The SEC has and will continue to issue regulations requiring companies to disclose their operations. As the public demands more transparency in order to make informed decisions, the SEC has created new rules, particularly in relation to carbon footprint disclosures. It is conceivable that they would extend these requirements to DEI or other aspects of corporate citizenship. Investors want to make money, but nobody wants the guilt that comes with investing in companies that have a proven track record of causing harm.

Q: So it seems like both investors and the SEC are becoming more likely to require companies to be accountable on the ESG front. Is that the main concern for investors overall?

A: It’s important. The SEC will continue to require disclosures of important, relevant information and other factors that may affect a company’s performance, and these disclosures are subject to change from time to time given the dynamic nature of business. We’ve seen the emergence of investors who want transparency on how companies are managing cybersecurity and risks such as finance, litigation, reputation, supply chain, etc. Concerns about current geopolitical and economic issues and their impact on businesses are also growing.

Disclosures provide benefits to investors, encourage valuable communications, and build trust. In times of uncertainty and critical to our economy, it is fundamental that they adapt to keep investors informed and protect their interests. And I’m fortunate to be able to see this from multiple perspectives: as a lawyer, as a salesperson, and as a board member.

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