It used to be that being a CEO impressed. And most impressive was being a CEO of a public company. It’s almost unfathomable how much this has changed in a few short years. What isn’t surprising is that an extended bull market led to some excesses and high profile cases of huge windfalls. And then the fallout came with even more high profile cases of abusing power. Some cases involved individuals and wrong-doing that would probably occur no matter how many checks and balances are in place. But other cases were more unsettling situations of systemic misuses of funds. 

No question, the holes in the system that allowed these situations needed fixing in order to restore investor credibility. Still, the efforts to make a clean sweep of the public markets have come at a cost that may be higher than a good, capitalist system really wants to pay. It is now a prevalent view that being public for many companies is so costly and such a burden that it outweighs the value of that access to capital. 

Even substantial companies are struggling with the challenge of meeting more diligent standards. Royal Dutch Shell’s reserves reporting issues have made headlines more than a few times in the past two months and there is likely more investigation before the dust settles. What may surface from the Shell reserves reporting problem is a dilemma between corporate reporting requirements and the interests of a nation where Shell operates. If Shell was truly caught between opposing interests of shareholders and the entire nation of Nigeria, then there may be more important things to consider than an individual shareholder’s perception. 

Other companies have asked for extensions for their 10K filings in the US, some needing more than a month beyond the deadline in order to more thoroughly review their own reporting processes in detail. This is happening one year ahead of regulations that further tighten reporting deadlines in Canada. It appears that by tightening deadlines, we’re simply heading to a situation where results will be disseminated followed by a series of corrections and restatements. This is going to improve credibility? 

We’re seeing the impact of the overwhelming regulatory burden in other places. For smaller start-ups, there is a trend towards beginning as a private structure, pursuing sophisticated investors so that the detailed, public company reporting guidelines can be avoided. It used to be a starting point, with a public listing to follow. Now, being a CEO of a private company is far more preferable, providing the company with manageable obligations and the flexibility to make decisions within appropriate timelines rather than on the regulatory clock. 

There are many who have forecast the demise of the Annual Report because of the shift to communicating digitally rather than on paper. But perhaps we won’t need Annual Reports because there will be so few public companies to even require one in any form.