All you executives in charge of corporate disclosure or investor relations, take heart: The Securities and Exchange Commission feels your pain.

So says Meredith Cross, head of the SEC’s Division of Corporation Finance, who spoke this morning at the National Investor Relations Institute annual conference in San Diego. I’m at the NIRI conference as well to host a panel discussion on social media and investor relations, and will have more on that in a few days. For now, Cross is giving us enough news to start the week.

Foremost, Cross shed more light on what might be contained in the fabled “proxy plumbing project”—a broad review of federal proxy rules that the SEC has touted for several years, without ever showing us so much as a concept release, much less an actual proposal. In theory, this review will haul proxy voting rules into the modern era of shareholder activism, hedge fund trading and online communications. In practice, however, the Commission’s attention keeps getting diverted to small matters like the financial crisis or Madoff-sized Ponzi schemes, and this much-needed review moves that much further toward the horizon.

Cross said today that any substantive SEC proposals might not arrive until 2011, which means no serious reforms until at least 2012. She did promise that it will be “quite sweeping” whenever it does see the light of day, and we can expect it to cover:

• Accuracy in proxy vote tabulation;
• The risks of empty voting and over-voting;
• The distinction between “Objecting Beneficial Owners” and “Non-Objecting Beneficial Owners,” including whether the OBO/NOBO difference should continue;
• The role of proxy advisory firms; and
• Communication among shareholders.

None of those points are particularly surprising. But one telling moment came when Cross was asked about the OBO/NOBO distinction, a rule that prevents companies from knowing who many of their shareholders actually are. Investor relations officers regularly complain that OBO/NOBO thwarts their efforts to foster good communication with shareholders, and Cross admitted, “Our current rules aren’t making that any easier.” I take that as a hint that perhaps the days of the OBO/NOBO distinction are numbered.

Of course, we still need to see an actual concept from the SEC before any of this is more than conjecture, and when that might happen is still anyone’s guess.

Cross had a few other morsels of news as well…

Web disclosure. Earlier this year we saw Google ruffle some feathers when it announced that it would no longer disseminate earnings release by wire service; instead, it only announces that its earnings are available for all to see on its Website (via wire service and Form 8-K filing), and posts the full details there. Cross wasn’t terribly enamored of this idea; while she didn’t mention Google directly, she pointedly said, “I am not commenting on whether this is a best practice … I do think that companies considering this approach should consider the investor relation implications.”

But, she added, the SEC does not necessarily frown on this practice either. So long as a company publishes a press release announcing that the earnings data is available on the corporate Website or 8-K filing, then it doesn’t need to worry about the SEC’s guidance from 2008 about whether the Website is a legitimate avenue of communication, and can proceed down this path if it chooses. (I personally suspect that the number of investors unhappy with this practice falls somewhere between zero and, well, zero. I have never heard any investor tell me he or she feels unable to keep current with a company’s earnings news.)

Regulation Fair Disclosure. Cross called Reg FD “a big success” as it celebrates its 10th anniversary this year. “Everyone thought when it was implemented that it was the end of the world … I think it’s now engrained in our system.” She did warn that the SEC continues to see the need for enforcement of Reg FD “from time to time.” We may be in one of those times, since the Commission has settled two Reg FD enforcement actions in recent months, for the first time in years.

Risk Disclosure. Cross couched her words carefully, but she also hinted that the SEC is not entirely thrilled with the quality of disclosure in Form 10-Ks and proxy statements about risk. Too often, she said, companies are good at plain disclosure of a risk, but then remain silent on what plans they might have to do something about that risk. Cross said the SEC staff is mulling whether to recommend that companies must say more: “If the risks are important, then the company probably has a plan.”

Likewise, the SEC is considering—and only considering—revisiting the rules for the Compensation Discussion and Analysis in the proxy statement, because companies still fall short on thoughtful discussion of executive pay. The SEC wants to see better, fuller discussion of why executive officers are making the amounts they’re making, and not just the precise compensation totals.

More to come later this week as news dictates.

News for those of you confused about how to comply with the Securities and Exchange Commission’s new mandate to use XBRL technology in financial reporting: A new supply of confusion has just arrived.

The latest batch of frustration erupted earlier this month, when largest companies in America had to start filing period reports “tagged” in XBRL coding. Those tags come from a taxonomy of accounting terms that neatly matches up the tags to concepts in U.S. Generally Accepted Accounting Principles.

Except, um—GAAP was replaced on July 1 by the new Accounting Standards Codification. The existing XBRL taxonomy doesn’t match up to accounting terms in the Codification, and won’t be accurate for filings that cite Codification. As you can imagine, this discrepancy has left financial reporting executives rather peeved.

Yesterday, however, I heard rumor that XBRL U.S. (the consortium that publishes the taxonomies) has created a temporary solution for those companies facing immediate filing deadlines. To get to the bottom of things, I contacted my spy attending XBRL U.S.’s conference happening out in California this week and asked him for the scoop.

The bottom line is this: Within the next two weeks, XBRL U.S. will publish an “extension taxonomy” that reflects accounting terms according to the new Accounting Standards Codification. When a company submits a periodic report to the SEC based on the new Codification—and that will be mandatory for periods ending after Sept. 15—it should also include the new extension taxonomy as part of its attached XBRL exhibits. That gets you off the hook.

XBRL U.S. confirms my spy’s summary as correct, although not surprisingly the officials there see things differently. Michelle Savage, the group’s chief spokeswoman, says XBRL U.S. and the Financial Accounting Standards Board have been planning for Codification all along, and releasing an extension taxonomy in mid-August “will give preparers plenty of time to review the new and old references before the FASB requirements in September.”

Some technical background: To create XBRL filings, companies use a “linkbase,” which is really just a database that connects XBRL tags to specific terms in U.S. accounting. The 2008 taxonomy released last year contained one linkbase; the 2009 taxonomy released this year contains another, to reflect new accounting rules adopted in the last six months. Codification now needs a linkbase of its own, and that is what’s coming next month.

The irritation springs from early filers that had been using the 2009 taxonomy since, well, that’s what they were told to do, and just as filings are about to begin they must now change course. Savage says releasing an extension taxonomy is standard procedure; XBRL U.S. wants to publish only one formal update each year, and will then follow up with extension releases as needed when a major change (like Codification) arises in the course of the year.

Thankfully, this should all pass (like a kidney stone, some would say) when XBRL U.S. publishes its 2010 taxonomy sometime around January. That document should be in full accordance with the Accounting Standards Codification, and all will be roses.

For now, however, my spy reports “lots of confusion” out there about XBRL—an unfortunate circumstance, since XBRL is still in its first year of adoption and needs all the support it can get.

A quick read of the Obama Administration’s proposed reforms of regulatory oversight leaves you with two impressions. First, for the large majority of compliance officers and financial reporting executives out there not involved in the financial sector, little will change. You still have much bigger concerns about increasingly aggressive folks at the Justice Department and Securities and Exchange Commission you need to worry about in your daily routines.

Second, not much has changed for those compliance officers who are in the financial sector, either: they still face too many voices in the regulatory realm, talking past each other and investors, sending conflicting messages about what financial firms are supposed to do.

To my thinking, the Administration’s proposed reforms fall somewhere between a missed opportunity and a mixed bag of under-developed ideas. Some seem sensible. Others seem to fly in the face of political reality. Most seem to have the potential to do good, but are in such an embryonic state that they could evolve into considerable new burdens or risks for corporations—financial and non-financial alike—by the time Washington is done fiddling with them.

A few high-lights:

• The agencies endure. Remember that halcyon time when everyone finally seemed to agree that the Commodities Futures Trading Commission and the Securities and Exchange Commission should be merged? Well, everyone in Washington has forgotten it. Both agencies will remain intact, doing what they’ve always done. At least one of them—presumably the SEC—will also start overseeing those over-the-counter derivatives that have caused so much trouble in the last year, but the Obama plan isn’t entirely clear on that point.

• Creation of a Consumer Financial Protection Agency. I already can envision new types of legal headache here. If an approved financial product fails to deliver on its promise—and good luck defining the scope of that—could an aggrieved investor sue the firm that sold it? Could corporations then claim some sort of pre-emption defense, akin to what drug-makers claim under Food and Drug Administration rulings? We also have no word on who would appoint this agency’s leadership. This is an important detail; remember, plaintiffs have hauled Public Company Accounting Oversight Board in front of the Supreme Court, saying its SEC-appointed leadership is unconstitutional.

• Enhanced regulatory cooperation internationally. The Administration might as well put this proposal out for comment in MAD Magazine. Politicians on both sides of the Atlantic are so busy pressuring securities and accounting rulemakers to relax the rules as a means of inflating economic growth, nobody will have time to develop a serious framework for international oversight of large institutions. That’s a shame, because we need one.

• Compensation crackdown! Don’t die of shock, but all public companies would now be required to let shareholders have an advisory vote on executive pay packages. They would also need to establish more independence on the board’s compensation committee, and achieve the fabled “alignment of executive pay with long-term shareholder value.” All of this is about as surprising as sunrise in the east. I was hoping the Treasury Department would decree that all CEOs are to be immediately enslaved.

• More accounting reforms. Financial firms would be required to use more forward-looking provisions for loan losses. Originators and issuers of securitized loans would be required to keep a financial interest in those loans. And fair-value accounting rules, which always crop up in these discussions, would get yet another examination to see how they can increase the transparency around cash-flows from holding investments. I’m not sure whether that’s code for “letting banks say they’re not going to sell worthless assets, so they don’t need to say the asset is worthless”—but since Congress already forced the Financial Accounting Standards Board to relax fair-value rules, I’m not sure we need to ask.

Alas, nowhere do we see some of the more creative solutions floated in past months, like imposing a small transaction tax on stock trades to curb speculators, or integrating the CFTC and SEC, or re-instating the Glass-Steagall Act to segregate investment banks and their dumb decisions from commercial banks that consumers depend on. Those were good ideas—and to boot, they could help unravel the financial crisis without imposing drastic new challenges on Corporate America and on the chief compliance officers who must ensure those challenges are met.

Instead, we will see a hodge-podge of regulatory reforms meander their way through Washington. Even if these ideas sound good—a statement I don’t know that I support, but it may be true—they will still need enforcement mechanisms. They will need to be quantified in data, which will need to be collected, disclosed, and reviewed or audited. How are you, the corporate compliance or governance executives, supposed to achieve that? Nobody really knows yet.

So like I said at the start—not much has changed.

Compliance Week’s annual conference happens in Washington, D.C., this week, and promises to be an information-packed event as usual. This is always my favorite week of the year—not just because the bar in the lobby of the Mayflower Hotel is legendary (although that helps), but also because this conference is the central way-station where those traveling the many paths of “corporate governance” converge.

I get to attend almost all sessions over the next three days, and I’m sure each will serve up excellent insights for the particular slice of governance it’s exploring. But for the attendees still deciding where they want to go, here’s my take on what’s likely to be most interesting:

• Luis Aguilar. The SEC commissioner is speaking Wednesday morning, and he’s always good for interesting comments. Since his appointment to the Commission last year, Aguilar has been an outspoken advocate for more shareholder-centric reforms; while he was a minority voice in the Bush Administration, he now has the force of a Democratic majority with him, and to my thinking Aguilar’s speeches are the ones to watch when you’re looking for hints of what the SEC plans to do next.

• David Ogden. Deputy attorney general of the United States, and chief arbiter of all questions about corporate investigations. He closes out our Thursday sessions. You haven’t really heard much from Ogden since he started work at the Justice Department this spring. I’m hoping he’ll give fresh clues about the Department’s stance on waiver of attorney-client privilege. In fact, if he doesn’t, I’m going to ask him about it.

• Bill Senhauser. You think your job is hard? Senhauser is the chief compliance officer of Fannie Mae, the mortgage giant that committed every ethical lapse known to man before it lurched into government receivership last year. At a Compliance Week editorial roundtable in March, he described how he’s supposed to managed compliance “when U.S. attorneys are fighting over the carcass otherwise known as your company.” You don’t want to be this guy, but he is an engaging, energetic speaker; you do want to listen to him. He’s on deck Wednesday morning after Aguilar.

• Amy Schuh. Schuh is associate general counsel for compliance at Hewlett-Packard, and on Thursday afternoon she’ll offer an extensive look at how HP conducts compliance risk assessments. HP has been no stranger to ethics missteps in the last several years, but has now put those problems behind it. I’ll be eager to hear Schuh talk about how the company makes sure problems stay there.

• Russ Golden. Golden is technical director at the Financial Accounting Standards Board, and the highest-ranking official there who isn’t on the FASB board itself. He will give a wide-ranging review of critical accounting issues on Thursday morning. Anyone who wants to grill him over determining the fair value of an asset during inactive markets, this is your big chance.

For the record, it’s still not too late to attend—anyone in the Washington area this week can do a walk-in registration. For the rest of you, be sure to check our website regularly throughout the week; we’ll be posting short updates of many sessions. After the conference wraps up, we’ll also make speakers’ presentations and other materials available to Compliance Week subscribers.

And for those of you who are attending: I look forward to meeting you. Feel free to introduce yourself during the conference, and if all else fails, look for me at the lobby bar!

To the best of my knowledge, XBRL has no tag for “disinterest.” That’s unfortunate, since it seems to be the adjective that best fits the U.S. Securities and Exchange Commission these days.

Yes, large U.S. companies must begin filing financial statements tagged in XBRL technology starting June 15. Yes, that’s because the SEC approved an XBRL mandate months ago after years of telegraphing its intention to do so. And yes, the plain truth is that most large filers will muddle through their first XBRL submissions without collapsing into chaos or bankruptcy.

Still, at what should be a proud hour for XBRL, enthusiasm has faded. We’re filing. Oh. Yippee.

The culprit here is new SEC Chairman Mary Schapiro. Given America’s current economic plight, she has astutely identified XBRL for what it is: the financial reporting equivalent of tidying up the front lobby for visitors, while the back of the company crumbles to the ground. Schapiro believes the SEC has much, much bigger problems to worry about than XBRL and the promise of easier comparison of financial data—and she’s right. The agency’s enforcement arm is a mess; the Obama Administration has proposed parceling out most SEC functions to the Federal Reserve or other agencies-to-be-named later as part of Washington’s wholesale regulatory reform. Now is not the time for the SEC to be worrying about tags.

William Lutz, director of the SEC’s 21st Century Disclosure Initiative, admitted as much at a May 28 conference discussing the future of XBRL. “A lot of the commission’s resources are turned internally” right now, he said, leaving “limited resources” for XBRL. Lutz added that two XBRL projects planned for this year—one to tag the Compensation Disclosure and Analysis and another to tag asset-backed securities—have been put off until next year, at least as far as SEC participation goes.

You can’t fault the SEC for putting its resources where they are needed. But it does underscore a fundamental problem with XBRL: adoption not only requires some specific vow of action; it requires maintenance, day in and day out, and that can be hard to deliver. Already, the XBRL taxonomy on the SEC’s website uses U.S. Generally Accepted Accounting Principles as of 2008—not the updated taxonomy for 2009, which was released in April. And neither taxonomy incorporates Financial Accounting Standard No. 165, Accounting for Subsequent Events, approved by the Financial Accounting Standards Board only last week.

Will either of those glitches last very long? Probably not. Still, they probably will last until someone at the SEC decides to fix them—and with the new SEC leadership responding to new problems that will endure for quite a while, expect fewer people at the SEC to be thinking about XBRL.  

Financial Executives International has just published a new report on the state of adopting International Financial Reporting Standards in the United States. It’s worthwhile reading, especially for anyone skeptical we can adopt IFRS here by 2014. Your suspicions will be validated.

The report starts with several pages about the proper way to plan for conversion to IFRS, and many of those steps are sensible: win support from senior management; map out any significant changes to accounting policy; inventory your overseas subsidiaries to see who is using IFRS already. But then comes the prosaic truth: Corporate America isn’t going to adopt IFRS until someone actually orders them to convert to IFRS.

The report is exactly right; someone needs to force the issue. And that’s where things break down.

For the wise among us who have mostly ignored IFRS adoption in the United States, since it’s never going to happen on schedule anyway, let me bring you up to speed. Last fall the Securities and Exchange Commission proposed to make IFRS mandatory starting in 2014. But the SEC won’t make a final decision on that date until 2011. It will, however, allow a select group of early adopters to start filing statements in IFRS as soon as next year, and study their experiences to help make that final decision in 2011.

Meanwhile, the corporations that might qualify for early adoption—very large U.S. companies, with global competitors already using IFRS—are suddenly staring at their shoes. The costs for conversion to IFRS are enormous, the differences with U.S. Generally Accepted Accounting Principles significant, and the questions of enforcement, litigation, auditing—well, those are too messy to contemplate. Nobody is going to volunteer for this, period.

A much more succinct view of the standoff comes from Patrick Mulva, controller at ExxonMobil, who submitted a comment to the SEC about its proposed roadmap on Feb. 17. Like so many other financial reporting types out there, Mulva was “generally supportive of the long-term goal of moving to a single set of accounting standards.”

But then he fired off this gem:

The proposed conversion to IFRS will be a major cost burden to companies that would easily exceed the cost of SOX 404 implementation. We do not anticipate many companies will be willing to make this investment in the absence of a date certain for mandatory adoption of IFRS.

That’s putting it mildly. The SEC’s own estimates are that conversion to IFRS would cost a company 0.125 to 0.13 percent of revenue. That’s tens of millions of dollars for any sizable company; for giants like Walmart, the bill approaches $400 million. And we haven’t even touched on the expenses companies will start reporting after conversion, like the giant hit to taxes many U.S. companies will take under IFRS rules for inventory accounting.

We are in a recession. The SEC is in regulatory retrenchment, undoing all the sloppiness of the last four years. Let’s all admit that IFRS adoption in the United States is a lofty idea, still being nibbled to death by a thousand ugly facts.

President-elect Barack Obama presented his economic team to the world this week. A new chairman of the Securities and Exchange Commissioner was not part of the picture. That says a lot.

For the record, I applaud the nominees Obama presented on Monday: Timothy Geithner as treasury secretary; Larry Summers as chairman of the National Economic Council; and Christina Romer as chairman of the Council of Economic Advisers. These are the sort of people you want to be in charge during a crisis, and Summers in particular is probably more intellectually able to confront the financial crisis than anyone on the planet.

Still, the absence of an SEC chairman bugs me. Some will say it’s to be expected, because an SEC chairman isn’t of the same importance as the treasury secretary or other economic advisers to the president. Well … yes and no. In ordinary times, that statement is true. But we are far from anything resembling ordinary times, and an effective regulator of corporate behavior will be crucial in getting this nation back to where it wants to be.

The appointments of Summers, Geithner, and the rest tells me that the Obama team sees our predicament foremost as an economic crisis. But this is also a financing crisis as well: an avalanche of unregulated hedge funds borrowing money to dabble in credit default swaps; short-sellers punishing bank stocks mercilessly; and securitized mortgage-backed bonds rubber-stamped by credit rating agencies, imploding on balance sheets across America.

Those were the vehicles of our economic disaster, and we need someone to repair them, pronto. Even if the country does stumble upon some new elixir of economic growth—the whiz kids at Stanford University or MIT invent the solar-powered car, for example—that potential growth is translated into actual new jobs, physical plants, and consulting services only by way of systematized financing. New companies need a method to obtain capital, spend it on operations, and return profits to investors. That takes clear and effective regulation, and right now we don’t have enough of it.

One subtext here could be that the Obama team has bigger plans for the next SEC chairman. The Paulson plan unveiled last year to combine the SEC and the Commodities Futures Trading Commission is still out there, as are numerous other arguments for wholesale change of how the United States regulates business and financial reporting. Obama may be searching for someone to enact a sweeping structural overhaul of the SEC, rather than to push through a series of policy changes in step with the Democrats’ tastes for corporate regulation.

Either way, the next SEC chairman will impose far-reaching changes on Corporate America and wield enormous influence over compliance and financial reporting executives. The sooner we know who that person is, the better.

From the I’d-rather-watch-paint-dry department: That conservative outfit still arguing that the Sarbanes-Oxley Act is unconstitutional has, yet again, lost a court dispute and vowed to appeal. 

Earlier this week, the U.S. Court of Appeals for Washington, D.C., voted 5-4 not to review the case, which argues that the structure of the Public Company Accounting Oversight Board violates the appointments clause of the U.S. Constitution. And because SOX lacks a severability clause, if that section of the law establishing the PCAOB ever were ruled unconstitutional, the whole of Sarbanes-Oxley would go out the window.

This is the third consecutive legal defeat for the plaintiffs, the Washington D.C.-based Free Enterprise Fund and Las Vegas accounting firm Beckstead & Watts. They lost in federal court last year and lost an appeal to a three-judge panel of the D.C. Circuit in August. Now they’ve lost again, and (naturally) they have vowed to appeal to the U.S. Supreme court. Beckstead & Watts, by the way, was once previously discplined by—you guessed it—the PCAOB.

Here’s the painful truth, folks: As much as you may detest the Sarbanes-Oxley Act, it’s here to stay. Congress does not want to revisit this can of worms. The judiciary doesn’t want to revisit this can of worms. Even if the plaintiffs do appeal to the Supreme Court, and by some miracle the court decides to hear the case, arguments won’t happen at least until late 2009, and by then we’ll probably have at least one new justice anyway pulling the court back from its rightward tilt.

This case is going nowhere. One wonders what the Free Enterprise Fund’s stance is about frivolous litigation …

You’ve got to feel a bit of sympathy for SEC Chairman Christopher Cox these days. The SEC faces a Gordian knot on the regulatory front, certainly. But the SEC also faces a deeper, more serious political crisis: It is becoming irrelevant in the conversation now occurring across Washington to decide what should happen next. Cox is on the outside looking in, and that is not where any policy-maker wants to be. It is not where companies regulated by the SEC—that would be you—should want him to be, either.

The Cox Irrelevance Factor has become apparent in any number of ways recently. Foremost, you could see the irrelevance by not seeing Cox himself in the numerous Congressional hearings lately into the Wall Street meltdown. That hearing of the House Oversight and Government Reform Committee, where Alan Greenspan was grilled for four hours? Cox was there; he just received scant attention. His testimony consisted of a) giving a history of how regulators, himself included, missed the scope of the crisis; and b) calling for a merger of the SEC and the Commodities Futures Trading Commission. That’s pretty much it.

For financial reporting executives, however, the Cox Irrelevance Factor is surfacing in more subtle ways that also make your job more frustrating. Those plans to unveil a final mandate for XBRL technology in financial reports? Nowhere to be seen. That roadmap to adopt International Financial Reporting Standards for U.S. companies? Lost in the great glove compartment of bureaucracy. Even the SEC’s annual ritual of delaying Sarbanes-Oxley compliance for non-accelerated filers isn’t happening. When a Republican-tilted SEC can’t muster the willpower to give into the U.S. Chamber of Commerce, you know things are bad.

At this point, one has to wonder whether any of the promised major SEC initiatives will happen at all. Cox’s term ends on Jan. 20, 2009. Three of his four fellow commissioners have less than a year’s experience on the job. All evidence indicates a Democratic president is going to name a Democratic chairman to replace him, and that person is likely to have very different ideas about what the SEC’s priorities should be.

So why fight for roadmaps and blueprints now? After all, those decisions are only going to be revisited in three months, and the critics will only give you grief for spending time on them rather than the crisis at hand. It’s wiser simply to stick with the corporate accounting basics. At the New York Society of Securities Analysts meeting this week, an SEC accounting fellow talked of materiality thresholds and judgment frameworks as the order of business at the SEC these days. That’s not huge, but every little bit helps, right?

The Big Picture has gone on the road to Washington, D.C., to attend the XBRL International annual conference. SEC Chairman Christopher Cox is scheduled to speak this morning, and rumor is he might unveil the SEC’s final rule for mandating XBRL use in financial reporting. I suspect that’s not true, since the credit crisis has left the Commission scrambling to tend to other matters. But we’ll be blogging later today or tomorrow to give you all the latest.

Incidentally, if any Compliance Week readers are attending the conference and want to meet, please shoot me an e-mail at mkelly@complianceweek.com.

UPDATE: The SEC has not proposed a final rule to mandate XBRL in financial reports. Those of you holding your breath until XBRL technology arrives, please resume respiration.

A clue emerged this morning, when conference organizers announced that Cox had been scratched from the schedule. To be fair, the chairman does have more pressing items on his schedule these days—but the practical upshot for us is that no final rule is here, and we have no idea when one will arrive.

David Blaszkowsky, Cox’s chief henchman on all matters XBRL, did address the audience today. He gave the usual boilerplate we’ve heard at XBRL conferences for several years about the wonders of the technology … and then dodged the question of exactly when the Commission will unveil a final rule. His only hint: “very soon.”

That sort of statement requires an <obscure> tag, if I understand my XBRL taxonomy correctly. I’m off to bug the vendors for some free pens.