Title: Curbing the AI-Fueled Board-CFO Revolving Door
The late filing of SEC documents has become a pressing concern, surpassing simple regulatory issues. In 2024, the number of missed quarterly and annual earnings deadlines shot up by 40%. Consequently, regulatory bodies are now scrutinizing more than just financial reporting, leading to hefty fines for companies like Goldman Sachs and Alphabet.
The SEC even penalized these companies and their executives to the tune of $4 billion due to tardy insider transaction disclosures. The fines, while substantial, are merely the tip of the iceberg. Companies like Tupperware, that failed to adhere to filing deadlines, ended up filing for bankruptcy. Archer Daniels Midland also faced severe consequences, with their delays leading to a transfer-pricing criminal probe.
CFOs across the board are at risk of losing their jobs due to late filings. A study by Columbia University revealed that filing delays often result in poor stock price performance and extended job jeopardy for CFOs. Moreover, Hudson Labs found that nearly a third of U.S.-listed companies, which blamed delays on operational issues, soon replaced their finance chiefs.
The main reason behind missed filing deadlines lies in outdated management practices. There's an entrenched need for change, yet there's a lack of motivation and capability to adapt to the AI-era demands.
The finance sector struggles with AI adoption, with only 28% of CFOs using artificial intelligence in financial and external reporting. A survey by PwC revealed that many executives are hesitant due to data integrity risks, cost concerns, and project management capabilities.
EY reported that 96% of finance leaders face issues related to non-financial data integrity. Nearly 40% of them find project management challenging when it comes to developing AI-enabled solutions for analytics and reporting. The traditional workplace culture and mindsets are often the primary culprits, slowing the modernization of the finance function.
Winston & Strawn warns that "late SEC filing situations often indicate other underlying issues for the company," which means that fixing the root cause becomes a top priority. Boards cannot afford to focus on timeliness alone; instead, they must determine if the finance team can articulate their AI needs and implement a credible plan.
Premier CFOs will embrace and leverage AI technologies, recognizing the significant potential they offer. AI can streamline SEC reporting, reducing the risk of late filings and ensuring compliance. A straightforward approach can help tackle this issue:
- Start with shared visibility of filing due dates: Utilize free online tools such as Toppan-Merrill’s interactive reporting calendar for easy scheduling.
- Divide the assessment into four categories: data accessibility, report agility, compliance needs, and workflow optimization.
By answering these eight questions, CFOs will demonstrate whether they are seriously considering AI, merely curious, or simply procrastinating. Addressing these challenges can help financial institutions avoid late SEC filings, ensuring compliance and financial stability.
In a digitally-driven era, financial institutions cannot afford to overlook AI's potential. Board members must align incentives, combat indifference, and eradicate incompetence to successfully integrate AI into their operations. Failure to do so could lead to missed opportunities, increased risks, and damaged reputations.
- The late filing of SEC documents has led to increased scrutiny by regulatory bodies, including fines worth billions for companies like Goldman Sachs and Alphabet due to issues with accounting governance and compliance.
- In a study by Columbia University, filing delays were found to often result in poor stock price performance and extended job jeopardy for chief financial officers (CFOs).
- Boards of companies cannot just focus on timeliness in SEC filings; they must also determine if the finance team can articulate their needs for AI technology and implement a credible plan.
- The finance sector is struggling with AI adoption, with only 28% of CFOs using artificial intelligence in financial and external reporting due to concerns about data integrity, cost, and project management capabilities.
- Premier CFOs will leverage AI technologies to streamline SEC reporting and ensure compliance, reducing the risk of late filings and mitigating the consequences of missed filing deadlines.
