“Et tu, Bruté?”: Do audit committees besmirch investors’ desire for increased disclosures?

This paper presents the results of a content analysis of the comment letters submitted in response to the SEC concept release on the enhancements of audit committee disclosures. The comment letters were drafted by investors and a cross-section of various governance actors or practitioners, such as audit committees, management, legal advisers, and auditors. Hence, the letters provide insights as to how these different groups interpret the proposed revisions and try to adapt them according to their needs and context. The comment letters are analyzed through the framework of the behavioral theory of boards and corporate governance, which arguably better explains the analysis results over the traditional agency theory framework. The theory examines governance actors’ interactions and behavioral processes and asserts that the corporation is a nexus of stakeholders’ coalitions, who render decisions primarily through engaging in political bargaining rather than through evaluating investor needs. Results show that, while investors are urging enhanced disclosures, audit committee respondents are against the suggested improvements. These results are consistent with the behavioral theory of boards and corporate governance but inconsistent with an agency theory perspective.