Online disclosure on audit committees: Comparison between New York Stock Exchange foreign issuers

Internet financial reporting (IFR) has gained tremendous momentum in recent years. It has been described as a medium that offers additional net benefits of providing financial reports. Yet, at the same time the level of reporting has been varied and non uniform. NYSE has mandated the disclosure on audit committees and audit committee charters for foreign issuers in its listing rules via the annual report, the company`s website or the company`s proxy statements. The focus in this paper is corporate governance disclosure and more specifically online disclosure on audit committees and charters by foreign companies listed on the New York Stock Exchange (NYSE). The study looked at two hundred companies` websites (from a population of four hundred and sixty) from forty one countries selected at random from the 2008 list of non U.S. companies listed on the NYSE. The two variables studied for disclosure on the companies` websites are existence of audit committee (mandatory for foreign companies listed on the NYSE) and existence of the audit committee charter (mandatory for companies listed on the NYSE). The companies were also analysed based on sub classifications of regions, industries and economic development groups. It was found that out of the total sample analysed only 58 percent of the companies had information on audit committees and 56 percent disclosed the audit committee charters on their websites either in the annual reports or in a separate section on the website. This is a low percentage considering that the two elements investigated are mandatory for foreign companies listed on the New York stock exchange and that two of the three disclosure mediums were analysed that is the annual reports and the other sections of the websites. This finding also implies a broad gap between the financial reporting requirements and actual disclosure on companies` websites. This would have a negative impact on informed decision making of users who rely on corporate governance information presented on companies` websites.