The surge in late SEC filings screams for a spot on every board’s agenda, as compliance tardiness is worse than “just a regulatory concern.” It’s a sign that senior leadership is likely not prepared, motivated and/or equipped for AI-era demands.
In 2024, missed quarterly and annual earnings deadlines spiked 40%. Now watchdogs are eyeing more than just profit reporting. In Q3, the SEC fined 23 companies, including Goldman Sachs and Alphabet, as well as their executives nearly $4 billion for tardy insider transaction disclosures. Those are “modest” consequences.
Tupperware filed for bankruptcy after its late filings and subsequent auditor change. Agriculture titan Archer Daniels Midland delays have mushroomed into a transfer-pricing criminal probe. Others, notably tech firm SMCI, faced real delisting risks.
More broadly, a Columbia University study showed filing delays “tend to be followed by continued poor operating and stock price performance.” CFOs face greater job jeopardy too. Hudson Labs found that nearly one-third of the 640 U.S.-listed companies that blamed delays on beancounter openings soon changed finance chiefs.
AI can help, but only if boards address three real underlying management merry-go-round challenges: entrenched incentives, indifference and incompetence.
AI merry-go-wrong
Many finance functions are already behind on AI and executives sense it.
Only 28% of CFOs use artificial intelligence in financial and external reporting, according to PwC’s October 2024 Pulse survey. Much of that adoption hesitance is rooted in data integrity risks, cost concerns and project management capabilities.
EY reported that 96% of finance leaders cite “some kind of problem” with nonfinancial data integrity and nearly 40% characterize budget limits as “very challenging” when “developing AI-enabled solutions for analytics and reporting.”
As discussed on Forbes, stubborn workplace culture is often the real culprit. Nearly 72% of the EY respondents in another study blamed “traditional back-office behaviors and mindsets” for “slowing the modernization of the function.” That’s problematic for the lasting change AI brings.
Not surprisingly, reporting struggles abound and are only exacerbated by boards which tolerate excuse-making and blame-shifting rationalizations. Law firm Winston & Strawn warns, “If a company is facing a late SEC filing situation, there are most likely other issues for the company underlying the late filing and the company and its legal and finance teams will be under pressure to address those issues as a priority.”
Rather than focusing on timeliness chances, boards must determine if the finance team can articulate its AI needs and implement a credible plan. Unlike AI downside handwringers, premier CFOs will see, crave and leverage the tech frontier’s upside.
AI (non)answers
AI can significantly streamline the SEC reporting, reducing the risk of late filings and ensuring compliance. A cost-free, three step process, rooted in candor, can help.
The first is easy. The board-CFO conversation should start with shared visibility of filing due dates. Free online tools, such as Toppan-Merrill’s interactive reporting calendar, allow for easy scheduling. With due dates clear, the hard work begins.
Next, boards should divide their assessment into four categories: (1) data accessibility; (2) report agility; (3) compliance needs and (4) workflow optimization. These categories, if well managed, highlight how AI tools can extract data, identify contingencies, spotlight audit risks, complete preliminary compliance checklists, automate compilation and identify addressable gaps. That’s a great head start in freeing senior leaders to hone strategy, drive growth and deliver results.
Third, CFOs’ (non) responses to these eight questions will swiftly inform boards if AI readiness is serious, a passing curiosity or simply procrastinating lip service.
- Which specific AI-powered tools does the finance function deploy to streamline and improve data entry, accuracy and integrity?
- Does AI help automate routine transaction processing, citing quantifiable evidence of time saving and error reduction?
- What AI-driven systems are in place to monitor financial data in real-time and help proactively identify, address and correct potential issues?
- How does AI improve the accuracy, speed and reliability of financial forecasts, budgetary reviews, variance analysis and period closes?
- Does AI automate internal and external financial report generation and measurably improve timeliness, completeness and consistency?
- Does AI ensure the quality and integrity of financial data, bolster controls and reduce audit exceptions?
- How does AI match regulatory readiness to emerging compliance standards, such as top risk, cyber and audit concerns?
- Specifically, how do (or will) AI technologies better the finance organization’s overall efficiency, productivity and performance?
These questions challenge CFOs to detail the specific ways AI betters the finance function, key performance indicators results and future growth expectations — while also clearly expressing (un)willingness to partner with company tech leaders.
Non-timely filings are inexcusable and (forced) resignations often follow. They signal management disarray, risk capital access, devour c-suite time and tarnish reputation by exception. Boards mustn’t settle for nor enable lock-jawed CFOs who view AI merely as text generation timesaver, overwhelming project or IT’s domain. In turn, the best CFOs won’t stay long with adrift boards and inadequate tech leadership.
Free will
AI finance investments mirror a board’s digital era seriousness. Directors cannot allow compliance misses and control deficiencies to derail strategic attention. After all, filing delays reflect governance frailty that can be overcome by aligning incentives, ending indifference and defanging incompetence. That’s the pinnacle stewardship stern directors, CFOs and CTOs embrace. Who’s AI excuse-taking?