Given economists forecasts of a slow recovery from the “great recession,”
investors are keenly interested in how management is planning to navigate the
remaining economic turbulence. This uncertain climate should make for an
especially challenging annual meeting season this Spring. BDO, an accounting and
consulting firms, has compiled the following list of topics that corporate
management and boards of directors should be prepared to address in connection
with 2010 annual meetings:
- Planning for a Recovery. Given many forecasts for a slow,
uneven economic recovery, shareholders will want to know if the company has
adopted a comprehensive plan based on real-time reporting that will provide
management with the ability to react quickly to opportunities or further
downturns in the market.
- Funding a Recovery. Despite positive economic signs in some
business sectors and geographic areas, credit remains tight. Shareholders will
want to know how management plans to access capital to fund current
operations, buildup inventories and fuel expansion should opportunities arise.
- Accessing Public Equity Markets. Despite the poor
performance of initial offerings thus far in 2010, U.S. IPO activity is well
ahead of last year’s pace and there is optimism among the capital markets
community that IPO activity in 2010 will build on the momentum established
last fall. Shareholders may want to know if the favorable IPO forecast will
translate to offerings from existing public companies and if management is
considering a securities offering.
- Quality Controls. Most businesses have undertaken
significant streamlining programs to deal with the recession. Shareholders may
ask how these programs have affected quality control from both an operational
and financial standpoint.
- SEC Compensation Risk Assessments. Reports of excessive
compensation during times of poor economic performance have riled shareholders
in recent years. The SEC has introduced new requirements in 2010 for corporate
compensation risk assessments at all levels. Shareholders will want to know
what the company has done to identify and address compensation risk in order
to fulfill the new SEC requirements and avoid penalties.
- Financial Risk Management. Given the losses numerous
companies sustained from investments in subprime mortgages, collateralized
debt obligations, asset-backed securities, auction rate securities, etc,
shareholders will want to know what risk management changes have been made to
avoid similar losses in the future.
- Changing Accounting Practices:
- On-The-Balance Sheet. A number of financial institutions
incurred losses rescuing off-balance-sheet entities. New accounting rules
will require most of these entities to be consolidated. How will these
“on-the-balance-sheet” entities impact financial statements moving forward?
- Are Companies Prepared for IFRS? The SEC recently
reiterated its support for a single set of high quality global accounting
standards. While a decision as to a definite conversion date is still a year
off, shareholders will want to know if management is prepared to meet the
potential timeline of 2015, what the conversion may cost and how it might
affect earnings per share.
- Fair Value Accounting. Does the company expect to
experience wide fluctuations in the value of assets and liabilities due to
fair value accounting?
- Public Interest Issues. Will businesses be increasing
their political contributions in light of the recent Supreme Court decision
removing caps on corporate contributions? Shareholders may also ask for
reports that describe the company’s environmental and sustainability policies.
- Impact of Tax Increases. Will new federal and state
government tax initiatives – such as the Obama administration’s proposal that
would significantly change current tax provisions affecting foreign operations
-impact the company’s ability to grow and invest in the business?
Source: www.riskcenter.com
