Tax reform, non-GAAP metrics and sustainability reporting are expected to be among the top shareholder concerns this spring at corporations’ annual general meetings, according to BDO USA.
Despite concerns about an eventual dip in the economy, reductions to the corporate tax rate and tax on repatriation of foreign earnings are giving businesses extra motivation to pursue mergers and acquisitions this year, BDO noted. Last year, M&A deal volume dipped slightly, but M&A deal value grew thanks to mega-deals across a number of industries. “Shareholders will want to know if M&A is a potential avenue for growth and how market volatility and a company’s ability to perform adequate due diligence and integration may impact plans,” said BDO.
The corporate tax cuts in the 2017 tax overhaul are giving organizations more of a reason to take a hard look at their tax exposures and opportunities. “For board members, understanding a company’s total tax liability — the sum amount of all taxes owed at the international, federal, state and local levels — is critical to effective financial oversight and strategic decision-making,” said BDO. “Given the significant U.S. tax law changes and the growing complexity of global tax regimes, seemingly small changes in corporate strategy can have meaningful consequences on a company’s total tax liabilities across jurisdictions.”
BDO also expects to see more emphasis by shareholders on new accounting standards, including revenue recognition, lease accounting, Current Expected Credit Losses (CECL) and their impact on corporate policies, reporting requirements, and organizational systems and controls. “Shareholders may be looking to understand the changes in reporting that new standards require and how this is reflected within the overall financial picture that companies are sharing publicly,” said BDO.
Sustainability reporting is also making inroads among investor demands. “In addition to traditional financial reporting and disclosures, more companies are turning to non-financial 'sustainability' reporting out of the perceived need to provide additional information about how companies are managing environmental, social, and human capitals, as well as corporate governance, to enhance a decision maker’s understanding of the company’s material risks and long-term value proposition,” said BDO.
