Corporate tax cuts likely to be on the agenda at shareholder meetings
Tax reform, cybersecurity, global trade and tariffs, and executive misconduct in the midst of the #MeToo movement are just some of the topics likely to come up at this year’s annual general meetings of shareholders, according to BDO USA.
The firm is advising corporate management and boards of directors to be prepared to answer questions about such subjects from shareholders. The Tax Cuts and Jobs Act, for example, is having a wide-reaching impact on tax reporting and tax planning for companies and their financial statements. Corporate cash flow is expected to increase, affecting decisions about capital investment and employee wages. Shareholders will want to know how the new tax law will impact company strategy.
The reduced corporate tax rate and lowered tax on repatriation of foreign profits will provide many businesses with additional funds to do M&A deals this year. Stockholders will want to know if management is looking for sell-side opportunities to get rid of assets that don’t fit with corporate goals anymore but can yield favorable returns, along with buy-side opportunities to improve strategic growth.
In terms of global trade, President Trump’s announcement last week that he plans to impose high tariffs on imported steel and aluminum led to outraged responses from allies around the world and prompted warnings of an international trade war that could hurt U.S. exports. The stock market initially dropped sharply in the wake of the announcement. Investors are concerned about how protectionism could affect U.S. companies in foreign markets and how company are proactively addressing this area.
Cybersecurity remains a hot topic after high-profile data breaches revealed this past year at Equifax, Uber and the Securities and Exchange Commission. Such occurrences damage corporate reputations and lead to tens of millions of dollars in remediation expenses and legal costs. Many shareholders will probably want to know how well the company is protecting its security and assessing its response plans to mitigate the possible damage from such attacks.
In the area of executive misconduct, several high-profile corporate leaders have needed to step down in recent months in the aftermath of sexual harassment accusations, including Steve Wynn and Harvey Weinstein. With the prominence of the #MeToo movement in the media, shareholders will want to know if the board and management are setting the right tone at the top and creating a culture where all reports of harassment are taken seriously. A slow response to allegations could point to the need for companies to document how they have reacted to charges of misconduct in a timely way.
Another topic that could come up is board refreshment and diversity. Last year, the SEC began to look into disclosures of the ethnic, racial and gender composition of public company boards and whether it should make such disclosures a mandatory requirement in the future. Under the SEC’s new chairman, Jay Clayton, the commission is continuing to monitor the issue. BlackRock, the world’s largest money manager, has said the companies in which it invests should have at least two women on their boards.