BDO United States

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, one of the nation’s leading 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?