Just in time to get ready for those annual meetings of shareholders, accounting firm BDO’s Center for Corporate Governance and Financial Reporting has developed a list of topics that companies should be prepared to address at their annual meetings of shareholders this season. The broad themes include the impact of efforts by the current administration regarding protectionism, taxes and deregulation, as well as corporate accountability and compliance.

Tax reform. BDO expects shareholders to inquire about the impact of the new tax law, particularly the potential for increased business activities in the U.S., as well as the impact of the new law on corporate strategy, capital investment and employee wages.

M&A opportunities. BDO expects the reductions in the corporate tax rate and tax on repatriation of foreign earnings to spur M&A activity, both sell-side opportunities (e.g., dispositions of assets that no longer align with corporate goals) and buy-side opportunities (e.g., acquisitions that could enhance strategic growth, funded perhaps by multinational repatriation). BDO suggests that shareholders may want to know how these investment decisions translate to shareholder value.

Global economic concerns. Protectionism, such as the imposition of tariffs, and warnings regarding the possibility of an international trade war that would impact U.S. exports are likely of concern to shareholders. BDO suggests that shareholders will want to know how the board is “proactively addressing management’s operational decisions in this area.” Other issues related to global trends—and how companies are addressing them—that may be of concern to shareholders include the effect of technology on changing labor markets, the impact of social media on corporate interactions and corporate reputations, exposure to geo-political risk and terrorism, challenges related to environmental risks (e.g., extreme weather events) and operations that could lead to environmental damage, and vulnerability of the company to risks related to interconnectivity and cybersecurity.

Cybersecurity. The damage wrought by recent high-profile cybersecurity attacks, including injury to corporate reputations and substantial remediation and legal costs, may spur shareholders to inquire about the company’s efforts to implement and assess cyberattack response and mitigation plans, procedures to ensure timely reporting of cyber incidents, plans to involve external experts in analyzing and reporting on any cyber incidents, establishing cyberrisk management requirements for third-party vendors (which BDO identifies as a major source of cyberattacks) and procedures for sharing information from cyberattacks with external entities to protect national security. Board oversight can be an important factor: BDO observes that one major breach has “led to lawsuits in more than 100 courts across the country, many citing the company’s slow response in reporting the breach.”


In February, the SEC issued new guidance on cybersecurity disclosure that addresses disclosure obligations under existing laws and regulations, cybersecurity policies and procedures, disclosure controls and procedures, insider trading prohibitions and Reg FD and selective disclosure prohibitions in the context of cybersecurity. In terms of timely reporting, the guidance emphasizes the need to adopt comprehensive policies and procedures related to cybersecurity and to assess regularly whether the company’s disclosure controls and procedures are adequate to reasonably ensure that information about cybersecurity risks and incidents is reported to “appropriate personnel, including up the corporate ladder, to enable senior management to make disclosure decisions and certifications.” The controls should also suffice to ensure that information is communicated to appropriate personnel to facilitate compliance with insider trading policies. In addition, in the guidance, the SEC recognizes that it may take time to investigate and understand the implications of an incident; however, “an ongoing internal or external investigation—which often can be lengthy—would not on its own provide a basis for avoiding disclosures of a material cybersecurity incident.” (See this PubCo post.)

Executive misconduct. Allegations of sexual harassment and other misconduct in the workplace can, in addition to harming the victims, cost businesses their reputations and millions in legal costs and settlements, and—as demonstrated by recent events—destroy shareholder value. BDO suggests that shareholders may well inquire about management’s efforts to set the correct “tone at the top,” create a robust no-tolerance culture and establish policies that take seriously all reports of harassment.


An article cited in thecorporatecounsel.net blog reports that, when companies experience high-profile harassment and discrimination scandals, shareholders are doing more than asking questions at shareholders meetings; they are also filing suits against boards and management alleging failures of oversight. The blog also highlights a recent report from the Council of Institutional Investors providing advice to boards on oversight of sexual harassment risk.

Board refreshment/diversity. With the increasing prominence of the issue of board diversity, shareholders may inquire about board diversity and refreshment. BDO suggests the following as tools to encourage board refreshment: tenure limits and mandatory retirement ages; reviews of director skill sets, highlighting notable gaps in skills and emerging operational risk areas; limits to prevent overboarding; and reviews of the “adequacy of board composition through the lens of diversification and independence.” BDO encourages directors to review the report of the NACD Blue Ribbon Commission, “Building the Strategic Asset Board.”


According to the WSJ, BlackRock’s global head of investment stewardship recently sent letters to about 300 companies in the Russell 1000 with fewer than two women directors, asking them to disclose their approaches to diversity and to establish a timeframe for improvement. The letter also cautioned that BlackRock believes that “a lack of diversity on the board undermines its ability to make effective strategic decisions. That, in turn, inhibits the company’s capacity for long-term growth.” The BlackRock voting guidelines regarding board composition make clear that BlackRock expects “boards to be comprised of a diverse selection of individuals who bring their personal and professional experiences to bear in order to create a constructive debate of competing views and opinions in the boardroom. In addition to other elements of diversity, we would normally expect to see at least two women directors on every board.”

New GAAP. Characterizing recent changes to GAAP, such as revenue recognition and lease accounting, as “the most historic accounting changes in decades,” BDO emphasizes that “[m]anagement, with board oversight, needs to communicate transparently with shareholders and other stakeholders as to how these changes will impact financial statements.” And the SEC staff has made clear its expectation that companies will need to describe the estimated impact of the new standards in their disclosures. BDO suggests that directors will need to be prepared to respond to “questions about the company’s state of readiness for adoption.”

Sustainability. BDO observes that there has been a substantial increase in the proportion of shareholder proposals on environmental, social and governance (“ESG”) issues and institutional investors have more frequently voiced their support of these proposals, as well as their interest in increased disclosure. BDO advises that “boards should be prepared to listen.” In the 2017 BDO Board Survey, 54% of directors indicated that they “believed that disclosures regarding sustainability matters are important to understanding a company’s business and helping investors make informed investment and voting decisions.” BDO indicates that demands for sustainability reporting have begun to be directed beyond large companies to mid-cap and smaller companies as well.

ISS reports that, this season, over two-thirds of the shareholder proposals in the ISS database related to social or environmental issues, far outpacing the governance- and compensation-related proposals that historically have dominated the agenda. The EY Center for Board Matters, which surveyed investors’ top priorities for companies in 2018, found that addressing climate risk and environmental sustainability, including topics such as resource use, greenhouse gas emissions reduction, carbon footprint or preparation for a low-carbon economy, was a priority for 64% of respondents. The success of three proposals last year for enhanced disclosure regarding climate change may have created an inflection point on climate-change related proposals, and the reason for success was reportedly that some of the largest institutional holders— including mammoth institutional holders BlackRock and Vanguard—switched sides on some of these votes, after years of limiting their actions to just cajoling. (See this PubCo post and this PubCo post.)

Deregulation. BDO reports that, according to the Unified Regulatory and Deregulatory Agenda published by the OMB, the current administration “withdrew or delayed 1,579 planned regulatory actions in 2017.” BDO predicts that shareholders will want confirmation that “management is closely monitoring this changing regulatory landscape in order to plan effectively.”

CEO/median employee pay ratio. Finally, BDO suggests that companies should be prepared to respond to questions about their pay-ratio disclosures, which are appearing in proxies for the first time this year. In particular, BDO advises that, given the potential for media reports of high ratios, “companies would be wise to mitigate any negative press by proactively communicating the benefits of their performance focused executive compensation models to shareholders ahead of time.