As the annual shareholder meeting season gears up, corporate executives and board members will be looking for even more guidance than usual from tax leaders. Topics directly and indirectly related to tax occupy the top three slots in a recent Shareholder Meeting Alert from BDO USA. Here are three key points I took away from BDO’s analysis:
Tax reform gets first billing. The U.S. Tax Cuts and Jobs Act is already having far-reaching effects on tax reporting and financial statements, the report notes. Shareholders will be eager to learn how the new law will impact corporate strategy, including capital investment and employee compensation. The new 21 percent corporate tax rate may also lead companies to reconsider the U.S. as a focal point for business activities.
M&A opportunities will be in the spotlight. One of the primary reasons for this relates to the reduction in the corporate tax rate and tax on repatriation of foreign earnings. On the sell side, the new tax rate “not only has enhanced after-tax earnings and cash flow, but creates a more competitive global rate, enhancing the attractiveness of U.S. targets for cross-border transactions,” according to the report. On the buy side, repatriation of funds may boost acquisitions, though possibly less than expected given that conditions are already favorable to buyers, with low interest rates and corporate cash reserves currently at high levels.
Global economic concerns linger and could intensify. We’ve seen this occur with the uncertainty sparked by President Trump’s plan to impose new tariffs on steel and aluminum and China’s response. These types of trade and economic issues will likely be top-of-mind for investors. Boards should be prepared to discuss the risks around protectionism and its potential effects on U.S. companies doing business abroad.
Other agenda toppers include some familiar items – including cybersecurity, sustainability, and CEO compensation – as well as a heads-up on the hot-button topic of executive misconduct. “Given the prominence of the #MeToo activism movement in the media, shareholders may want to know that the board and management are setting the correct tone at the top and creating a culture where all reports of harassment are taken seriously,” according to BDO.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.
Bernadette Pinamont is Vice President of Tax Research responsible for leading a global team of 85 tax professionals who contribute subject matter and technical expertise to build and maintain content for all products, powering millions of effective tax rate determinations for customers in over 19,000 global jurisdictions.
Prior to joining Vertex, Bernadette was Vice President of Tax for Endo Pharmaceuticals. Bernadette's 30 plus year tax career also includes the corporate tax departments of AstraZeneca, DuPont, Syngenta, Tyco Toys, and, initially, EY. When Bernadette joined Vertex in 2013, she was a thought leader in the Chief Tax Office and engaged both industry and clients on the trends, patterns, and emerging solutions to address the global challenges associated with regulatory compliance and tax technology.
Bernadette regularly speaks at local and industry events about tax and the importance of technology, including the annual International Tax Review’s (ITR) Women in Tax Forum. She leads the Philadelphia Women’s Tax Network and is a graduate of Seton Hall University, from which she earned both a B.S. in Accounting, Summa Cum Laude, and her Juris Doctor. Bernadette is also a licensed attorney and a CPA.