Press Releases
John Pappas |
Tuesday, February 17, 2009
“SAY ON PAY” A LOSING BATTLE WITH TECHNOLOGY COMPANIES ACCORDING TO BDO SEIDMAN, LLP SURVEY
CFOS WEIGH IN ON INTERNATIONAL ACCOUNTING STANDARDS AND SECURITY ISSUES
San Francisco, CA – February 17, 2009 - This year, according to the annual survey by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, the vast majority (89%, up from 69% in 2008) of chief financial officers (CFOs) at leading U.S. technology businesses indicate that their company does not allow shareholders to vote on their executive compensation plans, compared to only eleven percent (down from 31% in last year’s survey) that do. Moreover,only one-third (34%, down from 61% in 2008) of the CFOs personally feel shareholders should have a say on executive compensation plans in 2009.
The survey also asked the CFOs about the adjustments their companies are likely to make to equity compensation in the coming year, and found that less than a quarter (24%) of technology businesses will offer replacement grants, fourteen percent will re-price options and six percent are planning to eliminate options for employees.
“While President Obama, regulatory organizations and shareholder advocacy groups continue to push for more executive compensation disclosure and oversight in 2009, few companies in the technology sector seem to be prioritizing corresponding measures in their compensation plans,” said Andy Gibson, a Partner in BDO Seidman’s Technology Practice and Co-Leader of the firm’s National Executive Compensation Practice. “As companies look to re-evaluate their 2009 budgets and maintain shareholder support, they will feel increased pressure to allow more shareholder control over executive compensation. We believe the significant decline in CFOs’ willingness to embrace such a change is partly attributable to the current need to make swift changes to existing awards such as underwater stock options where waiting for a shareholder vote may cause retention issues.”
These findings are from the BDO Seidman 2009 Technology Outlook Survey, which annually examines the opinions of 100 CFOs at leading technology companies located throughout the U.S. The survey was conducted in January of 2009.
Other major findings of the 2009 Technology Outlook Survey:
- Adopting International Financial Reporting Standards (IFRS)
- Adopting Early Not In the Plans. As the Securities and Exchange Commission (SEC) adjusts the timeline for moving all U.S. public companies to International Financial Reporting Standards (IFRS) from the U.S. Generally Accepted Accounting Principles (GAAP), only one-fifth (21%) of CFOs at leading technology businesses indicate that their company would adopt the standards early, if given the opportunity.
- Opinions on Revenue Recognition Evolving. Businesses are becoming more receptive to IFRS, but nearly a two to one ratio (57%) still feel GAAP provides better revenue recognition rules for technology companies over IFRS. This is down from sixty-nine percent of companies who felt GAAP provided better quality revenue recognition rules when queried last year.
- Competitiveness Not as Much of a Concern. When asked if the switch from GAAP to IFRS will make U.S. companies more competitive with international firms, the majority (71%) indicate that there will be no impact on competitiveness. Less than a quarter (24%) say that the switch will make U.S. companies more competitive with international firms and only five percent say that the switch will make them less competitive. This compares to early 2008 when less than half (49%) of the CFOs thought that international companies reporting financial results using IFRS have a competitive advantage over U.S. companies filing under GAAP.
“From a company’s perspective, early adoption of IFRS, if allowed, is primarily a cost-benefit decision and many companies are understandably cautious about the needed investment given the difficult economic climate,” said Jay Howell, Partner in BDO Seidman’s Technology Practice. “However, the survey also indicates that a notable number of technology companies believe the benefits and competitive advantages outweigh the costs of early adoption. For some technology companies, these competitive factors could be much more significant than commonly realized.”
- Technology Companies Remain Secure. Despite the influx of identity theft cases with retailers and creditors in the past year, only ten percent of CFOs at technology companies indicate that their company had an external hacking or breach during the past year. This was followed by intellectual property infringement (7%), identity theft (5%) and misappropriation of assets (3%) as the most common security incidents.
- Top Security Concerns. External hacking or breaches (38%) is seen as the most potentially harmful security-related issue, followed by intellectual property infringement (32%), misappropriation of assets (18%) and identity theft (12%).
The BDO Seidman 2009 Technology Outlook Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers. Market Measurement used a telephone survey performed within a scientifically developed pure random sample of U.S. technology companies in the software, hardware, telecommunications, Internet and information technology services sub-sectors. The companies in the random sample had revenues up to $30 billion.
BDO Seidman, LLP is a national professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. Guided by core values including competence, honesty and integrity, professionalism, dedication, responsibility and accountability for almost 100 years, we have provided quality service and leadership through the active involvement of our most experienced and committed professionals.
BDO Seidman serves clients through 37 offices and more than 400 independent alliance firm locations nationwide. As a Member Firm of BDO International, BDO Seidman, LLP serves multi-national clients by leveraging a global network of 1,095 offices in 110 countries. BDO International is a worldwide network of public accounting firms, called BDO Member Firms. Each BDO Member Firm is an independent legal entity in its own country. The network is coordinated by BDO Global Coordination B.V., incorporated in The Netherlands, with its statutory seat in Eindhoven (trade register registration number 33205251) and with an office at Boulevard de la Woluwe 60, 1200 Brussels, Belgium, where the International Executive Office is located
