Shareholder Questions - 2005

BDO USA, LLP prepared this Financial Reporting letter to help our clients anticipate and respond to questions that may be asked in 2005.

The 2005 proxy season follows a three-year blizzard of regulatory reforms, and it arrives in a new era of corporate governance. Professional proxy advisors are using the power of the Internet to rally support for withholding votes. Through just-vote-no campaigns and related shareholder resolutions, investors are joining together to gain a greater say in such critical matters as how directors are elected and how senior executives are compensated. These big-company tactics help shape the issues for smaller companies.

In addition to executive pay and director elections, this year's key areas of concern reflect the headlines of the past year. Well-publicized SEC enforcement actions and trials of former corporate executives serve as vivid reminders of past business and reporting failures. Because these events shine a spotlight on overall business ethics, companies can expect questions about fraud prevention and codes of conduct.

Companies can also expect questions about the effects on their earnings and financial condition of legislative, regulatory and standard-setting changes. Internal control reporting, new tax laws, and changes in accounting rules are all likely to trigger questions. Companies should be prepared to address complex topics ranging from stock-based compensation plans, aggressive tax strategies and uncertain tax positions to how their shareholder communications practices stack up against emerging best practices.

Continue Reading - The Legislative and Regulatory Environment

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