CCBJ takes a look at Akin Gump’s annual list of issues and topics that will get significant attention in corporate boardrooms this year, drawn from the full report and edited for length and style. For more details, visit bit.ly/AkinTop10.
1. Corporate Culture
A company’s corporate culture starts at the top. The board of directors should be attuned to the company’s business, of course, but beyond that, they should also pay attention the organization’s people and values across the company. Ongoing and thoughtful efforts to understand the company’s culture and to address any issues will help the board prepare for possible crises, reduce potential liability, and facilitate appropriate responses both internally and externally.
2. Board Diversity
As studies continue to highlight the business case for diversity, public companies are facing increasing pressure from corporate governance groups, investors, regulators, and other stakeholders to improve the diversity of their boards of directors. And a recent McKinsey report indicated that many successful companies now regard inclusion and diversity as a competitive advantage and a key enabler of growth.
3. #MeToo Movement
A responsible board should anticipate the possibility that allegations of sexual harassment may arise against C-suite or other senior executives. The board should set the right tone from the top, creating a respectful culture within the company, while also having a plan in place before any incidents occur. Any such response plan should include conducting an investigation, proper communication with the affected parties, and the implementation of any necessary remedial steps.
4. Corporate Social Responsibility
Corporate social responsibility was a hot-button issue in 2018, as companies have become increasingly willing to confront social issues ranging from gun violence to climate change. This trend is likely to continue in 2019, with increased focus on environmental, social and governance issues, including attention from regulatory authorities.
5. Corporate Strategy
Strategic planning will continue to be a high priority for boards in 2019, as companies continue to assess changes to the U.S. and global economies, geopolitical and regulatory uncertainties, and the impact of mergers-and-acquisitions activity.
During the second year of the Trump administration, U.S. sanctions expanded significantly to include new restrictions that target transactions with Iran, Russia and Venezuela. Additionally, the U.S. government has expanded its use of secondary sanctions to penalize non-U.S. companies that engage in prohibited activities with sanctioned persons and countries. To avoid sanctions-related risks, boards should understand how these evolving rules apply to the business activities of their companies and management teams.
7. Shareholder Activism
There has been an overall increase in activism campaigns in 2018, with regards to both the number of companies targeted and the number of board seats won by these campaigns. There was also an uptick in traditionally passive and institutional investors playing an active role in encouraging company engagement with activists, advocating for change themselves and formulating policies for handling activist campaigns.
Cybersecurity and privacy have become critical areas for board oversight. Directors must focus on internal controls to guard against cyber threats (including accounting, cybersecurity and insider trading) and expand diligence of third-party suppliers. Integrating privacy and security will be critical to minimizing the ongoing risk of cybersecurity breaches and adhering to state and federal laws.
9. Tax Cuts and Jobs Act
A year has passed since President Trump signed the Tax Cuts and Jobs Act (TCJA) into law, and there will be plenty of action on the tax landscape in 2019. Both the Senate Committee on Finance and the Ways and Means Committee will have new chairs, and Treasury regulations implementing the TCJA will be finalized. Perennial issues like transportation, retirement savings and health care will likely make an appearance, and legislation improving the tax-reform bill could be on the table, depending on the outcome of the Treasury regulations.
10. SEC Regulation and Enforcement
To encourage public security ownership, the Securities and Exchange Commission (SEC) has adopted and proposed significant revisions to disclosure requirements for public companies. It has taken steps to enhance the board’s role in evaluating whether to include shareholder proposals in a company’s proxy statement. It has also solicited comments on the possible reform of proxy advisor regulation, following increasing and competing calls from corporations, investor advocates, and congressional leaders to revise these regulations. Boards and companies are advised to monitor developments in this area, as well as possible changes in congressional emphasis following the 2018 midterm elections.
Published March 9, 2019.