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WHAT’S ON THE MINDS OF BOARDS?JANUARY 2016
The presentation will begin shortly.Learn Live Customer Support at:
(888) 228-4188 or [email protected] USA, LLP, a Delaware limited liability partnership, is the U.S.member of BDO International Limited, a UK company limited byguarantee, and forms part of the international BDO network ofindependent member firms.
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CPE AND SUPPORTCPE Participation Requirements ‒ To receive CPE credit for this webcast:• You’ll need to actively participate throughout the program.• Be responsive to at least 75% of the participation pop-ups. • Please refer the CPE & Support Handout in the Handouts section for
more information about group participation and CPE certificates.
Q&A: Submit all questions using the Q&A feature on the lower right corner of the screen. At the end of the presentation, the presenter(s) will review and answer all questions submitted.
Technical Support: If you should have technical issues, please contact LearnLive:• Click on the Live Chat icon under the Support tab, OR• Call: 1-888-228-4088
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WITH YOU TODAY
Doug BekkerManaging Partner - TaxBDO USA, LLPDirect: (616) [email protected]
Shahryar ShaghaghiManaging Director –Technology Advisory LeaderBDO ConsultingDirect: (212) [email protected]
Amy RojikNational Assurance PartnerBDO USA, LLPDirect: (617) [email protected]
Jim WillisSenior Director BDO USA, LLPDirect: (312) [email protected]
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LEARNING OBJECTIVES
This course is designed to provide insight into various issues concerning board members in their oversight roles and perceived opportunities and risks. Specifically, participants will have gained insight into the thoughts expressed public company board members and will be able to:• Discuss areas of focus for board directors in response to questions
about risk management, regulatory and taxation issues, data security, and executive compensation.
• Identify opportunities for your own organizations with respect to such governance issues
• Recognize key areas of focus for corporate governance for further discussion with your company's management
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AGENDA
• BDO 2015 Board Survey:• Tax Planning Matters• Risk Management – Cyber Security • Executive Pay Practices• Additional Disclosure Considerations
• Resources
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BDO 2015 BOARD SURVEYKey findings: • Public company directors are becoming
increasingly involved in their companies’ cybersecurity efforts and how best to protect their digital assets from cyber attack.
• Boards are spending a good deal of time preparing for the implementation of the “Cadillac Tax,” as well as new financial reporting requirements and proposed disclosure rules that impact areas ranging from executive compensation to the audit committee to political contributions.
https://www.bdo.com/insights/assurance/client-advisories/2015-board-survey
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TAX PLANNING MATTERSDoug Bekker
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TAX EXTENDERS
For several years, Congress has waited until the final weeks of the year to vote on more than 50 “tax extenders,” such as the research and development credit, Section 179 expensing and bonus depreciation.
• Does the precarious nature of these credits, requiring renewal each year, make it difficult for your business to make long-term planning decisions? YES 77%
• Are you in favor of Congress making these tax extenders permanent? YES 77%
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CADILLAC TAX
40%
53%
7%
Will your company be impacted by the "Cadillac Tax," a provision of the Affordable Care Act?
Yes
No
Not familiar with thisprovision
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CONSUMPTION TAX
2015 20140%
10%20%30%40%50%60%
Are you in favor of replacing the corporate and personal income tax with a tax on consumption
(sales tax)?
49%40%
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RISK MANAGEMENT - CYBERSECURITYShahryar Shaghaghi
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CYBER SECURITY RISK TRENDS
11%
22%
Companies experiencing a cyber breach in last two years
2013 2015
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MANAGING CYBER RISK: BOARD ENGAGEMENT
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CORPORATE INVESTMENT IN CYBER SECURITY
70%
30%
2015
IncreasedinvestmentDecreasedinvestment
55%
45%
2014
IncreasedinvestmentDecreasedinvestment
19%
22%
2014
2015
Average Increase to Cyber Budget
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CYBER SECURITY: PROACTIVE PROTECTION
Do you have a cyber breach/incident response
plan in place?
Do you have cyber risk requirements that your third
party vendors must meet?
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CONSIDERING CYBER INSURANCE
10%
28%
2014
2015
Businesses Purchasing Cyber Insurance
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CYBER SECURITY RESOURCESResources accessible via the http://www.bdo.com:Upcoming Webcast: • Managing Risk: Elevation of Cybersecurity to the Boardroom –
2/26/2015 – Registration is available now!
CPE Self-Study Courses: • Managing Risk in Cyberspace• Data Breach Essentials
BDO Publications: http://www.bdo.com/insights• Cybersecurity – Its Impact on the External Audit and Other Recent
Developments• Cybersecurity – A Board Primer
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CYBER SECURITY RESOURCES• NIST Framework for Improving Critical Infrastructure Cybersecurity
http://www.nist.gov/cyberframework/upload/cybersecurity-framework-021214-final.pdf
• SEC Cybersecurity Risks and Incidents Disclosure Guidance http://www.sec.gov/divisions/corpfin/guidance/cfguidance-topic2.htm
• http://www.sec.gov/investment/im-guidance-2015-02.pdf• FFIEC Cybersecurity Awareness Framework• http://www.ffiec.gov/cybersecurity.htm• Center for Audit Quality Cybersecurity and the External Audit Alert
http://www.thecaq.org/docs/alerts/caqalert_2014_03.pdf?sfvrsn=2• The National Conference of State Legislatures maintains links to every
state’s data protection statutes:http://www.ncsl.org/research/telecommunications-and-information-technology/security-breach-notification-laws.aspx
• The law firm of Baker Hostetler maintains a constantly updated data privacy blog and other resources:http://www.dataprivacymonitor.com
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EXECUTIVE PAY PRACTICESJim Willis
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CEO - MEDIAN EMPLOYEE PAY RATIO
Beginning with 2018 proxies, public companies will be
required to disclose the ratio of median employee pay to CEO compensation. Which
best describes the action your Board is currently taking to
comply with this new requirement?
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CEO - MEDIAN EMPLOYEE PAY RATIO
Which ONE of the choices shown below is of greatest concern to you with regard to this new disclosure requirement?
74% Not a meaningful or helpful measure10% Internal and external reaction to perceived high ratios8% Unfair comparisons to other companies due to factors unique to our
company5% Difficulty in identifying median employee pay3% Ratio doesn't allow full exclusion of non-U.S. employees or other
factors that can inflate the ratio
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CEO - MEDIAN EMPLOYEE PAY RATIO
27%
52%
21%
A WSJ report indicates that the SEC expects public companies to spend approximately $19,000 per company to
comply with the new CEO/median employee ratio disclosure. Do you feel it will cost your company more or
less?More Less Not Sure
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CLAWBACKS
The SEC has proposed new rules requiring public companies to “claw back,” or revoke, top executives’ incentive pay if that pay was based upon financial statements later found to contain material errors.
Are you in favor of these new rules? 72% YES
Do you believe boards should be able to use their discretion on whether to pursue clawbacks from an executive? 78% Yes
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PAY FOR PERFORMANCE
7%
52%
31%
10%
Do you intend to change your incentive plan measures to include absolute and/or relative Total
Shareholder Return (TSR)?
Yes
No
TRS is already a measure of ourplanDo not have incentive planmeasures
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RELATED PARTIES & SIGNIFICANT UNUSUAL TRANSACTIONS
A new Public Company Accounting Oversight Board (PCAOB) standard (AS 18) for 2015 requires auditors to more closely scrutinize executive pay and identify inherent risks, such as incentives that could reward management for decisions detrimental to shareholders.
Has your board or compensation committee been briefed on this new standard? 64% YES
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ADDITIONAL DISCLOSURE CONSIDERATIONS
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POLITICAL CONTRIBUTIONS
53%
47%
Are you in favor of mandatory disclosure of political contributions by companies?
Yes No
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AUDIT COMMITTEE/AUDIT COMMUNICATIONS
The SEC has issued a Concept Release: Possible Revisions to Audit Committee Disclosures, that would require disclosure of communications between the audit committee and the external auditor.
Do you believe such a disclosure would have a positive or negative impact on the audit committee – auditor relationship? 87% NEGATIVE IMPACT
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RESOURCES
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BDO BOARD GOVERNANCE - WEBINARSUpcoming BDO Governance and Financial Reporting Knowledge Webinars: • The Board’s Role in Emerging Practices in Risk Management – January 28, 2016• Elevation of Cybersecurity to the Boardroom – February 26, 2016**Registration will be available shortly on https://www.bdo.com/events
Recent Archived Webinars: • Quarterly Technical Update (Q4 2015) – January 2016• Effective Audit Committees – November 2015• Establishing an Effective Internal Audit Function - October 2015• The Board’s Role in Anticorruption Compliance – October 2015• Quarterly Technical Update (Q3 2015)• Revenue Recognition Transition Resource Group 2015 Update – September 2015• Quarterly Technical Update (Q2 2015) – July 2015• How ASU 2015-02 Changes Consolidation Accounting - May 2015 • Data Analytics and Risk Management – A Board Primer – April 2015 • 2015 Executive Pay Outlook for Mid-Cap Companies – March 2015• What’s On the Minds of Boards – January 2015
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• Q4 2015 Significant Accounting and Reporting Matters (soon to be released)• 2015 SEC Year in Review• 2015 Accounting Year in Review• 2015 AICPA SEC and PCAOB Conference • SEC Re-Proposes Rule Requiring Resource Extraction Issuers to Disclose
Payments to Governments• FAST Act Amends SEC Reporting Requirements• FASB Issues ASU to Simplify the Balance Sheet Presentation of Deferred Income
Taxes • FASB Issues ASU to Simplify the Accounting for Measurement-Period Adjustments• Variable Interest Entities – After Adoption of ASU 2015-02• Variable Interest Entities – Before Adoption of ASU 2015-02• SEC Proposed Rules Requiring Clawback of Executive Compensation
BDO FINANCIAL REPORTING – PUBLICATIONS
For a complete listing of BDO publications, refer to: https://www.bdo.com/insights/
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Additional resources accessible via BDO Board Governance:https://www.bdo.com/services/assurance/board-governance/overview
• 2016 BDO IPO Outlook• BDO 600 2015 Survey of CEO and CFO Compensation Practices• PAOB Adopts rules Requiring Disclosure of the Engagement Partner…• Proxy Voting Policies Focus on Overboarding• CAQ Issues 2015 Audit Committee Transparency Barometer • 2015 Board Survey• Continuous Monitoring• SEC Issues Concept Release Seeking Comment on Possible Revisions to Audit
Committee Disclosures• PCAOB Audit Committee Dialogue and Other Resources• PCAOB Issues Proposals to Improve Transparency and Provide Insight Into Audit
Quality• External Auditor Assessment Tools• Audit Committee Disclosure Resources
BDO BOARD GOVERNANCE – PUBLICATIONS
For a complete listing of BDO publications, refer to: https://www.bdo.com/insights/
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GET TO KNOW BDOBDO commits significant resources to keep our professionals and our clients up to date on current and evolving technical, governance, industry and reporting developments. Visit http://www.bdo.com for all of our offerings.
To begin receiving email notifications regarding BDO publications and event invitations (live and web-based), visit https://www.bdo.com/member/registration and create a user profile. If you already have an account on BDO’s website, visit the My Profile page to login and manage your account preferences https://www.bdo.com/member/my-profile.
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GET TO KNOW BDOINDUSTRY EXPERIENCE
Industry experience has emerged at the top of the list of what businesses need and expect from their accountants and advisors. The power of industry experience is perspective - perspective we bring to help you best leverage your own capabilities and resources.
BDO’s industry focus is part of who we are and how we serve our clients, and has been for over a century. We demonstrate our experience through knowledgeable professionals, relevant client work and participation in the industries we serve.
A variety of publications and insights depicting specific industry issues, emerging trends and developments are available. For further information on the following BDO industries, please visit https://www.bdo.com/industries.
• Asset Management• Broker Dealers• Consumer Business• Financial Services • Gaming, Hospitality & Leisure • Government Contracting • Healthcare • Insurance
• Manufacturing & Distribution• Natural Resources • Nonprofit & Education • Private Equity • Public Sector• Real Estate & Construction • Restaurants • Technology & Life Sciences
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EVALUATION
We continually try and improve our programming and appreciate constructive feedback.
Following the program, we will be sending out a thank you e-mail that contains a link to a brief evaluation.
Thank you in advance for your participation!
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CONCLUSIONTHANK YOU FOR YOUR PARTICIPATION!
Certificate Availability – If you participated the entire time and responded to at least 75% of the polling questions, click the Participation tab to access the print certificate button.
Please exit the interface by clicking the red “X” in the upper right hand corner of your screen.
