BDO in the Boardroom

Key Takeaways:Building corporate sustainability is not about “being responsible for” but rather recognizing “how to work in concert with” a broader group of stakeholders to reduce friction and produce better results.Innovation in a staid industry requires: - Creation of an environment to embrace and enable change – first speak about what will remain the same and season in what the change will be.- Recognition that incumbency is NOT powerful (i.e., faulty assumption that formulas in the past will work in the future)- Innovate by embracing what is evolving – e.g., technologyAdopt a simple "Measure/Report/Reduce” framework – allows managements to act and the board to make informed decisions based on data-driven metrics to drive accountability and achieve whatever the “reduction” goals are – e.g., emissions, talent attrition, customer loss, use of resources, barriers to entry, etc. Don’t make the mistake of focusing heavily on low hanging fruit instead of looking broadly at both risk and opportunityOversight tool: Instead of asking management “How do we make this?” consider the asking “How do we make this better?”Resources:Book: BOOM! Deciphering Innovation: How Disruption Drives Companies to Transform or DieResource Center: BDO ESG Center of Excellence

Key Takeaways:The NEED: Data governance programs exist to manage change in data assets overtime. The WHAT: Data is an intangible asset that is constantly evolving and has a host of characteristics that make it difficult to manage compared to traditional assets. THE WAKE-UP CALL: When surveyed, 95% of respondents felt data governance programs were unsuccessful.The PITFALLS: Poor data governance stems from: poor data quality, lack of enforcement of policies and procedures; and data security and privacy practice that don’t evolve with hacker sophistication.The HOW: - Board directors should be asking corporate management the following: - Does the company have a data governance program? - Is the data governance program working? How do you know? - What assistance does the data governance program need from the board? Directors should encourage management to decompose data governance problems into smaller initiatives and ask for stratification of data governance decision-making so that people at the right level are making decisions about data.Resources:Data Privacy and Governance Checklist for the Board

Key Takeaways:The basic tenants of succession planning require continuous focus and consensus and can provide an outline for preparation and vigilance. These include:Agreement on short- and long-term company goalsNeeded skills for the position - Keeping the job description of the upcoming vacancy current Keep a pipeline of candidates that span an array of various disciplines and experiences Boards should build in process and policy around board refreshment.Board composition should be built for purpose - Consider directors with multiple skills and experiences so there is overlap existing in the boardroom.Succession doesn’t end with appointment – it further requires a robust onboarding system for the new director. Expanding the board to accommodate new board members before the departure of a retiring director can efficiently provide transfer of institutional knowledge and avoid “reinventing the wheel.”A board member with shareholder engagement skills and investor understanding that can help management articulate their story is the best defense against activists. Resources:  “What ‘Succession’ Gets Right (and Wrong) About Business Continuity Planning [Spoilers]Think Like an Activist

Key Takeaways:Funding for the CHIPS Act has been signed into law. This act provides tremendous opportunities for semiconductor industry organizations to expand production in the U.S. and additionally, provides many other benefits to the economy. This podcast discusses:Opportunities for national economic initiatives for organizations that can pass threshold question – How does the project enhance national economic security? Under the Act, lessons have been learned from PPP funding during COVID and the need for attestations to counter fraudulent/inappropriate use of funding, which came back to haunt many companies who could not support their use of PPP funds after the fact. Resources:Archive Webinar - The CHIPS Act Has Passed: Now What?What Semiconductor Organizations Need to Know about the CHIPS For America ActSemiconductor Industry Association

Key Takeaways:   Suppliers have become an integral part of a company’s ESG performance against targets and laws, and therefore have an outsized impact on operational and financial performance Boards should set clear expectations for including supply chain risk within Enterprise Risk Management and require detailed management action plans to address and mitigate risks as well as identify opportunities. Good questions to ask include: Has the company mapped their supply chain and knows their 3rd party vendors beyond Tier 1, globally? Have we evidenced processes and policies for supplier onboarding and data management?Is our existing technology adequate to collect and maintain large amounts of supplier data and documentation? How can our supplier management program of 3rd party vendors be verified to mitigate supply chain disruption due to ESG compliance issues? Is the board engaging with the right cross-functional operational leaders responsible for supply chain management? Is management monitoring industry trends and regulations and embedding those in supply chain planning, optimization, and monitoring? Resources:     Supply Chain Disruption isn’t Going Anywhere Three Key Supply Chain Management Questions for 2023 Ahead of Time Supply Chain Model eBook U.S. Senate Committee Expands Alleged Forced Labor Probe Involving Major Automakers to Suppliers.

Key Takeaways:Stakeholder-Centric: Ensure a communication strategy is developed around sustainability reporting that is driven by stakeholder needsDon’t neglect the passive or potential investorsDepth and Frequency: Don’t just stop at the launch date plans, have a plan for targeted communications specific to multiple audiences year-roundMulti-Channeled: Leverage multiple communication and media platforms, as stakeholders consume information in different waysSpokespeople: Identify and educate, from employees to the board, on how to tell your ESG storyAs ESG should be part of your sustainable risk strategy, so should the approach to ensuring consistency in public disclosures within and external to your financial reporting

Key Takeaways:Pillar Two comes in effect for accounting periods beginning on or after 1 January 2024 for multi-national companies with global revenue in excess of Euro 750m.Complexity will arise from both the detailed calculations involved as well as timing related to the phased-in approach by jurisdiction as to when each country will require implementation of global tax rules. Immediate steps to be undertaking by multinationals include an impact assessment and inventory of entities in different jurisdictions to determine potential increase in effective tax rates or cash tax increase, as well as financial statement and tax return compliance.Establish a strategic roadmap that considers accounting, systems, policy choices, resources, controls, disclosures and reporting requirements.Create the proper governance structure to properly monitor and drive accountability in both current and future decisions impacting the business. Resources:OCED Releases Additional Pillar Two Guidance

Key Takeaways and Tax Planning Points:Enacted as part of the Inflation Reduction Act (IRA), corporations are now subject to a 15% minimum tax on book income of $1 billion or more. The IRA also provided $80 billion of funding for IRS – with $46 billion earmarked specifically for enforcement. Enacted as part of the 2023 Omnibus Appropriations legislation, the SECURE Act of 2022 contains a host of retirement provisions such as changes to 401k, IRS, Roth, and other plan rules. While the current Administration’s “Green Book” on tax policy has not yet been released, a few tax proposals were discussed during the February 2023 State of the Union Address: Establishment of a new increase from a 1% excise tax on stock buybacks (enacted August 2022) to 4% excise tax Establishment of a new “billionaires” tax – households with net wealth exceeding $100 million would pay a minimum rate of 20% on an expanded computation of income, which would include unrealized capital gains. Reaffirmation by President Biden that the government would not raise taxes on anyone earning under $400,000/year. As Congress is split politically, it remains difficult for meaningful new tax legislation to make it through both houses and clear the President’s desk in the near term.Resources: Navigating the Intersection of Tax & ESG Is Your Company Effectively Managing Tax Risk?How to Benefit from Total Tax Transparency

Key Takeaways:The discipline of modern governance today is really in a global realm – can no longer be thought of in simply local or regional terms.Governance should be viewed as a discipline and thus, your individual board “packaging” is critical to you being identified as a serious board candidate.Board Documents are not comprised of a resume or CV but rather are highly structured and specific tools and should be reflective of your core leadership traits, your “major” and “minors” with respect to the depth of your experience and your governance skills and how these link ethics, values, and culture to strategy and risk oversight. The time and energy put into crafting Board Documents is an important exercise for your board journey.The Board interview is a two-way dialogues and vetting process that allows: (1) the company to understand how well you understand the particular linkage of values, culture, risk and strategy to governance and (2) specifically, how well you will fit into the board and whether your depth and experience will enable you to be accretive to the board’s operations. Don’t be afraid to ask thoughtful questions and be intentional in developing linkage between yourself and the board dynamics. Resources: Becoming an Exceptional Board Director Candidate Education & Certification CourseAcross the Board: The Modern Architecture Behind an Effective Board of Directors

Key Takeaways:Be mindful of identifying material impacts of climate risk and whether you are satisfying current disclosure requirementsDon’t be lulled into complacency or the belief that mid-term elections may derail final rule-makingReview carefully current financial risk disclosures in line with other information being disclosed by the company Consider the resources you will need to implement expanded disclosures and leverage advisors to help you navigate the complexities of climate-related disclosures Remain abreast of developments – not only I the U.S. but globally, particular if your organization has significant international operationsResources:SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for InvestorsThe Enhancement and Standardization of Climate-Related Disclosures for Investors – SEC Comment Letter