Areas to Consider at Your Next Quarterly Board Meeting

At their quarterly meeting, boards and management focus on the way traditional and emerging risks may affect their operations. Weaver, knowledgeable in advisory services, offers the following topics to incorporate into your next board meeting to generate productive discussion.

1. What topics should you be discussing with your auditor?

Year-end reporting is in full swing and audit committees will soon be receiving the results of audits completed for calendar year-end financial reports. This is a prime opportunity to ask your external auditors questions such as:

• Which areas of the audit were the most challenging to complete, and why?
• How do the company’s processes and controls compare to those of other companies, of similar size and industry, they have audited?
• Considering the company’s reliance on data and systems, what additional steps could the company be taking to mitigate technology and cyber risk?
• What are your views on the structure and size (e.g., headcount) of the company’s accounting and reporting functions?
• What challenges, or changes, do you see on the horizon that the board should be aware of?
• What is your firm doing related to audit and firm quality control, and how do you see recent trends in regulatory oversight (PCAOB and SEC) impacting both audits in general, and your firm specifically?

2. What is the organization’s protocol for periodically reviewing and updating company policies?

Registrant organizations are generally effective at developing and implementing internal policies and procedures but may struggle or lag in keeping them up to date or responsive to changes in the business. Having the board regularly request information about how, and when, policies are reviewed and updated can help ensure that policies and procedures are kept current.

• What is the inventory of company policies, and who is responsible for their management and monitoring?
• Are standard operating procedures in place to support policy execution?
• Are policies reviewed regularly for any necessary changes? How often?
• What does the company do to assess whether the policies and procedural practices are followed?
• Does the organization periodically benchmark policies to best practices or seek a ‘fresh’ perspective?
• Should certain policy changes require board approval?

3. How is the company navigating remote working and flexible work arrangements?

Many organizations had to rush to adapt to growing number of employees requiring, or expecting, remote and flexible work schedules during the pandemic. For many companies, what was once seen as a temporary challenge (or opportunity, in matters such as evaluating the cost of office space) is now an integral part of operations. Companies that have made a significant transition to remote work should consider:

• Has the company assessed the effectiveness of remote workers and those on flexible work arrangements?
• Has remote working and flexible scheduling impacted productivity of individual teams, either positively or negatively?
• Are individuals that work remotely or on a flexible schedule progressing in their careers (i.e., receiving promotions and effectively taking on new responsibilities) at the expected rate?
• Has the company identified those who are most effective in remote work and considered the attributes contribute to their success?
• How does the company determine when a remote working situation is not effective? In such a situation, what actions are taken?

4. Has the organization analyzed executive compensation arrangements for purposes of the Section 162(m) deduction limitations?

Section 162 (m) of the Internal Revenue Code prohibits public companies from deducting more than $1 million per year in compensation paid to each of certain covered employees. Most types of executive compensation—i.e. share-based awards, retirement plan contributions—are within the scope of this regulation.

• Has the organization correctly identified all executives who meet the definition of “covered employee” under Section 162 (m)?
• Has the organization considered payments made to former covered employees in its analysis of compensation potentially subject to Section 162 (m)?
• Has there been significant share-based award activity, including vesting of restricted shares or option exercises that need to be considered in compensation for covered employees?

5. Will new developments related to crypto assets have an impact on our operations?

Crypto has continued to move more into the mainstream with recent regulatory actions, which has brought some much-needed clarity into the associated accounting effects. The Financial Accounting Standards Board (FASB) will now require entities to use fair value accounting for crypto assets and provide additional information about their crypto holdings beginning in 2025. While being very clear in stating that it did not amount to approval or endorsement of bitcoin, the SEC voted on January 10, 2024, to approve spot bitcoin Exchange-Traded Funds (ETFs), which paves the way for Wall Street firms to offer easier ways to buy and sell bitcoin on regulated financial markets.

• What position has our organization taken with regard to the use of cryptocurrency?
• How do the new accounting standards related to crypto assets effect our organization, and are we prepared for the related accounting and disclosure requirements?
• Are there tax reporting considerations related to the adoption of the new accounting standard for cryptocurrency?
• What impact, if any, will the SEC’s decision to approve Bitcoin Spot ETFs have on our company’s short and long-term investment strategies?

Weaver offers information and insights to prepare for your next board meeting. We can help you ask the right questions and determine appropriate plans of action based on topics and trends as they unfold. Subscribe to our monthly insights for articles and information to help you review your organization’s operations and prepare for change in an uncertain world. Contact us for information about these areas of Board governance.

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