Top 10 Topics for Directors in 2016: Strategic Planning Considerations

Dec 18, 2015

Reading Time : 4 min
  • Economic/geopolitical outlook. On the economic front, the U.S. economy is going strong, at least compared to the rest of the world. The global economic outlook remains tenuous. Growth in China, the world’s second largest economy, dipped to a six-year low in the third quarter of 2015, and economists predict its slowdown may continue for some time.ii Japan, the world’s third largest economy, has fallen back into a recession despite “Abenomics,” the economic stimulus program crafted in 2012 to revitalize Japan.iii Rising geopolitical tensions, including apprehension about the spread of ISIS terrorism, instability in the Middle East, and the ongoing Syrian conflict and refugee crisis, are also casting a shadow over the world economic picture. Directors need to consider, among other things, how this global uncertainty and volatility could likely impact their company’s business and ensure that the company’s strategic direction takes these factors into account.
  • Achieving growth. One of the biggest challenges facing companies is finding ways to drive top-line growth, preferably through organic growth, which is often the toughest to achieve. After the financial crisis, profit growth was driven largely by cost-cutting. With costs now cut to the bone, many companies have turned to M&A to drive growth, leading to another record-setting year for M&A. With so few options available for top-line growth these days, directors face important strategic decisions about how best to deploy their assets to grow profits, particularly with U.S. economic growth predicted to be around 2.5 percent in 2016.
  • Short-term vs. long-term. Short-term successes breed immediate economic gain. We live in a world where patience seemingly is no longer a virtue. Accordingly, it has become more and more difficult for directors to focus on long-term goals and enhance long-term shareholder value in the face of “What have you done for me today?” Despite mounting pressures to deliver short-term results, directors must remain focused on governing for the long term and achieving long-term shareholder value. According to PricewaterhouseCooper’s (PwC) 2015 Annual Corporate Directors Survey, an increasing number are doing just that. Fifty-eight percent of directors surveyed say their company’s strategic time horizon is five years or longer, compared to just 48 percent in 2011.iv And only 39 percent of directors now say that they use a one-to three-year horizon, compared to 52 percent in 2011.v
  • Effect of low oil and gas prices. Another year of record low oil and gas prices has continued to both boost and wreak havoc on companies, depending on the industry. The low prices have benefited many sectors of the U.S. economy, including consumers who are enjoying the extra money in their pocketbooks. At the same time, however, these low prices have truly challenged energy companies, as they have watched their stock prices drop and have had to cut costs, reduce workforces, delay investments and significantly reduce capital spending. The cheaper valuations have created synergistic opportunities for some, while others continue to seek partners or other lifelines to get them through this rough patch. Directors in all industries need to understand the challenges and opportunities that low oil prices may create for their companies and ensure that the companies’ strategies address them.
  • Cash stockpiles. U.S. companies continue to stash cash, having grown their cash stockpiles to $1.4 trillion as of mid-2015.vi Ultimately, companies will need to make important strategic decisions on whether, and when, to deploy these funds, particularly as shareholders demand more return on their investments. Many companies have already increased their stock buybacks and dividends, which are on track to hit a new high of $1 trillion this year.vii While stock buybacks and dividends create shareholder value, directors need to consider whether choosing to buy back stock and issue dividends in lieu of other investment and growth opportunities is the best use of corporate funds.
  • Climate change. Climate change can be a highly polarizing topic, but it is hard to ignore the headlines blaming climate change on melting ice sheets, extreme heat waves, droughts, flooding, wildfires and more. Companies should assess — or reassess — and quantify the opportunities and risks that climate change and resource scarcity may present to the company and determine what role it may play in the company’s strategy. Companies also need to pay attention to their disclosures on climate change risk and liabilities as government agencies have recently turned up the heat in this area, and many expect it to continue. In November 2015, New York Attorney General Eric Schneiderman subpoenaed Exxon Mobil, seeking documents to determine whether the company lied to investors and consumers or withheld information about the effects of climate change. Also in November, Peabody Energy reached a settlement with Schneiderman after a two-year investigation found that Peabody’s disclosures about the potential impact of climate change did not always square with its internal financial projections.
  • Corporate social responsibility. Climate change is only one aspect of the broader corporate social responsibility initiative. More and more companies are integrating corporate social responsibility into their businesses, and more and more shareholders are asking companies to conduct their business in a socially and environmentally responsible manner. Boards should try to understand their stakeholders’ views on this topic and any related investment policies they may have. Several U.S. companies now publish corporate social responsibility annual reports to, among other things, help shareholders understand what the company is doing to be a good corporate citizen environmentally, socially and ethically. Although social responsibility is of growing importance to many shareholders, in addition to the benefits of being socially responsible, boards must also weigh the consequences that could arise if corporate assets are deployed for social causes rather than profit, as well as the potential liability if the company does not live up to the social responsibilities that it discloses to shareholders.

This post was excerpted from our annual Top 10 Topic for Directors in 2016 alert. To read the full alert, please click here.


i PwC’s 2015 Annual Corporate Directors Survey, at p. 20.

ii Mark Magnier, “China Economic Growth Falls Below 7% for First Time Since 2009,” The Wall Street Journal (October 18, 2015).

iii Keiko Ujikane, “Japan Falls into Recession For Second Time Under ‘Abenomics,’” Bloomberg Business (November 15, 2015).

iv PwC’s 2015 Annual Corporate Directors Survey, at p. 27.

v Id.

vi Patrick Gillespie, “America’s Companies are Hoarding $1.4 Trillion in Cash,” CNN Money (September 25, 2015).

[vii] Id.

Share This Insight

Previous Entries

Deal Diary

June 27, 2024

On June 24, 2024, the U.S. Securities and Exchange Commission (SEC) published five new Form 8-K Compliance and Disclosure Interpretations (C&DIs) expanding the agency’s interpretations of cybersecurity incident disclosures pursuant to Item 1.05 of Form 8-K. In July 2023, the SEC adopted final rules with respect to cybersecurity incidents that generally require public companies to disclose (i) material cybersecurity incidents within four business days after determining the incident was material and (ii) material information regarding their cybersecurity risk management, strategy and governance on an annual basis. We wrote about the final cybersecurity disclosure rules here.

...

Read More

Deal Diary

February 12, 2024

The Securities and Exchange Commission (SEC) recently adopted final rules (available here; also see the fact sheet and press release) representing significant changes to  special purpose acquisition companies (SPACs), shell companies and the disclosure of projections. These rules aim to enhance disclosures, protect investors and align the regulatory framework for SPACs with traditional IPOs. The following summarizes the key aspects of these rules.

...

Read More

Deal Diary

October 4, 2023

On September 20, 2023, the U.S. Securities and Exchange Commission (SEC) issued a final rule amending the so-called “Names Rule” (found here) that is “designed to modernize and enhance” protections under Rule 35d-1 of the Investment Company Act of 1940. The final rule is part of the SEC’s holistic efforts to regulate environmental, social and governance (ESG) matters, and is the SEC’s latest attempt to curb greenwashing in U.S. capital markets. The amendments require registered investment funds that include ESG factors in their names to place 80% of their assets in investments corresponding to those factors, thereby extending to ESG funds the SEC’s long-standing approach of regulating the names of registered funds to ensure they are marketed to investors truthfully. Fund complexes with more than $1 billion in assets will have two years from the final rule’s effective date (60 days after publication in the Federal Register) to comply, while fund complexes with less than $1 billion in assets will be given a compliance period of 30 months.

Chair Gary Gensler said “[t]he Names Rule reflects a basic idea: A fund’s investment portfolio should match a fund’s advertised investment focus. In essence, if a fund’s name suggests an investment focus, the fund in turn needs to invest shareholders’ dollars in a manner consistent with that investment focus. Otherwise, a fund’s portfolio might be inconsistent with what fund investors desired when selecting a fund based upon its name.” The sole dissenting vote against the rule modification, Commissioner Mark Uyeda, said “[w]ith these amendments, the Commission overemphasizes the importance of a fund’s name, as if to suggest that investors and their financial professionals need not look at the prospectus disclosures.” Commissioner Uyeda also expressed concern that fund investors will bear the increased compliance costs associated with the rule change.

...

Read More

Deal Diary

May 31, 2023

As discussed in our prior publication (found here), the Securities and Exchange Commission (SEC) adopted amendments on December 14, 2022, regarding Rule 10b5-1 insider trading plans and related disclosures. On May 25, 2023, the SEC issued three new compliance and disclosure interpretations (C&DIs) relating to the Rule 10b5-1 amendments.

...

Read More

Deal Diary

May 24, 2023

On May 15, 2023, the Eastern District of California ruled that California Assembly Bill No. 979 (“AB 979”) violates the Equal Protection Clause of the U.S. Constitution’s Fourteenth Amendment and 42 U.S.C. § 1981. As enacted, California’s Board Diversity Statute, required public companies with headquarters in the state to include a minimum number of directors from “underrepresented communities” or be subject to fines for violating the statute. AB 979 defines a “director from an underrepresented community” as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

...

Read More

Deal Diary

May 9, 2023

Update: On October 31, 2023, the Fifth Circuit granted the US Chamber of Commerce's petition for review of the SEC's share repurchase disclosure rules, holding that the SEC acted arbitrarily and capriciously in violation of the Administrative Procedure Act. The court directed the SEC to correct the defects within 30 days of the opinion. On December 1, 2023, the SEC informed the Fifth Circuit that it was unable to correct the rule's defects within 30 days of the opinion. On December 19, 2023, the Fifth Circuit vacated the SEC’s share repurchase disclosure rules.

...

Read More

Deal Diary

April 12, 2023

We have released our 2023 ESG Survey which includes a collection of reports reflecting on significant ESG themes and trends from 2022, as well as what we believe to be key developments for 2023.

...

Read More

Deal Diary

February 6, 2023

As companies begin preparing for the 2023 proxy season, we note that Institutional Shareholder Services Inc. (ISS) and Glass Lewis, the leading providers of corporate governance solutions and proxy advisory services, issued updated benchmark policies (proxy voting guidelines), which can be found here and here, respectively. The updated proxy voting guidelines generally focus on board accountability and oversight considerations and address topics such as climate accountability, board diversity, shareholder rights, corporate governance standards, executive compensation and social issues. What follows is a summary of the proxy voting guidelines published by ISS and Glass Lewis for the 2023 proxy season.

...

Read More

© 2025 Akin Gump Strauss Hauer & Feld LLP. All rights reserved. Attorney advertising. This document is distributed for informational use only; it does not constitute legal advice and should not be used as such. Prior results do not guarantee a similar outcome. Akin is the practicing name of Akin Gump LLP, a New York limited liability partnership authorized and regulated by the Solicitors Regulation Authority under number 267321. A list of the partners is available for inspection at Eighth Floor, Ten Bishops Square, London E1 6EG. For more information about Akin Gump LLP, Akin Gump Strauss Hauer & Feld LLP and other associated entities under which the Akin Gump network operates worldwide, please see our Legal Notices page.