Ongoing concerns

The tariffs debacle is having an effect in surprising places. This week, we learn that auditors are asking regulators for help because, they argue, Donald Trump’s tariff policies have made it difficult to judge the going concern status of accounts.

The Times reports auditors have gone to the Financial Reporting Council watchdog, asking for “leeway” and seeking more guidance on “auditing companies whose operations are significantly affected by the US president’s trade war”.

The key issue is forecasting profits, or the lack thereof.

According to The Times  auditors are “invoking the example of the pandemic”, when the watchdog did issue special guidance which, frankly, amounted to ‘be honest with investors about what’s going to happen’. And you can’t say fairer than that.

Unreliable data

Proxy advisers have become concerned about misinformation and disinformation.

ISS comms supremo Subodh Mishra writes for the Harvard Law School governance blog that companies have got worries that only 10% of companies examined are “good or better” at handling disinformation.

Mishra concludes that regulation around the world is trying to deal with unreliable information.

“As a result, businesses that proactively implement strong governance frameworks and policies are likely to be better positioned to manage both regulatory expectations as well as market conditions.”

That’s another thing on the governance to-do list.

Lone Star link

A quick note about the US controversy about where to register a company. As you may be aware, Elon Musk’s displeasure with court rulings in Delaware over his gargantuan $55bn paycheck caused him to move Tesla’s registration from Delaware to the Lone Star State of Texas.

In response, Delaware’s legislature has working overtime to reform its corporate law framework to make it more attractive.

Writing for the Oxford University governance blog, academics Zohar Goshen and Tomer Stein point out the real story here is not the competition between Texas and Delaware or “political bargaining”. It’s the much more prosaic ‘what’s the purpose of company courts?’. Goshen and Tomer conclude the answer is “claims dismissal expertise”, or, to put it another way: their job is deciding which claims are justified and which should be kicked into touch.

Delaware’s efforts to reform, they argue, are therefore welcome. “Legislatures play a key role in preserving the efficiency of corporate adjudication, especially conflict-of-interest cases, where courts may overreach.

“Even in the absence of any threat of corporate flight from Delaware, the legislature was right to step in to restore the court’s claim-dismissal function.” Music to Elon’s ears. Though not yet money in his pocket.