The Greening of D&O Insurance

Swiss Re may drop D&O policies for those lagging in gas-emission controls. Plus: One survey lauds XBRL, another warns about worker relocation. And: AICPA backs off selling its credentials.

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At least one large global reinsurance company is thinking about denying directors’ and officers’ coverage to companies that are vulnerable to global warming—related shareholder suits.

Swiss Re, the Zurich-based insurance giant, is surveying current D&O buyers to assess their corporate-compliance plans regarding the regulation of greenhouse-gas pollution. Greenhouse gases are byproducts of many industrial processes, and the air emissions are blamed for causing global warming.

Swiss Re executives apparently believe that ill-prepared companies will be at risk of attracting shareholder suits based on poor compliance records. Reportedly directors and officers could be held accountable by shareholders if their companies aren’t doing enough—or are too slow—to reduce greenhouse-gas emissions.

Swiss Re managing director Christopher Walker told the Wall Street Journal that protracted legal action could be costly for companies. Company managers would be forced to play catch-up, either by ordering costly last-minute plant retrofits or buying high-priced emissions credits to meet fast-approaching regulatory deadlines.

The pending regulations are based on the Kyoto Protocol, which recommends reduction of greenhouse gases from industrial facilities in the next decade or so.

European countries are slated to impose regulatory caps on greenhouse-gas emissions by 2005. Other countries are expected to follow suit. Although the United States rejected the protocol, Swiss Re executives believe multinationals will still be at risk, reports the Journal.

Relocation, Relocation, Relocation

The personal toll that relocations can take on workers is often ignored by employers, says a new study conducted by Warwick University in the United Kingdom. “This means that employers are likely to have less room to maneuver in the future if they want to retain valuable staff,” Ann Green told the Financial Times.

Green, the co-author of the study, Career Mobility: Family Impact, contends that employees are increasingly stretched in different directions by their own and their partner’s careers, and by the needs of their children and aging parents.

The research found that while employees believe making a move advances their career, their partners were less enthusiastic with the switch. The study noted that partners of relocating workers felt increased uncertainty and resented having to quit their job. Several of these employees also complained that recent job relocations hurt and compromised their family life.

Some company executives admitted they should be doing more to address relocation problems, especially in light of the rhetoric about family-friendly policies, writes the Financial Times. However, there is a split about where a company’s responsibility to employees begins and ends.

Green concedes that many companies have a good reason for not getting involved in nonbusiness-related issues: it could open a Pandora’s box of discrimination claims. For example, employees without families may demand financial equivalents for the amount spent on assistance given to children during a move.

But the report asserts that executives may want to consider alternatives to relocation, or become more creative when dealing with families who face a move. In that way, companies are apt to find mutually beneficial solutions.

One manager interviewed for Green’s report did just that. Keen on retaining a top management consultant when her husband was transferred to a different city, the company provided the coveted employee with office space in the new city, plus a home-office setup.

PwC Report Touts XBRL

During the next three to five years, real-time reporting will be the corporate technology mantra, predicts a new study by PricewaterhouseCoopers. In the report, Technology Forecast: 2003—2005, editor-in-chief Eric Berg gave high marks to XBRL (extensible business reporting language), the Web standard that is poised to greatly improve the speed and accuracy of financial reporting.

Berg, managing director of PwC’s global technology center, also gave a nod to innovation in business-intelligence (BI) systems and integration technologies. He points out that improvements in these categories will make it easier for senior executives to develop real-time operations, and keep them one step ahead of the competition.

Nevertheless, XBRL is the technology that will change corporate finance the most appreciably. The XBRL effect “will be more significant than the transition from paper and pencil analysis…to the use of spreadsheets,” predicts Mike Willis, deputy chief knowledge officer at PwC and founding member of XBRL International. He posits that XBRL could move from the early-adopter phase to the generally accepted way to report business information as soon as 2006; but definitely by 2008.

When data is converted into XBRL, the information is tagged so it can be easily transferred from one application to another without losing the data’s integrity. The tagging should cut hundreds of man-hours out of manual data reporting, crunching, and assembling. It also will allow investors and analysts to pluck information from corporate filings and drop it into a financial-analysis software program.

Microsoft Corp. seems more than willing to help introduce analysts, investors, and finance departments to XBRL. In June the software maker is scheduled to release an XBRL-enabled version of Excel, the most widely used business spreadsheet software in the world.

The PwC’s report also makes a few other IT predictions. For example, it contends that BI systems will greatly expand in scope, moving from processing historical data to monitoring and managing individual transactions and business processes.

The report also says that business-integration technologies can now handle long-running transactions (lasting hours or days) alongside short-running transactions (lasting a few seconds). That’s important for E-commerce applications that keep business processes running while trading partners wait for a response.

Today: Stock-Option Debate

A public roundtable focusing on the pros and cons of expensing employee stock options will be held in Washington later today. The forum, given the lilting title Preserving Partnership Capitalism Through Stock Options for America’s Workforce, is scheduled to take place at 2:00 p.m. in the Senate Dirksen Office Building, Room 106.

Alternative valuation methods and economic impact on broad-based plans and small business will also be debated.

The roundtable sponsors, Sens. Mike Enzi (R-Wyo.), George Allen (R-Va.), and Barbara Boxer (D-Calif.), believe that the Financial Accounting Standards Board (FASB) moved too quickly to favor stock-option expensing. The senators put together the roundtable as a way of giving policymakers and the public a chance to consider all sides of the issue.

Participants include FASB’s Bob Herz; Sandra Wijnberg, CFO of Marsh and McLennan; Dennis Powell, senior vice president for finance of Cisco Systems; Andy Bryant, CFO of Intel Corp.; William Sahlman of the Harvard Business School; and Colleen A. Sayther, president of Financial Executives International.

Short Takes

* How will new tax proposals affect small businesses? The bill currently before the House of Representatives seeks to increase small-business expensing limits to $100,000 through 2007, plus raise bonus depreciation to 50 percent from the current 30 percent level through 2005, reports the Wall Street Journal. As for the Senate, its bill would triple the expensing limits to $75,000 through 2012. The Bush Administration proposes the same limit as the Senate for small businesses, but expands the period by one year, to 2013.

* R. Neal Batson, the federal bankruptcy examiner investigating the Enron Corp. case, is being criticized for charging the Enron estate $65.2 million in fees. Critics say the Alston & Bird attorney is covering old ground already probed by other investigators, reports Dow Jones Newswires. Others note, however, that Batson has already identified $5 billion worth of assets that may be recoverable through bankruptcy proceedings.

* The American Institute of Certified Public Accountants seems to have backed away from the idea of transferring its three specialty credentials to another entity. The AICPA Council voted to explore new strategies, including strategic partnerships, to enhance the PFS (Personal Financial Specialist), CITP (Certified Information Technology Professional), and ABV (Accredited in Business Valuation) credentials. A prior council resolution mentioned that the AICPA should consider “exit strategies” related to management of the credentials.

* Leslie F. Seidman has been named to a three-year term at FASB. Seidman is the managing member of an eponymous consulting firm and a former vice president of accounting policy at J.P. Morgan & Co. Her appointment takes effect July 1. Seidman will complete the term of John Wulff, who recently announced his resignation to return to the private sector. Seidman is a CPA who began her career with Arthur Young in 1984. In addition, Gary S. Schieneman was reappointed to his FASB seat. Before joining FASB in July 2001 to finish out Anthony Cope’s term, he was an equity analysis director at Merrill Lynch & Co.

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