Despite US President Donald Trump having not yet conceded the election, it looks certain Joe Biden will be in the White House come January 20. So what should IROs be anticipating from the incoming administration?
IR Magazine talks to Nick Mazing, director of research at financial and corporate research platform Sentieo, about digging through the Biden platform and working out which changes are likely to happen – and which are not.
‘The Biden platform is very extensive: you can read pages and pages about everything,’ Mazing says. ‘For an IRO, however, I think it is mandatory to read the entire Biden platform – because you don’t know what’s going to pop up where.’
He stresses that what IR professionals shouldn’t be doing is reading news stories about proposals that could affect their company. Instead, they should be reading the complete Biden/Harris platform and the transition team priorities website.
While it’s always important to get information from the source, however, Mazing notes that potentially material information can be found in unexpected sections of the Biden platform and team priorities website.
‘There is a lot of reading involved but there are some unexpected things that might be extremely relevant to your industry – though not headlined as such,’ he explains. ‘For example, in the racial economic equity proposals, Biden is proposing the creation of a public credit reporting bureau. This is obviously highly relevant to current [credit] providers but it is not under ‘banking’ or a similar section.’
But even once an IRO has read through all this, how do you work out what is likely to actually come to fruition? Mazing suggests three levels of analysis to help IROs prioritize their focus but says ‘there is no excuse for an IRO not to read the platform in full’.
1. Lower likelihood for situations where Congressional action is needed. ‘For example, on things like tax reform, healthcare reform, and so on, the final version of the changes might be very different from what is currently proposed,’ says Mazing. For these ‘lower likelihood’ issues, he explains that ‘the big proposals’ do need to be on IROs’ radar but that they should understand the degree to which changes can happen: ‘There will be plenty of time to think about disclosure and communication strategies.’
2. Higher likelihood where the executive branch can act alone. ‘There are issues where the executive branch can act alone, whether by legal authority or by established precedent. These are things that are more likely to happen,’ says Mazing, citing immigration policies, ‘including the actual enforcement of existing immigration laws, which has been very haphazard.’ Sentieo research shows immigration is mentioned as a risk factor in more than 600 10K reports in the last year.
For an issue where the executive branch can act alone and that could result in material changes for a company, Mazing is blunt: ‘IROs need to start having these conversations now.’
3. Highest likelihood where the executive branch can act alone and where there is a serious prior precedent. ‘In my opinion, an IRO should consider not only whether executive branch action is possible but also what the precedent is,’ says Mazing, using the example of banning the federal use of private prisons. ‘It is in the platform: vice president-elect Kamala Harris said it point-blank during the vice presidential debate, and Barak Obama banned it in 2016 (Trump reversed the ban).’ This is an issue that affects the two publicly listed private prisons in the US: CoreCivic and GEO Group.
Another ‘high odds’ issue is employer joint-liability, says Mazing, explaining that the Trump administration rolled back a major Obama initiative that enabled legal liability for franchisors for franchsee misconduct. ‘This affects a lot of restaurant companies,’ he says. ‘It was a major issue back then, and now it is back.’
He compares this to Biden ‘wanting to change the personal income tax implications of the popular 401k retirement saving plans’, which he describes as ‘less likely’.
There are, however, other considerations going into 2021.
In addition to the ‘pure business implications – Woo hoo, I make solar panels and now Uncle Joe is giving me sweet taxpayer cash – issuers need to think about a few other things’ from ESG to the potential opening up of US markets to marijuana companies if the drug is ‘de-escalated’ and how a future return to office might work.
Mazing predicts that ESG disclosure requirements are likely to accelerate, noting the recent announcement that Jay Clayton, SEC commissioner since 2017, will step down early, and saying IROs should take into consideration what direction his replacement will take.
When it comes to any return to offices, Mazing points out that Covid-19 has been bad for working women in particular – an issue his team has written about in the past in Forbes and on Sentieo’s own blog. ‘Unemployment rates for women are higher,’ he says. ‘And it’s not just that: women are actually leaving the labor force altogether. So a company requiring employees to go back to the office is really bad news for women.’
Companies need to be cautious in how they communicate around the issue, warns Mazing: ‘There is huge potential for bad headlines.’
Photo source: Adam Schultz / Biden for President