Monthly Archives: December 2021

The importance of Having a Plan When Including Family in Business

In this article Jolene Brown, a family business consultant points to four major mistakes when breaking down a family business. She firstly points out that assuming all genetic relationships equal good working relationships is wrong. Brown says “acceptance in a family should be unconditional, but acceptance into a business should be conditional and is not a birthright.” Her second suggestion is to stop believing that the business can financially support any and all family members who want to work together. Brown suggests checking your business‚Äôs financial ratios to see if you are financially capable of paying them. Brown's third tip is to stop assuming others should change, but not themselves. Her final tip is to avoid presuming a conversation is a contract. Brown mentions how if the contract is verbal then it does not count until it is written on ink.

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What the End-of-Work Landscape Looks Like Now

This article discusses how the coronavirus pandemic forced many employees to look towards their 401(k) plan in order to borrow cash for personal financial burdens. However. “About 47% of employees who took a retirement loan say they ended up taking more than they needed,” according to research from Voya Financial. Through the years, more and more employees are expecting that they will have to work part-time in retirement because of financial instability. However, as an employer, offering a good retirement plan, using automatic enrollment, and utilizing government programs can all help your employees be in the best possible position when the time comes for retirement. Be sure to check out this link for more information and details!

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Things to Consider When Planning Your Family Business Succession

This article explains why family businesses continue to generate 70-90% of global GDP annually. Ernst and Young reported that “the largest 500 family businesses constitute the third-largest economic contribution in the world by revenue and employ 24.1 million people worldwide.” Family businesses will thrive if they continue to follow four categories: the nature of change, talent in transition, the advisor advantage, and the not-so-secret family recipe for success. In the ‚Äúnature of change‚Äù category, digitalization, changing priorities, and passing the torch play key roles in family business success. Digitalization has become extremely important since the Covid-19 pandemic arose. Within the ‚Äútalent in transition‚Äù category some key concepts include professionalization, strengthening governance, succession, and bringing outsiders in. Some concepts to look for in ‚Äúthe advisor advantage‚Äù category are confidentiality, objectivity, attracting talent, understanding the family and the business, and diversity. The ‚Äúnot-so-secret family recipe for success‚Äù includes the long view, family control, and values. Following these fifteen considerations can help a family business continue to be successful.

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Potential New Tax on Stock Buybacks and What it Could Mean for the Financial Markets

President Biden’s latest spending bill could result in a new tax on corporate stock buybacks. In its most recent incarnation, the Senate version of the plan includes a two percent excise tax on stock buybacks. Still, this isn’t enough for many critics of stock buybacks, who claim they incentivize short-term behavior in lieu of long-term investment.

Short-Term Incentives

Stock buyback programs have long been criticized for giving a short-term boost to share prices with funds that could have been used for long-term investment instead. Critics, including the current president, believe stock buybacks come at the expense of capital investment in new or updated factories, research, worker training, etc. These critics believe this type of long-term investment is the key to sustainable growth.

Changing Behavior with Taxes

Some critics advocate for an outright ban on stock buybacks, but they are in the minority. Instead, the recent Senate bill proposes a two percent tax on stock buybacks. This tax has a dual purpose. First, it aims to discourage buybacks and encourage longer-term investment. Second, it's a revenue generator to help fund the trillions in new spending in the bill.

Will the Two Percent Tax be Enough to Matter?

While a two percent excise tax on buybacks may not be draconian, it appears to be significant enough to drive a change in behavior. In a CNBC poll, more than half of CFOs indicated the two percent tax is enough for them to curtail their buyback program. Only 40 percent said they would not change their buyback program plans (CNBC Global CFO Council Survey).

Impact on the Capital Markets 

Stock buybacks have had a significant impact on the markets. Not only are companies using excess cash to buy back shares, but with interest rates so low for so long, many companies have even taken on debt to buy back shares. Still, excess cash that can't just sit on the corporate balance sheet is the main driver of the largest buyback programs. Established, cash-flush tech companies such as Apple, Alphabet, and Microsoft are the dominant players, accounting for nearly one-third of all buyback activity in the first half of 2021.

Given the recent run-up in the markets, buyback programs have not kept up. Couple this with the proposed increases in corporate tax rates from 21 percent to 25 percent, and there’s even less cash to fund buyback programs. Generally, most experts believe these macro-economic factors combined with the new two percent tax will cause a shift toward dividend payouts as they will be more favorable to shareholders.

Conclusion

The main idea behind the proposed two percent excise tax on stock buybacks is to both raise revenue and encourage corporate investment. Critics of stock buyback programs believe this is better for the economy and workers, whereas buybacks favor corporate shareholders at their expense. While a two percent tax might not be enough to create wholesale change, when combined with corporate tax rate changes, it appears to have enough teeth to change most public company CFOs.

How to Develop Company Travel Policies Post-COVID

According to a recent U.S. Travel Association forecast, only about one-third of companies are requiring their employees to travel. With business travel still at a low, how can companies develop a travel policy that reduces the risk of COVID-19?

Occupational Safety and Health Administration

When it comes to business travelers, whether employees are traveling domestically or internationally, OSHA recommends employers consult the Centers for Disease Control and Prevention (CDC) for guidance.

Travel Guidance

The CDC advises against traveling internationally for those who are not vaccinated, have been exposed to the virus, are sick with it, test positive for it, and/or are waiting for results from COVID-19 exposure. Even for travelers who are fully vaccinated, the CDC reminds us that becoming infected and/or spreading the virus is still possible.

Travelers should follow all guidelines at their point of departure, on the airline, and at their destination (e.g., wear face masks, get tested to show proof of being COVID-19 negative, maintain social distancing) to be compliant with requirements during each point of the journey.

For those returning to the United States, fully vaccinated travelers must have a negative COVID-19 test taken within 72 hours of travel. Fully vaccinated individuals are suggested to test three to five days post-travel, keep an eye out for symptoms, and test and isolate if there are symptoms. Travelers who are not fully vaccinated must have a negative COVID-19 test within 24 hours of travel. Travelers who are not fully vaccinated are advised to test three to five days after, along with self-quarantining for seven days, post-return. Even if the COVID-19 test is negative, self-quarantining for seven days after travel is advised. If the COVID-19 test is positive, travelers should quarantine. If unvaccinated travelers don't get tested, they should stay at home and self-quarantine for 10 days post-travel. If symptomatic, test and isolate.

When it comes to domestic travel, differences exist between fully vaccinated and partially/non-vaccinated travelers. Along with masking and government mandates for fully vaccinated travelers, upon return, they need to keep an eye out for symptoms and isolate if any develop. However, there are no recommendations for testing or self-quarantining for fully vaccinated or those who have recovered from an infection within the past three months.

For unvaccinated domestic travelers, along with adhering to masking, social distancing, hand hygiene practices, and government mandates, testing 24 to 72 hours before departure is recommended. Upon return, travelers are advised to get tested three to five days later and quarantine for one week. If non-vaccinated travelers don't test, a 10-day quarantine is recommended. If a test is done and it's negative, a one-week isolation period is recommended.

Assessing Financial/Legal Risk

Employers must determine if the work that requires travel is truly essential, and if it is in all jurisdictions, it should be documented. There are a few types of potential financial and/or legal liabilities if employees travel to perform their work duties. If an employee becomes infected, a workers' compensation claim could be opened. If an employee does not receive accommodation, either not having to travel or being unable to work safely in the office with a worker who may have been exposed to COVID-19, legal issues may develop. Additionally, a whistleblower lawsuit may exist if an employee alleges the company has violated public health requirements. However, if business travel can't be delayed, there must be guidelines to reduce the risk of travel becoming a way to catch COVID.

Protect Employees Before Travel Begins

Businesses are advised to give their employees adequate personal protective equipment (PPE). Depending on how and where the employee is traveling, he or she is required by federal law to wear a mask in and on mass transit (e.g., airplanes, trains). It also may help to provide gloves, hand sanitizer, and wipes.

Study Transit and Destination COVID-19 Policies

Whether it’s domestic or international travel, different cities, states, and countries have different requirements for those who are vaccinated and those who are not. Depending on where the traveler has a layover, there could be testing, proof of vaccination, or masking/social distancing requirements in place at various spots.

Agree to Travel-Related Activities

By highlighting the risks of visiting certain venues that may pose higher risks (e.g., restaurants, gyms), an employer also can mandate employees to wear masks, socially distance, wash hands frequently, etc., regardless of the locale’s requirements.

Plan Ahead for Post-Travel Office Work

Another important component of a travel policy is how the business and its employee(s) will return safely to work and interact with co-workers and clients. For the most extreme cases, there could be a 14-day work-from-home policy to reduce the risk. Businesses can mandate testing for employees as long as they cover testing costs and testing requirements are applied fairly companywide.

While the world is reopening to commerce, especially instances when business deals necessitate face-to-face meetings with people from different cities and continents, safety with COVID-19 is paramount.

Sources

https://www.ustravel.org/press/new-forecast-signals-long-road-recovery-business-travel

https://www.osha.gov/coronavirus/control-prevention/business-travelers

https://www.cdc.gov/coronavirus/2019-ncov/travelers/travel-during-covid19.html 

https://www.cdc.gov/coronavirus/2019-ncov/travelers/international-travel-during-covid19.html