The week in GRC: Columbia Threadneedle pushes board diversity, and Tesla’s board has discussed going-private proposal
— The Wall Street Journal reported that US tech companies, having faced questions about how they treat consumers’ personal data, are hoping to get ahead of the public and legal fallout by working with policy makers to help shape potential new federal privacy legislation. ‘There’s been such a shift’ in industry views ‘that I really think the time is now,’ Karen Zacharia, chief privacy officer at Verizon Communications said late last month. ‘We need to go forward and do it.’
The legislation would almost certainly pre-empt regulation of online privacy by states such as California, which recently adopted its own tough new law. Firms are worried that state-by-state rules could create a burdensome patchwork of regulation. The new US legislation is likely to be less stringent compared to the California law and new EU privacy rules.
— According to the Financial Times, Columbia Threadneedle Investments, which manages $482 billion in assets, is adding to pressure on US companies to improve board diversity by targeting directors in businesses where women are under-represented.
The group, which is owned by Ameriprise, has put in place a policy under which it refuses to support the re-election of committee chairs, who are charged with hiring new directors, where women account for less than 15 percent of board members. Iain Richards, head of governance and responsible investment at Columbia Threadneedle, said the US had ‘some catching up to do.’
— NPR reported that PepsiCo’s Indra Nooyi announced she is stepping aside as CEO after some 12 years at the helm. Nooyi plans to stay on as chair until early 2019. The company's board announced said it elected Ramon Laguarta, president of the company since 2017, to succeed her as CEO. PepsiCo prides itself on recruiting leaders internally — every other CEO has come from in-house.
Nooyi is a rare minority female CEO. As of May, according to Fortune, there were just 24 female chief executives of Fortune 500 companies.
— US companies seem poised to eclipse the $1 trillion mark in share buybacks this year, according to CNBC. Wall Street already had been expecting a potentially record year for repurchases, but Goldman Sachs anticipates that the corporate appetite will be even stronger than anticipated, particularly with August being the biggest month traditionally for buybacks. ‘Corporate repurchases remain the largest source of demand for shares,’ wrote David Kostin, chief US equity strategist at Goldman Sachs.
— The WSJ said that Federal Deposit Insurance Corporation chair Jelena McWilliams said she is ready to re-evaluate rules on bank capital, small-dollar loans and investments in low-income areas. McWilliams said her top priorities are examining the regulatory burden on small banks, speeding up her agency’s review of bank-charter applications and helping banks introduce new financial products for underserved communities.
‘There should be pilot programs where the regulators and the banks work together’ to allow testing of new products, she said, echoing a recent US Department of the Treasury proposal to create regulatory ‘sandboxes’ for experimentation.
— The New York Times reported that Alisher Usmanov agreed to sell his 30 percent stake in English Premier League team Arsenal to the club’s majority owner, US billionaire Stanley Kroenke. The deal clears the way for Kroenke to take the club private, an action that Usmanov had long blocked by refusing to sell his shares.
In announcing the terms of the deal, Kroenke’s investment firm KSE said the sale would further the club’s strategy and ambitions, allowing it to act more decisively than in the past. But the Arsenal Supporters Trust, a group that represents the club’s small shareholders, described the announcement as a ‘dreadful day.’ Under private ownership, the club will no longer have to hold annual meetings.
— Several independent directors of Tesla’s board said it had met several times over the previous week to discuss CEO Elon Musk’s proposal to take the electric-car maker private in what would be the biggest buyout in history, according to the WSJ.
‘Last week, Elon opened a discussion with the board about taking the company private,’ according to a statement from several board members. The talks included how being a private company could ‘better serve Tesla’s long-term interests, and also addressed the funding for this to occur,’ the statement said.
— According to the FT, Pimco group chief investment officer Daniel Ivascyn said the fund manager’s income strategy, which encompasses its flagship bond fund, is ‘diversifying away’ from US corporate debt as it prepares for a more turbulent investment landscape. Ivascyn said the income strategy is shifting away ‘from sectors that we think are prone to overshooting to the downside’ as it becomes ‘a bit more defensive’ in its investment approach.
— The WSJ reported that Salesforce.com promoted president and COO Keith Block to co-CEO, giving him shared leadership of the business-software company with its co-founder and chair, Marc Benioff. Block will report directly to Salesforce’s board of directors. Benioff will continue leading the company’s ‘vision and innovation in areas including technology, marketing, stakeholder engagement and culture,’ while Block will run the company’s ‘growth strategy, execution and operations,’ Salesforce said in a statement.
‘This is just a natural evolution of what’s been happening over the last five years,’ Block said, adding that no particular event or factor precipitated the change.
— CNBC reported later in the week that, according to people familiar with the matter, the Tesla board of directors plans to meet with financial advisers to formalize a process to explore Elon Musk's take-private proposal. The board is likely to tell Musk, Tesla chair and CEO, to recuse himself as the company prepares to review his proposal, according to the people. The board has told Musk that he needs his own advisers, one of the people said.
Tesla's board will likely develop a special committee of a smaller number of independent directors to review the buyout details, the people added. Tesla did not respond immediately to a request for comment.
— According to the WSJ, Tribune Media terminated its merger agreement with Sinclair Broadcast Group and sued the TV-station owner, alleging that it failed to make sufficient efforts to get their $3.9 billion deal approved by regulators.
Federal Communications Commission chair Ajit Pai last month said he had serious concerns about Sinclair’s submissions as part of the agency’s review, and sent the matter to an administrative law judge. The Tribune lawsuit, filed in Delaware Chancery Court, seeks $1 billion of lost premium to its stockholders and additional damages.
On Thursday, Sinclair announced a $1 billion share-buyback program. ‘It is unfortunate that Tribune Media Company terminated our merger agreement. Nonetheless, we strongly believe in the long-term outlook of our company and disagree with the market’s current discounted view on our share price,’ Sinclair CEO Chris Ripley said in a statement. Sinclair didn’t respond immediately to a request for comment.