The week in GRC: Vanguard to get tougher on overboarding, and activist pursues Barclays board seat
– The Wall Street Journal reported that Nissan Motor Co shareholders voted to remove Carlos Ghosn from the Nissan board, ending his final connection with the company he has led for nearly two decades. They elected Renault chair Jean-Dominique Senard to replace him. That ensures the French car company, which owns 43.4 percent of Nissan, retains the full complement of board members mandated by its shareholding agreement with Nissan. Senard will become vice chair of Nissan’s board, a newly created position.
Ghosn says he is innocent of all alleged wrongdoing. A spokesperson for Ghosn didn’t immediately have a comment on the shareholder meeting.
– Reuters said that, according to people familiar with the matter, Daniel Loeb’s hedge fund firm Third Point is building a stake in Sony to push for changes. Sony is in the middle of a turnaround effort spearheaded by Kenichiro Yoshida, its CEO and former CFO.
Third Point wants Sony to explore options for some of its business units, including its movie studio, which the hedge fund believes has attracted takeover interest from the likes of Amazon and Netflix, the people said. Third Point also wants clarity on how the semiconductor and insurance divisions fit in to the rest of the company.
Sony and Third Point declined to comment.
– The Federal Reserve Board proposed easing key post-financial crisis regulations for the largest US banks, despite concerns from one member that the proposal goes too far, according to The Washington Post. Under the proposal, the affected banks would have to submit their full ‘living wills’ – plans for their closure during another crisis – every four years instead of every year. Slightly smaller banks would have to file their complete plans once every six years.
The industry has complained about the costs and burdens of post-crisis rules such as the requirement for yearly living wills. ‘The proposal seeks to increase the efficiency of firms without compromising the strong resiliency of the financial sector,’ said Randal Quarles, Fed vice chair for supervision, in a statement.
Lael Brainard, a member of the Fed’s board of governors and an Obama-era appointee, said she would support easing the rules but the proposal could ‘leave the system less safe.’
– The WSJ reported that, according to court documents, Fiat Chrysler Automobiles will pay $110 million to settle a lawsuit alleging that the company misled US investors regarding safety concerns and excess diesel emissions. A group of investors sued the Italian-American company in 2015, alleging that Fiat falsely claimed it was complying with safety regulations. The investor group also claimed it lost money when it was disclosed that the company didn’t properly carry out recalls of some of its cars that year.
The settlement must be approved by a federal judge. The company said in a written statement it was pleased to resolve the matter. ‘The company continues to vigorously deny the allegations of wrongdoing made in this lawsuit,’ Fiat Chrysler said. ‘The settlement amount will be completely covered by the company’s insurance.’
– Standard Chartered will pay $1.1 billion to settle allegations that it violated Iranian sanctions and had lax dirty controls, the Financial Times reported. Standard Chartered processed dollar payments for a correspondent bank that reportedly later had ties to Isis, according to findings published by a group of enforcement agencies on both sides of the Atlantic. US regulators also alleged breaches pertaining to Myanmar, Cuba, Syria and Sudan.
The penalty comes seven years after the bank paid a $667 million fine and signed a deferred prosecution agreement (DPA) to avoid criminal charges on similar grounds. That DPA has been extended on several occasions and Standard Chartered said on Tuesday that it would now have a DPA with US prosecutors running until 2021.
The bank insisted than none of the failings detailed by the agencies occurred after 2014. It said it took ‘full responsibility for the violations and control deficiencies outlined.’ CEO Bill Winters said: ‘The circumstances that led to today’s resolutions are completely unacceptable and not representative of the Standard Chartered I am proud to lead today.’
– Reuters reported that one of Bayer’s largest shareholders criticized the company’s management for underestimating the legal risks of its takeover of Monsanto, setting the stage for a fiery AGM. Bayer has seen roughly €30 billion ($34 billion) lost from its market value since August, when a US jury found Bayer liable because Monsanto had not warned of weed killer Roundup’s alleged cancer risks. It suffered a similar courtroom defeat last month. Bayer is appealing, or has vowed to appeal, the two jury verdicts.
‘It’s quite drastic when a takeover triggers such value destruction and reputational damage so quickly. There can be no talk of a successful takeover any more,’ said Ingo Speich, head of sustainability and corporate governance at Deka Investment. He will be among the shareholders to speak at the April 26 AGM. ‘What’s startling is that things have effectively moved beyond management’s control because we’re now at a point where the decisions over future development are made in courtrooms,’ he said.
– The FT said Edward Bramson, the activist investor pressing for Barclays to shrink its investment bank, warned that here is a ‘real threat’ that the UK lender will have to raise fresh capital unless it scales back its trading operations. Bramson on Monday urged Barclays shareholders to support his attempt to secure a board seat at the bank. ‘Continuation on the existing course represents a real threat that more new capital will need to be raised to underpin the activities of the corporate and investment bank,’ he said in a letter to Barclays investors.
The activist has built a stake of roughly 5.5 percent in Barclays through his vehicle Sherborne Investors. ‘Our recommendation to our shareholders to reject Sherborne’s proposal for a board seat has not changed,’ a Barclays spokesperson said, adding that the bank would publish a fuller rebuttal of Bramson’s criticisms ‘in due course.’
– Bloomberg reported that, according to people familiar with the matter, utility PG&E is talking with one of its investors about potentially bolstering the board it announced recently with different nominees. BlueMountain Capital Management is in discussions about potentially replacing some of the three incumbent directors on the 13-member board, the people said. The investment firm had nominated its own directors who were passed over in favor of a slate organized in partnership with another group of investors.
BlueMountain’s efforts could address concerns expressed by California Governor Gavin Newsom that the board appointments announced recently lacked the necessary expertise. Talks are continuing and there is no certainty that an agreement can be reached that would involve any of BlueMountain’s nominees joining the board, the people said.
Representatives for PG&E and BlueMountain declined to comment.
– According to the WSJ, the Vanguard Group is taking a tougher stance against companies whose board members it believes are stretched too thinly. The asset manager plans to vote, in most cases, against corporate executives running for two or more public company board seats beyond where they are employed, a Vanguard spokesperson said. The firm said it would generally vote against other board candidates seeking more than four board seats at one time.
Vanguard has recently begun informing US companies it invests in about the new policy, which is part of a broader update on corporate governance guidance. The firm said it is following the new policy as it votes on proxies at this year’s annual meetings.
‘Overboarding has become a bigger and bigger issue because the role of the director has increased over time,’ said Jack ‘Rusty’ O’Kelley, who leads Russell Reynolds Associates’ board advisory and effectiveness practice. ‘To serve on a board is requiring more time and effort.’
– The WSJ reported that Verizon Communications will study employee retention among women and people of color working in advertising and media. It is the latest in a number of industry initiatives aimed at boosting diversity and inclusion. In 2016 General Mills required agencies pitching for its ad business to at least strive for creative departments that were 50 percent female and 20 percent people of color. HP and Verizon, meanwhile, asked their agencies for data on the employees handling their accounts as well as the agencies’ plans to improve diversity and gender equality.
– The FT said Neuberger Berman told software company Verint Systems it is nominating three board members as the firm continues to take on more vocal activist tactics. ‘Our preference is always constructive dialogue with the company,’ said Benjamin Nahum, a portfolio manager for Neuberger Berman’s Intrinsic Value Fund, which has been invested with Verint for more than 12 years.
He added that Verint ‘has some excellent technology’ and ‘there’s a lot of value to be realized’ but that in recent months Neuberger Berman has ‘been denied access to the entirety of the board and been relegated to one director’ as a point of contact as it complained about structural issues and the pace at which Verint is moving on its cloud strategy.
Verint said its board ‘has carefully reviewed’ the asset manager’s candidates ‘and determined that none of these candidates’ skills are additive to the current board.’