The week in GRC: Icahn launches Occidental proxy fight, and Uber to link exec pay to diversity goals
– The Wall Street Journal reported that, according to lawyers, a recent shift in SEC policy may give companies facing allegations of wrongdoing more certainty about the potential consequences of a settlement with the agency. SEC chair Jay Clayton this month said the agency will notify companies about the decision to grant a so-called disqualification waiver when it approves or denies a settlement.
Companies can be automatically disqualified from a range of business activities if subject to an SEC enforcement action, unless the agency grants a waiver. Commissioners in most cases vote on whether to grant a waiver after receiving a recommendation from the agency’s staff. If the commission denies a waiver, a company will have five days to decide whether to withdraw from the settlement, Clayton said on July 3. That allows outside counsel to assure a company’s board that it will have a chance to reconsider a settlement if the company is denied a waiver.
– According to Reuters, a proposal that would bar big technology companies from functioning as financial institutions or issuing digital currencies has been circulated for discussion by the Democratic majority that leads the House Financial Services Committee. Such a sweeping plan would likely be opposed by Republican members of the house and would likely struggle to gather enough votes to pass the lower chamber. But the draft proposal sends a strong message to large tech firms increasingly eyeing the financial services space.
– CNN reported that Uber is for the first time setting some diversity and inclusion goals for 2022 that will be tied to the compensation of several of its senior executives: CEO Dara Khosrowshahi, CFO Nelson Chai, chief legal officer Tony West and chief people officer Nikki Krishnamurthy.
The new diversity and inclusion goals are to increase the percentage of women in managerial roles and the percentage of underrepresented people in transitional roles, which are sometimes but not always positions that include managing others.
Uber this week released its latest diversity report, which included a breakdown of its US workforce by race or ethnicity and gender. White men still make up most of its staff (30.1 percent), a pattern that is even more evident in leadership, technology and leadership in tech roles. The company has shown some diversity gains: the percentage of women in leadership roles grew from 20.9 percent to 28 percent in the past year. But the majority of women in US leadership roles are white.
– According to the WSJ, economic commentator Judy Shelton, one of US President Donald Trump’s latest picks for the Federal Reserve, has a spotty attendance record on the board of the European Bank for Reconstruction and Development (EBRD) where she serves as US envoy.
Shelton missed 11 of 26 board meetings, or 42 percent, at the EBRD in her first year as the US representative, according to minutes of the meetings. That is a greater share than her predecessor and all but two of the bank’s 23 current directors. Her performance as an EBRD board director could raise questions in addition to the typical queries about the economy and financial regulation she would likely face during confirmation hearings if she is formally nominated for the Fed job.
Shelton said in response to questions that scheduling conflicts prevented her from attending a number of meetings but added that she co-ordinates closely with the Department of the Treasury adviser who represents the US when she is absent. ‘When I have not been physically present at board meetings, it has often coincided with appointments in DC at Treasury and/or other agencies of government concerned with EBRD matters,’ she said.
– Reuters reported that the US Department of Justice (DoJ) asked a federal appeals court to pause the enforcement of an antitrust ruling against Qualcomm, pointing to support from the departments of energy and defense. ‘For [the Department of Defense], Qualcomm is a key player both in terms of its trusted supply chain and as a leader in innovation, and it would be impossible to replace Qualcomm’s critical role in 5G technology in the short term,’ Ellen Lord, under-secretary for defense for acquisition and sustainment, wrote in a filing made in the 9th Circuit Court of Appeals.
US District Judge Lucy Koh had ruled that Qualcomm had engaged in anticompetitive patent-licensing practices to keep a monopoly on the mobile chip market. Koh ordered Qualcomm to license its technology to rival chipmakers. The company has been trying to have the ruling put on hold while it pursues an appeal. Koh declined to pause the ruling, bringing the case before the 9th Circuit.
– The UK’s Financial Reporting Council (FRC) is proposing tougher rules for the country’s auditors, according to the WSJ. The FRC launched a consultation seeking comment from the public on its proposed changes to the country’s ethical and auditing standards. Among the FRC’s proposed changes is a new test requiring auditing firms to consider whether future actions would affect their independence. Ethics partners at audit firms would be given a more central role and would be required to report auditors that don’t follow their advice to the firm’s governance department.
– The US House of Representatives passed legislation that would raise the federal minimum wage to $15 an hour by October 2025, although it remains unlikely the bill will pass a Republican-controlled Senate, Reuters reported. The move comes at a time when the $15 minimum wage fight has been gaining momentum with several states and large private-sector employers that hire entry-level workers.
Cities and states including Seattle, San Francisco, New York state, California, Arkansas and Missouri have raised their minimum wage. Over the past year, employers such as Amazon.com and Costco Wholesale have raised their base wages to $15 an hour while others including Target have pledged to do so by the end of 2020. McDonald’s said recently it would no longer fight proposals to raise the federal minimum wage.
– Bloomberg reported that Senator Elizabeth Warren, D-Massachusetts, released a policy proposal to impose new rules on private equity firms and ‘useless speculation’ on Wall Street while rolling back President Trump’s deregulation of the financial industry.
Warren’s plan would make private equity firms responsible for debts and retirement pension obligations of companies they purchase, while making their profits contingent on the success of the entities they control. She said she’d curb firms’ ability to pay themselves ‘monitoring fees’ and dividends, while limiting their ability to use tax breaks for the debt placed on companies they buy.
– According to Reuters, BMW named Oliver Zipse as its new CEO, continuing a tradition of promoting a manufacturing expert to the top job. ‘The supervisory board of BMW at today’s meeting appointed Oliver Zipse as the new chairman of the board of management, with effect from August 16, 2019,’ the company said in a statement.
– FASB will give certain lenders more time to prepare for the implementation of a new rule that would require them to record expected future losses as soon as loans are issued, according to the WSJ. FASB adopted the current expected credit losses standard in 2016 amid criticism that banks and other financial institutions had recorded losses too slowly following the financial crisis. The board on Wednesday voted for a proposal to extend the implementation deadline for small public lenders, private lenders and non-profits, such as credit unions.
For large public banks, the standard would still take effect in the fiscal year and interim periods beginning after December 15, 2019.
– Reuters reported that activist investor Carl Icahn formally launched a proxy fight against Occidental Petroleum in an effort to get control of four board seats after talks with the oil company’s CEO failed to reach an agreement. Icahn has criticized the company for what he says is its failure to give owners a say on its proposed $38 billion acquisition of Anadarko Petroleum, which he has called ‘misguided and hugely overpriced.’
‘Occidental refused to craft a compromise so we’ll happily take our case to stockholders, which the company should have done with this bet-the-company transaction,’ Icahn said on Thursday. ‘We prefer to have peace, and have a great record in reaching settlements.’
Icahn’s use of a consent solicitation to elect directors would require a majority of shares outstanding to be voted in favor, a higher hurdle than a special meeting of shareholders, according to an Occidental spokesperson. Occidental has urged shareholders to reject the activist’s proxy, calling the request ‘not in the best interests of Occidental or its shareholders.’
– Honeywell International said it is co-operating with bribery investigations by US and Brazilian authorities, according to the WSJ. The probes by the DoJ, the SEC and Brazilian authorities focus on Honeywell’s compliance with the FCPA and similar laws in Brazil, the company said in a quarterly securities filing. ‘Honeywell complies with all laws in all countries in which we do business and requires all of our representatives to do the same,’ a Honeywell spokesperson said in a statement.