The week in GRC: Renault board votes to remove CEO and NYC comptroller makes board diversity push
– The Wall Street Journal reported that shares of newly public companies, which had been hot investments earlier in the year, are now in a slump after investors turned on unprofitable start-ups. Shares of technology start-ups and other companies that went public in the US this year were trading roughly 5 percent above, on average, their IPO prices, less than the 18 percent gain in the S&P 500 index, according to Dealogic data. Earlier in the year IPO shares were big outperformers.
The downturn upends expectations that 2019 would be a record year for IPOs in terms of the money raised. It also highlights the risks for private investors that have endured long periods of losses funding a crop of companies that are older and bigger than IPO candidates in previous cycles. That could chill the private-funding market.
– Unilever has committed to halving its use of new plastic by 2025, according to CNN. If the consumer goods company meets its goal, it will use no more than 386,000 tons of new plastic each year from 2025, down from roughly 772,000 tons in 2018. To do this, Unilever will offer more reusable and refillable packaging and sell more unwrapped products. It will also use more recycled plastic in its packaging. ‘There is a lot of plastic pollution in the environment. And the fact of the matter is, too much of it carries our name,’ Unilever said in a statement.
The push by consumer goods makers to reduce their use of plastic comes amid growing pressure from governments. Consumers are also increasingly aware of the damage that’s caused when plastic enters the environment.
– The Guardian reported that Hong Kong Exchanges and Clearing (HKEX) dropped its £32 billion ($39 billion) takeover offer for the London Stock Exchange (LSE), saying it had been ‘unable to engage’ with management on the deal. The HKEX announcement came nearly four weeks after the LSE rejected the bid.
HKEX said: ‘Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSE in realizing this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal.’
In a statement, the LSE noted HKEX’s announcement and said it was making good progress on the planned purchase of Refinitiv. It is looking for approval from regulators and will hold a shareholder meeting next month.
– According to Reuters, AMAG Pharmaceuticals agreed to add two directors proposed by Caligan Partners after the hedge fund firm pressured the drugmaker to conduct a strategic business review. AMAG said it will expand its board to 11 people, making room for Caligan Partners founder David Johnson and Paul Fonteyne, a former head of Boehringer Ingelheim USA.
‘As part of AMAG’s commitment to good corporate governance and ongoing board refreshment, we are pleased to have reached an agreement with Caligan that is in the best interests of all shareholders,’ said AMAG board chair Gino Santini in a statement. A Caligan spokesperson had no further comment.
– Nissan Motor Co named Makoto Uchida, head of Nissan’s China business, as its new CEO and said the company would be led by a three-person team, the WSJ reported. ‘Looking at the current situation of Nissan, strong leadership is expected, but there are two sides of the coin on strong leadership,’ said Yasushi Kimura, Nissan’s board chair. ‘We thought a group leadership, where they can support each other, will be more transparent and can make fairer decisions.’
Ashwani Gupta, COO of alliance member Mitsubishi Motors, will become COO of Nissan Motor Co, while an executive who has been overseeing turnaround efforts, Jun Seki, will become vice COO and report to Gupta. All three are set to assume their roles by January 1.
– The SEC and four other federal financial regulators announced that they had finalized revisions to simplify compliance requirements relating to the Volcker Rule, which generally bars banks from engaging in proprietary trading or investing in or sponsoring hedge funds or private equity funds.
Under the revised rule, firms that do not have significant trading activities will have simplified and streamlined compliance requirements, while firms with significant trading activity will have more stringent compliance requirements.
The changes were jointly developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the SEC.
– CNBC said that, according to Challenger Gray & Christmas, CEOs are leaving their posts at a record pace in 2019. CEO exits were at a record high for the year this past month with 1,160 US-based companies announcing chief executive departures through September. This is the highest year-to-date level since the firm started tracking in 2002. August saw the highest monthly total for CEO exits on record with 159 departures.
‘Coming off a decade-long expansion, companies that started and developed during this period find themselves needing new leadership to continue to grow,’ said Challenger Gray & Christmas vice president Andrew Challenger. The main reasons for CEOs leaving are stepping down and retirement, his firm said. Some go to a new company and a handful leave because of M&A or scandals.
– Aberdeen Standard Investments, one of BHP’s biggest shareholders, added to pressure on the world’s leading mining company to cut ties with lobby groups that Aberdeen says are at odds with BHP’s pledges on climate leadership, according to Reuters.
Aberdeen Standard said it was taking the rare step of speaking out ahead of a vote at BHP’s AGM on October 17 because of the urgency of tackling climate change, and after its research found the lobby groups were the biggest single obstacle to progress. Bill Hartnett, stewardship director at Aberdeen Standard, said BHP had shown climate leadership in many ways, but that those efforts were undermined by its membership of some industry groups.
BHP said it is committed to cutting emissions and making mining sustainable. It also said it is reviewing its membership of industry groups and has withdrawn from some of them but believes engagement can promote best practice.
– The WSJ reported that the US Department of Justice (DoJ) issued guidance for federal prosecutors to use where companies claim they can’t pay a criminal fine. Assistant Attorney General Brian Benczkowski said the guidance is designed to give prosecutors and companies more transparency around what to expect in cases where financially troubled companies are faced with criminal penalties.
‘Our aim is for companies to work diligently to deter criminal wrongdoing before it ever needs the attention of the DoJ, but also to make wise decisions about how to approach us when things do go wrong,’ Benczkowski said. The guidance instructs prosecutors to look at several considerations when assessing a company’s claims, including its ability to raise capital and factors that led to its financial condition.
– The WSJ reported that the EU is developing a new approach for flagging countries with weak anti-money-laundering laws after its previous attempt to create a blacklist failed. A newly proposed methodology for designating high-risk countries is intended to respond to concerns about transparency in the previous process. The Council of Economic and Financial Affairs was scheduled on Thursday to discuss the proposed methodology, which is aimed at giving countries a clearer sense of how they could be designated as high risk, as well as a process to respond.
Blacklists impose higher compliance costs and due-diligence requirements, as well as possible reputational risks, on banks that operate in such countries.
– The WSJ reported that Renault’s board voted to remove CEO Thierry Bolloré with immediate effect after he refused to resign. Three of Renault’s 18 directors abstained from the vote while the rest backed the move, chair Jean-Dominique Senard said. ‘I had hoped this would be done differently,’ he said.
Bolloré did not respond to a request for comment. He told French newspaper Les Echos ahead of the meeting that ‘the brutality and the totally unexpected character of what is happening are stupefying.’ His removal is part of Renault-Nissan’s effort to get rid of executives who were allies of Carlos Ghosn when he headed both companies. Ghosn was arrested in November and later charged in Japan with financial misconduct. He denies any wrongdoing.
‘The alliance needs a breath of fresh air,’ Senard said. ‘It’s nothing personal.’ Renault’s board appointed CFO Clotilde Delbos to take over as interim CEO while it searches for a replacement.
– New York City comptroller Scott Stringer said he has sent a letter to 56 companies asking them to adopt policies to consider women and people of color for every open board seat, as well as for CEO appointments, according to The Washington Post. The move is in line with the Rooney Rule, an NFL policy adopted in 2003 that requires every team to interview at least one person of color for head coach vacancies; it now includes other high-ranking front-office positions.
‘As a pension system, we want to invest in 21st century companies that represent the future – not companies with management teams that look like they’re out of the 1950s,’ Stringer said in a statement. ‘It’s time for the business world to embrace these reforms that will lead to decades of progress.’
– Reuters reported that California Attorney General Xavier Becerra detailed the draft regulations for the state’s new privacy law – due to take effect on January 1, 2020 – which he said will allow people to ‘pull the curtains back’ on information companies have collected on them. The proposed regulations would give consumers more control over how businesses collect and manage their personal information, including requiring a ‘Do Not Sell My Info’ link on companies’ websites or apps.
The law will allow people to request that their data be deleted and opt out of having data sold to third parties. Becerra’s draft regulations proposed specific requirements for compliance with the law.
– According to the WSJ, shareholders have approved the creation of one of the world’s largest aerospace companies by voting in favor of the $135 billion combination of United Technologies Corp and Raytheon. The merger plan overcame initial opposition from some activists and other investors skeptical about combining two companies with different growth paths in the defense and commercial-aerospace businesses.
The companies secured investor support in a record year for industry consolidation, arguing that the combination could address changing defense priorities and budget pressures. The new company will be called Raytheon Technologies.