The week in GRC: Papa John’s founder sues over board disclosures, and US guides on sanctions compliance
– The Wall Street Journal reported that the highest-paid CEO in the retail industry was Stephen Kaufer of the online travel company TripAdvisor. Kaufer, who made $47.9 million, joined the bosses of two other consumer internet websites atop the list of the highest-paid CEOs at companies in Standard & Poor’s retail industry group in 2017, according to a WSJ analysis.
Glenn Fogel of Booking Holdings, which runs travel sites Booking.com, Kayak.com and Priceline.com, came in second, at $27.8 million. In third place was Reed Hastings of streaming-video company Netflix, who made $24.4 million.
– Papa John’s is preparing for a fight against founder and former chair John Schnatter by adopting a poison pill defense to protect itself against a hostile takeover attempt, according to The New York Times. The plan, announced by the company’s board, is meant to prevent any shareholder from amassing a controlling interest in Papa John’s.
Schnatter, who resigned as chair this month after a report that he had used a racial slur in a comment about black people, owns 30 percent of the company’s stock, making him its largest shareholder. He has said since stepping down that doing so ‘was a mistake’ and that he was pressured to leave by board members acting on ‘rumor and innuendo.’
A lawyer for Schnatter said he ‘is not going to go quietly into the night.’ The lawyer declined to comment on the poison pill move by Papa John’s, which would take effect if Schnatter and his affiliates raised their combined stake in the company to 31 percent or if anyone were to buy 15 percent of the common stock without the board’s approval.
– The SEC said Julie Lutz, the regional director of the agency’s Denver office, will leave the SEC at the end of this month after more than 40 years of service. Lutz has led the Denver office since November 2013, overseeing the agency’s enforcement and examinations in a seven-state region.
‘For the last 40 years, Julie has worked hard every day to serve America’s investors, particularly Main Street investors across the West and Midwest,’ said SEC chair Jay Clayton. ‘Julie has been and will remain a role model for all of us at the commission.’
– According to the WSJ, CFOs say forming a complete and cohesive assessment of a company using proliferating data in an increasingly digital workplace has emerged as a top challenge, according to a survey by Workday. Only 39 percent of more than 670 finance executives around the world said they are highly confident about managing their company’s risks while tackling the mission to modernize systems and processes to keep pace with competitors amid increasing global risk.
Risks such as international trade tension or volatile currency markets put the spotlight on CFOs and their ability to quickly assess available information and respond to such threats. But CFOs often lack the relevant skills within their teams, and those in the C-suite fail to collaborate effectively, according to the survey.
– The WSJ also reported that, under proposed legislation, criminals using the UK property market to launder money face prison time. Foreign companies owning UK real estate will have to reveal their beneficial owners, and failing to do so could lead to up to five years in prison, according to the bill. The owners’ names will appear on a corporate registry, making it easier for law enforcement to seize assets linked to criminals.
– According to the WSJ, US officials released guidance highlighting the ways North Korea evades sanctions, saying it could help make companies aware of tactics that expose them to compliance risks. The guidance discusses two primary sanctions risk areas: inadvertent sourcing of goods, services or technology from North Korea, or the presence of North Korean citizens in supply chains. US companies are barred from importing products from anywhere in the world if made by North Korean workers or sourced from North Korean goods.
‘Businesses should be aware of these deceptive practices in order to implement effective due diligence policies, procedures and internal controls to ensure compliance with applicable legal requirements across their entire supply chains,’ the guidance states.
– The SEC proposed rule amendments designed to simplify and streamline the financial disclosure requirements applicable to registered debt offerings for guarantors and issuers of guaranteed securities, as well as for affiliates whose securities collateralize a registrant’s securities.
The proposed changes to rules 3-10 and 3-16 of regulation S-X would focus disclosures on information that is material to investors given the specific facts and circumstances, make the disclosures easier to understand and reduce the costs and burdens for registrants, the SEC said in a statement. In reducing compliance burdens, the proposed changes should ‘further encourage issuers to register debt offerings, and thus provide investors with additional protections that are not present in unregistered offerings,’ the agency stated.
– According to the WSJ, Facebook’s top lawyer will leave the company at the end of the year. Colin Stretch, who has worked at the company since 2010, announced his departure in a Facebook post.
Stretch said he had moved to Washington, DC, several years ago and was therefore several time zones removed from Facebook’s headquarters in Menlo Park, California. ‘As Facebook embraces the broader responsibility [CEO Mark Zuckerberg] has discussed in recent months, I’ve concluded that the company and the legal team need sustained leadership in Menlo Park,’ he wrote.
– UK asset manager Standard Life Aberdeen criticized peers for not attending the AGMs of investee companies in person, according to Reuters. In its second-quarter corporate governance report, Euan Stirling, who heads stewardship at the firm, said it was particularly important to do so when challenging the board. ‘We think it is important to attend AGMs where possible. This is particularly the case where we want to hold a board, or specific members of it, to account,’ Stirling said.
– The FT reported that rebel shareholders narrowly won a vote to remove the entire board of Ellaktor, Greece’s largest construction company, at an annual meeting in Athens. According to the final count of proxy votes, 52.92 percent of votes cast were in favor of a new nine-member board to be headed by Georgios Provopoulos, a former central bank governor, as chair, while 47.08 percent backed the current board.
Anastasios Kallitsantsis, a former chair and head of the contractor’s wind energy arm, will take over as CEO with a five-year mandate. The new board’s first priority will be to strengthen corporate governance based on best international practices, Kallitsantsis said.
– The SEC appointed Kristin Snyder deputy director of the agency’s office of compliance inspections and examinations (Ocie). Snyder has served as the co-national associate director of Ocie’s investment company/investment adviser exam program since August 2016 and as the associate regional director for examinations in the SEC’s San Francisco office since November 2011. She will continue in both of these roles while also assuming this additional leadership role in Ocie.
Her appointment followed the announcement that Jane Jarcho, deputy director of Ocie, will retire from the agency at the end of August. Jarcho has served as Ocie’s deputy director since 2016. Among other things, she has led targeted high-risk examination initiatives in areas including cyber-security, internet and robo-advisers, alternative mutual funds, share class recommendations, retirement accounts and supervision of individuals with disciplinary history.
– The SEC also named Elizabeth Baird and Christian Sabella deputy directors in the division of trading and markets. Baird joins the SEC from Morgan Lewis & Bockius, where she was a partner in the firm’s Washington, DC office and advised businesses and investors in the fixed income, equities and options markets. Sabella has been an associate director in the division’s office of clearance and settlement since 2015.
– Later in the week, the WSJ reported that Papa John’s founder John Schnatter filed a complaint against the company alleging that it failed to disclose documents he requested related to his resignation as chair. Schnatter said he requested records of communication between board members, which he said will show directors were planning to terminate his chairmanship and his lease agreement to work from corporate headquarters before they formed a special committee to address allegations against him, according to the filing. Schnatter said he has a right to view such records because he’s a director, according to the court document.
A spokesperson for Papa John’s said the company believes it has given Schnatter all of the documents he is entitled to as a director.