The week in GRC: Kodak under investigation, and Trump admin proposed changes for Chinese companies listed in US
– The SEC started investigating trading activity at Kodak last week, following a temporary 2,190 percent increase in the company’s share price, the Wall Street Journal reported. Trading volume increased to eight times the average level the day before the company announced it had received a $765 million government loan to make drugs at its US factories. The investigation was announced after Democratic Senator Elizabeth Warren wrote to Jay Clayton at the SEC, expressing concern about insider trading tied to the Trump administration.
‘This is just the latest example of unusual trading activity involving a major Trump administration decision,’ Warren wrote. ‘I have previously written to you regarding potential insider trading related to defense industry stocks or commodities in advance of the administration’s attacks in Iran, Navient Corporation stock trades in advance of Department of Education announcements, potential insider trading by Commerce Secretary Wilbur Ross and several other incidents. This series of examples of questionable trading activity related to Trump administration actions has become a pattern that deserves further scrutiny from the SEC.’
– More than 100 current and former CEOs called on US Treasury Secretary Steven Mnuchin to increase the government aid available to small businesses, reported the New York Times. The letter was signed by the CEOs of Disney, Walmart and Alphabet, along with former Starbucks CEO Howard Schultz.
‘By Labor Day, we foresee a wave of permanent closures if the right steps are not taken soon,’ the letter authors wrote. ‘Tens of millions of Americans have already lost their jobs in this pandemic. Allowing small businesses to fail will turn temporary job losses into permanent ones. By year-end, the domino effect of lost jobs – as well as the lost services and lost products small businesses provide – could be catastrophic.’
– Uber told its corporate employees that the company’s voluntary work-from-home policy will last until at least June 2021, according to Business Insider. Corporate employees are being offered a $500 stipend to assist with their home office set-up. Facebook and Google have announced similar policies, Business Insider added.
– Ford Motor Co announced a change at the top, with James Farley taking over from Jim Hackett, who will retire on October 1. The New York Times reported that Farley’s promotion to chief operating officer in February led to speculation that Hackett’s time as CEO was coming to an end. Farley will take on the title of president and CEO and join the board of directors.
– The Trump administration recommended that Chinese companies listed on US exchanges should be required to comply with US accounting standards, the WSJ reported. The administration’s plan would require Chinese companies listed in the US to comply by 2022 or give up their listings in the US. Chinese auditors would need to share their work with US auditors for Chinese companies to be compliant with the proposed change, according to senior Treasury and SEC representatives.
– A shareholder in Airbus filed a class action lawsuit against the company, accusing it of securities fraud for misleading the shareholder about corruption allegations, Reuters reported. The lawsuit names the company’s current and former CEOs and current and former CFOs, and alleges that the fraud spanned four and a half years.
Airbus agreed to a $4 billion settlement of corruption charges made by US, UK and French authorities in January. The shareholder lawsuit argues that the company concealed shortfalls in its compliance controls, which resulted in a stock price fall.
– The chief investment officer at CalPERS, Yu Ben Meng, stepped down from his role, effective immediately. Meng cited the need to focus on his health and family in a statement but Reuters reported that the news comes in the wake of pressure from the US government for investors to divest from Chinese companies. Meng previously worked as the deputy chief investment officer with China’s State Administration of Foreign Exchange, which oversees China’ US Treasury security holdings.
– NBCUniversal announced that Paul Telegdy, chairman of NBC Entertainment, will be leaving the company, amid accusations that he fostered a toxic work environment, the New York Times reported. Telegdy was due to face an investigation from outside counsel hired by NBCUniversal, following accusations from several Hollywood stars, including Gabrielle Union.
Union was a judge on America’s Got Talent but was fired from the show after she alleged racist and offensive behavior was happening. She filed a harassment complaint with California’s Department of Fair Employment and Housing against NBCUniversal in June.
– Boards are being advised to develop strong internal controls to strengthen the oversight of blockchain technology products, according to a report in the WSJ. While blockchain is best known as the technology that underpins cryptocurrencies like bitcoin, it is also expected to influence compliance reporting and corporate transparency. With this in mind, The Committee of Sponsoring Organizations of the Treadway Commission (COSO) has published a guide for boards and auditors to evaluate risk when using blockchain in financial reporting.
‘This is going to be the future of transacting and, ultimately, certain aspects of financial reporting,’ COSO chairman Paul Sobel said in an interview with the WSJ. ‘But there are new risks.’