The week in GRC: COSO urges co-ordinating compliance and risk, and New Yorkers reluctant to return to offices

Nov 13, 2020
This week’s governance, compliance and risk-management stories from around the web

The Wall Street Journal reported that Apple suspended new business with key supplier Pegatron Corp, saying that the Taiwanese company violated the US smartphone maker’s rules related to student worker programs at its China facilities. Apple said it placed Pegatron on probation and won’t give the Taiwanese company any new business until it completes all required corrective actions.

‘Pegatron misclassified the student workers in its program and falsified paperwork to disguise violations of our code,’ Apple said in a statement. It said Pegatron fired the executive with direct oversight over the program.

In a statement, Pegatron said the violations involved its plants in Shanghai and Kunshan, Jiangsu province. The company said it has since removed the student workers from production lines and made arrangements for them to return home or to school with proper compensation.

– According to Reuters, Alaska Air Group named Ben Minicucci to take over as CEO. He will succeed Brad Tilden, who retires on March 31, 2021. Minicucci has been serving as president since 2016. Tilden will keep his seat on Alaska’s board, the company said.

CNN reported that the EU unveiled formal antitrust charges against Amazon for allegedly abusing its dominance in online shopping and opened a second investigation into the company’s business practices. Margrethe Vestager, the European Commission’s top antitrust official, accused Amazon of illegally abusing its dominant position as an online marketplace in Germany and France. The commission in July 2019 opened a formal investigation into Amazon to probe its dual role as marketplace and retailer.

Amazon took issue with the investigation’s findings. ‘We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts,’ the company said in a statement.

‘We do not take issue with the success of Amazon or its size; our concern is the very specific business conduct that appears to distort competition,’ Vestager said.

– China’s State Administration for Market Regulation has released new draft anti-monopoly rules for its online platforms, indicating an increased desire to rein in the country’s dominant technology companies, according to the WSJ. The regulator said it would seek feedback on rules covering a range of potential anti-monopolistic practices on the country’s digital platforms, including offering different prices to different consumers for the same product.

‘Regulators are sending a message to online platforms to behave themselves,’ said He Jing, a lawyer at GEN Law Firm, who said the draft rules were likely meant to help advance a recent push from China’s top leaders to encourage domestic consumption over the next five years.

Bloomberg reported that, according to access-control systems provider Kastle Systems International, companies in the greater New York City area have had the least success among major US regions in bringing employees back to the office. By contrast, employers in major cities in Texas have brought the most workers back, the report finds. Kastle Systems measures key-card and fob office-access data from 3,600 buildings and 41,000 businesses in 47 states.

Only about a quarter of workers in all 10 cities returned to the office last week. The gauge fell from 27.1 percent on October 28 to 25.1 percent on November 4, the lowest since early September. In New York City, only 13.1 percent of workers were back in the office during that week.

– The Committee of Sponsoring Organizations (COSO) of the Treadway Commission said companies should create closer links between their compliance departments and risk managers, the WSJ reported. COSO, whose recommendations are followed closely by public companies, issued voluntary guidance aimed at helping boards, executives and managers better identify, monitor and mitigate compliance risks. The guidance encourages organizations to better co-ordinate risk management, compliance and ethics functions to strengthen protections against legal and regulatory problems.

– According to Reuters, senior Democratic lawmakers demanded that Federal Communications Commission chair Ajit Pai and Federal Trade Commission chair Joseph Simons stop work on all partisan or controversial items following the US presidential election results. ‘We strongly urge the agency to only pursue consensus and administrative matters that are non-partisan for the remainder of your tenure,’ House Energy and Commerce Committee chair Frank Pallone, D-New Jersey, wrote in letters to the two agencies, joined by the subcommittee chairs overseeing the agencies.

Pai said last month he would move to set new rules clarifying the meaning of a key legal protection for social media companies after a demand by President Donald Trump and over the strong objections of Democrats.

– The UK’s Financial Reporting Council (FRC) said company accounts are not meeting the needs of investors in factoring in the related risks of climate change, according to Reuters. The FRC said in a letter to boards that it expects them to do a better job of assessing areas such as the impact on asset impairments and fair value. Some financial statements did not mention climate change even though narrative reporting elsewhere in a company’s annual report suggested it could be having ‘a significant impact on key financial statement assumptions,’ the FRC said.

The letter follows a campaign by some investors to push companies to better reflect climate risk in their accounts.

– According to Reuters, California Air Resources Board chair Mary Nichols said her state’s agreement with major automakers for fuel efficiency requirements could serve as a ‘good template’ for federal standards through 2025. The Trump administration in March finished rolling back US corporate average fuel economy standards set under Obama administration rules.

California and other states have filed suit to challenge the rollback, and companies including Ford Motor Co and Honda Motor reached a compromise deal with the state that falls between the Trump administration and Obama-era requirements. President-elect Joe Biden has vowed to negotiate ‘ambitious fuel economy standards’ with industry, unions and environmental groups.

–The WSJ reported that Tyson Foods is developing plans to reduce the risk of deforestation in its global supply chain. Tyson said it is working to reduce deforestation risk for four sets of commodities – cattle & beef, soy, palm oil & pulp and paper & packaging – after an analysis found that 6 percent of the company’s footprint was at risk of being associated with deforestation. The company said it would outline its progress in an annual sustainability report.

But Green Century Capital Management said Tyson’s plans failed to eliminate the company’s exposure to deforestation and its planned timeline to reduce the risks were too protracted. Green Century last year backed a shareholder proposal that sought to push Tyson to strengthen efforts to eliminate deforestation from its supply chain but withdrew the proposal in February after Tyson announced plans to address the issue.

Asked to respond to Green Century, a Tyson spokesperson said the company was taking the next year to evaluate the portion of its footprint associated with deforestation risk: ‘Protecting forest resources aligns with our purpose.’

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