The week in GRC: Aon and Willis Towers Watson call off merger and Activision Blizzard face employee backlash
– Pharmaceutical executives, lobbyists and consultants are working to prevent a global corporate tax rate of 15 percent that was agreed to by 130 countries earlier this month, the Wall Street Journal (paywall) reported. Lawyers for the big pharma firms estimate that the global tax rate could cost the firms hundreds of millions of dollars per year, and come at a time when the industry faces downward pressure on its drug pricing.
– Companies should be braced for a tougher stance from the SEC’s enforcement division under its new leader, Gurbir Grewal, according to Reuters. Grewal is the first enforcement director without recent ties to corporate America since 2005 and is not afraid of the courtroom. He sued ExxonMobil, DuPont and Unilever as part of an environmental justice initiative while serving as the New Jersey attorney general.
‘As a career prosecutor accustomed to the courtroom, [Grewal] won’t be afraid to aggressively push matters to trial,’ said John Carney, who ran New Jersey’s economic crimes unit from 2002 to 2005 – the same unit Grewal ran from 2014 to 2016.
– Aon and Willis Towers Watson called off their planned $30 bn merger, the New York Times reported, a little more than a month after the Department of Justice (DoJ) sued to block the deal. The merger was proposed in March 2020 and faced scrutiny from regulators around the world, but it was the US regulator that ultimately caused the deal to hit the rocks. The DoJ’s lawsuit would have gone to trial in November at the earliest, which would have postponed the deal until the first quarter of 2022 at the earliest. A spokesperson for Aon told the New York Times that the delay was untenable.
‘This is a victory for competition and for American businesses and, ultimately, for their customers, employees and retirees across the country,’ said Attorney General Merrick Garland in a statement.
– UK regulator the Financial Conduct Authority (FCA) is considering adding requirements for public companies to report on progress toward board diversity targets, Pensions & Investments reported. The proposed ‘comply or explain’ rules would require companies to report on progress toward 40 percent female board representation, having at least one woman in a senior position – chair, CEO, CFO or lead independent director – and at least one board director from a non-white ethnic background. The FCA will take input on the proposals until October 22.
– Facebook could face continued legal uncertainty over its US antitrust litigation, as more than 40 state attorneys general plan to appeal the dismissal of their case, according to the New York Times. Last month a federal judge threw out the case – which argues that the acquisitions of Instagram in 2012 and WhatsApp in 2014 harmed competition – on the grounds that too many years had passed between the acquisitions and the lawsuit. But the Federal Trade Commission is expected to resubmit its lawsuit on August 19. The states’ notice of plan to appeal did not include new antitrust arguments and was filed to the United States Court of Appeals for the District of Columbia Circuit.
- Activision Blizzard – the video game company behind titles like Call of Duty, World of Warcraft and others – faced employee revolt this week, reported the New York Times. On July 20, California’s Department of Fair Employment and Housing filed a lawsuit accusing the company of fostering a ‘frat boy workplace culture’, in which men joked about sexual assault and women were harassed.
The company chief compliance officer, Frances Townsend, sent out an internal memo calling the lawsuit ‘truly meritless and irresponsible’. As a result, more than 3,000 former and current Activision Blizzard employees signed a letter rebuking the firm, while more than 1,500 employees staged a walkout.
Bobby Kotick, the company’s CEO, apologized to employees this week, called its response to the lawsuit ‘irresponsible’ and ordered an investigation into its cultural by an external law firm. Kotick has recently faced significant scrutiny for his $155 mn pay package, which makes him one of the highest-paid executives in the US.
- Neiman Marcus Group has appointed Hannah Kim as its new chief legal and compliance officer, according to the WSJ. Kim most recently served as chief legal officer at Energizer Holdings and brings significant ESG experience – an area of focus for Neiman Marcus Group, according to the newspaper.
- Shares in the commission-free trading platform Robinhood fell 8.4 percent on their first day of trading, the New York Times reported. The company completed its IPO on July 29 and by the end of the first day of trading, the company was valued at $29 bn.
Shares in 2021 IPOs jumped by 39 percent, on average, on their first day of trading, according to data from Dealogic, but The New York Times reported that it has been an especially busy period for IPOs, with 25 companies going public this week alone.
- The US attorney’s office in Manhattan has accused Nikola founder Trevor Milton of lying about ‘nearly all aspects of the business’ and charged him with two counts of securities fraud and one count of wire fraud, CNBC reported. The SEC also filed civil securities fraud charges against Milton and is seeking action to prevent him from acting as an officer at a company that issues securities ever again.
Milton, who stepped down as Nikola’s chairman in September 2020, is accused of pumping the company’s stock for his own gain and using the company’s route to the public markets – via a special purpose acquisition company (Spac) – to target amateur retail investors.
Milton’s legal team asserts his innocence.