The week in GRC: House Dems to target board diversity, and global co-operation remains key in FCPA cases
– Politico reported that Rep Maxine Waters, D-California, the incoming chair of the House Financial Services Committee, is planning to use her new power to press for more women and minorities in the top ranks of corporate America. Waters has proposed creating a subcommittee focused on diversity and inclusion. Senior members of her committee are preparing to introduce bills that would require companies to disclose the gender and racial makeup of their boards.
According to lobbyists, some companies are panicking at the prospect of new public scrutiny. ‘They have a right to be nervous,’ said Rep Emanuel Cleaver, D-Missouri, a member of the financial services panel. ‘They should feel the fire is getting started and will burn, at least for two years, and hopefully beyond.’
Lobbyists privately admit that some firms have been slow to improve and that nudging from Congress may be what’s needed to force them to act.
– According to The New York Times, recent cases show that insider trading continues to be a focus for the US Department of Justice and the SEC.
– Reuters reported that Hertz Global Holdings agreed to pay a $16 million fine to settle an SEC case over alleged accounting misstatements. Beginning in 2012, ‘Hertz’s public filings materially misstated pretax income because of accounting errors made in a number of business units, and over multiple reporting periods,’ the SEC said in a filing. The company settled without admitting or denying wrongdoing.
– House Democrats have put legislation responding to the 2017 Equifax hack at the top of their agenda for this year, according to The Wall Street Journal. A handful of existing proposals, some bipartisan, offer insight into potential changes to how the industry handles consumer information, including subjecting credit-reporting companies to tougher cyber-security standards and making it easier for consumers to fix errors on their credit reports.
‘The Equifax data breach response is far from over,’ said Jaret Seiberg, an analyst for Cowen Washington Research Group. ‘There will be more legislation in the next two years that impacts Equifax and the other credit bureaus.’ An Equifax spokesperson said the company has undertaken ‘a host of security, operational and technological improvements’ since the breach.
Rep Maxine Waters wants to revive the credit-reporting debate, saying the House Financial Services Committee will focus on the industry and will use as a template a bill she introduced to overhaul the industry.
– The WSJ reported that 2018 US enforcement figures indicate that international co-operation continues to be a central theme in FCPA cases. US authorities resolved 17 corporate cases of FCPA violations in 2018, matching the average amount struck over the past 10 years. They announced roughly $2.9 billion in penalties connected to those cases, but in several instances collected only a portion of that amount, as the companies involved struck simultaneous settlements with multiple countries.
‘In the past, the US often brought cases because no one else would; today, that has changed,’ said Philip Urofsky, a partner with Shearman & Sterling who previously served as assistant chief of the fraud section at the US Department of Justice. Cross-border engagement between the US and its law-enforcement counterparts in other countries is substantial and is here to stay, according to Joseph Warin, co-chair of the white-collar defense and investigations practice at Gibson Dunn & Crutcher.
– According to Reuters, a report by the Chartered Institute of Personnel & Development and High Pay Centre found that the earnings of the UK’s CEOs will match an average worker’s entire annual salary even faster than last year – hitting the mark by Friday lunchtime. The widening pay gap comes despite pressure from leading investors for excessive pay to be curbed and after several high-profile revolts at company AGMs in 2018.
Median pay for a FTSE 100 CEO in 2017, the most recently disclosed data, was £3.9 million ($4.9 million), the report said, up 11 percent from the previous year. Average full-time worker pay in 2018 was £29,574 a year, it added. ‘Excessive executive pay represents a massive corporate governance failure and is a barrier to a fairer economy,’ said Luke Hildyard, director of the High Pay Centre.
– In a column for CNBC, Baja Corporation CEO and founder Betsy Atkins outlined several trends corporate boards should be keeping tabs on this year. These include: board diversity, ESG topics, active in-person engagement with index funds and big shareholders, technological changes such as robotic process automation, crisis management and potential SEC rules for proxy advisers.