The week in GRC: Investors step up votes for shareholder proposals and DoJ appoints FCPA chief

Aug 13, 2021
This week’s governance, compliance and risk-management stories from around the web

Reuters said that, according to a report from Thomson Reuters Peer Monitor Index, law firms that have survived the pandemic are seeing average demand and productivity levels return to their pre-Covid-19 normal and some practices are outpacing 2019. Peer Monitor found an overall 0.6 percent increase in demand for legal services and a 0.5 decrease decrease in productivity between Q2 2021 and Q2 2019.

The increases stand out even more compared to the second quarter of last year, when coronavirus lockdowns were in full swing. Demand for legal services and productivity both increased by 7.3 percent between Q2 2020 and Q2 2021. Corporate and M&A work are up in Q2 2021, regardless of whether 2019 or 2020 is used as a baseline. Compared to Q2 2019, demand for corporate work is up 3.2 percent, while demand for M&A work is up 11.2 percent.

–The SEC said it would look at revising two amendments to its whistleblower award program rules adopted last September, adding that in the interim it would largely pause enforcement of parts of the two amendments, according to The Wall Street Journal. SEC chair Gary Gensler said recently that he was directing officials to prepare potential revisions to the two amendments for the agency’s consideration later this year to address concerns that they would discourage whistleblowers from coming forward.

One amendment, according to Gensler’s statement, could be used by a future commission to lower an award because of its size. The other could prevent the SEC from making an award in related enforcement actions brought by other law enforcement and regulatory authorities if another whistleblower award program might also apply, he said.

Reuters also reported that the widespread switch in Europe to holding virtual AGMs has gained pace this year, raising concern among some investors that some companies will try to drop the physical version permanently. From January to July, 40 percent of AGMs globally were fully virtual, compared with 27 percent in the whole of 2020, according to Computershare.

In continental Europe the increase was particularly high, with 753 of 878 going fully virtual in the first seven months of 2021, compared to 548 of 918 in 2020. The US did not see the same shift. Around half of the 2021 meetings up to July were virtual, a similar proportion to all of 2020.

–According to the WSJ, the SEC intends to close an investigation into potential bribery violations that Pactiv Evergreen disclosed before an IPO last year, following a similar decision by the US Department of Justice. The probes resulted from Pactiv Evergreen’s voluntary disclosure to the agencies of an internal investigation that later found employees had occasionally given gift cards to government regulators and employees of state-owned companies in China, the company said.

The SEC has indicated that it won’t take any action against the company, Pactiv Evergreen said in a financial report. The company has said it would cooperate fully with the SEC. The amounts of money involved ‘were immaterial, individually and in the aggregate, and these appear to have been provided at the times of [Chinese] holidays for generalized goodwill purposes only,’ according to the filings.

An SEC spokesperson declined to comment. The company didn’t respond to a request for further comment.

Reuters reported that Wells Fargo & Co named Steven Black as board chair, succeeding Charles Noski who will retire at the end of September. Black has been co-CEO of private equity firm Bregal Investments since 2012. ‘Chuck [Noski] stepped into the chairman role at an important inflection point for the company — both in terms of our ongoing work to improve our controls and governance and in the early days of what became an unprecedented global pandemic,’ Wells Fargo CEO Charlie Scharf said.

–President Joe Biden met the CEOs of United Airlines Holdings and Kaiser Permanente in an effort to encourage more companies to follow their lead and require workers to get vaccinated against Covid-19, the WSJ reported. Howard University president Wayne Frederick and Diane Sumpter, a small business leader from South Carolina, were also expected to attend the virtual meeting alongside United CEO Scott Kirby and Kaiser Permanente CEO Gregory Adams.

The companies and university have all said staff must be vaccinated, and Howard is also requiring students to get the shots. The White House reached out to business groups such as the Chamber of Commerce, National Association of Manufacturers and Business Roundtable before Biden announced vaccine requirements for federal workers, a White House official said, and those associations praised the policy change.

–The SEC is rethinking rules on 10b5-1 plans that let company executives sell stock without violating insider-trading provisions, the WSJ noted. In theory a predetermined sale, even if it comes at a fortuitous time, wouldn’t be based on inside information, but research shows the reality is more complicated, the WSJ reporter notes – executives can tweak, cancel or stagger sales, which may be cause for concern.

SEC chairman Gary Gensler has expressed skepticism about the plans and has asked the SEC staff to recommend changes that would curb abuses. The WSJ looked at four areas likely to draw attention.

CNBC reported that the NYSE will require full Covid-19 vaccination for access to its trading floor as of September 13. The exchange said exemptions are being granted for medical or religious reasons and it is expanding its onsite random testing to include vaccinated personnel. The NYSE already requires that people visiting to ring the bell or for IPOs show proof of vaccination. Wednesday’s announcement extends the requirement to those who work on the floor.

The move follows a trend among US companies as the spread of the highly contagious delta variant has affected plans to return more employees to the workplace. More than a dozen large issuers have announced vaccine mandates for some or all of their workers.

–BlackRock and other major asset managers were more willing to flex their muscles against companies in the past year, setting the stage for future showdowns over issues from board seats to climate change disclosure, according to the WSJ. BlackRock funds withheld support from 10 percent of board directors on company shareholder ballots, or more than 6,500 director election proposals, in the year ended in June. That is up from 8.5 percent in the previous year. BlackRock also increased support for shareholder-led proposals. It backed 64 percent of environmental proposals, up from 11 percent during the previous year.

‘There have been subtle but significant shifts at the largest institutions to be more assertive,’ said Rich Fields, who heads Russell Reynolds Associates’ board-effectiveness practice. ‘The implication is there’s going to be more of this.’

–The WSJ reported that the US Department of Justice has appointed David Last chief of its high-profile FCPA unit. Last was made acting chief of the unit in April and was recently given the job on a permanent basis. The unit’s former chief, Christopher Cestaro, left the Department in April to join law firm WilmerHale.

Last is a five-year veteran of the FCPA unit, serving as a trial attorney, assistant chief and principal assistant chief before being appointed to lead the unit. Before joining the fraud section, which houses the foreign bribery team, he was a federal prosecutor in the US attorney’s office in Washington, DC.

 

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