The week in GRC: Google facing discrimination lawsuit and P&G's activist fight heats up
– Reuters reported that at least 24 federal lawsuits had been filed against Equifax by September 10, following a cyber-breach that could hit as many as 143 million Americans. The news agency expects more lawsuits to be filed and, ultimately, for these lawsuits to be combined into one nationwide piece of legislation.
Equifax said it learned of the cyber-breach on July 29 and has taken measures to protect its customers’ data since then. Two key US senators – Orrin Hatch, who chairs the Senate Finance Committee, and Ron Wyden – demanded that Equifax disclose when three executives who sold stock in the company in August were first notified of the data breach, Reuters reported in a separate story.
– Google has appealed its record €2.4 billion ($2.9 billion) European antitrust fine, starting a legal battle that could take years to conclude, according to the Financial Times. The search giant filed its appeal on Monday with the General Court in Luxembourg against Brussels’ June decision. But it did not seek to block the regulator’s request to change its search engine to treat comparison-shopping rivals equally with its own service, according to the European court’s spokesperson.
Google sent its proposed fix to Margrethe Vestager, EU competition commissioner, at the end of August, which she said ‘pointed in the very right direction’, but could only be judged once in effect, according to an interview with AFP. The precise changes could take months or even years to negotiate.
– Elliott Management has taken a 5 percent stake in Hitachi’s subsidiary Hitachi Kokusai Electric, the FT reported. It is the second active legal tussle between Elliott and Hitachi, following Elliott’s objections to Hitachi’s proposed takeover of Ansaldo STS, an Italian rail-signaling equipment company.
Hitachi Kokusai’s share price rose 4.6 percent following the Elliot announcement. In April the US private equity group Kohlberg Kravis Roberts agreed to buy the company from Hitachi in a deal that valued the company at more than $2 billion. But a minority shareholder committee declined the deal in August, saying that the offer to buy a 48 percent stake at ¥2,503 ($22.68) a share was undervaluing the company. The committee pointed out that Hitachi Kokusai’s shares had jumped to ¥2,845 in July following better-than-expected results.
– BP filed for an IPO of its US Midwest and Gulf Coast pipeline assets, Reuters reported. BP Midstream Partners, the master limited partnership (MLP), plans to list on the NYSE, where it hopes to raise up to $100 million. ‘An MLP is a tax-advantaged structure often used by pipelines and other capital-intensive companies to distribute excess cash to investors in the form of tax-deferred dividends. Most MLPs rely on external debt to fund new projects,’ Reuters noted.
Other energy companies that have spun off their pipeline assets include Royal Dutch Shell, which in 2014 raised nearly $1 billion in the largest MLP listing to date, and refiners such as Valero Energy Corp, Andeavor (formerly Tesoro Corp) and Marathon Petroleum Corp.
– The fight between Procter & Gamble and Trian Partners is heating up, ahead of a shareholder vote on October 10 to determine whether to elect Trian’s co-founder Nelson Peltz to P&G’s board, Reuters reported. P&G is contesting Peltz’s nomination.
Last week Trian released a 94-page plan to reorganize P&G into three global business units, having recently reorganized it into 16 business units. Speaking about Peltz’s proposal, P&G’s chief executive David Taylor said: ‘He’s proposed some things that could be very dangerous to the short term, which is to reorganize the company right now.’
– Institutional investors are planning to increase their investments related to tackling climate change, the FT reported. According to a study by East & Partners, commissioned by HSBC, 97 percent of European investors surveyed intend to increase their green investments, while 85 percent of investors in America and 68 percent of investors in Asia also intend to increase their capital allocations in low-carbon technology and companies that could stand to benefit from climate policies.
Daniel Klier, group head of strategy at HSBC, said the findings showed green finance was moving beyond the realm of specialist ‘ethical’ funds and becoming a routine part of many investment decisions. ‘It is being embedded across the investment community,’ he told the FT.
– Jamie Dimon, chief executive of JPMorgan Chase & Co, has suggested there is a strong succession plan in place if he were to leave the company, according to Reuters. Dimon was questioned at a recent investor conference on whether he might be succeeded by Gary Cohn, the former chief operating officer of Goldman Sachs and current economic adviser to President Donald Trump. Dimon said ‘there are several people’ in the bank who board members know could now do his job if necessary. Dimon also suggested he would like to remain as CEO of JPMorgan Chase & Co for another five years.
– More than three quarters (78 percent) of public company directors expect tax reform will be achieved during Trump’s four-year term, according to a survey from BDO covered by TheStreet. But 22 percent of respondents to BDO’s survey don’t expect the tax reforms to be completed this year. Treasury Secretary Steve Mnuchin said at a conference this week that tax reform will happen this year, as the Trump administration is ‘super-focused’ on passing it.
‘The need to pass the 2018 budget, deal with the deadline on raising the debt ceiling and overcoming the divisions that defeated healthcare legislation will make tax reform a tall order for 2017,’ Matthew Becker, leader of BDO USA’s national tax office, told TheStreet in a statement.
– A group of Silicon Valley entrepreneurs are looking to change IPOs for tech companies, the FT reported. Social Capital Hedosophia, a special purpose acquisition company (Spac), floated on the NYSE on Wednesday, raising $600 million. Spacs are known as ‘blank-check companies’, according to the FT, and set out to use the proceeds of a listing to buy a technology ‘unicorn’, as private companies valued at $1 billion or more are now known.
The Silicon Valley company has a management team that will be familiar to investors and intends to bring a solution to the tech companies that are choosing not to go public. A banner outside the NYSE on Thursday read: ‘Introducing IPO 2.0’. Chamath Palihapitiya, the former vice president of user growth at Facebook and current chairman and CEO of Social Capital, told the FT he was targeting a company with a valuation of $3 billion to $20 billion. He said he had already received a ‘tidal wave’ of inquiries from the CFOs ‘of some of the biggest, most obvious unicorn companies’.
But Lise Buyer, a partner at Class V Group, an IPO adviser, said the Spac model could be limited. ‘The real concern for most companies contemplating an IPO isn’t the challenge of going public,’ she told the FT. ‘It is the obligations and opportunities that come with being public.’
– President Trump blocked a China-backed investor from buying an American semiconductor maker due to national security concerns, the New York Times reported. The White House said on Wednesday that it prevented the acquisition of Lattice Semiconductor, in part because the US government relies on the company’s products. The integrity of the semiconductor industry, it said, was vital. The White House also raised concerns over the buyer’s close ties to Beijing: the investment group included China Venture Capital Fund Corporation, which is owned by state-backed entities, the White House said.
– The Financial Conduct Authority (FCA), the UK’s financial watchdog, has launched an investigation into the investment consultancy and fiduciary management sector by referring it to the Competition and Markets Authority, according to the FT. In a warning shot to Aon Hewitt, Mercer and Willis Towers Watson – global investment consultants that collectively control up to 80 percent of the British market – the FCA said it feared competition in the sector was suffering because of ‘high levels of concentration’.
Ashby Monk, research director of the Global Projects Center at Stanford University, said the review is likely to be watched closely by regulators around the world. ‘There are inherent conflicts of interest in the business model of investment consultants,’ he told the FT.
– Google has been hit by a class action lawsuit from all women employed by the company in California in the last four years, alleging that Google pays women less than men, the Guardian reported. The lawsuit details formal accounts of alleged gender discrimination and pay disparities and follows accusations in April from the US Department of Labor that Google exercises ‘extreme’ pay discrimination.
The class-action complaint, filed in San Francisco, included three named plaintiffs who offered specific stories of Google ‘assigning and keeping female employees in lower-compensation levels than male employees with similar skills, experience and duties’. Google disputed the central claims of the lawsuit on Thursday, saying it had ‘extensive systems in place to ensure that we pay fairly’.
Google had an intense focus placed on it last month, when the company fired an engineer for writing an internal memo saying white men have become the victims of discrimination as a result of affirmative action.
– The Hong Kong Exchange and the Securities and Futures Commission (SFC), Hong Kong’s financial regulator, have pulled back on their plans to reform the city’s listing process, the FT reported. Last year, the SFC published a list of proposals to improve its oversight of the listings process to ensure Hong Kong can compete with London and New York as a listings venue.
The SFC is reportedly abandoning those plans and will now focus on using its existing powers to question, and in some cases block, applications for listings and capital raising. This year the regulator has suspended eight stocks – double its total actions in the previous three years – and blocked at least one capital raising.
– The SEC is monitoring the trend toward initial coin offerings (ICOs) through crypto-currency, according to Bloomberg. More than $2 billion has already been raised this year through ICOs, which are seen as an alternative to IPOs. The SEC warned in July that if these tokens are effectively securities, they must be registered as such. According to Bloomberg, the SEC is following several companies’ use of ICOs closely through news reports to see whether they are in breach of existing regulations.
– President Trump nominated Joseph Hunt to serve as assistant attorney general for the Department of Justice’s Civil Division, according to Reuters. Hunt currently serves as the chief of staff and senior counselor to Jeff Sessions, the US attorney general.