The week in GRC: TCI founder backs say-on-climate push and rule freeze affects AML proposals

Jan 29, 2021
This week’s governance, compliance and risk-management stories from around the web

– According to Reuters, lobbyists and legal experts say that although progressives want to repeal the Trump administration’s Wall Street-friendly rules they may struggle to secure enough votes in a narrowly divided Congress and risk obstructing President Joe Biden’s agencies from writing stricter new rules.

Sherrod Brown, D-Ohio, who is expected to chair the Senate Banking Committee, said this month he was drawing up a list of rules passed by Trump regulators that he hopes to kill using the Congressional Review Act. But he may find it difficult to win vital support from moderate Democrats.

Brown’s office said it will consult with Biden’s new regulators on which rules the agencies can fix and which would require Congressional action. The office did not identify specific rules, but pointed to those it said ‘gutted fair housing protections, undermined state consumer protection laws and threatened’ financial stability.

– Senator Bernie Sanders, I-Vermont, said the widespread economic suffering caused by the pandemic has made it ‘morally imperative’ to increase the US’ minimum wage to $15 an hour, The Guardian reported. Sanders and other lawmakers pressing for a higher minimum wage say the chances of enacting a $15 minimum are better than ever given that President Biden has called for a $15 federal minimum as part of his emergency Covid-19 legislative package.

The House of Representatives voted last July to raise the minimum wage to $15 in steps through 2025, but then-Senate majority leader Mitch McConnell, R-Kentucky, blocked a vote on it. Sanders, the incoming chair of the Senate Budget Committee, said the reform could be done under the budget reconciliation – a process where measures deemed to have budgetary impact can be approved by a simple majority vote.

– According to CNBC, Google’s political action committee (PAC) will not fund members of Congress who voted against the presidential election results. ‘After the disturbing events at the Capitol, NetPAC paused all contributions while undertaking a review,’ a Google spokesperson said. ‘Following that review, the NetPAC board has decided it will not be making any contributions this cycle to any member of Congress who voted against certification of the election results.’

Google’s PAC donated to the Senate campaign of Senator Ted Cruz, R-Texas, in 2017 and 2018. Tech companies including Amazon, Facebook, Google and Microsoft have said they will pause contributions from their PACs in the wake of the deadly insurrection at the US Capitol on January 6.

CNN issued a roundup of where major companies stand in terms of their political spending as a result of the January 6 events. Among Fortune 500 companies, roughly 280 had previously supported Republican Congress members who objected to the 2020 election results. CNN surveyed those companies and found that many have not decided a position on future donations. Among many companies that said they plan to pause their political donations, details are vague.

– The Wall Street Journal reported that Kimmeridge Energy Management Co is launching a proxy fight at Ovintiv, arguing that the oil & gas producer should change its spending and improve governance to boost the company’s share price. Kimmeridge nominated three candidates, including its founder Ben Dell, to Ovintiv’s board. Kimmeridge managing partner Mark Viviano said Ovintiv has underperformed its peers, which he blamed on a board he says has limited experience in shale.

An Ovintiv spokesperson said the company is focused on creating sustainable value for investors. ‘We have generated significant free cash flow for each of the last three years and we’re entering this year with strong momentum,’ she said.

– According to the WSJ, ExxonMobil is preparing to make changes to its board and take further steps to reduce its carbon footprint as it faces pressure from activist investors. The company is discussing adding one or more new directors to the board and increasing sustainability investments, people familiar with the matter said. Exxon is in talks with one of the activists, DE Shaw Group, which may ultimately support the moves, some of the people said. The other activist, Engine No 1, is moving forward with a planned proxy fight for four board seats, it said Wednesday.

Exxon said in a statement in response to the Engine No 1 move that it has engaged with the firm since mid-December and that its board affairs committee will evaluate the nominees. ‘ExxonMobil will continue to update shareholders in the coming weeks on the company’s strategy to build long-term, sustainable value for shareholders,’ the company said.

‘It will also provide updates on company performance and actions to address climate change, including initiatives to commercialize technologies that are key to reducing emissions and meeting societal goals consistent with the Paris Agreement.’

– According to the WSJ, billionaire hedge-fund manager Christopher Hohn is bankrolling a campaign designed to force dozens of the world’s largest companies to publish carbon-emission reduction plans and put them up for shareholder votes. Hohn is working with non-profit groups and investor organizations to get at least 100 of the companies in the S&P 500 stock index to adopt the initiative by the end of 2022 – voluntarily if possible and through proxy battles at AGMs if not.

‘There will be resistance from some companies but I’m willing to put it to the vote,’ said Hohn, TCI Fund Management founder and portfolio manager.

– The WSJ said a regulatory freeze imposed by the Biden administration may affect regulations proposed by the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The White House has issued a memorandum ordering federal departments and agencies to halt new or pending rules and regulations advanced by the former Trump administration until a Biden appointee reviews the rules. Incoming administrations commonly conduct such reviews.

The move pauses amendments to anti-money-laundering rules proposed by FinCEN and the Federal Reserve Board. Doing so would give financial institutions and industry groups more time to study the proposals and submit feedback, said Daniel Stipano, a partner at Davis Polk & Wardwell. ‘Companies would like to see some of these rules slow down… and industry groups feel like they need to study these proposals and figure out how they are going to respond,’ he said.

Reuters reported that, according to a memo the company sent to employees, Roblox Corp has postponed its IPO plans because the SEC is looking at how the video game platform recognizes revenue in its finances. The SEC has reservations over the way Roblox recognizes revenue from the sale of its currency, Robux, on its platform, according to the memo seen by Reuters.

The SEC wants Roblox to be more specific and recognize revenue on consumable products on the platform as they are consumed, while durable services will still be recognized over the life of a Roblox user, the memo said. ‘By adopting that accounting position, our revenue will actually be a bit higher, while bookings, [daily active users], hours of engagement and cash flow will not change,’ founder and CEO David Baszucki wrote in the memo. ‘It will, however, take us some time to update this change in our financial statements.’

A Roblox spokesperson declined to comment.


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