The week in GRC: US banks face climate stress tests and Norway SWF eyes corporate audit quality
– The Wall Street Journal reported that, according to people familiar with the matter, a group of activist investors has taken a big stake in Kohl’s and is trying to take control of the company’s board. The group controls a combined 9.5 percent stake in the department-store chain and earlier this year nominated nine people to its now 12-person board, the people said. The activists think Kohl’s isn’t moving fast enough to tackle stagnant sales and declining operating margins, issues that predate the pandemic, the people said.
Kohl’s said in a statement that it has been in discussions with the group since early December and remains open to new ideas. It said it is confident its new strategy, published in October 2020, will accelerate growth and profitability. It also noted that since the plan was unveiled, Kohl’s has received seven upgrades from equity analysts and its stock price has risen 150 percent.
– Principal Financial Group said it plans to launch a strategic review and appoint two new independent directors as part of a settlement agreement with activist investor Elliott Investment Management, Bloomberg reported. The hedge fund firm has been pressing Principal to explore selling or spinning off its more capital-intensive life insurance business to focus on its more profitable wealth-management operations, according to people familiar with the matter.
The company said in a statement that, as part of the deal with Elliott, it had struck a committee to initiate a strategic review of its business mix, capital management and capital deployment options. ‘This review builds on work Principal has consistently undertaken to enhance shareholder returns and will help ensure we remain well positioned for continued growth, future success and value creation,’ said Dan Houston, Principal’s chair, president and CEO.
– The WSJ reported that Treasury secretary Janet Yellen said the US Department of the Treasury may be able to facilitate climate stress tests on US banks and insurers, although the tests likely wouldn’t impose capital requirements or limit dividend payouts as existing stress tests do.
Yellen said the tests would be carried out by the Federal Reserve and other financial regulators and not the Treasury. But she said the Treasury, which helps shape regulatory policy toward US financial services firms, may be able to facilitate the tests. Yellen has said she plans to create a hub within the Treasury to review the tax policy incentives and financial stability risks related to climate change and will appoint a senior official to lead the review.
– Reuters reported that Marriott International named Tony Capuano as its new CEO. Capuano succeeds Arne Sorenson, who died the week before after a battle with pancreatic cancer and during whose tenure Marriott struck a $12.2 billion deal to buy Starwood Hotels & Resorts Worldwide. Capuano, who most recently led the company’s US and Canada lodging business, takes up the role at a time when the Covid-19 pandemic has severely hit travel demand.
– Kirsty Everett, the compliance chief operating officer at HSBC Holdings, will be the bank’s interim compliance chief as it looks to fill the role permanently, the WSJ reported. The vacancy was created by the appointment of Colin Bell, HSBC’s group chief compliance officer for the past four years, as CEO of HSBC Europe and HSBC Bank. Everett will take up Bell’s role in addition to her existing responsibilities, a company spokesperson said.
– Apple shareholders voted to re-elect the company’s board and approve 2020 pay for executives including CEO Tim Cook, CNBC reported. Apple shareholders also voted against a shareholder proposal opposed by the company that would have asked it to reduce executive pay compared with median Apple employee pay. Cook said in a Q&A session that although Apple had adapted well to remote work, the company still ‘can’t wait until we can gather together in the office again.’
– According to the WSJ, new laws intended to protect whistleblowers in antitrust and anti-money-laundering cases are leading to a broader investigative role for the US Department of Labor. The department’s Occupational Safety and Health Administration (OSHA) will now investigate complaints by individual whistleblowers who face retaliation for reporting antitrust or money laundering-related violations to their superiors or the federal government, the agency said.
OSHA said it would also investigate complaints from whistleblowers who say they were retaliated against for assisting investigations or proceedings related to alleged antitrust or money laundering-related wrongdoing.
– Reuters reported that Bausch Health Companies agreed to add two directors from Icahn Group to its board, weeks after activist investor Carl Icahn disclosed a nearly 8 percent stake in the Canadian drug company. The new members will be appointed to committees including those assisting with the potential spinoff of Bausch’s eye health business. Bausch said in August it would spin off its eye care unit, Bausch + Lomb, into a separate publicly listed company.
– The UK’s Serious Fraud Office (SFO) has taken steps to emphasize the need for companies to invest in compliance programs and procedures, the WSJ reported. The focus on the strength of companies’ compliance programs is a new one for the SFO. ‘The emphasis we place on it today is significantly stronger than it was when the agency was born’ in the late 1980s, said SFO director Lisa Osofsky. Under Osofsky, who began her tenure in 2018, the regulator has offered additional guidance on how it handles corporate cases, including how it evaluates compliance programs.
– Reuters reported that Norway’s $1.3 trillion sovereign wealth fund is considering how to ensure high-quality audits are conducted in its roughly 9,100 portfolio companies. ‘What we are looking into is the role of the auditor and whether there is anything we can do to make sure the audit quality of the companies is the way it should be,’ said Carine Smith Ihenacho, the fund’s chief governance and compliance officer.
The fund has been at the forefront of promoting ESG issues, recently telling companies to name more women to their boards and demanding they do more to show how they affect the climate. Smith Ihenacho said auditing was on the radar in part because the fund, as a shareholder, votes to approve a company’s auditors at its AGM.
– UK investment managers plan to increase pressure on companies to promote the presence of racial and ethnic minorities on their boards, the WSJ reported. The UK’s Investment Association said it will issue warnings to FTSE 350 companies that don’t publish information on the ethnic and racial composition of their board. The group will also warn companies that don’t have a plan to have at least one director from an ethnic minority background by the end of the year.
‘The UK’s boardrooms need to reflect the diversity of modern-day Britain,’ said Andrew Ninian, the Investment Association’s director of stewardship and corporate governance, in a statement. ‘Investors are now calling on companies to take decisive action.’