The week in GRC: P&G says Peltz fails to secure board seat, and Sky faces shareholder criticism
– Ericsson’s leading shareholders chose the former CEO of Swedish industrial group Atlas Copco as the new chair of the telecoms equipment maker, according to the Financial Times. Ronnie Leten will become chair next year if other shareholders approve the plan at the annual meeting, replacing Leif Johansson, who is leaving the company. ‘Ronnie Leten has a very strong track record when it comes to value creation… He has significant experience from digitalization of major operations,’ said Johan Forssell, the head of Ericsson’s nomination committee.
– Bloomberg reported that European antitrust authorities are probing whether the banking industry is preventing rival services from accessing customers’ accounts, as the EU prepares to introduce new data-sharing rules for finance. EU officials carried out unannounced inspections on October 3 in ‘a few’ countries amid suspicions that ‘companies involved and/or banking associations representing them’ may have thwarted non-bank services, the European Commission said.
‘These alleged anti-competitive practices are aimed at excluding non-bank-owned providers of financial services by preventing them from gaining access to bank customers’ account data, despite the fact that the respective customers have given their consent to such access,’ the commission said.
– The Wall Street Journal reported that General Electric (GE) named activist investor Trian Fund Management’s co-founder Ed Garden to its board. The move came a week after GE’s longtime leader, Jeff Immelt, resigned from the company’s board. Trian will now have access to GE’s board deliberations and detailed financial results, just as the company is conducting a strategic review of its business portfolio and deciding how to cut costs and spend its cash.
– The FT reported that Honeywell will spin off its turbo charger unit and its home heating and security businesses to create two new publicly listed companies, in response to pressure from activist investor Third Point. The move falls short of Third Point’s demand that the company spin off its entire aerospace division. But Honeywell president and CEO Darius Adamczyk said the remaining businesses in the core company ‘are best positioned to leverage Honeywell synergies from our technologies, financial and business models and talent.’ At the same time, the spin-offs will be ‘better positioned to maximize shareowner value through focused strategic decision-making and capital allocation,’ he said. Honeywell said the planned separations will not require a shareholder vote and are expected to be completed by the end of next year.
– The FT also reported that, according to new research, Diageo is the best-governed company of the UK’s largest listed businesses. The owner of Guinness, Smirnoff and Johnnie Walker topped the annual ranking of 103 public companies by the Institute of Directors (IoD), the Chartered Quality Institute and Cass Business School.
The 47 factors used to compile the rankings include board diversity, directors’ pay, how long the business has been with an auditor and whether it has a whistleblowing policy. Ken Olisa, deputy chairman of the IoD and leader of the good governance report advisory council, said: ‘Corporate governance is about much more than compliance – it’s about achieving competitive advantage.’
– The WSJ reported that Facebook COO Sheryl Sandberg and other business leaders warned companies against complacency in the effort to advance women in the workplace, arguing that there was a business imperative for committing to gender diversity. Sandberg pointed to new data from LeanIn.Org – which she founded – and McKinsey & Co showing that at companies where one in 10 senior posts is filled by a woman, 50 percent of men and 33 percent of women believe that is sufficient. ‘This has been happening for so long, on gender and on race, that we actually don’t think more is achievable,’ Sandberg said.
McKinsey CEO Dominic Barton said he was worried that slow progress in boosting the number of women in managerial ranks would discourage companies from pursuing more ambitious targets. Women make up 20 percent of C-suite roles, up from 19 percent last year, according to the research.
– The SEC proposed amendments intended to modernize and simplify disclosure requirements for public companies, investment advisers and investment companies and to implement a mandate under the Fixing America’s Surface Transportation Act. The proposed amendments, if adopted, would make adjustments to update, streamline or otherwise improve the commission’s disclosure framework, officials wrote in a related filing.
– According to The New York Times, Democratic lawmakers introduced a bill that would compel top federal officials, including President Donald Trump, to disclose how changes to regulations might benefit them financially. The bill comes after a recent investigation by the Times and ProPublica showed that some appointees to the Trump administration’s deregulation teams had close industry connections and may be reviewing rules that their previous employers had tried to weaken or remove.
Trump established the teams at major federal agencies as part of his effort to roll back regulations, presenting industries with a new avenue for avoiding rules they have long argued were hurting profits, hurting job creation and raising prices. The bill does not have Republican sponsors, which suggests it is unlikely to be approved.
– Bloomberg reported that, according to people familiar with the matter, negotiators in the Basel Committee on Banking Supervision recently came up with a plan to break a year-long deadlock that has delayed completion of the Basel III capital standards. A final deal must be approved by the central bank governors and supervisors on the Basel Committee’s oversight body.
The last big stumbling block in the talks is a measure that restricts how low banks can drive their capital requirements by measuring asset risk with their own statistical models. The EU has been pushing for a floor set at 70 percent of the result yielded by using a standard formula set by regulators; the US wants 75 percent.
– The FT said representatives of US banks and investment groups were complaining about the looming EU Mifid II regulations’ impact on the US finance industry, which is still waiting for regulators to resolve key conflicts with US rules. Mifid II ‘has been a massive headache,’ said Karen Barr, head of the Investment Adviser Association. ‘If people are only waking up to it now, they are in trouble.’
Jennifer Choi, associate general counsel at the Investment Company Institute, said: ‘There’s a tension between Mifid II and complying with US law. Mifid II unbundles research, but US regulations are predicated on bundling research and execution. We’re hoping the regulatory regimes can coexist.’
– Activist investor Nelson Peltz narrowly lost his bid to win a board seat at Procter & Gamble (P&G) but his campaign isn’t going away, the WSJ reported. After waging the largest and most expensive proxy fight in US history, P&G said a preliminary vote tally showed all 11 current directors had been re-elected, without disclosing the count.
‘We will continue to respectfully engage with Nelson Peltz, whose input we value,’ P&G CEO David Taylor said after declaring victory. But Peltz wasn’t admitting defeat and said he disagreed with P&G’s counting of the ballots. His Trian Fund Management said it would wait for the tally to be certified, which could take days or weeks. The close vote promises to keep P&G under pressure to show its big brands can grow.
– The New York Times reported that Mark Tucker – the first outsider to serve as HSBC’s chair – has chosen someone from within as the bank’s next CEO. John Flint, who is in charge of the lender’s retail banking and wealth management business, will assume the role of chief executive in February when Stuart Gulliver retires.
– According to the WSJ, the Chinese government is pushing some of its biggest technology companies to offer the state a stake in them and a direct role in corporate decisions. Wary of the increasing power of private businesses, internet regulators have discussed taking 1 percent stakes in large social media firms, according to people familiar with the matter. Although the government already exerts heavy sway over businesses through regulation, a management role would give it a direct hand in innovative companies that have hundreds of millions of Chinese clients.
– The FT reported that broadcaster Sky and its chair James Murdoch suffered a rebuke from independent shareholders at the company’s annual meeting with a strong protest vote over pay. Nearly half of the votes on the re-election of Murdoch by independent shareholders were cast against him; 64 percent of votes on the remuneration report by shareholders independent of 21st Century Fox, the Murdoch family-owned US media group, also went against Sky.
The protest came after Institutional Shareholder Services, Glass Lewis and Pirc called on investors to revolt against Murdoch. But he was reappointed by the majority of investors at the company’s annual meeting, backed by 21st Century Fox’s 39 percent shareholding. The board said it noted the ‘significant vote’ against the pay report and re-election of Murdoch. ‘We will continue to engage with shareholders to understand their views as part of our ongoing program of engagement,’ it added.
– Bloomberg said Senate Banking Committee chair Mike Crapo, R-Idaho, wants to know whether US bank regulators should be given more power to supervise credit reporting companies following the data breach at Equifax. In a letter, Crapo asked the heads of the Federal Reserve, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency whether they have or need authority to help ensure credit bureaus are adequately protecting consumers’ information.
– The SEC announced that a whistleblower has earned an award of more than $1 million for providing the agency with new information and substantial corroborating documentation of a securities law violation by a registered entity that impacted retail customers. More than $162 million has been awarded to 47 whistleblowers to date. By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal their identity.