The week in GRC: Loeb launches Campbell proxy fight, and SEC awards $54 million to whistleblowers
– The Wall Street Journal reported that some inside CalPERS’ boardroom are concerned that a decision to build what would be the tallest tower in its hometown of Sacramento represents too much risk. During a private meeting earlier this summer, three CalPERS directors voted against a new $550 million commitment to the proposed office-condominium-retail complex, according to people familiar with the matter.
The dissent came after board members reviewed a memo from an outside consultant that raised some concerns about the development’s return projections, the people said. A majority of other board members agreed to support the project on the condition that it yielded a 5.8 percent return and 40 percent of the office space was preleased.
‘Should this project go forward with development, we believe it will be a successful investment for the fund and an iconic building,’ CalPERS said in a statement.
– Bloomberg said ING Group agreed to pay €775 million ($900 million) to settle an investigation by the Dutch prosecutor into issues including alleged money laundering and corrupt practices. It is one of the biggest fines ever given to one of the country’s banks in a criminal case. The bank acknowledged ‘serious shortcomings’ in executing customer due diligence policies to prevent financial crime at its Dutch unit from 2010 through 2016. It expects to resolve the matter with the SEC without further fines, according to a statement.
The settlement consists of a €675 million fine and a €100 million disgorgement payment. Executive board members will give up their bonuses in 2018, according to the bank’s statement. CEO Ralph Hamers said ‘preventing the bank from being used for money laundering is a top priority for ING.’ The size of the team that handles customer due diligence in the Netherlands has tripled to 450 full-time positions, and more measures are being taken, he added.
– Regulators said they are giving the public an extra 30 days to comment on a proposed rewrite of the Volcker Rule banning proprietary trading by banks, according to Reuters. The five regulators charged with enforcing the rule – the Federal Reserve, Federal Deposit Insurance Corporation, SEC, Commodity Futures Trading Commission and Office of the Comptroller of the Currency – will now accept comments until October 17. A final version of the rule could be completed as soon as early 2019.
– The WSJ reported that, according to lawyers and accountants, the anticipated cost savings of shifting to semi-annual reporting would benefit smaller public companies, but the change probably wouldn’t make a substantial difference for larger firms. When President Donald Trump asked financial regulators to consider allowing public companies to report results on a semi-annual rather than quarterly basis, he said the change would reduce costs and offer greater flexibility.
Accelerated and large accelerated filers paid audit fees of $541 per $1 million of revenue to their independent auditors in 2016, the latest year for which full data is available. By contrast, smaller reporting companies that recorded revenue in 2016 paid $3,345 per $1 million in revenue, according to an analysis by Audit Analytics.
– Reuters reported that Norway’s $1 trillion sovereign wealth fund said it wants companies in which it invests to follow tougher guidelines on sustainability and increase efforts to tackle plastic pollution of the oceans. The fund has stakes in around 9,000 companies across 72 countries. Its aims as an investor significantly overlap with the United Nations’ (UN) goals of achieving sustainable economic, social and environmental development by 2030.
The UN’s goals include responsible consumption and production, affordable and clean energy and sustainable life below water. The fund wants companies’ boards to develop strategies to address these goals and it may sell out of companies if it is not satisfied.
– The Guardian was among those to note that Amazon became the second company to be valued by Wall Street at $1 trillion, weeks after Apple reached the milestone first. The company that started life selling books and CDs online now makes much of its money from hosting websites such as Airbnb, Netflix and Unilever.
Alongside cloud services, Amazon has been growing its own content business, developing TV shows and movies. Last year it bought Whole Foods Market and the company now appears to have targeted the healthcare market as its next big opportunity.
– Bloomberg reported that, according to a review of agency records, the SEC’s enforcement division has hired only five new staffers despite losing more than three dozen since the late days of the Obama administration. The enforcement division departures – the most in any SEC group – come amid a hiring freeze and a decline in enforcement actions. The annual tally of enforcement actions the commission compiles each fall was down 13 percent in 2017, following a series of increases beginning in 2014.
‘The SEC is a human capital agency,’ said commission member Robert Jackson, a Democratic-leaning independent, in a statement. ‘Our people are our most valuable asset. The tragedy of these reductions in staff is that it means fewer investigations, fewer actions and, ultimately, fewer dollars returned to investors.’ A spokesperson for SEC chair Jay Clayton declined to comment.
– The US Senate voted 85 to 14 to confirm Elad Roisman, Trump’s pick as commissioner, to fill the vacant Republican seat at the SEC, Reuters reported. The decision allows Roisman to be sworn in, replacing Michael Piwowar, a Republican who vacated the role when his term ended in June. The vote brings the panel to its full five-member complement, at least until year-end, when one of the Democratic commissioners ends her term.
– The WSJ said a study by brokerage Pragma Securities found an SEC experiment designed to stimulate trading in shares of smaller companies has cost investors more than $300 million over the past two years. The study adds to a body of research that suggests the tick size pilot program has added to investors’ costs without doing much for the small and mid-size companies it was meant to help. The program was launched by the SEC following pressure from some members of Congress.
An SEC spokesperson declined to comment.
– CNBC reported that, according to people familiar with the matter, CBS’ board is in settlement talks with CEO Les Moonves that would see his departure and the appointment of COO Joe Ianniello as interim CEO. The talks between Moonves and his board have been going on for some time but have yet to reach a conclusion, given continued back and forth about his exit package.
CBS officials declined to comment.
– Daniel Loeb, who wants Campbell Soup to sell itself, launched a proxy fight to remove the food company’s entire board, according to Reuters. Loeb’s hedge fund firm Third Point is nominating 12 people, it stated in a letter sent to the company’s board on Friday. Third Point, which owns a 5.65 percent stake in Campbell Soup, announced its move a week after the company issued a strategic plan.
‘This board’s persistent failure to discharge its fiduciary duties leaves us no choice but to seek to replace the entire board with our shareholder slate,’ Loeb wrote in the letter. Campbell did not respond immediately to requests for comment.
– The Guardian reported that Burberry is to end its practice of burning unsold clothes, bags and perfume and will also stop using real fur after criticism from environmental campaigners. The UK fashion company destroyed £28.6 million ($37.1 million) worth of unsold products last year to protect its brand and prevent unwanted stock from being sold at low prices. The FTSE 100 company now says it will reuse, repair, donate or recycle all unsaleable products.
CEO Marco Gobbetti said he hoped others in the industry would follow suit. ‘Modern luxury means being socially and environmentally responsible,’ he said. ‘This belief is core to us at Burberry and key to our long-term success. We are committed to applying the same creativity to all parts of Burberry as we do to our products.’ Burberry shareholders have questioned why the unsold products were not offered to the company’s private investors.
– The SEC awarded $39 million to one whistleblower and $15 million to another whose critical information and continued assistance helped the agency bring an important enforcement action. The $39 million award is the second-largest in the history of the agency’s whistleblower program. The SEC has awarded more than $320 million to 57 individuals since issuing its first award in 2012.
‘Whistleblowers serve as invaluable sources of information, and can propel an investigation forward by helping us overcome obstacles and delays in investigation,’ said Jane Norberg, chief of the SEC’s office of the whistleblower. ‘These substantial awards send a strong message about the SEC’s commitment to whistleblowers and the value they bring to the agency’s mission.’