The week in GRC: Nike faces shareholder proposal on political spending, and oil companies join climate initiative
– The Wall Street Journal reported that long-time 21st Century Fox board member Viet Dinh is stepping down to become chief legal and policy officer with Fox, the provisional name for the company that will consist of entertainment and news assets – such as Fox News, Fox Sports and the Fox broadcast network – not being acquired by Walt Disney. In addition to oversight of its legal affairs, Dinh will direct the new Fox’s government and public affairs operations.
Most recently a partner at law firm Kirkland & Ellis, Dinh will take on many of the roles previously held by 21st Century Fox general counsel Gerson Zweifach, who will depart when the sale of assets to Disney is completed. Dinh’s board seat won’t be filled.
– According to Bloomberg, Noble Group was planning to introduce the schemes of arrangement that underpin its restructuring, a key step in the creation of a new company that senior creditors signaled they will hold to the highest standards of corporate governance. The company’s ad hoc group of senior creditors said they expected ‘Old Noble’ to file for insolvency, while its successor entity revives the core business overseen by a tough new board.
The ad hoc group ‘believes the current management team, coupled with a new governance structure, is well positioned to execute on the proposed turnaround,’ said Joseph Swanson, senior managing director at Houlihan Lokey, a financial adviser to the creditors backing the rescue. Candidates for the new board ‘must be committed to international best practices and the highest levels of ethical comportment.’
– Reuters reported that Deutsche Bank said it would move assets from London to Frankfurt after the UK’s planned exit from the EU next year, in line with demands from UK and EU regulators. The bank said in a statement that it would make Frankfurt rather than London the primary booking hub for its investment banking clients. ‘By definition this involves moving assets from London to Frankfurt, a process that is already under way with the full understanding of UK and EU regulators,’ it said, declining to specify the volume of asset shifts.
Regulators are demanding that capital, risk management and governance structures are set up on the continent to support investment banking activities, according to a person familiar with the matter. The European Central Bank declined to comment.
– The WSJ said DowDuPont CEO Edward Breen will assume the executive chair position at the specialty products company – to be named DuPont – that will be created next year as part of the conglomerate’s plan to split into three entities.
DowDuPont was created a year ago in a merger. Both Dow Chemical and DuPont had faced shareholder pressure to streamline operations and focus on faster-growing businesses. Since merging, Breen has overseen efforts to cut $3.3 billion in costs while preparing to break the combined entity into three separate companies focused on materials, agriculture and specialty products such as enzymes and fibers.
The plan is for the materials business, to be named Dow, to be spun off from its parent by April 2019. Corteva Agriscience, the agricultural business, and DuPont should be separated by June, company officials said.
– The SEC named Mark Wolfe associate director of the office of derivatives policy and trading practices in the agency’s division of trading and markets. Wolfe first joined the SEC in November 1999 as an attorney in the office of compliance inspections and examinations’ market oversight program. From April 2003 to September 2006 he was a senior counsel in the division of enforcement. After leaving the SEC he worked in regulatory affairs and compliance functions at broker-dealers and investment banks including, most recently, as executive director of equities compliance at JP Morgan Securities.
– CNBC reported that McDonald’s employees, emboldened by the #MeToo movement, staged a one-day strike Tuesday at restaurants in 10 US cities in an effort to draw attention to alleged sexual harassment at the company. The strike took place as union-backed organizations have been putting pressure on McDonald’s to increase its hourly wage to $15 and provide better working conditions for its employees.
‘We have strong policies, procedures and training in place specifically designed to prevent sexual harassment,’ McDonald’s said in a statement. The company also disclosed a new initiative to engage outside experts to work with the company to help ‘evolve’ those policies and procedures.
– Bloomberg reported that, according to people familiar with the matter, Tesla is under investigation by the US Department of Justice (DoJ) over public statements made by the company and CEO Elon Musk. The DoJ opened a fraud investigation after Musk tweeted last month that he was contemplating taking Tesla private and had ‘funding secured’ for the deal, the people said.
The criminal inquiry is in its early stages, one of the people familiar with the matter said. DoJ probes, like the civil inquiries undertaken by the SEC, can take months and sometimes end with prosecutors deciding against bringing an enforcement action. Tesla didn’t have an immediate comment. A spokesperson for the US attorney’s office in San Francisco declined to comment.
– According to the WSJ, the US Department of the Treasury named two senior officials to its counter-terrorism staff, appointing Andrea Gacki as permanent director of its sanctions office and swearing in Isabel Patelunas to lead the intelligence office.
Gacki has served as acting director of the Office of Foreign Assets Control (Ofac) since May, when former director John Smith left the office following an announced departure to join joined Morrison & Foerster, where he co-chairs the law firm’s national security practice. Gacki has held various leadership roles at Ofac for nearly a decade, after first joining as a senior sanctions adviser.
– Danske Bank CEO Thomas Borgen resigned as the bank published results of an investigation into how its operation in Estonia turned into a hub for illicit flows out of Russia and other ex-Soviet states into the West, the WSJ reported. The report said a ‘large portion’ of the transactions are likely related to money laundering, but that it couldn’t be determined how much.
‘It is clear Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia,’ the company said, adding that the investigation didn’t find breaches of Borgen’s legal obligations. But it did say he failed to inform its board of directors of an internal report about the matter as early as 2014, more than a year before the accounts at issue were shut down.
US, Danish and Estonian authorities are investigating the case. The bank declined to comment in a press conference on continuing investigations, but the report said so far there were no findings of sanction violations.
– Reuters reported that the Commodity Futures Trading Commission (CFTC) ordered Bank of America to pay a $30 million civil penalty to settle allegations of what it called attempted manipulation of the swaps and derivatives benchmark. The CFTC said Bank of America from January 2007 through December 2012 made false reports and attempted to manipulate the US Dollar International Swaps and Derivatives Association Fix, a leading global benchmark.
A Bank of America spokesperson said the bank has ‘significantly enhanced’ the procedures it uses to detect inappropriate behavior. The bank settled without admitting or denying wrongdoing.
– According to CNBC, ExxonMobil, Chevron and Occidental Petroleum will join a coalition that aims to reduce greenhouse gas emissions from the oil and gas industry. The move is a reversal for the companies, which did not join the Oil and Gas Climate Initiative when it was formed in 2014. The initiative currently has 10 members, including Total, Royal Dutch Shell and BP, as well as state oil companies Saudi Aramco, Pemex and CNPC.
Members of the initiative pledge to take action to reduce methane and transport emissions, improve their energy efficiency and develop technology to capture and store carbon emissions. ‘It will take the collective efforts of many in the energy industry and society to develop scalable, affordable solutions that will be needed to address the risks of climate change,’ said Exxon chair and CEO Darren Woods in a statement.
– The SEC said Christopher Hetner, senior adviser to chairman Jay Clayton for cyber-security policy, plans to leave the agency. Hetner will remain in the chair’s office during the search for and transition to his successor. He previously served in the same role for former chair Mary Jo White and former acting chair Michael Piwowar.
Hetner helped to create the position in 2016 to better co-ordinate cyber-security policy efforts across federal financial regulators, enhance the SEC’s ability to assess cyber-related market risks and improve the commission’s cyber-security posture.
– The WSJ reported that Stephanie Avakian, the SEC’s co-director of enforcement, said the agency is still policing wrongdoers, even if the volume of its enforcement actions and dollar amount of its fines drop this year. The SEC rejects the premise ‘that numbers – standing alone – can adequately measure the success or impact of an enforcement program,’ she said. ‘Any assessment that suggests our effectiveness should be measured solely based on the number of cases we bring over any particular period of time is misguided.’
The SEC hasn’t revealed its enforcement statistics for fiscal year 2018, which ends on September 30. Total fines ordered through its enforcement activity fell 7.2 percent in 2017 to roughly $3.8 billion, the lowest total since 2013, according to SEC figures.
– The WSJ reported that investors voted Thursday on a proposal demanding regular reporting from Nike on political contributions. The vote, at the company’s AGM, came a few weeks after the sportswear company unveiled an advertising campaign featuring NFL quarterback-turned-activist Colin Kaepernick. The campaign led some consumers to call for a boycott of the company and others to buy more of its sneakers.
Nike’s board recommended that shareholders vote against the resolution for greater political-spending transparency, adding that the company’s existing policies and disclosures have proper oversight and give shareholders enough information to evaluate any risk related to political contributions, according to its proxy statement. Nike didn’t respond to a request for comment.
– According to Reuters, the Moscow Exchange (Moex) said it had put off plans to offer access to the 50 most liquid US shares due to political tensions with the West. Russia is bracing itself for more US sanctions that could curb foreign investment in Russian sovereign debt. Moex had planned to expand its range of trading tools by offering access to around 50 US companies with the most popular and liquid shares in the third quarter.