The week in GRC: Tesla names new board chair, and IMF’s Lagarde calls for more women business leaders
– The Wall Street Journal reported that Citigroup plans to keep its CEO and chair roles separate. The bank’s board said it had selected director John Dugan, a former top banking regulator, as its next chair. Dugan will move into the role in January, following Michael O’Neill’s retirement, setting him up to preside over the bank’s annual meeting next year. Dugan was head of the Office of the Comptroller of the Currency from 2005 to 2010, a span that included the financial crisis and Citigroup’s bailout.
Although some other banks that split the CEO and chair roles after the financial crisis have recombined them, Citigroup has kept them apart. Investors are often reluctant to support combining the chief executive and chair posts. In recent years, JPMorgan Chase CEO Jamie Dimon and Bank of America CEO Brian Moynihan have faced down tough campaigns by some shareholders to strip them of their chair titles.
– The WSJ also reported that veteran investor Evelyn Davis died at a hospital in Washington, DC. She was 89. For more than five decades, Davis attended AGMs of Bank of America, Ford Motor Co and Goldman Sachs, among many other companies, to offer advice and demand changes. She advocated lower pay for executives and term limits for directors. Sometimes she advised CEOs to resign.
– According to the WSJ, tech entrepreneurs who for years were reluctant to enter the public stock market have begun jumping in with both feet. As their shares outperform, newly public tech companies have been returning to the market to sell more stock at an unprecedented pace. Roughly 44 percent of follow-on stock offerings from US-listed technology companies in the first 10 months of the year have come within 180 days of an IPO. That would be the second-highest yearly percentage since Dealogic began collecting data in 1995.
– Tesla said on November 2 that it had received a subpoena from the SEC over forecasts it made about Model 3 production in 2017, a set of targets the electric vehicle company failed to hit on time, according to Reuters. The SEC issued subpoenas over ‘certain projections that we made for Model 3 production rates during 2017 and other public statements relating to Model 3 production,’ Tesla noted in a quarterly filing.
‘To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,’ Tesla wrote in its filing. The SEC declined to comment.
– The WSJ reported that banks are urging regulators to write a new rule limiting the use of informal guidance, signaling that firms aren’t satisfied with the pace of deregulation under the Trump administration. The Bank Policy Institute and American Bankers Association filed a petition with the Federal Reserve and other bank regulators. Their request is that the regulators write a rule stating that bank examiners won’t punish firms for violating informal policies known as ‘guidance.'
The petition is part of a years-long fight over guidance documents, which spell out regulatory expectations from loan underwriting to business relationships with third-party vendors. Bankers say regulators often punish or threaten to punish them for violating guidance, even though compliance is supposed to be voluntary.
Representatives of the Fed, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau said the agencies had received the petition and were reviewing it. A Federal Deposit Insurance Corporation spokesperson said the agency ‘has taken a variety of steps to ensure our examiners understand the role of supervisory guidance, including written instructions, calls to examiners and regional and field personnel, and in-person training’, adding that ‘supervisory guidance does not have the force or effect of law.’
– The Washington Post reported that Tesla named Robyn Denholm, the CFO of Australian telecommunications firm Telstra, as chair of the electric car maker’s board, which oversees CEO Elon Musk. Denholm, who joined Tesla’s board in 2014, will become chair immediately and step down from her role as CFO and strategy head at Telstra in six months to hold the role full time. She ‘will also temporarily step down as chair of Tesla’s audit committee until she leaves Telstra,’ the US company said.
The decision comes after Musk settled with the SEC over his tweets about taking Tesla private. The settlement stripped Musk of the ability to serve as chair for three years and required Tesla to appoint two new independent directors, establish a new committee of independent directors, add controls for overseeing Musk’s communications and pay penalties. Musk and Tesla settled without admitting or denying wrongdoing.
In a tweet responding to Tesla’s announcement, Musk said he ‘would like to thank Robyn for joining the team. Great respect. Very much look forward to working together.’
– Christine Lagarde, managing director of the International Monetary Fund, is calling for more women to become business leaders as a way to address the issue of corporations being too myopic, according to Bloomberg. ‘Bring more women to the business. That is an imperative. It’s true,’ Lagarde said in response to a question about how to fix this short-term focus.
More than three quarters of large organizations globally are looking to add women to their upper echelons. As of April, however, women held only one in four positions at manager level or higher in Asia, a McKinsey & Co report found. That compares with more than one in three at companies in the US and Europe, according to Catalyst, a non-profit organization that advises firms on diversity and inclusion.
– According to the WSJ, the midterm election results won’t derail the Trump administration’s push to ease rules for banks, but Democratic control of the House of Representatives will put Wall Street at the center of political battles.
Rep Maxine Waters, D-California, one of the loudest Democratic critics of Wall Street and the Trump administration, is poised to lead the House Financial Services Committee. In the Senate, Republicans retain control of the Senate Banking Committee.
Although a divided Congress heralds more partisan bickering, it doesn’t necessarily signal a change in the Trump administration’s push to ease rules for financial companies. Lawmakers have already delegated to the Federal Reserve, SEC and other agencies the authority to reset Wall Street rules. Gridlock will likely maintain this status quo, with the rule-writing pen in the hands of Trump-appointed officials leading those agencies.
–The WSJ reported that, according to people familiar with the matter, Wells Fargo has ended its investigation into alleged gender bias in its wealth management division. Jon Weiss, the unit’s top executive, told some managers on a call that ‘there is unequivocally no gender bias’ in the unit, the people said.
The investigation arose from allegations of female senior executives who said women in Wells Fargo’s wealth management division are systematically belittled or blocked from promotions. The allegations and investigation show how the #MeToo movement has become part of a broader discussion about whether women are being fairly promoted into senior roles in a variety of industries.
A Wells Fargo spokesperson said the bank values all its employees and takes seriously any allegations raised by them. ‘We ensure that concerns raised are thoroughly and objectively investigated, while taking measures to protect confidentiality,’ she said.