The week in GRC: Slack seeks direct listing, and PG&E reaches deal with investor over board member
– Reuters reported that Japanese prosecutors indicted Carlos Ghosn on another charge of aggravated breach of trust, the fourth charge against the former Nissan Motor Co chair. The charge came on the day Ghosn’s latest detention period was set to expire and his attorneys met it immediately with a bail request.
Ghosn has denied all four of the charges, which include understating his income, and said he is the victim of a boardroom coup. ‘Carlos Ghosn is innocent of the latest charges brought against him by the Tokyo prosecutors, aided and abetted by certain Nissan conspirators,’ a Ghosn representative said.
According to the latest indictment, Ghosn caused a total of $5 million in losses to Nissan from July 2017 through July 2018. Nissan said it had filed a criminal complaint against the former chair in relation to the matter, saying it had determined that some of its overseas payments had been ordered by Ghosn for his personal enrichment. Ghosn’s French lawyer denied the allegations.
– According to The Wall Street Journal, Kraft Heinz named a new CEO, replacing Bernardo Hees with another veteran manager of companies controlled by 3G Capital. Miguel Patricio, the former chief marketing officer of brewer Anheuser-Busch InBev, will succeed Hees as chief executive on July 1, Kraft said.
Patricio said the leadership change, after Hees led the company for six years, was a natural step in Kraft’s evolution under 3G. ‘He was the first one to admit that he was finishing this cycle with the company and that the company would benefit from having a person with a different background to lead it in the future,’ Patricio said.
Hees said in a statement that it had been an honor to oversee Kraft Heinz. ‘I have confidence that Miguel and the team will take Kraft Heinz to new heights,’ he said. A Kraft spokesperson said Hees decided to move back to 3G Capital to focus on other projects.
– Bed Bath & Beyond said it appointed five new independent members to its board, replacing some directors after facing pressure from a trio of activist investors, according to Reuters. Activist investors Legion Partners Asset Management, Macellum Advisors and Ancora Advisors last month urged Bed Bath & Beyond to replace its entire board and oust CEO Steven Temares. The company’s latest board shake-up did not please the trio, which declined an invitation to take part in the board overhaul.
Bed Bath & Beyond said its new appointees are ‘leaders in the fields of global retail, merchandising, technology, logistics, finance and governance’ and have held senior positions in companies such as Amazon, Avon Products and Family Dollar.
‘The changes announced today reflect significant shareholder input and underscore our commitment to ensuring we have best-in-class governance,’ said Patrick Gaston, who was named an independent chair.
– According to Bloomberg, PG&E reached a deal to replace one of its board members with a director proposed by activist investor BlueMountain Capital Management. Fred Buckman, former head of the utility Consumers Energy, will join PG&E’s board as part of an agreement with BlueMountain. He will replace Richard Kelly, who resigned after recently serving as chair.
PG&E, which filed for bankruptcy in January, proposed adding an additional spot to its board that would expand it to 15 directors. It also named Chris Hart, the former chair of the National Transportation Safety Board, as a special independent safety adviser who will report to new CEO Bill Johnson.
PG&E announced recently that it had pushed back its AGM from May 21 to sometime in June to allow for some additional time following a substantial refreshment of the board this month.
– The UK Financial Conduct Authority (FCA) ruled out a new ‘duty of care’ protection for consumers for the time being, saying it will focus instead on revising existing rules, Reuters reported. The FCA published a discussion paper last July on whether it should introduce a duty of care or a legal obligation on financial firms to take care of customers. ‘The majority of respondents, from across the range of the FCA’s stakeholders, consider that levels of harm to consumers are high and there is a need for change to protect them better,’ the regulator said.
Consumer groups and lawmakers want an overarching duty of care following a series of scandals in the financial services industry. Opponents say the FCA can already fine firms for breaching principles that ensure fair treatment of customers and have new powers to hold senior individuals to account. Although a duty of care could have greater visibility, this was not a sufficient basis for making changes to the law, the FCA said.
– The WSJ said that Abigail Disney, a great-niece of Walt Disney and granddaughter of his brother and company co-founder Roy Disney, characterized Walt Disney Co CEO Robert Iger’s most recent $65 million pay package as a flagrant example of the bulk of corporate profits going to the wrong employees. Her remarks came in response to a recent study by Equilar showing that Iger’s annual compensation is more than 1,400 times that of the median Disney employee. ‘I like Bob Iger. I do NOT speak for my family but only for myself,’ Abigail Disney tweeted. ‘But by any objective measure a pay ratio of over a thousand is insane.’
A Disney company spokesperson disputed her assertion that Iger’s pay was disproportionate. ‘Disney has made historic investments to expand the earning potential and upward mobility of our workers, implementing a starting hourly wage of $15 at Disneyland that’s double the federal minimum wage,’ the spokesperson said. He added that 90 percent of Iger’s compensation is based on performance, and that Disney’s stock price has increased to $132 a share from $24 a share when Iger became CEO in 2005.
– According to CNN, Equinor recently became the latest European energy company to respond to investor pressure over climate change. The company, which used the name Statoil until 2018, said it will align its strategy with the goals of the Paris climate agreement and link executive bonuses to climate targets.
The Norwegian state producer joins Total, Royal Dutch Shell and BP, as well as coal mining and commodities firm Glencore, in taking steps to make their business more green. Although the companies do not have immediate plans to cut their production of fossil fuels, they have taken steps to increase transparency over emissions and invest in clean energy.
The flurry of activity suggests pressure applied by investors is having an effect in Europe – but activist shareholders face a much tougher task in the US.
– The WSJ reported that MDC Partners settled a dispute with hedge fund firm FrontFour Capital Group, saying it would nominate two new members to its board of directors. The advertising firm said it would include one of FrontFour’s nominees, Kristen O’Hara, on its slate of directors for election at an annual meeting in June. MDC also said it would work with FrontFour to select the second director, who the company said will have significant industry experience and be a resident of Canada, a country that accounts for about 8 percent of MDC’s annual revenue.
‘We are pleased to have reached this constructive outcome with FrontFour, and to welcome Kristen O’Hara as a nominee to our board,’ said MDC CEO Mark Penn said in a statement. ‘Kristen’s experience in marketing leadership roles at top companies across the media sector will be highly beneficial as we continue to evolve our business, and we look forward to her perspectives.’ MDC also said Penn has been appointed as board chair.
– CNN reported that Wells Fargo’s AGM was repeatedly interrupted by angry shareholders protesting the bank’s consumer abuses. Countless shareholders were asked by Wells Fargo interim CEO Allen Parker to leave the meeting after making outbursts. Parker calmly pleaded with shareholders not to speak out of turn and reminded them that the bank could have decided to have a virtual meeting, as other companies have.
Despite the outbursts, all of Wells Fargo’s directors were re-elected with overwhelming support. Two shareholder proposals – one calling on Wells Fargo to enhance its incentive-based compensation disclosure, the other urging the bank to reveal its global median gender pay gap – failed to attract significant backing. ‘I’m committed to addressing the mistakes of the past,’ Parker said.
– According to the WSJ, Vanguard Group is handing some of its voting power to outside stock pickers that oversee more than $470 billion of its holdings. By the end of the year these firms that manage Vanguard’s active equity funds will be able to cast votes on takeovers, board slates or shareholder proposals affecting the portion of shares they oversee. Historically, Vanguard made those votes on its own.
The shift will affect roughly 9 percent of Vanguard’s $5.3 trillion in assets but won’t affect votes at shareholder meetings in the coming months. Vanguard will continue to vote on its index fund holdings and other funds it manages on its own.
‘We are passing the baton to give active managers direct control over voting the shares of companies in which they invest,’ said Glenn Booraem, who heads investment stewardship at Vanguard. ‘It’s to integrate their voting and engagement processes with their investment decisions.’
– Slack filed paperwork on Friday to go public through a direct listing, the same method used by Spotify, according to CNN. Slack will list shares directly on a stock exchange without relying on underwriters to help assess demand and set a price. The potential downside of this approach is thought to be that the stock may suffer more volatile trading. But Spotify largely disproved this with relative stability in its first days on the market. Slack is just one of a growing number of unicorns, or private companies worth $1 billion or more, racing to go public.
– Reuters reported that a group of activist investors on Friday again urged Bed Bath & Beyond to replace CEO Steven Temares and laid out a plan including cost cuts and better inventory management to improve the retailer’s profitability. The investor group, comprising Legion Partners Asset Management, Macellum Advisors and Ancora Advisors, also said the recent company management shake-up appeared hastily constructed, with new directors lacking the experience to improve the company’s fortunes. The company on Monday appointed five new independent members to its board.
The company did not immediately respond to a request for comment.
– According to the WSJ, Ford Motor Co said in a securities filing that the US Department of Justice has launched a criminal investigation into how the company certifies its vehicles to meet US emissions standards. Ford said in February it was going to investigate its certification process and start by looking at its 2019 Ford Ranger compact pickup. That month, the company informed both the Environmental Protection Agency and the California Air Resources Board of the situation.
The company said in its filing that it couldn’t predict what would happen with the matter and couldn’t ‘provide assurance that it will not have a material adverse effect on us.’ Ford started an internal investigation late last year after it had an outside company look into employees’ concerns.
– Reuters reported that shareholders approved Credit Suisse’s 2018 compensation report with an 82 percent majority, overcoming frustrations expressed at the bank’s AGM over increases in executive pay during a year its share price dropped. Three shareholder advisers had recommended investors vote against the remuneration report, while a fourth backed the report but expressed reservations about whether management pay matched performance.
‘The divide between the compensation proposed today and the roughly 40 percent share price loss your bank recorded last year is untenable for these long-term investors,’ Vincent Kaufmann, head of proxy adviser Ethos, told board directors and executives. Credit Suisse said a 30 percent pay rise given to executives in 2018 reflected a job well done: last year the bank turned its first annual profit since 2014, reduced costs and focused growth on managing wealth for private clients.