The week in GRC: Asset managers said to target corporate access, and Icahn wants new Occidental directors

Jun 28, 2019
This week’s governance, compliance and risk-management stories from around the web

CNN reported that Eldorado Resorts is to buy Caesars Entertainment to create the largest gaming company in the US. Eldorado Resorts said it has agreed to buy its larger rival in a cash and stock deal worth $17.3 billion. The announcement came three months after Carl Icahn joined Caesars’ board and pushed for a sale of the company. The proposed company would have roughly 60 casinos and resorts across 16 states.

– A bipartisan team of senators introduced a bill that would force social media companies to disclose more information about the data they collect and monetize from their consumers, according to CNBC. The Designing Accounting Safeguards to Help Broaden Oversight And Regulations on Data (Dashboard) Act is intended to help consumers understand the price of using social media services that are free at face value.

The bill seeks to require ‘commercial data operators’ with more than 100 million monthly active users to disclose the type of data they collect from users and give them ‘an assessment of the value of that data,’ according to a statement. The introduction of the Dashboard Act is the latest step from lawmakers from both parties who have threatened regulatory action against the largest US tech companies.

Google and Twitter declined to comment on the bill. Facebook did not respond immediately to a request for comment.

SEC chair Jay Clayton, Commodity Futures Trading Commission chair J Christopher Giancarlo and UK Financial Conduct Authority CEO Andrew Bailey issued a joint statement regarding the credit derivatives markets, saying: ‘The continued pursuit of various opportunistic strategies in the credit derivatives markets, including but not limited to those that have been referred to as manufactured credit events, may adversely affect the integrity, confidence and reputation of the credit derivatives markets, as well as markets more generally. These opportunistic strategies raise various issues under securities, derivatives, conduct and antifraud laws, as well as public policy concerns.’

The statement adds, in part: ‘As a result… the agencies will make collaborative efforts to prioritize the exploration of avenues, including industry input [that] will address these concerns and foster transparency, accountability, integrity, good conduct and investor protection in these markets.’

–  The New York Times reported that Nissan CEO Hiroto Saikawa was re-elected to the company’s board during an AGM. Saikawa said he would quickly implement an overhaul of Nissan’s corporate governance structure, which shareholders approved on Tuesday. The new system introduces independent committees for nominations and compensation, putting the company in line with global governance standards.

– Bill Gates urged the US government to increase regulation of big tech companies, according to CNN. ‘Technology has become so central that governments have to think: what does that mean about elections? What does that mean about bullying? What does it mean about wiretapping authorities that let you find out what’s going on financially or drug money laundering, things like that,’ Gates said. ‘So, yes, the government needs to get involved.’ He said he expects ‘there will be more regulation of the tech sector’, particularly with regard to privacy issues.

The Wall Street Journal reported that AbbVie agreed to buy Allergan for roughly $63 billion. Buying Dublin-based Allergan would create a dominant position in the $8 billion-plus market for Botox and other beauty drugs, as well as a number of popular eye treatments, as AbbVie braces for the end of patent protection for Humira, the world’s top-selling drug.

Richard Gonzalez will remain chair and CEO of AbbVie. Two Allergan directors will join AbbVie’s board when the deal closes.

– A small but growing number of companies, including Royal Dutch Shell and candy-maker Mars, have started linking a portion of executive pay to corporate ESG goals, using a tactic they say helps align management’s thinking with the company’s ESG strategy, according to the WSJ. The idea is to give managers a personal incentive to incorporate such considerations into everyday business decisions.

Proponents argue that if everyone from the CEO to the plant manager takes into account things such as carbon emissions in capital-expenditure decisions, rank-and-file employees will also be more likely to make choices that help the company reach its goals more quickly.

CNBC reported that the US Supreme Court declined to overturn a precedent that strengthens the power of government regulators. The precedent, known as ‘Auer deference’, holds that courts should defer to federal agencies’ interpretations of their own rules if those rules are ambiguous. Although the Supreme Court retained the precedent, it did so while imposing limitations.

– The WSJ reported that, according to people familiar with the matter, five large asset managers overseeing more than $7 trillion will band together next year to directly organize a series of meetings with company executives. Such meetings pose a direct threat to the millions of dollars in fees banks make each year introducing their investor clients to the managers in whose companies they own stock.

Fidelity Investments, Capital Group, Wellington Management, T Rowe Price and Norway’s sovereign wealth fund are planning a series of private conferences where their analysts can meet CEOs, people familiar with the matter said. ‘We plan to partner on corporate access events and conferences that will provide a tailored research experience for our investors,’ a T Rowe spokesperson said.

– EU antitrust regulators want US chip-maker Broadcom to ditch its exclusivity clauses with TV and modem makers to avoid harming the market while the authorities investigate whether this tactic and others are designed to block rivals, according to Reuters. The European Commission said the so-called interim measures were warranted because of Broadcom’s likely dominance in the TV and modem chipset markets and deals between the company and seven major customers that led to them buying chips only from Broadcom.

Broadcom has two weeks to respond. It can also ask for a closed-door hearing to defend itself. Broadcom said it believes it complies with European Competition rules and that the concerns are ‘without merit.'

– According to Reuters, the US Supreme Court in its term that concludes this week was not quite as business-friendly as it has been in recent years. Overall, the court’s rulings were more pro-business than against – as has been the case under conservative Chief Justice John Roberts – but it also indicated that there are limits to what business can expect.

Although the court in recent years has broadly favored the business community over employees, consumers and regulators, several cases were decided this term in favor of challengers to corporate interests on issues such as class-action litigation, antitrust law, arbitration, investor protection and the environment.

– Carl Icahn is seeking to replace four directors at Occidental Petroleum, saying the company’s board mismanaged its $38 billion deal to buy Anadarko Petroleum, the WSJ reported. The pending deal revealed a lack of ‘effective corporate governance’ and the company needs new directors to ensure the acquisition realizes its cost savings, Icahn said in a letter to shareholders.

Although Icahn has previously acknowledged that the deal is likely to close despite some investor disapproval, he asked shareholders to request that Occidental set a date to consider his proposal, adding that it is a necessary step in the process to nominate new directors.

‘We will review the latest materials filed by Mr Icahn and look forward to addressing them in our ongoing conversations with Occidental shareholders,’ Occidental said in a statement. Anadarko didn’t immediately respond to requests for comment.

CNN reported that major US banks are preparing to dole out larger dividend payouts after the Federal Reserve gave them the go-ahead. Lenders such as JPMorgan Chase, Goldman Sachs and Bank of America are able to increase their payouts after the Fed’s stress test rated them well capitalized. The approved capital plans also include room for share buybacks.

– ISS urged investors of natural gas producer EQT Corp to vote in favor of all nominees put forward by shareholders Toby and Derek Rice, Reuters reported. The Rice brothers were part of the founding team at Rice Energy, which EQT bought in November 2017. They have been pushing for a change in EQT’s strategy and a revamp of its 12-member board.

‘Although the board has undergone considerable refreshment since the 2017 merger... the significant value destruction overseen by legacy directors in the interim poses a question to shareholders,’ the ISS report stated. It said shareholders should support all seven nominees by the Rice brothers and five existing members of the board it backs.

EQT did not respond immediately to a request for comment.

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