The week in GRC: ExxonMobil defeats climate lawsuit, and Saudi Aramco celebrates IPO
– Jefferies has agreed to pay almost $4 million to draw a line under accusations it mismanaged its ADR program, according to the Wall Street Journal. The action against Jefferies was initiated by the SEC, which the WSJ reports is looking into misconduct in the ADR market.
‘Today’s action makes clear that market participants like Jefferies may not use other market participants to facilitate inappropriate securities transactions,’ said Sanjay Wadhwa, senior associate director for enforcement in the SEC’s New York office.
– ExxonMobil defeated a lawsuit filed by the New York Attorney General’s Office that alleged the company downplayed the financial risks it faces from possible climate regulation, NPR reported. The case is only the second climate change lawsuit to take place in the US, and was marked by the testimony of Rex Tillerson, the former secretary of state and ExxonMobil CEO.
According to NPR, Exxon said the ruling ‘affirms the position ExxonMobil has held throughout the New York Attorney General’s baseless investigation. We provided our investors with accurate information on the risks of climate change. The court agreed that the attorney general failed to make a case, even with the extremely low threshold of the Martin Act in its favor.’
The company faces the specter of a similar lawsuit filed by the attorney general of Massachusetts, according to NPR.
– Saudi Aramco became the world’s most valuable public company on Wednesday as it began trading on the Saudi stock exchange in Riyadh, according to The New York Times. Aramco shares rose 10 percent shortly after trading began, taking the company’s valuation to near $1.9 trillion.
‘The slice of the company being traded is tiny, and the shares are benefiting from the hothouse environment of the local stock exchange, which the Saudi leadership chose over a bigger, more global market,’ writes Stanley Reed of The New York Times. ‘Given the opportunity to buy into a national crown jewel, Saudi individuals and companies lined up to buy the shares. Many major investment funds from outside the region were largely on the sidelines.’
– Contrary to expectations this time last year, large-cap technology companies have had a banner year, reported The New York Times. The S&P 500 tech sector is up more than 40 percent this year, with Apple, Alphabet, Microsoft and Facebook all experiencing significant growth. Matt Phillips of The New York Times wrote: ‘Tech has surged in part thanks to the tide of rate cuts unleashed by the Federal Reserve, which has lifted all boats. The gains also reflect the relief investors are feeling that the trade war’s worst outcomes haven’t come to pass.’
– CNN reported that Boeing CEO Dennis Muilenburg will take a considerable pay cut in 2020, following the two 737 crashes that killed 346 people and left the aircraft grounded since March.
Boeing’s new chairman Dave Calhoun was interviewed on CNBC earlier this week, and suggested that Boeing’s CEO shouldn’t take any stock or bonus payments this year. Last year Muilenburg received $23.4 million in total compensation, with $20.4 million coming in stock and bonuses.
Calhoun added that the board still has confidence in Muilenburg to run the company.
– Colleen Graham, who spent 20 years with Credit Suisse, has alleged that she was fired after refusing to mislead auditors scrutinizing a joint venture between the bank and Palantir Technologies, according to NBC News. The case relates to a joint venture between Credit Suisse and Palantir Technologies called Signac, which Graham was co-leading.
Graham filed her complaint, which also alleges that she was followed to job interviews with other financial firms, with the Department of Labor. Neither Credit Suisse nor Palantir Technologies responded to NBC News’ request for comment. The case will be heard by an administrative law judge at the Labor Department.
– SoftBank is facing questions about its investing process as another start-up that it has backed slashed its valuation ahead of an IPO, CNN reported. OneConnect downgraded its pricing for its IPO, ultimately valuing the company at between $3.2 billion and $3.6 billion – significantly lower than the $7.5 billion that parent company Ping An said the company was worth this time last year.
The news comes just one month after WeWork’s botched IPO, which was also backed by SoftBank. The bank ended up bailing out WeWork with a $9.5 billion rescue plan, which valued the company at far less than its peak valuation of $47 billion.
– On Wednesday the US Federal Reserve held interest rates and indicated that borrowing costs would not change any time soon, Reuters reported. ‘In its final policy meeting of a tumultuous year, when it was spurred to cut interest rates three times to forestall a slowdown fueled largely by President Donald Trump’s trade war, the US central bank struck a remarkably sanguine tone, confident the actions it had taken so far are working,’ wrote Reuters’ staff Howard Schneider and Lindsay Dunsmuir.
Reuters also reported that Wall Street stocks responded well to the Fed’s announcement, with a modest increase for major stock indexes.
- Google parent company Alphabet has asked for and received a two-month extension to respond to a shareholder lawsuit alleging that the company’s board mishandled claims of misconduct, CNBC reported. The extension runs until February 14, 2020.
CNBC reported that Alphabet faced a shareholder lawsuit in January for allegedly covering up sexual misconduct of executives. Alphabet’s board has formed an independent subcommittee to investigate the allegations, which is supported by outside counsel.
- The retail sector now has the largest representation of female CEOs among all sectors in the Russell 3000, Bloomberg reported. About 7 percent of retail CEOs are women, compared to about 5 percent in the broader index. Bloomberg cites Genesco, Kohl's, JCPenney and Best Buy as examples of companies that have recently appointed female CEOs.
- As part of its cost-cutting measures, Deutsche Bank is considering deep cuts to bonuses for this year, Bloomberg reported. While the board will reportedly wait until the end of the quarter to make a final decision, Bloomberg suggests that the company could reduce discretionary compensation by as much as 20 percent, as its CEO Christian Sewing has pledged to deliver $6 billion in cost cuts during the next few years. Deutsche Bank declined to comment on the Bloomberg story.