The week in GRC: Elliott said to build SoftBank stake, and COSO urges board focus on risk
– The WSJ said that, according to people familiar with the matter, activist investor Elliott Management has quietly built up a more than $2.5 billion stake in Japan’s SoftBank Group and is pushing the company to make changes it says will increase its share price. Discussions have focused on ways to improve SoftBank’s corporate governance, including a call for more transparency and better management of investment decisions at its $100 billion Vision Fund, according to the people.
‘SoftBank always maintains constructive discussions with shareholders regarding their views on the company and we are in complete agreement that our shares are deeply undervalued by public investors. SoftBank welcomes feedback from fellow shareholders,’ a SoftBank spokesperson said.
‘Elliott has engaged privately with SoftBank’s leadership and is working constructively on solutions to help SoftBank materially and sustainably reduce its discount to intrinsic value,’ an Elliott spokesperson said.
– Facebook said Drew Houston, co-founder and CEO of Dropbox, has been appointed to the company's board of directors. CEO Mark Zuckerberg said: ‘Drew brings valuable perspective to our board as a leader of a technology company with services used by millions of people and businesses. He thinks deeply about where technology is going and how to build a culture that delivers services that always work well.’
Facebook's board members are: Mark Zuckerberg; Peggy Alford, senior vice president, core markets of PayPal Holdings; Marc Andreessen of Andreessen Horowitz; Kenneth Chenault, chair and managing director at General Catalyst; Sheryl Sandberg, COO of Facebook; Peter Thiel of Founders Fund; and Jeffrey Zients, CEO of the Cranemere Group.
– The US Court of Appeals for the District of Columbia said it will not reconsider an October ruling that largely upheld the repeal of landmark net neutrality rules, rejecting requests by 15 US states and tech and advocacy groups, according to Reuters.
The Federal Communications Commission (FCC) in December 2017 reversed Obama-era rules prohibiting internet service providers from blocking or curbing, or offering paid fast lanes, in a blow to large tech companies and consumer groups that had championed the level playing field of net neutrality. The full court declined without comment to rehear the decision, as did the three-judge panel that issued the ruling in October.
FCC chair Ajit Pai, who proposed and pushed for the repeal, was pleased with the decision, a spokesperson said, adding: ‘The internet has remained free and open, consumers have been protected, speeds have increased and more and more Americans have gotten access to broadband.’
Free Press, among the advocacy groups that sought the rehearing, said it will ‘keep weighing our legal options. And we’ll keep making the case in Congress, in statehouses and in future FCC proceedings about the need to restore the vital non-discrimination rules.’
– Reuters reported that WeWork said Kirthiga Reddy, partner at SoftBank Investment Advisers since 2018, would join its board. Reddy’s appointment came a few days after WeWork named Sandeep Mathrani CEO. At SoftBank Investment Advisers, Reddy has been overseeing investments in healthcare, and was previously managing director of Facebook’s operations in India and South Asia.
‘In partnership with the SoftBank Vision Fund, we sought a director who adds strategic value to our business as we implement our five-year plan,’ said WeWork executive chair Marcelo Claure.
– According to the WSJ, Peabody Energy Corp is shaking up its board by adding partners from its largest shareholder Elliott Management. Peabody said it has agreed to appoint to its board Dave Miller, Elliott’s head of US restructuring, and portfolio manager Samantha Algaze. The company also agreed to name Darren Yeates, a consultant and former CEO at steam coal producer MACH Energy Australia, to the board, and to add another independent director in the future.
Elliott also agreed to customary standstill provisions restricting future solicitation on the election or removal of directors from the board under a separate cooperation agreement, Peabody said. ‘We welcome this closer relationship with Elliott, which has been a substantial investor in Peabody’s capital structure for more than four years,’ Peabody CEO Glenn Kellow said.
Spokespeople for Peabody and Elliott declined to comment.
– The WSJ reported that the Committee of Sponsoring Organizations of the Treadway Commission (COSO) called on boards and senior executives to incorporate risk analyses into high-level decision-making. COSO issued guidance to help executives better manage enterprise-wide risks. The guidance emphasizes the benefit of including risk managers in strategic decisions, such as whether to expand overseas or buy back stock.
‘Historically, rightly or wrongly, people have tended to view risk management as managing the bad things that could happen,’ said COSO chair Paul Sobel. But he said that risk management can have a financial upside for companies that incorporate it into strategic planning. The latest guidance provides practical advice on how to establish an enterprise risk program, including how to describe the benefits to senior executives.
– According to CNN, Best Buy CEO Corie Barry will stay in her job after the company’s board investigated misconduct allegations against her. The audit committee said the investigation, which it launched in December after receiving an anonymous letter containing the allegations, has concluded. The board committee said it ‘supports the continued leadership of the company by Ms Barry.’
‘The board takes allegations of misconduct seriously regardless of who is the subject,’ it said. ‘When the board received an anonymous letter regarding Corie Barry, the audit committee immediately retained outside legal counsel, Sidley Austin, to conduct an independent review. Ms Barry fully cooperated with the review, which has now concluded... To preserve the confidentiality and integrity of the process, the board will have no further comment.’ Best Buy has declined to detail the claims that were made in the letter.
‘I appreciate the board's support and look forward to continuing to execute on our strategic vision,’ Barry said in a statement.
– The WSJ reported that, according to research by the Financial Reporting Council (FRC) and a government-backed committee, the UK’s largest companies rarely set targets for ethnic diversity on boards and fail to report on the issue. The research comes amid growing scrutiny of companies’ reporting, disclosure and business practices following a series of corporate collapses.
A majority of UK companies that responded to the FRC’s survey didn’t have goals for ethnic diversity on the board during the 2019 financial year, and 52 percent failed to mention ethnicity in their board diversity policy. Fourteen percent of companies listed on the FTSE 100 had measurable objectives for ethnic diversity on boards, the FRC said. Among the 256 businesses that responded to the FRC’s survey, none reported on progress related to the issue and most companies did not have plans with specific measures to boost ethnic diversity on the board.
– CNN reported that WeWork hired real estate executive Sandeep Mathrani as its new CEO. Mathrani will officially assume the job on February 18, reporting to WeWork’s executive chair Marcelo Claure and succeeding Artie Minson and Sebastian Gunningham who have been working as co-CEOs since the September departure of former CEO and co-founder Adam Neumann.
‘I am honored to be joining WeWork at this pivotal time in its history,’ Mathrani said in a statement. He most recently served as CEO of Brookfield Properties’ retail group. Before that, he served as CEO of GGP before its sale to Brookfield in 2018.
– According to Reuters, Credit Suisse proposed Richard Meddings, a UK banker with long experience of crisis management, for election to its board. Meddings, chair of TSB Bank, has wide experience helping lenders navigate challenging times, including previously at Deutsche Bank and Standard Chartered. His appointment requires shareholder approval at an AGM on April 30.
– The Wall Street Journal reported that Tribune Publishing has appointed CFO Terry Jimenez as its CEO. He succeeds Timothy Knight, who has stepped down from the board and will leave the company at the end of the month. The company, which owns newspapers such as the Chicago Tribune, New York Daily News and the Orlando Sentinel, tapped controller and chief accounting officer Mike Lavey as its interim CFO and named Philip Franklin, chair of the Tribune board’s audit committee, as its non-executive chair. He succeeds David Dreier, who will remain on the board.
– The Federal Trade Commission (FTC) filed a lawsuit aiming to block Edgewell Personal Care (EPC), which owns the Wilkinson Sword and Schick brands, from buying start-up shaving company Harry’s, according to CNN. The merger would ‘eliminate one of the most important competitive forces in the shaving industry,’ the FTC said. Harry’s, along with Dollar Shave Club, has disrupted the men’s razor business by selling low-priced products online. The space has been dominated for decades by EPC and Gillette-owner Procter & Gamble.
The FTC said in a statement that Harry’s is an independent competitor and its loss ‘would remove a critical disruptive rival that has driven down prices and spurred innovation in an industry that was previously dominated by two main suppliers, one of whom is the acquirer.’
Harry’s said in a statement that it is ‘disappointed’ with the FTC’s decision and is ‘evaluating the best path forward.’ It said: ‘We believe strongly that the combined company will deliver exceptional brands and products at a great value and are determined to bring those benefits to consumers.’
– Reuters reported that activist shareholder Starboard Value added more pressure on eBay to sell its classifieds business, saying it had not made enough progress to improve shareholder value. The online auction house last year agreed to sell its ticketing unit, StubHub, under pressure from Starboard and Elliott Management, which had also urged the company to sell eBay Classifieds Group as part of a plan that could double the company’s value.
‘To achieve the optimal outcome, we believe Classifieds must be separated, and a more comprehensive and aggressive operating plan must be put in place to drive profitable growth in the core marketplace business,’ Starboard said in a letter to eBay’s board. The company is expected to provide an update this year on its Classifieds business. Elliott Management did not immediately respond to a request for comment on Starboard’s letter.
– CVS Health announced that former Aetna CEO Mark Bertolini will leave the CVS board, the WSJ reported. Bertolini joined the board after the pharmacy company paid almost $70 billion to buy the health insurer in 2018. He says he is being pushed out, with the integration of the two companies still not complete. CVS said he would be leaving ‘following the successful integration of the Aetna business.’
‘I was willing to continue to serve on the board of directors in support of the most transformative effort in healthcare for our nation. [But] the board thought otherwise,’ Bertolini said.
CVS announced that Bertolini and two other directors won’t stand for re-election. The company said it was reducing the size of its board following corporate governance best practices. CVS chair David Dorman said in a statement that the remaining board members strongly back management and its direction. ‘The integration has been a success and the board has the utmost confidence in the current management team and the progress the combined company has shown to date,’ a CVS spokesperson said.