The week in GRC: Starbucks shareholders reject executive pay plan and companies urged to resume political spending

Mar 19, 2021
This week’s governance, compliance and risk-management stories from around the web

CNN reported that former Starbucks executive Rosalind Brewer assumed her new role as CEO of Walgreens, making her the only black woman currently serving as the head of a Fortune 500 company and just the third in history to do so. Today, there are only four African Americans serving as Fortune 500 CEOs, including Brewer.

Kenneth Frazier has led Merck since 2011. There are also Lowe’s CEO Marvin Ellison and TIAA CEO Roger Ferguson, who is stepping down. JPMorgan Chase executive Thasunda Brown Duckett, a black woman, is set to replace Ferguson on May 1.

– The Financial Times reported that Danone’s board of directors decided to replace Emmanuel Faber as CEO and chair following pressure from activist investors. Danone announced Faber’s departure with immediate effect. Activist investors have criticized Danone for what they cast as its chronic underperformance compared with larger rival Nestlé, and publicly called for Faber’s departure.

Gilles Schnepp, the former CEO of industrial group Legrand who joined the Danone board in December, was named as chair and will lead the search for a new chief executive. Two executives already at the company will ‘jointly lead the business’ while the search is carried out: Véronique Penchienati-Bosetta, who was running international operations, and Shane Grant, the head of North America.

Faber has been one of the most visible advocates in global business for a more responsible capitalism in which companies do not only serve shareholders but also protect the environment, their employees and suppliers. Danone has espoused a more human, multi-stakeholder model of business since the 1960s.

– Goldman Sachs’s board of directors nominated the CFO of Royal Dutch Shell to become its newest member, according to Reuters. If her appointment is approved by shareholders, Jessica Uhl will be the fifth woman director on Goldman’s board and its only member to come from the fossil fuel industry. The bank has moved away from fossil fuel development in recent years.

In 2019 it said it would no longer finance certain drilling and coal activities and set a target of making $750 bn in loans, underwriting, advisory services and investments in projects that tackle climate change or help financially disadvantaged people. Shell recently pledged to eliminate net-carbon emissions by 2050.

– According to Reuters, hedge fund firm Indaba Capital said it had nominated two directors to Benefitfocus’ board. The software company responded a few hours later, saying it had named a veteran human resources executive as a new independent director.

The two sides are at odds over the company’s future, turnover in its executive suite and who should be sitting on its board. Benefitfocus took steps to overhaul corporate governance earlier this year by naming a new director and promising to appoint an independent chair at its AGM. Indaba contends these steps fall short of what investors deserve.

Reuters reported that Warren Buffett’s Berkshire Hathaway urged shareholders to reject proposals that annual reports be produced about its efforts to address climate change and promote diversity and inclusion. The proposals were disclosed in Berkshire’s proxy statement ahead of its May 1 AGM.

Citing its decentralized model, Berkshire said the climate proposal from CalPERS, Federated Hermes and Caisse de dépôt et placement du Québec was unnecessary, and that many businesses’ climate decisions already made ‘great sense’ for the environment. The company also cited its business model and Buffett’s record of ‘opposing efforts, seen or unseen, to suppress diversity or religious inclusion’ in opposing the proposal on diversity from As You Sow.

– According to The Wall Street Journal, some of Germany’s largest listed companies are facing a gender-diversity quota on executives. Under a draft of the regulation, which won cabinet approval this year and is now under debate in the German parliament, some companies would have to have at least one woman on their management board. The rule would apply to roughly 70 of the country’s biggest companies that meet the criteria, including around 30 that don’t have a female management board member, the Federal Ministry of Family Affairs, Senior Citizens, Women and Youth said this month.

The regulation would affect public companies with more than 2,000 employees in Germany, which as a result have an equal representation of employees and shareholders on their supervisory board.

– The FT reported that the largest UK public companies would have to appoint a minimum number of diverse board members or face regulatory scrutiny under measures being considered by the Financial Conduct Authority (FCA). FCA chief executive Nikhil Rathi said premium listed companies must build more diverse boards. UK financial services companies more widely will also need to improve diversity at senior levels or face regulatory consequences, he added.

Rathi pointed to Nasdaq, which has proposed that companies listed on its exchange should have at least two non-white or female board members or explain why not. ‘As part of our regulatory work on diversity and inclusion and the listings framework, we will be exploring whether we should make similar requirements part of our premium listing rules,’ Rathi said.

CNBC reported that Starbucks shareholders rejected the company’s executive compensation proposal. The resolution is not binding and likely won’t affect the board’s decision, but such an admonition of an S&P 500 company is rare. The proposal included a $1.86 mn payout for CEO Kevin Johnson for fiscal 2020 performance as the company dealt with the Covid-19 pandemic and $50 mn in retention pay if he stays through fiscal 2022.

‘The board unanimously supported the performance-based retention rewards granted to our executives in late 2019,’ said board member and Ulta CEO Mary Dillon in a statement. ‘This award – which is earned through exceptional company performance over a period of time – is consistent with our commitment to shareholder value creation and pay-for-performance philosophy.’

– According to the WSJ, the Commodity Futures Trading Commission (CFTC) has created a new unit to assess the dangers posed by climate change to futures and options markets in the latest move by a financial regulator related to climate change under the Biden administration. The CFTC said its new climate risk unit will help ensure that new products and markets fairly take into account climate-change risks, including factors such as severe weather, in their pricing and other activities.

– According to Reuters, Corteva said it had agreed to appoint three new independent directors backed by activist investor Starboard Value. Corteva said David Everitt, Janet Giesselman and Kerry Preete will join its board, effective immediately. Starboard had in January nominated eight directors to Corteva’s board, seeking to oust CEO James Collins and take control of the company.

As a result of the agreement, Starboard will withdraw its director nominations previously submitted to Corteva and will support the board’s full slate of directors.

CNBC reported that, according to people familiar with the matter, fund-raisers for congressional candidates and party campaign arms have been lobbying companies to resume donating after many suspended their political contributions. Dozens of corporations at least temporarily paused donations from their political action committee (Pac) after the January 6 Capitol Hill riot.

Most companies have since said they are reviewing their Pac policies on who they give to in the future. Some companies decided to pause contributions for an indefinite period of time, or up to six months, to Republican lawmakers who challenged the election results. Others chose to suspend donations to candidates across the political spectrum.

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