The week in GRC: Governor Hochul nominates top New York regulator and Allbirds targets sustainability in IPO filing

Sep 03, 2021
This week’s governance, compliance and risk-management stories from around the web

The Wall Street Journal reported that, according to an analysis by University of Florida finance professor Jay Ritter, the still relatively small group of companies that have made their debut on US exchanges through direct listings have, on average, outperformed the S&P 500 and a key broader index for IPOs during the same period.

In a direct listing, a company simply starts trading on an exchange with a reference price for where trading could start, but no shares are sold in advance at that price. Existing shareholders can sell their shares, but companies don’t raise any cash by going public. In general, companies that choose this route tend to be in solid financial shape because they don’t need to raise capital through a traditional IPO.

Reuters noted a Financial Times article that reported Rolls-Royce shareholder Causeway Capital Management calling on the company’s incoming chair to refresh the board. ‘I really believe the board needs some fresh thinking. The company is facing some challenges,’ Jonathan Eng, portfolio manager at Causeway Capital Management, told the FT. Rolls-Royce also needed to make sure it had the right expertise to tackle the decarbonization challenge, Eng added.

‘We regularly review the effectiveness, composition and skillset of our board, using independent advice and benchmarking,’ a spokesperson for Rolls-Royce told Reuters. Rolls-Royce said in June that Anita Frew would succeed Ian Davis as chair on October 1.

Causeway Capital could not be immediately reached by Reuters for comment.

CNN reported that progressive Democratic lawmakers urged President Joe Biden to give the Federal Reserve a sweeping makeover by replacing Jerome Powell as chair. ‘We urge President Biden to reimagine a Federal Reserve focused on eliminating climate risk and advancing racial and economic justice,’ the lawmakers said in a statement.

The Fed is tasked by Congress to maximize the number of US jobs while keeping inflation low. The Democrats in the statement credited the Powell-led Fed with making changes to how it approaches its goal of full employment, but they expressed concern over his track record on the climate crisis. The statement criticized the Fed for ‘weakening’ financial regulations enacted after the financial crisis, including capital and liquidity requirements, stress tests and the Volcker Rule. Powell has previously disputed the argument that the Fed has weakened regulations.

The Federal Reserve declined to comment.

– New York Governor Kathy Hochul has nominated Adrienne Harris, an Obama administration veteran, to lead the New York State Department of Financial Services, the WSJ reported. Hochul said the agency’s focus would be consumer protection and ensuring an equitable recovery from the Covid-19 pandemic.

Harris is now a senior adviser at public relations firm Brunswick Group, where she advises financial institutions, fintech companies and venture capital firms. She worked as a senior adviser in the US Department of the Treasury from 2013 to 2015 and then as a special assistant in the White House until 2017. She said in a statement she would use the position ‘to ensure we have a robust and fair financial system and an equitable economy.’

– According to Reuters, Allbirds said it has filed for a US IPO. The footwear company, which mentions the word ‘sustainability’ 112 times in its regulatory filing, says it hopes to help pioneer a framework for companies to conduct what it called a ‘sustainable public equity offering.’ Allbirds said as part of its IPO process an independent third party assessed the company to determine whether it achieved certain ESG goals and followed best practices on climate response. Allbirds is known for the use of sustainable materials in its products.

– The SEC said agency chair Gary Gensler directed officials to carefully monitor developments as a result of Hurricane Ida making landfall on August 29. ‘The safety of local residents is our highest priority. We invite inquiries from any person with obligations under the federal securities laws that may be affected by Hurricane Ida. The staff will evaluate the appropriateness of providing regulatory relief for those affected by the storm,’ the SEC said in a statement.

Reuters reported that Kansas City Southern would delay a special stockholder meeting intended for voting on its proposed deal with Canadian National Railway Co. The move came a day after the US Surface Transportation Board (STB) rejected a voting trust structure that would have allowed Canadian National to proceed with its $29 bn proposed acquisition of Kansas City.

The company did not say when the stockholder meeting would now be held but said Canadian Pacific Railway had reaffirmed its buyout offer in light of the STB ruling. ‘We are disappointed in the STB’s decision to reject Canadian National’s proposed voting trust. We are working with Canadian National to evaluate the options available to us,’ Kansas City said.

– The WSJ reported that, according to people familiar with the matter, Chevron Corp is preparing to defend itself against a potential challenge from activist investors like the one ExxonMobil faced earlier this year. In recent weeks, Chevron executives met with representatives of Engine No 1, the firm that led the successful fight to win three seats on Exxon’s board, people familiar with the matter said. Chevron shared some of its plans to reduce carbon emissions during the talks and Engine No 1 gave no indication that it would pursue a campaign against Chevron, the people said. Engine No 1 hasn’t made any decision about another campaign, one of the people said.

Chevron has been developing its energy-transition strategy since the pandemic began. In coming weeks, it plans to announce more ambitious carbon-reduction targets than those it has previously laid out, according to people familiar with the matter.

A Chevron spokesperson said: ‘We have contingency plans to respond to many different types of events, including an activist investor. We engage regularly with shareholders in constructive two-way dialogue and look forward to discussing the next chapter of our lower-carbon story with them later this month.’

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