The week in GRC: ISO releases its first governance framework and companies issue statement opposing Texas abortion law
– The Wall Street Journal reported that Twitter said it agreed to pay more than $800 mn to settle a consolidated class action securities lawsuit alleging the company deliberately misled investors about user engagement in 2015. Twitter said the proposed settlement would resolve all claims against it and the other named defendants without any admission, concession or finding of any fault, liability or wrongdoing.
The shareholder action claimed Twitter misled investors about two closely tracked metrics: monthly active users – a measure of the total number of users on its platform – and timeline views, a measure of how frequently users interacted with the platform. Twitter said it would pay $809.5 mn under the binding agreement to settle claims alleging securities law violations, adding that it continues to deny any wrongdoing or improper actions.
– According to CNBC, Coinbase decided to halt plans to launch an interest-earning product two weeks after CEO Brian Armstrong criticized the SEC in a tweet for what he said was its lack of guidance on the matter.
‘We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest,’ the post said. ‘We will not stop looking for ways to bring innovative, trusted programs and products to our customers.’
A Coinbase spokesperson declined to comment beyond the content of the blog post. The SEC did not immediately respond to a request for comment. SEC chair Gary Gensler testified recently that the agency is looking at crypto-related assets to determine whether they fall under securities laws and he has shown interest in increasing regulation of the space.
– According to the WSJ, dozens of companies are going public with their opposition to a new Texas law that bars abortion after about six weeks of pregnancy. Employers including Lyft, Box, Stitch Fix and Trillium Asset Management signed a statement that says ‘restricting access to comprehensive reproductive care, including abortion, threatens the health, independence and economic stability of our workers and customers.’
The statement doesn’t call for any specific action. Its organizers say it is intended, in part, to show other states considering new abortion laws that they can cause economic harm, such as by hindering employers’ ability to recruit workers from out of state. Many of the signatories are not based in Texas, although a number of them have operations or employees in the state.
– The Guardian reported that, according to an analysis from the think tank InfluenceMap, the world’s biggest tech companies are coming out with bold commitments to tackle climate change but, when it comes to using their corporate muscle to advocate for stronger climate policies, their engagement is almost nonexistent. Apple, Amazon, Alphabet (Google’s parent company), Facebook and Microsoft spent about $65 mn on lobbying in 2020, but an average of only 6 percent of their lobbying activity between July 2020 and June 2021 was related to climate policy, according to the analysis.
They have not been entirely silent. Apple, for example, has expressed support for the Biden administration’s proposed clean energy standard.
Microsoft and Apple declined to comment on the report and Alphabet did not respond to requests for comment. A spokesperson for Amazon said the company engages at local, state and international levels to ‘actively advocate for policies that promote clean energy, increase access to renewable electricity and decarbonize the transportation system.’
A Facebook spokesperson said: ‘We’re committed to fighting climate change and are taking substantive steps without waiting for any legislative action.’ The spokesperson added that the company supports the Paris climate agreement goals and helped found the Renewable Energy Buyers Alliance.
– Law firms are going back to the drawing board on reopening their offices, and more are leaving decisions unmade for now, according to Reuters. Some law firms that had previously targeted October for mandatory office returns are canceling those plans without setting a new date. The moves reflect the extremely fluid situation firms are facing, industry consultants said. Law firm leaders are trying to balance the interests and preferences of lawyers and clients while keeping track of fast-moving events and fast-changing data, they said.
– The WSJ reported that the International Organization for Standardization (ISO) has thrown its weight behind a push for companies to go beyond traditional ideas of good governance to include more environmentally and socially conscious models. The Geneva-based ISO’s first framework for good governance is unique because it represents the outcome of a consensus-driven process involving more than 70 countries, according to experts involved in creating the standard.
The framework released by the ISO defines governance as a system by which an organization is held accountable for achieving a defined purpose in an ethical and responsible manner. The standard also spells out guidelines for internal controls, which include a company’s risk-management system, compliance program and financial controls. One of the goals of the standard is to push companies to move beyond the concept of governance that is set up merely to optimize financial results, said Victoria Hurth, a fellow at the University of Cambridge’s Institute for Sustainability Leadership and co-chair of the group of experts who developed the ISO standard.
– Bloomberg reported that think tank Universal Owner said Vanguard Group is falling short on addressing climate change through its investments relative to its biggest rivals. According to the think tank, Vanguard has just one employee to monitor climate issues for every 300 of its portfolio companies and lacks a policy to divest some funds from coal producers. The group also said the asset manager has lent millions of dollars to tar sands companies, whose projects are among the most harmful to combatting global warming.
‘Vanguard isn’t understanding its position in the market,’ said Thomas O’Neill, director of Universal Owner. ‘It should be focused on stewarding the whole market.’
Vanguard said in response to the report that it has an ‘experienced and growing investment stewardship team’ that ‘seeks to manage and identify climate-related risks’ by speaking with corporate executives and boards, as well as through proxy voting.
‘We have and will continue to outline our expectations for companies where climate change is a material risk, including the need to establish climate-competent boards, demonstrate how climate risk is integrated in their long-term strategic planning, and effectively disclose climate-related targets, actions and outcomes,’ a Vanguard spokesperson said. ‘We have made a concerted effort to further disclose our engagements with companies on climate change risks and inform investors of our rationale for key votes on environmental and climate-related shareholder proposals over the course of the proxy season this year.’
– A federal judge in San Francisco has thrown out claims that Walmart labels some of its house-brand plastic products ‘recyclable’ when that option is not available for most consumers, Reuters reported. US District Judge Maxine Chesney dismissed Greenpeace’s claims that it violates California’s Unfair Competition Law by marketing and selling single-use plastic products labeled No 3 to No 7 as recyclable even though their US consumers’ recycling programs rarely accept them. Chesney said Greenpeace can file an amended complaint.
A Walmart spokesperson said the company relies on ‘labeling developed and validated by our suppliers and sustainability partners.’
‘Big brands know their customers are growing concerned about plastic pollution, but instead of addressing real solutions they have opted for greenwashing,’ said Greenpeace USA oceans campaign director John Hocevar.
– The Guardian reported that GSK chief executive Emma Walmsley has come under pressure from a second activist hedge fund firm, Bluebell Capital Partners, which is pushing for change at the company. Bluebell Capital Partners has joined Elliott Management on the pharmaceutical company’s shareholder roster.
In a letter to GSK chair Sir Jonathan Symonds, Bluebell called on the company to appoint more directors with scientific experience to its board, and to run a ‘thorough and robust process’ to find a leader for the drugs and vaccines business following the planned spin-off of the consumer health division next summer.
GSK put out a firm rebuttal, saying that Walmsley would lead the pharmaceuticals and vaccines company after the split. Marco Taricco and Giuseppe Bivona, the chief investment officers at Bluebell, said GSK’s financial performance had been disappointing during the last few years, and argued that Walmsley had less industry experience than other pharma bosses.
A GSK spokesperson said: ‘The board is confident that we have the right strategy and the right team. Under Emma’s leadership, the board expects the team to deliver the new ambitions set out at our investor update in June, through separation and in the years beyond.’
– According to Reuters, as many as 2,000 companies could disappear from the off-exchange ‘pink sheets,’ long a favorite of retail investors, when a new rule aimed at stamping out fraud in this notoriously risky segment of US equities markets comes into effect next week. The SEC rule increases investor disclosures by requiring off-exchange issuers, frequently penny-stock companies that do not meet the main exchanges’ listing standards, to make accurate, up-to-date financial information publicly available.
Due to a loophole in the existing rules, around 2,000 of the roughly 11,000 companies quoted on the Pink Market operated by OTC Markets Group do not publicly provide such information. OTC Markets has been trying to spread the word and encourage companies to get their paperwork in order, but it was unclear how many would do so in time for the September 28 deadline, if at all, said Daniel Zinn, OTC Markets’ general counsel.
The SEC did not respond to a request for comment.
– The WSJ reported that FASB proposed a rule that would require companies to disclose key terms and the size of their supply-chain financing, a move intended to help investors better understand the short-term borrowing mechanism. Until now, US companies have not been required to disclose supply-chain financing arrangements in their financial statements. Accounting firms have pressed FASB to issue clear guidance on how to disclose supply-chain finance.