The week in GRC: Norway’s SWF warns directors on climate change and activists ‘swarm’ some companies
– Reuters (paywall) reported that Nissan Motor Co and Renault agreed to a sweeping overhaul of their two-decade-old automaking alliance that will put them on equal footing and see the Japanese company invest in Renault’s new electric vehicle business.
The deal, which is subject to board approvals, will entail Renault reducing its stake in Nissan to 15 percent from around 43 percent, the firm said. That will see Renault put around 28 percent of the Japanese automaker in a French trust, making the two more equal partners. Nissan and Renault would then have a 15 percent cross-shareholding that will allow Nissan to exercise its voting rights, which it was unable to do previously.
– Unilever appointed Hein Schumacher to replace Alan Jope as CEO from July in a move that was welcomed by investors including board member and activist shareholder Nelson Peltz, CNBC reported. Schumacher joined Unilever in October last year as non-executive director and is at present the CEO of Dutch dairy company FrieslandCampina. He previously worked for Royal Ahold and for a decade at HJ Heinz in the US, Europe and Asia.
His appointment is the first time Unilever has given the top job to a non-Unilever executive since it recruited Paul Polman from Nestlé in 2008. Peltz, who heads investor Trian Partners, said he strongly supports Schumacher ‘as our new CEO and look(s) forward to working closely with him to drive significant sustainable stakeholder value.’ Peltz become a Unilever board member in July.
– According to CNN, boards are cutting the pay of some leading CEOs in what may be the start of a new trend. The cuts follow a tough year in the stock market and come as a growing number of companies lay off employees to brace for a potential recession.
'This is a show of solidarity. CEOs need to share the pain,’ said Nell Minow, vice chair of ValueEdge Advisors, which advises institutional investors on corporate governance matters. Some of the responsibility is being taken because the rules have changed with the introduction of say on pay. Such votes are advisory but having shareholders reject pay packages is an embarrassment companies try to avoid.
– The SEC proposed changes to its ethics rules that would add new requirements and prohibitions to the ethics compliance program, which applies to all agency employees, their spouses and minor children. At present, SEC employees must pre-clear securities transactions and comply with minimum holding periods. All employees are prohibited from, among other things, transacting in securities of companies the agency is investigating, engaging in short-selling, transacting in derivatives, participating in IPOs for seven calendar days or purchasing or carrying securities on margin.
The amendments would, for example, expand the existing prohibited holdings restrictions to ban employees from investing in financial industry funds and authorize the SEC to collect data on employees’ covered securities transactions.
– Reuters said that, according to a new report, the market for alternative legal services continues to grow, of which providers owned by traditional law firms remain the fastest-growing segment. The total market grew to $20.6 bn by the end of the 2021 fiscal year, up 45 percent from two years earlier, the report found. Alternative legal services providers (ALSPs) include independent companies, the Big Four professional services firms and ventures created within law firms, known as captive providers.
Law firm captives make up the smallest part of the ALSP market with about $1 bn in revenues, compared with independent providers that generate about $18 bn and the Big Four, which have reached $1.5 bn, noted the report, which is based on a survey in the US, the UK, Canada, the EU and Australia.
– According to The Wall Street Journal (paywall), the Ukrainian government is increasing the pressure on western executives who have retained posts at Russian companies, saying their presence is indirectly supporting Russia’s war effort. Many western executives cut ties with Russia after it invaded Ukraine, sometimes in opposition to the war or to comply with western sanctions. Others remained for various reasons, including saying they had a fiduciary duty to their investors, a responsibility to local employees or years-long ties to the country that were hard to break.
Ukraine’s government is running a campaign to name and shame western individuals still working for Russian companies. Although they aren’t breaking the law by working at companies that aren’t sanctioned by the US or its allies, Ukraine says their continued presence in Russian boardrooms risks undermining efforts to isolate the country.
– Reuters reported that Capricorn Energy said shareholders voted in favor of six new directors proposed by activist shareholder Palliser, days after the chair, CEO and others quit the board of the oil and gas company. Palliser and some of Capricorn’s biggest shareholders had also opposed a planned merger with NewMed, with major proxy advisers recommending votes against the takeover plan.
A shareholder vote on the NewMed deal was initially due to happen on Wednesday but Capricorn postponed it until February 22 to give the new board time to assess the proposed transaction.
– Shareholder activists, newly emboldened by lower share prices, are increasingly crowding into the same big company names, the WSJ said. There were 17 instances where a US company drew more than one activist in 2022, situations that bankers refer to as ‘swarming’, according to data compiled by Lazard Capital Markets Advisory Group. That is up from nine in 2021 and seven in 2020. Although there were 20 instances in both 2019 and 2017, industry experts anticipate the number will continue to climb this year as overall levels of activism increase.
A down market for stocks has helped increase the number of activist campaigns, as investors seize opportunities to push for change at companies. There were 135 activist campaigns in the US in 2022, a 41 percent rise from the previous year, Lazard found.
– CNBC reported that Republican attorneys general in 20 states warned CVS and Walgreens against mailing abortion pills in their jurisdictions, indicating that they would take legal action. ‘We emphasize that it is our responsibility as state attorneys general to uphold the law and protect the health, safety and well-being of women and unborn children in our states,’ the attorneys general said in letters to the nation’s two largest pharmacy chains. ‘Part of that responsibility includes ensuring that companies like yours are fully informed of the law so that harm does not come to our citizens.’
The Food and Drug Administration (FDA) approved mifepristone more than 20 years ago as a safe and effective way to terminate an early pregnancy. The FDA says scientific and real-world evidence demonstrates that the pill is safer than surgical abortion and childbirth. The companies said last month that they are applying to become certified with the FDA to dispense the prescription pill in states where it is legal to do so. The FDA recently changed its rules to allow retail pharmacies to dispense the pill if the prescription comes from a certified healthcare provider.
– The Guardian reported that Norway’s sovereign wealth fund has warned it will vote against directors’ re-election to the board if they do not step up their efforts to tackle the climate crisis, human rights abuses and boardroom diversity. Carine Smith Ihenacho, the chief governance and compliance officer of Norges Bank Investment Management, said the fund was preparing to vote against the re-election of at least 80 company boards for failing to set or hit environmental or social targets.
‘We all know we live in a world with a climate crisis and we have a role to play, and then companies have a role to play,’ she said. ‘So we have stepped up our expectations toward the companies when it comes to setting targets to get to that net-zero [emissions] by 2050 target. And we will push the companies more in setting targets and understanding how they’re going to get there.
– According to the WSJ, Activision Blizzard agreed to pay $35 mn to settle SEC claims tied to its process for deciding whether its disclosures to investors should reflect any employee complaints about workplace misconduct. The SEC also alleged that Activision violated a whistleblower-protection rule. The company settled the probe without admitting or denying the SEC’s allegations.
A spokesperson for Activision said the company was pleased to have amicably resolved the matter and was confident in its workplace disclosures: ‘As the order recognizes, we have enhanced our disclosure processes with regard to workplace reporting and updated our separation contract language. We did so as part of our continuing commitment to operational excellence and transparency.’