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Apr 02, 2021

The week in GRC: CEOs criticize voting curbs and ‘say on climate’ initiative faces pushback

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

Reuters reported that Deutsche Bank said its CEO Christian Sewing will transfer oversight of the investment and corporate bank to board member Fabrizio Campelli as part of a revamp of the management board. Deutsche Bank was one of the few major banks in the world to assign day-to-day oversight of investment banking to its CEO. At most banks, other board members oversee the division. Sewing, whose contract was extended to 2026, will also take charge of human resources at management board level.

– The SEC awarded more than $500,000 to a whistleblower who raised concerns internally before submitting a tip to the regulator. The whistleblower’s information and assistance allowed the commission and another agency to quickly file actions, shutting down a fraudulent scheme, the SEC said. The whistleblower’s information prompted an internal investigation by the company, which then reported to an outside agency, which in turn provided the information to the SEC.

Under the safe harbor provision of the SEC’s whistleblower rules, the SEC treats the whistleblower’s information as though it had been submitted to the SEC at the same time it was internally reported provided the whistleblower also reports the information to the SEC within 120 days of the internal report.

– According to the Financial Times, Glass Lewis urged shareholders to vote against UniCredit’s pay policy at the bank’s AGM in two weeks, in protest at new CEO Andrea Orcel’s potential €7.5 mn ($8.8 mn) package. Glass Lewis said it is ‘concerned by the structure of the CEO’s remuneration package, which comprises an equity award not linked to performance and not subject to recovery provisions.’ It also questioned why Orcel’s pay was higher than his predecessor’s and criticized ‘poor disclosure of key features of the remuneration structure for the CEO, which we believe lags behind market best practice.'

Explaining Orcel’s pay package, UniCredit said: ‘In order to align the shareholders’ and the CEO’s interests, the board has approved from the first year of the CEO’s term an equity award that amounts to the whole variable compensation for 2021 payable in two tranches and without any performance condition, malus or clawback.’ The bank added that from 2022, Orcel’s remuneration will be based on performance.

UniCredit was not immediately able to comment on behalf of the company or Orcel.

– As environmentally friendly investing grows at an exponential rate, Tariq Fancy, former chief investment officer for sustainable investing at BlackRock, has come to the conclusion that it ‘is definitely not going to work,’ The Guardian reported. ‘I have looked inside the machine and I can tell you [that] business does not have this,’ Tariq said. ‘Not because these are bad people but because they run for-profit machines that will operate exactly as you would expect them to do.’

Investors have a fiduciary duty to maximize returns to their clients and as long as there is money to be made in activities that contribute to global warming, no amount of rhetoric about the need for sustainable investing will change that, he believes.

The Wall Street Journal reported that Chris Hohn’s campaign to make large public companies set near-term targets for carbon-emissions cuts is encountering challenges from US companies and asset managers. More than a dozen companies in Europe, Canada and Australia have signed up to Hohn’s ‘say on climate’ initiative, according to ISS. The drive has also aimed to make companies’ emissions targets subject to annual shareholder votes. In recent weeks, however, two US companies have decided to oppose Hohn’s proposed shareholder resolutions. Some large US fund managers have also taken issue with aspects of the proposals.

– According to the FT, black employees held a lower share of top US financial services jobs in 2018 than they did more than a decade earlier, highlighting the shortcomings of Wall Street’s efforts to improve racial diversity. Black staff account for 13 percent of all finance staff and are the industry’s biggest ethnic minority but, in the most senior jobs, they are the only demographic whose share fell from 2007 to 2018, the FT’s research found.

The fall in representation – from 2.87 percent to 2.62 percent – comes amid multiple initiatives by financial services companies intended to improve racial diversity by identifying, training and mentoring talent from ethnic minorities. ‘It begs the question of all the efforts and all the energy that was put into this: what are they doing and why is none of this working?’ said Dee Marshall, CEO of Diverse & Engaged, a diversity consultancy that focuses on financial services.

CNN reported that JPMorgan Chase CEO Jamie Dimon spoke in defense of voting rights following the passage of Georgia’s restrictive voting law and as other battleground states consider similar actions. The company’s ‘employees span the [US] and, as state capitals debate election laws, we believe voting must be accessible and equitable,’ Dimon said in a statement. ‘We regularly encourage our employees to exercise their fundamental right to vote, and we stand against efforts that may prevent them from being able to do so.’

His comments contrast with a relative silence from major business groups and CEOs after Georgia passed the new law.

Reuters reported that a group of investors managing a combined $3 tn in assets were calling on operators of nursing homes to improve pay and working standards for care workers, noting the ‘devastating outcomes’ of the Covid-19 pandemic on the industry. Aviva Investors and BMO Global Asset Management are among the more than 90 investors that have teamed up with UNI Global Union, which represents 20 mn workers globally.

The coalition will send a statement later to private care home companies and real estate owners, setting out expectations on issues such as health and safety standards, staffing levels and pay. In the statement, the investor group says the pandemic highlighted the ‘direct link between poor working conditions and quality of resident care.’ The move is the latest in a series of investor initiatives that aim to use their financial clout to influence corporate decision-making in favor of ESG issues.

– Delta Airlines, one of the Georgia-based companies that declined to speak out as the state’s new restrictive voting law moved through the legislature, issued a forceful statement on Wednesday saying the measure was ‘unacceptable,’ The Guardian reported.

‘After having time to now fully understand all that is in the bill, coupled with discussions with leaders and employees in the black community, it’s evident that the bill includes provisions that will make it harder for many under-represented voters, particularly black voters, to exercise their constitutional right to elect their representatives. That is wrong,’ wrote Delta CEO Ed Bastian in a company memo.

– The WSJ reported that Kenneth Blanco, who has served as the Financial Crimes Enforcement Network’s (FinCEN) director since late 2017, will depart on April 9. Michael Mosier, a counselor to the US Department of the Treasury’s deputy secretary, will take over as acting director on April 11. The change comes as FinCEN prepares to write a complex set of regulations enacting an anti-money laundering reform law passed in January as part of an annual defense-policy bill. The law calls for the creation of a corporate ownership registry to help authorities unmask anonymous shell companies and track illicit money.

– According to CNN, CEOs and other senior executives from more than 100 companies including Target, Snapchat and Uber issued a public statement on Friday opposing any measures that deny eligible voters the right to cast ballots. ‘We believe every American should have a voice in our democracy and that voting should be safe and accessible to all voters,’ the statement said. The companies are part of Civic Alliance, a coalition that ‘recognizes that a strong democracy is good for business,’ according to its website.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...