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Jun 18, 2021

The week in GRC: Companies eye return to workplace and study finds uptick in diverse board appointments

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

The Wall Street Journal reported that companies are increasing the pressure on workers to get vaccinated – not necessarily with mandates but with strong nudges. Many employers have for months tried to coax workers into receiving a Covid-19 vaccine by offering cash, time off and other incentives. Executives have made personal appeals in town hall meetings and internal memos.

Now, some of those efforts are taking a more assertive tone. Although most employers haven’t explicitly ordered staff to get vaccinated, many are asking workers to report their vaccination status or are implementing policies that restrict the activities of unvaccinated workers. The latest efforts affect more professionals at banks, law firms and similar businesses. Some companies say they want reassurance that the majority of their workers are vaccinated before broadly reopening offices.

– The SEC‘s office of information and regulatory affairs on June 11 released the agency’s regulatory agenda. ‘To meet our mission of protecting investors, maintaining fair, orderly and efficient markets, and facilitating capital formation, the SEC has a lot of regulatory work ahead of us,’ said SEC chair Gary Gensler. ‘I look forward to collaborating with my fellow commissioners and the dedicated staff to propose and finalize rules that will strengthen our markets, increase transparency and safeguard investors.’

Proposed and final SEC rulemaking areas include: disclosure relating to climate risk, human capital, including workforce diversity and corporate board diversity, and cyber-security risk; transparency around stock buybacks, short-sale disclosure, securities-based swaps ownership and the stock loan market; 10b5-1 affirmative defense provisions; ‘enhancing shareholder democracy’; and special purpose acquisition companies.

– According to the WSJ, companies are investing in new facilities and products to reduce emissions or meet other targets in the hope of a payoff later. Businesses increasingly are facing pressure from investors, lawmakers and regulators for more details on their spending plans and the progress they are making to achieve their ESG goals.

Investments in, for example, electric vehicles or renewable energy present challenges for CFOs overseeing companies’ capital spending plans. Many are allocating funds to projects that carry big price tags, cover long time periods and yield returns that are sometimes hard to quantify. Companies often make these investments before new regulations are proposed or consumer choices change, making it more difficult to find the right balance.

– As The Guardian noted, this is Pride month and many US companies are advertising their support for the LGBTQ+ community. But the paper reported that according to a new study, 25 companies otherwise showing their support have donated more than $10 mn to anti-LGBTQ+ federal and state politicians over the past two years. The study by the Popular Information newsletter found that alongside pronouncements of LGBTQ+ support, some companies have backed candidates who seek to block or otherwise restrict equal rights based on gender or sexual orientation.

– The WSJ reported that PwC plans to spend $12 bn and hire 100,000 new people in areas such as artificial intelligence and cyber-security by 2026. The investments are aimed at better advising companies that face increasing pressure from investors on issues such as data privacy, diversity and sustainability, said Tim Ryan, US chair and senior partner at PwC.

PwC said it intends to hire more experienced personnel in areas such as ESG and offer new products that feature artificial intelligence and machine learning. The company is also considering acquiring other companies to expand certain capabilities, such as climate-risk assessments, Ryan said.

– The SEC announced that Renee Jones has been appointed director of the agency’s division of corporation finance. John Coates, the division’s current acting director, has been named as the SEC’s general counsel. Both appointments are effective on June 21.

Jones most recently served as professor of law and associate dean for academic affairs at Boston College Law School, where she taught courses in corporations, securities regulation, start-up company governance and financial regulation. Previously, she represented private and public companies on corporate and securities matters at law firm Hill & Barlow.

– According to the WSJ, the European Central Bank (ECB) wants to include gender diversity as a criterion to approve bank board members and executives, a step that would put further pressure on an industry in which the vast majority of senior posts are still held by men. The ECB’s banking supervisor, which oversees the eurozone’s largest banks, said that although ‘diversity in leadership has long been recognized as crucial for effective governance,’ figures by the European Banking Authority show only 8 percent of CEOs of European credit and investment institutions are women.

The new criterion will be used when the supervisor reviews new or current board members or executives, a process known as a ‘fit-and-proper’ assessment. ‘Whenever targets are not met, we will issue recommendations to remedy such imbalances,’ said Elizabeth McCaul, a member of the ECB’s supervisory board.

– The WSJ reported that, according to an analysis of corporate proxy filings from Spencer Stuart, S&P 500 companies have tripled the share of new directors who are black and more than doubled the share who are Latino. The shift leaves nearly 80 percent of the companies’ board seats occupied by white directors and about 70 percent by men.

S&P 500 boards added 456 new independent directors over the past year, many this spring, the highest number since 2004, according to the study. Nearly three quarters of the new directors are women or belong to a racial or ethnic minority, up from about 60 percent last year and 31 percent a decade ago.

– Former Xerox CEO Ursula Burns said rethinking criteria can help companies improve the gender and racial diversity of their boards, according to CNBC. Burns said the idea that there is a shortage of qualified board candidates who are female, people of color or both is ‘small minded.’

‘The specifications are biased, not that people are incapable. Some people are, but this is not what we’re talking about here,’ said Burns, who serves on the boards of Uber and ExxonMobil. ‘They spec’d it in such a way that only five or 10 people could possibly fit the specification, and every one of those guys are boarded up. Some of them are getting too old to serve.’

– Microsoft CEO Satya Nadella was named chair of the company’s board, CNN reported. Nadella, who has been CEO since 2014, has helped transform the PC maker into a leader in cloud computing. Microsoft said in a statement that Nadella had been ‘unanimously elected’ to replace John Thompson in the position.

CNBC reported that the US Department of Justice (DoJ) filed a lawsuit aimed at stopping insurance broker Aon’s $30 bn acquisition of Willis Towers Watson, arguing that the deal would reduce competition and could lead to higher prices. The complaint, filed in the US District Court for the District of Columbia, listed five areas of concern, including identifying appropriate health benefits plans for big customers and plans for property, casualty and financial risk for large customers.

In a joint statement, Aon and Willis said they disagreed with the DoJ’s action, ‘which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.’ The companies added: ‘We continue to make material progress with other regulators around the world and remain fully committed to the benefits of our combination.’

CNN reported that Bank of America is encouraging its vaccinated employees to return to the office after Labor Day in September. After Labor Day, ‘our view is [that] all the vaccinated teammates will be back,’ the company’s CEO Brian Moynihan said. ‘We’ll be able to operate fairly normally and will then start to make provisions for the other teammates as we move through the fall.’

A spokesperson for Bank of America said: ‘We encourage employees to enter their vaccination status in the company portal, and we expect the majority of our employees to return after Labor Day.’

It isn't the only big bank focused on getting its employees back into the office. Morgan Stanley CEO James Gorman recently said it's time for the bank's New York employees to return to work in person now that more people are getting vaccinated for Covid-19.

– Chief compliance officers (CCOs) in the financial services industry would get more clarity on their exposure to regulatory charges under a framework proposed by the New York City Bar Association, but some say more needs to be done to alleviate growing concerns over personal liability, according to the WSJ.

Structural changes at firms, such as modifications to reporting lines for CCOs and how involved they get in business decisions, would go a long way toward helping companies attract and retain compliance talent at a time when candidates can be reluctant to take those positions over worries they could be held personally liable for institutional failures, some professionals say.