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Jul 02, 2020

The week in GRC: Companies pressed for racial diversity disclosures, and OCC raises compliance concerns

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

The Wall Street Journal reported that more than 40 percent of S&P 500 companies have pulled their guidance as the Covid-19 pandemic has created uncertainty, and their shares together have fallen more than the broader index. Through June 25, at least 218 companies from a variety of industries have withdrawn or withheld either their quarterly or annual guidance, according to Dow Jones Newswires. Many point to the overall uncertainty of the pandemic but some cite the likelihood of additional outbreaks, changing consumer habits and factors such as the need to boost pay for frontline workers.

‘There are still many unknown factors related to the long-term impact of Covid-19 that could influence our financial results for the remainder of 2020,’ said Kroger Co CFO Gary Millerchip. He pointed to investments for employees and uncertainty related to consumer behavior as reasons for the company’s decision earlier this month to withhold guidance.

Reuters reported that L’Oréal chair and CEO Jean-Paul Agon said he expected the cosmetic group’s nominations committee to propose a candidate to succeed him by the fall as his mandate expires. He told a shareholder meeting that the board had already recommended his successor should come from inside the company, as has been the case for previous transitions. Agon, who has been CEO since 2006, said: ‘The board estimated that L’Oréal had enough resources internally to find very high-quality candidates, so the governance and nomination committees are working on that.’

– According to The Guardian, the US Supreme Court gave the president the authority to remove the head of the Consumer Financial Protection Bureau (CFPB), ruling that the structure it was given by Congress violated the US constitution. But the court did not invalidate the agency, which was the brainchild of Senator Elizabeth Warren, D-Massachusetts, and was created in 2011 under President Barack Obama.

Warren defended the CFPB on Twitter, noting that even after the Supreme Court ruling it remained an ‘independent agency.’

‘The agency may therefore continue to operate, but its director, in light of our decision, must be removable by the president at will,’ wrote Chief Justice John Roberts on behalf of the 5-4 majority. The legal fight focused on whether the agency’s director, a presidential appointee who serves a five-year term, had too much power because the president had limited authority to remove him or her.

CNN reported that Amazon is handing out more than $500 million as a bonus to frontline workers who were with the company throughout the month of June, a step it’s taking after eliminating a $2 hourly wage bump and double overtime pay for frontline workers at the end of May. ‘Our frontline operations teams has been on an incredible journey over the last few months, and we want to show our appreciation with a special one-time ‘thank you’ bonus totaling more than $500 million,’ said Amazon senior vice president of worldwide operations Dave Clark in a note. Amazon has become the subject of increased scrutiny concerning the workplace conditions of its warehouses during the pandemic.

The one-time bonus amounts vary. Full-time employees of Amazon, Amazon-owned Whole Foods and drivers for delivery service partners will get $500; part-time employees or drivers will get $250; frontline leaders at Amazon and Whole Foods will get $1,000; and delivery service partner-owners, who help get packages to customers, will get $3,000.

Reuters said Cannae Holdings and Senator Investment Group, which are trying to buy CoreLogic, said they have a large enough stake in the data and analytics company to call a special shareholder meeting and that Bank of America is sure it can arrange financing for the deal. Cannae and Senator have made an unsolicited bid to buy the property data and analytics company.

CoreLogic is reviewing the bid and said in a statement it will update shareholders on the outcome ‘in due course.’ The company also said its board and management team were ‘laser-focused on increasing growth and profitability to drive shareholder value.’

– The Office of the Comptroller of the Currency (OCC) said the Covid-19 pandemic has forced some financial institutions to reduce staff numbers or reassign personnel at a time when applications for government relief programs are flooding in, heightening banks’ compliance risks, according to the WSJ. The OCC said in a report that it would consider the impact of pandemic-related challenges on compliance as it conducts examinations and contemplates potential enforcement actions.

The pandemic could create challenges for financial institutions to comply with a host of policies, procedures and requirements ranging from data privacy and fair lending to anti-money-laundering efforts, the OCC said. Some banks taking part in the federal stimulus program for small businesses have expressed concerns that they could end up in regulatory or legal crosshairs for approving shoddy loans because they skipped certain due diligence in an effort to disburse stimulus funds more quickly to businesses hit by the pandemic. Others are doing more due diligence than the program requires.

CNN reported that Pinterest has hired an outside legal team to examine its workplace culture in response to accusations of racism and discrimination by two former employees. The move comes two weeks after former Pinterest public policy and social impact managers Ifeoma Ozoma and Aerica Shimizu Banks, both black women who left the company in May, made public accusations of abuse and discrimination they said they faced at Pinterest.

The company’s board said a newly created committee has hired WilmerHale to conduct a ‘comprehensive and independent review of our policies and practices concerning discrimination, harassment and other workplace issues.’ The law firm will also review how Pinterest ‘evaluates, promotes and compensates employees and how the company responds to and investigates complaints of discrimination, harassment and retaliation,’ said Pinterest co-founder and CEO Ben Silbermann in a statement.

‘We want each and every one of our employees at Pinterest to feel welcomed, valued and respected,’ a company spokesperson said. ‘As we outlined in our statement on June 2, we’re committed to advancing our work in inclusion and diversity by taking action at our company and on our platform. In areas where we as a company fall short, we must and will do better.’

– The WSJ said Eileen Murray, former co-CEO of the world’s largest hedge fund firm, will become chair of the Financial Industry Regulatory Authority (FINRA). Murray was one of the investment industry’s highest-ranking female executives as co-CEO of Bridgewater Associates. Bridgewater in December said Murray would step down as co-CEO in March. Murray has severed remaining ties to Bridgewater, a spokesperson for her said. A spokesperson for Bridgewater could not be reached immediately.

Murray will take over as chair at FINRA’s annual meeting in August. She succeeds William Heyman, vice chairman of Travelers Cos and the firm’s former chief investment officer, who is finishing his three-year term on the board.

– According to Reuters, US companies are facing increasing pressure from investors to disclose information about diversity among employees in the wake of nationwide protests against racial discrimination. The aim of investors increasingly focused on social and governance issues is to gain a common metric on racial diversity to compare companies and hold them to account on their pledges, building on efforts to improve gender equality.

US companies with more than 100 employees already gather such information for the federal government annually via a form known as the EEO-1, along with gender information. But they are not required to publicly release it and only 32 companies in the Russell 1000 do so, according to researcher JUST Capital. ‘The EEO-1 is not the Holy Grail, but it’s an excellent starting point,’ said John Streur, CEO of Calvert Research and Management, an investment firm pressing executives to publicly disclose the data.

CNBC said that, according to a report from executive search firm Spencer Stuart, black executives accounted for only 11 percent of new directors over the past year, down from 13 percent a year ago. The report found that nearly all of the top 200 publicly traded companies have minority directors but people of color make up only 20 percent of all board members at those companies, up just 1 percentage point from last year. Minority women made no progress, with board representation stuck at 10 percent in 2020.

Julie Hembrock Daum, who leads Spencer Stuart’s North American board practice, said slow board turnover is one of the main culprits.

Reuters reported that, according to a memo, Goldman Sachs Group’s investment bank has created a new group to increase its recruitment and hiring of black employees and improve career development and retention among existing black employees. A Goldman Sachs spokesperson verified the contents of the memo and said the new group will work on honing and improving diversity targets set in 2019 specifically for the investment bank.

The new Council for Advancement of Racial Equity will also develop better division-wide education and training on avoiding bias and improving management to promote wider racial inclusion in the bank’s leadership.


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...