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Oct 02, 2020

The week in GRC: Supreme Court to hear companies’ climate suit appeal, and Treasury warns over ransomware payments

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

– According to Reuters, US companies with Covid-19 outbreaks are facing an emerging legal threat from claims that employees brought coronavirus home and infected relatives. One risk-analysis firm said these could cost employers billions of dollars. The cases borrow aspects of ‘take home’ asbestos litigation and avoid caps on liability for workplace injuries, exposing companies to expensive pain-and-suffering damages, even though the plaintiff never went to their premises.

‘Businesses should be very concerned about these cases,’ said Tom Gies of Crowell & Moring, which defends employers. Between 7 percent and 9 percent of the roughly 200,000 US Covid-19 deaths so far are believed to have arisen from take-home infections and the lawsuits could cost businesses up to $21 billion if the number of US fatalities reaches 300,000, according to risk analysis firm Praedicat.

The Wall Street Journal reported that Commerzbank appointed Manfred Knof, head of Deutsche Bank’s private bank in Germany, as its new CEO. Knof, who will take over in January, will succeed Martin Zielke, who resigned along with Commerzbank’s chair in July after acknowledging he had failed to sufficiently turn the bank around. Commerzbank’s new chair, Hans-Jörg Vetter, said Knof has the ‘necessary expertise and human leadership skills for the tasks that lie ahead.’

Cerberus Capital Management, which holds more than 5 percent of Commerzbank, complained last summer that the bank didn’t have a coherent strategy and wasn’t executing on ‘progressively less ambitious’ plans. It said it wants bigger cuts and two board seats, which Commerzbank has rejected. Cerberus didn’t respond immediately to a request for comment on Knof’s appointment.

– The SEC announced an award of more than $1.8 million to a company outsider, who it said expeditiously reported significant information to the agency about securities law violations. ‘Today’s award demonstrates the success of the program and the important role company outsiders can play in halting ongoing violations,’ said Jane Norberg, chief of the SEC’s office of the whistleblower. ‘While many of our whistleblowers have been insiders, the agency also receives critical intelligence from company outsiders, like today’s whistleblower, whose swift reporting alerted staff to the violations that resulted in the success of this enforcement action.’

– According to the WSJ, Blackstone Group has set a goal of reducing carbon emissions by 15 percent within the first three years of buying any asset or company across its portfolio. The initiative will start in 2021 and will apply to new investments where Blackstone controls the energy systems. The firm will work with French energy and digital-automation company Schneider Electric to track its progress. Schneider will tabulate usage, cost and associated emissions data based on monthly energy bills from each new item in Blackstone’s portfolio. Emissions reductions will be reported in aggregate against the firm’s overall target.

Private equity firms have become increasingly focused on ESG issues, in part due to pressure from the public pension funds and other institutions that invest in them. Like many of its peers, Blackstone has been monitoring energy consumption and implementing strategies at various properties and portfolio companies for years, but it is the first to publicly set an overall target.

Reuters reported that JPMorgan Chase & Co agreed to pay more than $920 million and admitted to wrongdoing to settle federal US market manipulation probes into its trading of metals futures and Treasury securities. Between 2008 and 2016, JPMorgan engaged in a pattern of manipulation in the precious metals futures and US Treasury futures market, the Commodity Futures Trading Commission (CFTC) said.

‘The conduct of the individuals referenced in today’s resolutions is unacceptable and they are no longer with the firm,’ said Daniel Pinto, co-president of JPMorgan and CEO of the corporate and investment bank. He added that the bank had invested ‘considerable resources’ in enhancing its compliance policies, surveillance systems and training programs.

In parallel settlements, the bank entered into a deferred prosecution agreement with the US Department of Justice (DoJ) and the US Attorney’s Office for the District of Connecticut. It also agreed to pay $35 million to settle related charges with the SEC, although the bank’s payment to the CFTC would offset that fine, it said. In an unusual concession, JPMorgan admitted wrongdoing in agreeing to the SEC and DoJ settlements.

– According to the WSJ, Democratic lawmakers are expected to call for Congress to curb the power of big technology companies, possibly through forced separation of online platforms, as a House panel concludes a probe into the sector. Rep David Cicilline, D-Rhode Island, who chairs the subcommittee, has indicated the panel is ready to recommend measures targeting big tech companies’ power, including requiring owners of huge technology platforms to separate those platforms from other businesses.

The committee’s final report may include the platform-separation idea among a series of policy options, Cicilline has said. Others include increasing the budgets of US antitrust enforcement agencies and amending US antitrust laws.

CNN reported that California Governor Gavin Newsom signed a law that means, from next year, public companies headquartered in the state will be required to diversify their boards racially, ethnically and in terms of sexual and gender identity. Under the law, companies must have at least one board member from an under-represented community by the end of 2021 and at least two or three – depending on the board’s size – by the end of 2022.

People from under-represented communities are defined in the bill as anyone who self-identifies as black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native, or who self-identifies as gay, lesbian, bisexual or transgender. The law is likely to establish a new minimum threshold for corporate diversity across the country, much like the state’s 2018 law requiring a minimum number of women directors.

– On Thursday the Senate Commerce Committee voted on a unanimous, bipartisan basis to subpoena the CEOs of Facebook, Google and Twitter to testify about concerns over the tech industry’s key legal shield, Section 230 of the Communications Decency Act, CNBC reported.

Section 230 allows online platforms to be protected from liability for their users’ posts and their moderation practices if taken in good faith. Although the bill was introduced in the 1990s to allow young tech companies to grow, many lawmakers from both parties have begun to question its language, which now serves to protect some of the world’s largest companies from legal challenges.

A Facebook spokesperson declined to comment. Representatives for Google and Twitter did not immediately respond to requests for comment.

Reuters reported that the US Supreme Court agreed to hear an appeal by energy companies that are contesting a lawsuit brought by the city of Baltimore seeking damages for the impact of climate change. The justices will consider whether the lawsuit must be heard in state court, as the city would prefer, or in federal court, which corporate defendants typically regard as a more favorable venue. The suit targets 21 US and foreign energy companies that extract, produce, distribute or sell fossil fuels.

The outcome could have an impact on roughly a dozen similar lawsuits by US states, cities and counties – including Rhode Island and New York City – seeking to hold such companies liable for the impact of climate change.

– Aviva, Deloitte and Microsoft’s UK business will set new ethnicity targets for their boards and executive teams as part of an effort to improve racial diversity at UK companies, according to The Guardian. The companies are among the first signatories to the Confederation of British Industry’s (CBI) Change the Race Ratio campaign, which will align with – and expand – on targets set by the Parker Review in 2016.

The government-backed Parker Review gave FTSE 100 companies until the end of 2021 to appoint at least one black, Asian or minority ethnic (BAME) board-level director, with FTSE 250 companies given until 2024 to do the same. But the CBI said 37 percent of FTSE 100 firms still do not have any BAME representation on their boards.

– The WSJ reported that the US Department of the Treasury said in advisories that victims of ransomware schemes and financial institutions could violate sanctions or anti-money-laundering rules if they facilitate or make payments to cyber-attackers. The notices from units of the Treasury’s Office of Terrorism and Financial Intelligence warned victims – and companies that assist them – to be particularly wary of making ransomware payments to blacklisted individuals and entities, including hacker groups in countries such as Iran, North Korea and Russia.


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...