Skip to main content
Aug 27, 2021

The week in GRC: Delta to raise health costs for unvaccinated staff and CFA’s Barbara Roper joins SEC

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

Reuters reported that ISS backed cloud storage vendor Box in its fight with activist investor Starboard Value by recommending that shareholders vote for the company’s directors instead of the hedge fund firm’s nominees. In its report, ISS said shareholders should vote for Box directors Peter Leav and Aaron Levie, arguing that the existing board has made sensible changes and should get more time to effect a turnaround.

Earlier this year, Starboard nominated four directors to Box’s 10-person board, saying that the company failed to capitalize on the work-from-home trend during the Covid-19 pandemic.

– According to CNN, some California gig worker advocacy groups expressed cautious optimism about a federal court judge’s ruling against Proposition 22, a ballot measure that was approved by a majority of state voters in November 2020. The measure allows companies such as Uber, Lyft and DoorDash to classify their drivers and couriers as independent contractors instead of employees who are entitled to benefits such as healthcare coverage, paid time off and the right to collectively bargain.

Alameda County Superior Court Judge Frank Roesch determined that Proposition 22 is ‘unconstitutional’ and ‘unenforceable’ because a section in the measure limits the ability of future legislatures to amend the law. ‘A prohibition on legislation authorizing collective bargaining by app-based drivers does not promote the right to work as an independent contractor, nor does it protect work flexibility, nor does it provide minimum workplace safety and pay standards for those workers,’ Roesch wrote in his ruling. 

Uber said the ruling ‘defies both logic and the law’ and vowed to appeal. ‘We will appeal and we expect to win,’ an Uber spokesperson said. Lyft deferred comment to a representative for the Protect App-Based Drivers & Services (Pads) Coalition, whose members support Proposition 22. A Pads spokesperson said the judge’s decision was an ‘outrageous’ affront to the majority of California voters who supported the ballot measure less than a year ago. ‘We will file an immediate appeal and are confident the appellate court will uphold [Proposition] 22,’ he said. DoorDash also denounced the judge’s ruling, arguing that it would prevent the company’s contract couriers from ‘maintaining the independence that is so vital to them’ if the judgment is upheld.

CNBC reported that, according to a study by New Street Consulting Group, women working as executive directors at UK FTSE 100 companies are being paid, on average, 40 percent less a year than men. Female executive directors at a major UK company are typically being paid £1.5 mn ($2.1 mn) each year, while male counterparts take home £2.5 mn on average, the research finds.

The research also finds that female non-executive directors working at FTSE 100 companies were typically being paid £104,800 a year, compared with £170,400 for men in those roles, representing a 38 percent pay gap.

– The SEC announced that Joseph Brenner has retired as chief counsel of the division of enforcement, a role he held since January 2011. As chief counsel, Brenner oversaw the process of providing legal and policy advice on potential enforcement actions and other critical issues. ‘Joe’s expertise, counsel and advice have been invaluable to more than half a dozen enforcement directors and countless members of the staff of the division,’ said Gurbir Grewal, director of the division. ‘Joe’s thoughtful approach to some of the thorniest issues we face has made us more effective in protecting investors and the integrity of the markets.’

Reuters reported that SEC chair Gary Gensler said the agency will seek input on whether digital customer engagement innovations used by financial services firms should be governed by existing rules or may need new ones. Although the SEC’s considerations on the subject are at an ‘early stage,’ its rules may need updating to account for an artificial intelligence (AI)-led revolution in predictive analytics, differential marketing and behavioral prompts designed to optimize customer engagement, he said.

‘We’re at a transformational time. I really believe data analytics and AI can bring a lot of positives, but it means we should look back and think about what [this means] for user interface, user engagement, fairness and bias,’ Gensler said. ‘What does it mean about rules written in an earlier era?’ The consultation was partly sparked by January’s meme stock saga, which resulted in intense scrutiny of retail broker practices, including ‘gamification’ – game-like prompts designed to optimize customer engagement.

– Michael Murray, a senior US Department of Justice (DoJ) antitrust lawyer, has joined law firm Paul Hastings as a partner, Reuters reported. Murray spent the last four years in various positions at the DoJ, most recently as principal deputy assistant attorney general for the department’s antitrust division. He is now part of the Paul Hastings’ litigation department and is based in Washington, DC.

The Wall Street Journal reported that AMC Networks CEO Josh Sapan is stepping down following a 26-year run during which he shepherded hits such as Mad Men and The Walking Dead. Sapan will be replaced in the interim by Matthew Blank, the former chair of Showtime Networks and a senior adviser at the Raine Group, a merchant bank. The company said it would conduct a search for a permanent replacement for Sapan, who will become executive vice chair of AMC Networks, advising the company on its video-streaming efforts.

– Reuters (via CNBC) reported that, according to a document it had reviewed and people familiar with the matter, the SEC has started to issue new disclosure requirements for Chinese companies seeking to list in New York as part of an effort to raise investor awareness of the risks involved.

Some Chinese companies have started to receive detailed instructions from the SEC about greater disclosure of their use of offshore vehicles known as variable interest entities for IPOs, implications for investors and the risk that Chinese authorities will interfere with company operations. Gensler last month asked for a ‘pause’ in US IPOs of Chinese companies and sought more transparency about these issues. Chinese listings in the US came to a standstill after the SEC freeze.

An SEC spokesperson did not immediately respond to a request for comment.

– Delta Air Lines CEO Ed Bastian notified employees that they will face $200 monthly increases on their health insurance premiums starting November 1 if they aren’t vaccinated against Covid-19, citing steep costs to cover employees who are hospitalized with the virus, CNBC reported. Unvaccinated employees will face other restrictions, including indoor masking effective immediately and weekly Covid-19 tests starting September 12.

The measures are the latest attempt by a US company to increase vaccination rates. Delta stopped short of an outright mandate like that established by rival United Airlines earlier this month. Delta also said that starting September 30, ‘in compliance with state and local laws, Covid pay protection will be provided only to fully vaccinated individuals who are experiencing a breakthrough infection.’

– In other pandemic-related news, CNBC reported that Ford Motor is delaying its hybrid return-to-work program for employees who have not already returned to offices from October until no earlier than January 2022 due to the rapidly spreading Covid-19 delta variant. About 120,000 to 130,000 of Ford’s 182,000 employees, primarily in manufacturing, have already returned to work. Schedules are not expected to change much, if any, for workers who need to be at a certain facility to perform their duties.

– According to Reuters, India has fewer ESG funds than other top 10 economies. The world’s sixth-largest economy has 23 ESG funds, Refinitiv data shows, compared with the US and UK, which have more than 500 each. Japan has 182 and China has 119. Other economies in the top 10 also have more ESG funds.

‘Indian investors are not completely attuned to the concept of sustainable investing, unlike global markets led by Europe, where sustainable investing has been present for many years,’ said Kaustubh Belapurkar, director at Morningstar India. Analysts said investors were reluctant to put cash into ESG funds as most funds in the sector were new and could not show a track record of outperformance.

– The SEC announced the appointment of Barbara Roper as senior adviser to the chair. Roper’s focus will be on issues relating to retail investor protection, including matters relating to policy, broker-dealer oversight, investment adviser oversight and examinations. She is currently director of investor protection for the Consumer Federation of America (CFA).

Roper has worked at the CFA for 35 years and has been a leading consumer spokesperson on investor protection issues, particularly the standards that apply to investment professionals whom investors rely on for advice and recommendations.

– The WSJ reported that, according to people familiar with the matter, the Chinese authorities plan to propose new rules that would ban companies with large amounts of sensitive consumer data from going public in the US. In recent weeks, officials from China’s stock regulator have told some companies and international investors that the new rules would bar internet firms holding a lot of user-related data from listing abroad, the people said. The regulators said the rules target companies seeking foreign IPOs via units incorporated outside the country, according to the people.

The China Securities Regulatory Commission didn’t immediately respond to a request for comment.