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Dec 03, 2021

The week in GRC: DoJ gets tough on corporate recidivists and ESG investors eye gender equity

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

CNBC reported that Jack Dorsey stepped down as CEO of Twitter. Parag Agrawal, the company’s chief technology officer, took over the role. Dorsey was serving as CEO of both Twitter and Square, his digital payments company. Dorsey will remain a member of the board until his term expires at the 2022 AGM, the company said. Salesforce president and COO Bret Taylor will become board chair, succeeding Patrick Pichette, a former Google executive, who will remain on the board as chair of the audit committee.

‘I’ve decided to leave Twitter because I believe the company is ready to move on from its founders,’ Dorsey said in a statement, although he didn’t provide any additional detail on why he decided to resign.

– The SEC released guidance for companies on how to properly recognize and disclose compensation costs for ‘spring-loaded awards’ made to executives. Spring-loaded awards are share-based compensation arrangements where a company grants stock options or other awards shortly before it announces market-moving information such as an earnings release with better-than-expected results or the disclosure of a significant transaction.

According to the new guidance, non-routine spring-loaded grants merit particular scrutiny by those responsible for compensation and financial reporting governance at public companies. The SEC staff believe that as companies measure compensation paid to executives, they must take into account the impact the material non-public information will have when released.

– Activist investor Bluebell Capital Partners has called on commodities group Glencore to spin off its thermal coal business, divest non-core assets and improve corporate governance, the Financial Times reported. Bluebell wrote to the miner and trader earlier this month, urging it to ‘chart a new future’ without coal, the world’s most polluting fossil fuel.

Bluebell said Glencore’s plan to run down its coal business and close all its mines within the next 30 years – a strategy that has been backed by its biggest shareholders – is both ‘morally unacceptable and financially flawed.’ It wrote in a letter: ‘A clear separation between carbonized and decarbonized assets is needed to increase shareholder value.’

In a statement, Glencore said it ‘regularly’ engaged with its investors: ‘We are confident that our business model is uniquely placed to produce, recycle and market the materials needed to decarbonize energy while reducing our own emissions and delivering value for stakeholders.’

– According to CNBC, the National Labor Relations Board (NLRB) authorized a new union election at one of Amazon’s Alabama warehouses. In a statement, the Retail Wholesale and Department Store Union (RWDSU) said an NLRB director formally granted a new union election at Amazon’s Bessemer, Alabama warehouse. As a result, workers at the facility will get another chance to vote on whether to join the union.

An NLRB spokesperson confirmed the agency has ordered a new election but didn’t specify when the new union election will take place. The warehouse at issue was the site of a high-stakes union drive that attracted global attention. In April, employees overwhelmingly rejected forming a union, with fewer than 30 percent of votes tallied in favor of joining the RWDSU.

An Amazon spokesperson said the company disagrees with the NLRB’s decision on Monday and that Amazon doesn’t think unions are the best answer for its employees. ‘Our employees have always had the choice of whether or not to join a union, and they overwhelmingly chose not to join the RWDSU earlier this year,’ the spokesperson said. ‘It’s disappointing that the NLRB has now decided that those votes shouldn’t count.’

Reuters reported that Marta Ortega, daughter of the founder of Spanish fashion retailer Inditex, will replace chair Pablo Isla. Ortega will take over as chair of the group that owns the Zara brand in April with a new CEO, the last step in handing over to a new generation that began a decade ago, the company said. Isla said it was the right time for the change thanks to the company’s solid position, with sales in the second quarter climbing above 2019 pre-pandemic levels.

‘These changes we are announcing today are very well-thought-out changes, which are part of a process within the company and we understand that now is the right time to address this new stage,’ Isla said.

– The White House said the US Department of Justice (DoJ) ‘will vigorously defend’ the government’s authority to promote its vaccine requirement in federal contracting after courts blocked the administration from enforcing two vaccine mandates, Reuters reported.

A US district judge in Louisiana on Tuesday temporarily blocked the Centers for Medicare & Medicaid Services from enforcing its vaccine mandate for healthcare workers. A US district judge in Kentucky blocked the administration from enforcing a regulation that new government contracts must include clauses requiring that contractors’ employees get vaccinated.

– According to CNBC, a small but growing focus in the ESG investing movement is gender equity. ‘Gender-lens’ investing prioritizes companies with higher representation of women on their boards and in management positions, as well as those that score well on pay equity and other workplace policies that particularly help women. ‘We’re seeing more investors, primarily women... looking to bring a gender lens to their portfolio,’ said Kathleen McQuiggan, a financial adviser at Artemis.

The Wall Street Journal reported that DoJ officials said companies looking to resolve violations such as bribery should prepare for a very thorough review of their previous sins. Department leadership has said the agency will step up enforcement against white-collar criminals, including by taking a harder look at companies with long histories of offenses. Officials defended the new stance on corporate recidivism, which drew skepticism from white-collar defense lawyers gathered at an annual conference on the FCPA.

‘As a baseline… we’re gonna be starting from the perspective that it’s all potentially relevant,’ said David Last, chief of the DoJ’s FCPA unit. That includes all federal, state and international offenses, as well as all criminal, civil and regulatory violations, he noted. ‘And look, if there are so many instances to count, that may be another conversation we need to have,’ he added. ‘If you’re in the 50s or the hundreds of prior touches, that’s something we probably need to know.’

Reuters reported that Chris James, founder of Engine No 1, said a failing governance structure propagated by a management without a strategy for the energy transition was behind the hedge fund firm’s campaign to bring independence to ExxonMobil’s board. ExxonMobil has been an outlier in transparency and accountability regarding its environmental impact, James said. Three of four people with energy transition experience nominated by Engine No 1 joined ExxonMobil’s board earlier this year.

Some oil companies facing pressure from regulators and investors have moved to develop cleaner energy and divest from fossil fuels.

In response to a request for comment ExxonMobil said: ‘We evaluate our investments across a range of scenarios – including net-zero pathways – and we look forward to sharing more details in the coming months. There is significant growth potential in the low-carbon opportunities where we can leverage our competencies in technology, engineering and project development. This gives ExxonMobil an advantaged position irrespective of the pace of the energy transition.’

– Susan Arnold is taking over as chair of Disney’s board, CNBC reported. She will succeed Bob Iger, who stepped down as Disney CEO early last year. Iger has served as board chair since 2012 and is set to leave the position on December 31. Arnold has been on Disney’s board for 14 years and has served as the independent lead director since 2018. She was an operating executive at The Carlyle Group until this year. She served as president of the global business units of Procter & Gamble from 2007 to 2009 and was a member of the board at McDonald’s from 2008 to 2016.

– The SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. The rules apply to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate.

‘We have a basic bargain in our securities regime, which came out of Congress on a bipartisan basis under the Sarbanes-Oxley Act of 2002,’ said SEC chair Gary Gensler in a statement. ‘If you want to issue public securities in the US, the firms that audit your books have to be subject to inspection by the PCAOB.’

– According to CNN, Didi said Friday that it would ‘immediately’ start the process of delisting from the NYSE and move to Hong Kong just months after its IPO. In an English-language statement, the company said its board of directors has authorized the company to file for delisting in New York. The board will ‘organize a shareholders meeting to vote on the above matter at an appropriate time in the future, following necessary procedures,’ Didi said.


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...