Skip to main content
Apr 16, 2021

The week in GRC: Gensler confirmed as SEC chair and CEOs join together on voting rights

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

The Wall Street Journal reported that Jack Ma’s Ant Group will apply to become a financial holding company overseen by China’s central bank, revamping its business to adapt to a new era of tighter regulation for internet companies. In a statement, the People’s Bank of China said Ant representatives were summoned to a meeting with four regulatory agencies that also included the country’s banking, securities and foreign-exchange overseers. It said a ‘comprehensive, viable rectification plan’ for Ant has been developed under the regulators’ supervision over the past few months.

The directive follows a regulatory pressure on Ma’s business that began with the suspension of the company’s IPO in November. In a statement, Ant said it ‘will spare no effort in implementing the rectification plan, ensuring that the operation and growth of our financial-related businesses are fully compliant.’

– According to Reuters, President Joe Biden’s interim regulators are moving to unravel Wall Street-friendly measures introduced under the previous administration. They have dropped or delayed more than a dozen Trump-era measures that critics said eroded consumer protections, weakened enforcement and limited investors’ ability to push for ESG changes.

Lawyers and consumer groups say that, rather than taking on the lengthy process of rewriting the rules, agencies have in many instances used speedy legal tools such as delaying unfinished rules, issuing informal guidance, rescinding old policy statements or issuing new ones and choosing not to enforce existing rules.

‘The interim Democratic leadership for these agencies is moving very quickly to tackle the deregulatory policy shifts that occurred under Trump,’ said Quyen Truong, partner at Stroock & Stroock & Lavan. ‘The agencies’ use of guidance and reversal of policy statements demands a quick turnaround of compliance for firms.’

CNN reported that dozens of business leaders held a brainstorming session to discuss ways to fight controversial voting restrictions proposed in states around the country. The Zoom meeting with CEOs from a cross-section of industries highlights the growing tensions between the business community and Republicans following former president Donald Trump’s efforts to sow doubts about the legitimacy of the 2020 election. ‘It was a defiant stand against those politicians trying to silence them,’ said Yale’s Professor Jeffrey Sonnenfeld, who helped organize the event with the Coalition for Inclusive Capitalism and the Leadership Now Project.

– Ahead of Boeing’s April 20 AGM, shareholders are considering whether to re-elect the company’s slate of 10 board members or follow a proxy advisory firm’s recommendation to vote against longtime directors Larry Kellner, who is board chair, and Edmund Giambastiani, according to the WSJ. Seven directors who were on the board when a second 737 MAX crashed two years ago have since left or will soon depart and the board has four new members.

ISS gives Boeing credit for ‘significant board and management changes and reforms to the company’s safety and compliance processes,’ as well as the 737 MAX’s return to commercial service last year, and recommends investors re-elect the company’s directors. But Glass Lewis has recommended shareholders vote against the re-election of Kellner and Giambastiani, who leads the board’s safety committee.

A Boeing spokesperson pointed to a new investor presentation that cites the company’s four new directors as evidence of the board’s ‘deep commitment to refreshing its membership.’ The presentation says its ‘highly qualified, diverse board’ has a combination of experiences needed to oversee management effectively. It notes the appointment of a new chief aerospace safety officer. Kellner and Giambastiani declined to comment through the Boeing spokesperson.

– A discretionary budget request released by the Biden administration includes a significant boost for the Financial Crimes Enforcement Network (FinCEN), which is tasked with building a complex corporate ownership registry, the WSJ reported. The White House request seeks an additional $64 mn for FinCEN for building the database, which is meant to help authorities combat anonymous shell companies and track the flow of illicit money.

The increase in funding would help address loopholes in financial reporting requirements that undermine corporate accountability and allow illicit actors to evade scrutiny, the White House said.

– According to Reuters, the SEC released accounting guidance for special purpose acquisition companies (Spacs) that called into question whether warrants issued by hundreds of Spacs could be considered equity instruments. The guidance suggests that many Spacs may potentially have to refile their financial statements to account for the warrants as a liability. Spacs have raised a record $170 bn so far this year, surpassing last year’s total of $157 bn, according to Refinitiv.

CNN reported that New Zealand lawmakers will consider legislation that would require banks, insurers and asset managers to disclose the impacts of climate change on their businesses. The government said the bill is the first of its kind to be proposed anywhere in the world. It will receive its first reading in parliament this week, and it would make climate-related disclosures mandatory for around 200 organizations. The legislation would require financial services firms to disclose how climate change affects their business and explain how they will manage climate-related risks and opportunities.

– The WSJ reported that hundreds of business leaders and companies, including Amazon, JPMorgan Chase and Netflix, signed a new statement to ‘defend the right to vote and oppose any discriminatory legislation,’ in the latest corporate response to a wave of Republican-led voting bills being advanced in dozens of states.

More than 300 companies, CEOs and other executives signed the statement, which appeared as a full-page advertisement in The New York Times and other publications on Wednesday. It was organized by Kenneth Chenault, the former CEO of American Express, and Kenneth Frazier, CEO of Merck & Co. ‘There is overwhelming support in corporate America for this principle of voting rights,’ Chenault said. ‘The right to vote is fundamental to America. It is not a partisan issue.’

– Kohl’s said it has reached an agreement with a group of activist investors that have been trying to take control of the company’s board, CNBC reported. Margaret Jenkins and Thomas Kingsbury, two new independent directors nominated by the investors, will join Kohl’s board at the close of its 2021 AGM, the firm said. Jenkins was previously chief marketing officer of the restaurant chains Denny’s and El Pollo Loco, and Kingsbury was previously CEO of Burlington Stores.

Kohl’s, with support from the investors, will also name an additional independent director, Christine Day, who was CEO of lululemon from 2008 to 2013. ‘We are pleased to have been able to reach this constructive resolution with the company, and we are confident these changes will help further our shared goal of creating long-term value for shareholders,’ the activists said in a statement.

– The SEC announced an award of more than $50 mn to joint whistleblowers whose information alerted the agency to violations that involved complex transactions and would have been difficult to detect otherwise. It is the second-largest in the history of the whistleblower program. The joint whistleblowers provided ‘exemplary assistance’ to the SEC staff during the investigation, including meeting with staff many times and providing detailed documents, the agency said.

– The WSJ reported that, for the second year in a row, Trillium Asset Management has submitted a shareholder proposal to Google’s parent Alphabet asking the board to oversee a third-party review of the effectiveness of the company’s whistleblower policies in protecting human rights. ‘Investors for the most part are familiar with whistleblowing systems and protections and really prize whistleblower protections because, [ultimately], they do protect long-term investors like Trillium,’ said Jonas Kron, the firm’s chief advocacy officer.

The proposal cites several examples of alleged retaliation against workers, saying the incidents constituted red flags about potential internal problems related to culture, ethics and human rights. Trillium’s proposal calls for the company to make the report public.

A spokesperson for Alphabet declined to comment.

– In his final letter to shareholders, Amazon CEO Jeff Bezos pointed to the recent union election outcome at one of Amazon’s Alabama warehouses as an example of why the company needs to address challenges within its workforce, according to CNBC.

‘While the voting results were lopsided and our direct relationship with employees is strong, it’s clear to me that we need a better vision for how we create value for employees – a vision for their success,’ said Bezos, who will step down as CEO in the third quarter, to be succeeded by Andy Jassy, CEO of Amazon Web Services. Bezos will become executive chair of Amazon’s board.

Reuters reported that the US Senate voted 53-45 to confirm Gary Gensler as chair of the SEC. A former Goldman Sachs banker and a professor at MIT Sloan School of Management, Gensler most recently led President Biden’s transition plan for financial industry oversight and served under former president Barack Obama as chair of the Commodity Futures Trading Commission.

Last month he told Congress he would explore new climate and political spending corporate disclosures.

‘Gary Gensler has the perfect mix of market expertise, regulatory experience and commitment to the public interest to be an outstanding SEC chairman,’ said Barbara Roper, chief investor advocate at the Consumer Federation of America.

– According to the WSJ, investors are cooling toward Spacs as new regulatory scrutiny cuts the flow of new issues to a trickle while share prices tumble. Critical comments from regulators seem to be scaring off some investors and new offerings. Until last month, roughly five new Spacs hit the stock market every business day in 2021. In the past 14 days, just 12 new Spacs have started trading, according to data from SPAC Research.

The SEC recently questioned the optimistic revenue projections used by start-ups that are merging with Spacs. An SEC warning that could require Spacs to restate their financial results put the brakes on some new offerings. ‘The SEC [in effect] has now come in and stopped the party,’ said Matt Simpson, managing partner at Wealthspring Capital and a Spac investor.


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...