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Apr 17, 2020

The week in GRC: Pandemic hampers compliance monitors, and companies retooling amid Covid-19 face liabilities

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

– In an effort to chart the impact of the coronavirus pandemic on corporate America, The Wall Street Journal and MyLogIQ analyzed public filings for companies in the S&P Composite 1500 Index. The findings include that almost 300 companies withdrew their financial guidance, citing Covid-19. Roughly 175 companies suspended stock buybacks or cut their dividend, while 100 firms that employ a combined 3 million people said they would furlough workers.

CNBC reported that eBay hired Jamie Iannone, Walmart’s COO for US e-commerce, as its new CEO. Iannone will take up the role on April 27. He was credited for growing the membership and online sales of Sam’s Club, Walmart’s membership-based subsidiary. He spent nearly eight years at eBay as a vice president, according to a statement.

Iannone will succeed Devin Wenig, who left eBay in September. Wenig resigned as eBay’s board did a strategic review of the company’s portfolio and explored selling off some assets, including StubHub. Wenig explained his departure in a tweet, saying that he ‘was not on the same page as my new board.’

– According to The Guardian, the EU has hired BlackRock to work on potential new environmental rules for banks. The European Commission said BlackRock had won a contract to study how the EU could best integrate ESG factors into its banking supervision. Campaigners raised concerns about potential conflicts of interest, given BlackRock’s financial interests in sectors that could be directly impacted by new environmental rules.

But the company this year has taken significant steps to make environmental sustainability a core part of its business. In January it said it would divest from companies that made 25 percent or more of their revenues from coal and pledged to start using its voting power to force companies to disclose climate risks.

A spokesperson for BlackRock said its financial markets advisory (FMA) arm functioned separately from the investment management unit. The spokesperson said: ‘We are honored that BlackRock [FMA] has been selected to perform an analysis to inform the European Commission’s action plan on sustainable finance, deploying our expertise and capabilities in advising public sector clients on structural trends, including the transition to a low-carbon future.’

A European Commission spokesperson said the contract was awarded ‘in full and strict compliance with the applicable EU procurement rules, including those on the eligibility of tenderers and the prevention of any potential conflict of interest.’

The Guardian also reported that Disney’s Bob Iger postponed his semi-retirement to retake control of the company as it prepares for changes caused by the Covid-19 pandemic. Iger was due to end his term as CEO this year, with Bob Chapek, head of Disney’s theme park business, unveiled as his successor in February. But Iger, who had already said he would not take his $3 million salary during the pandemic, has decided to remain in charge to help steer the company through a period of unprecedented turmoil.

‘A crisis of this magnitude, and its impact on Disney, would necessarily result in my actively helping Bob and the company contend with it,’ Iger said.

– According to The Washington Post, Amazon fired two employees who were outspoken critics of its climate policies and who had publicly complained about conditions at its warehouses, saying they were unsafe during the coronavirus outbreak. One of the fired workers, Emily Cunningham, who is part of the group Amazon Employees for Climate Justice, had offered on Twitter to match donations up to $500 to Amazon warehouse workers. Cunningham said late Monday that she was fired the previous Friday.

Maren Costa, a principal user experience designer who is also part of the employee climate group, said she was also fired the previous Friday. Costa has retweeted criticism from Cunningham, as well as from groups supporting activist warehouse workers. Cunningham and Costa believe they were fired for their outspokenness.

Amazon fired the workers for ‘repeatedly violating internal policies,’ a spokesperson said in a statement. ‘We support every employee’s right to criticize [his or her] employer’s working conditions, but that does not come with blanket immunity against any and all internal policies.’

– The US Supreme Court said that for the first time it would hear cases argued by teleconference rather than in the courtroom due to the Covid-19 pandemic, Reuters reported. The court will hear arguments next month by teleconference in 10 cases, with the justices and lawyers for the litigants set to participate remotely in light of ‘public health guidance’ in response to the coronavirus, a court spokesperson said. In another break with tradition, the court will provide a live audio feed of the arguments to the news media.

– According to the WSJ, lockdowns designed to thwart the spread of Covid-19 are delaying the work of corporate monitors who rely on visits to companies and access to sensitive data to ensure that regulator-mandated changes to compliance regimes are being done. Monitors are using digital tools to continue their work but observing corporate culture and day-to-day operations at a virtual remove is less than ideal. Corporate monitors are independent compliance experts appointed by regulators, usually as part of a settlement.

– The WSJ said major financial institutions are looking at potential changes to US stock market circuit breakers after the rarely used mechanisms repeatedly halted trading last month during volatility arising in large part from the Covid-19 pandemic.

The firms are part of a loose industry taskforce made up mainly of brokerages, trading firms and exchanges that have held several rounds of discussions in recent weeks on circuit breakers, according to people familiar with the matter. The group is reviewing how circuit breakers worked during the unprecedented sell-off in March and is seeking possible fixes to recommend to the SEC.

– According to Reuters, citing regulatory filings, although most activist shareholders have refrained from challenging the boards of US companies this proxy season amid the economic fallout of the coronavirus outbreak, Starboard Value is pursuing proxy contests against five US firms.

Starboard recently nominated six candidates at Commvault Systems, adding another fight to a line-up that already includes eBay, GCP Applied Technologies, MEDNAX and Merit Medical. Starboard is seeking roughly two dozen board seats in total, according to the filings. Last year Starboard won 20 board seats at seven companies, and since 2013 it has won 118 seats, according to data from Activist Insight.

Starboard, eBay, Commvault, GCP, Merit and MEDNAX declined to comment.

– The WSJ later reported that Starboard Value withdrew its nominees for eBay’s board after the company named a new CEO. The online auction giant said it expects to select a new independent board director and will consider the people Starboard nominated, and that it will choose that new director in the next few months.

On Monday eBay said Jamie Iannone will become its CEO on April 27. Starboard, which settled for one board seat more than a year ago, had nominated four additional directors to the board earlier this year, including its own research director, Peter Feld. The fund had urged eBay to search for an external CEO and to move faster to sell its online classified ads business or make changes to its board.

– Amazon is developing a test for Covid-19 in order to help restart the battered economy, according to CNN. CEO Jeff Bezos in his annual letter to shareholders said regular testing for every industry is needed to ‘both help keep people safe and help get the economy back up and running.’ He said for that to happen, society needs ‘vastly more testing capacity’ than is currently available and he has assembled a team of Amazon employees from various units to create new tools to test for Covid-19.

Bezos said in his letter that he’s focused on the safety of Amazon’s global workforce, despite criticism that the company isn’t doing enough and has fired outspoken critics. The company has made 150 ‘significant process changes’ in both its operations network and at Whole Foods, he said. That includes temperature checks, increased sanitation of facilities and offering personal protection equipment.

– The SEC announced that it has awarded more than $27 million to a whistleblower who alerted the agency to misconduct occurring, in part, overseas. After providing the tip, the whistleblower gave ‘critical investigative leads that advanced the investigation and saved significant commission resources,’ the agency said.

‘This award marks several milestones for the program,’ said Jane Norberg, chief of the SEC’s office of the whistleblower. ‘This is the largest whistleblower award announced by the commission this year, and the sixth-largest award overall since the inception of the program. This award also brings the total amount awarded to whistleblowers by the SEC over the $400 million mark.’ 

– According to the WSJ, companies that are shifting operations to make masks, ventilators and other medical equipment in the battle against Covid-19 are assuming compliance and liability risks. Many companies have retooled manufacturing processes and supply chains to survive the market fallout from the pandemic or have done so in response to government orders and appeals for help.

That has presented compliance teams with responsibilities such as vetting new vendors, distributors and suppliers to prevent possible sanctions violations and find corruption risks. They are also working to ensure their new procedures and products meet federal guidelines governing once-unfamiliar industries. Amid the pandemic, compliance teams have had to move quickly, finding a balance between accuracy and speed as they build compliance programs from scratch, and doing so while adjusting to new remote-working environments.

CNBC reported that Marlboro cigarette maker Altria CEO Howard Willard, who is recovering from Covid-19, has stepped down after nearly three decades with the company. Finance chief Billy Gifford, who was last month named interim CEO when the company disclosed that Willard had taken a medical leave of absence, will take on the CEO role on a permanent basis.

Altria said it was separating the roles of CEO and chair and named Thomas Farrell, formerly the board’s independent presiding director, to the chair role.