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Jan 28, 2022

The week in GRC: SEC reopens comment process on executive pay rules and ESG experts join Prada board

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

CNN reported that activist investor Blackwells Capital in an open letter said it had ‘grave concerns’ about Peloton’s performance and called on its board to fire CEO John Foley and explore a sale. The investment firm criticized Peloton for not capitalizing on the success it achieved in 2020, saying it squandered the opportunity to grow sales of its internet-connected bikes and treadmills.

Blackwells’ chief investment officer Jason Aintabi said Peloton is on ‘worse footing today than it was prior to the pandemic, with high fixed costs, excessive inventory, a listless strategy, dispirited employees and thousands of disgruntled shareholders.’ A sale could help Peloton, Aintabi argued, saying that a stand-alone company wouldn’t ‘be able to fully exploit the opportunities its assets and brand enable.’

Peloton declined to comment.

Reuters reported that, according to a person familiar with the matter, Nelson Peltz’s activist hedge fund firm Trian Partners has built a stake in Unilever. Trian is known for proposing operational fixes at its portfolio companies, often through white papers. It presents itself as a partner that can offer constructive advice rather than a corporate raider intent on breaking companies apart.

Trian and Unilever declined to comment.

– Transparency International warned that many countries around the world have stalled in their efforts to improve their image regarding the level of corruption within their borders, The Wall Street Journal reported. The group’s survey found that as many as 131 countries out of the 180 it scored failed to make any meaningful progress on corruption over the last decade, with the reputation of more than two dozen reaching an all-time low.

The Biden administration last year asked a range of executive-branch departments and agencies to find ways to strengthen their fight against corruption. Officials have pointed to the continuing implementation of a landmark anti-money-laundering bill, which lawmakers hope will help stop bad actors from using anonymous shell companies for nefarious purposes. They have also promised to step up enforcement of anti-foreign bribery laws in countries where corruption is perceived to be rampant.

Reuters reported that GameStop, the video game retailer at the center of last year’s meme stock trading frenzy, named CEO Matt Furlong to its board as the former Amazon executive took formal charge of the company. Furlong was named GameStop’s CEO earlier this month, succeeding George Sherman who, the company said, also retired from the board. Top shareholder Ryan Cohen was made GameStop’s chair earlier this month.

CNBC reported that, according to a letter published Tuesday, activist hedge fund firm Macellum Advisors has been asking Kohl’s to consider selling itself and now wants at least one seat on the retailer’s board. Macellum said it also wants Kohl’s to publicly commit to carrying out a process in which it reviews strategic alternatives. ‘We feel the best risk-adjusted path forward for shareholders right now is a credible and open process to evaluate a full sale of the company at an attractive premium,’ wrote Macellum’s managing partner Jonathan Duskin. ‘Candidly, we do not have faith in the current board to run this process on its own.’

Kohl’s said in a statement Monday that it had received letters expressing interest in acquiring the business, but it didn’t name any potential suitors. A representative from Kohl’s didn’t immediately respond to a request for comment on the latest letter from Macellum.

– The WSJ reported that the SEC proposed measures that would significantly increase its insight into private equity funds and some hedge funds, the first in a range of plans to expand the agency’s oversight of private markets. The proposal would increase the amount and timeliness of confidential information that private equity and hedge funds report to the agency on a document known as Form PF. The main goal, said SEC chair Gary Gensler, is to allow regulators to better identify risks building up in private markets.

Net assets managed by private funds rose to $11.7 tn in the first quarter of last year from $5.3 tn in 2013, according to the SEC. This growth has raised concerns from some policy makers about the potential for unseen risks to accumulate in a corner of the market that is far less transparent than mutual funds or publicly traded companies.

Reuters reported that liberal US Supreme Court Justice Stephen Breyer will retire when the court’s term ends in June, giving President Joe Biden the opportunity to appoint a successor. Democrats aim to confirm Biden’s nominee in a timeframe similar to the one-month process the Republicans used in 2020 to confirm then-president Donald Trump’s third appointee, Amy Coney Barrett, according to a person familiar with the matter. During the 2020 presidential election campaign Biden pledged to nominate a black woman to fill any Supreme Court vacancy, which would be a historic first.

– The Financial Times reported that, according to the Conference Board, fewer than 10 out of almost 12,000 eligible companies have demonstrated that they are ready to comply with new environmental reporting rules brought into force in Europe at the start of the year. The group warned that the majority of European companies it had analyzed could fail to provide data at their financial year-end about capital spending on key issues such as renewable energy.

The new EU rules require any listed company with more than 500 staff to publish the percentage of revenue, capital expenditure and operating costs from activities covered by the green taxonomy – a classification system that defines environmentally sustainable activities in line with the EU’s climate change objectives. The global assessment found ‘only a handful’ had published taxonomy audits.

There was widespread ignorance, said Anuj Saush, leader of the governance and sustainability center of the Conference Board, which was sending almost 200 members a briefing on how to comply.

– The SEC reopened the comment period on proposed rules under the Dodd-Frank Act requiring disclosure of information reflecting the relationship between executive compensation paid by a company and the company’s financial performance. The reopening is due in part to certain developments since 2015 when the proposing release was issued, including developments in executive compensation practices, according to the agency. 

‘If adopted, this proposed rule would strengthen the transparency and quality of executive compensation disclosure,’ said Gensler in a statement. ‘The commission has long recognized the value of information on executive compensation to investors. In 2015, [it] proposed rules to implement the Dodd-Frank Act’s ‘pay versus performance’ requirement. In this reopening release, we are considering whether additional performance metrics would better reflect Congress’ intention in the Dodd-Frank Act and would provide shareholders with information they need to evaluate a company’s executive compensation policies.’

Reuters reported that the shareholders’ meeting of Prada appointed ESG experts Pamela Culpepper and Anna Maria Rugarli as independent non-executive directors to its board. Culpepper is the founder of diversity, equity and inclusion consultancy Have Her Back. She was the chief human resources officer at Chicago-based exchange operator Cboe Global Markets and held various leadership roles at PepsiCo.

Rugarli is a CSR specialist who launched Nike’s sustainability and CSR programs in Europe, Middle East and Africa and is currently the corporate sustainability vice president of Japan Tobacco International.

– The SEC said LizAnn Eisen has been named deputy director of the division of corporation finance’s disclosure program. In this role, she will ensure the effectiveness of the division’s review of company filings, monitor market trends and assess emerging risks. Before joining the agency, Eisen was an adjunct professor and senior lecturer at Cornell Tech/Cornell Law School and an adjunct professor at the University of Oregon law school. Before 2019, she was a corporate partner at Cravath Swaine & Moore.

– According to CNBC, Home Depot said COO Ted Decker will step into the role of CEO, effective March 1. The company’s current CEO Craig Menear will continue to serve as chair of the board. Menear has been at the retailer for more than 20 years and began as CEO in November 2014.


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...