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May 03, 2019

The week in GRC: Treasury issues sanctions compliance guide, and judge approves SEC-Musk deal

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

CNN reported that Anadarko Petroleum announced on Monday it plans to enter merger talks with Occidental Petroleum. The Occidental cash-and-stock bid values Anadarko at nearly $57 billion – about 20 percent more than the takeover deal Anadarko already reached with Chevron. Anadarko and Occidental had been in merger talks even before Chevron’s takeover bid was reached. Now, Anadarko says it will resume negotiations with Occidental.

After reviewing the Occidental bid with lawyers and bankers, Anadarko’s board of directors said it has unanimously determined it could reasonably be expected to result in a ‘superior proposal’. In a statement, Anadarko’s board said the Occidental bid reflects ‘significant improvement’ in value, terms, conditions and closing certainty over Occidental’s previous proposals.

In a statement, Chevron expressed confidence its deal will prevail. ‘We believe our signed agreement with Anadarko provides the best value and the most certainty to Anadarko’s shareholders,’ it said.

– According to Reuters, Joachim Faber, chair of the supervisory board at Deutsche Börse, will step down after the stock exchange operator’s 2020 AGM. Details on succession will be announced ‘in due course,’ Deutsche Börse said. Faber had signaled last year that he would not insist on serving another full three-year term.

– The WSJ reported that shared-office-space company WeWork became the latest highly valued start-up heading to the public markets. WeWork, which rebranded as the We Company early this year, said it filed confidentially for an IPO in December, not long before it was valued at $47 billion by SoftBank Group.

WeWork will likely make its debut this year, according to a person familiar with the matter. Uber is planning to go public next week in one of the largest US-listed IPOs, following the debuts of Lyft, Pinterest and Zoom Video Communications.

– According to The Washington Post, Boeing’s CEO Dennis Muilenburg and board of directors faced difficult questions from investors and the media at its shareholder AGM on Monday – the first since two crashes of the 737 Max jet. Muilenburg tried to reassure investors that the company takes safety concerns seriously and is working with regulators to update the technical features of the plane that contributed to both accidents. ‘When it comes to safety, there are no competing priorities,’ Muilenburg said at the AGM.

At the meeting, Boeing shareholders rejected a proposal to create a separate independent chair position. Investors also voted against measures that would force the company to reveal more details about its government lobbying.

– The SEC obtained an asset freeze in connection with suspected insider trading in Anadarko Petroleum before the oil company agreed to be acquired by rival Chevron, Reuters reported. US District Judge Gregory Woods in Manhattan granted the freeze over accounts linked to suspicious purchases between February 8 and April 1 by unknown buyers of Anadarko securities, who the SEC said stand to make roughly $2.5 million in illicit profits, according to a court filing.

In a separate complaint, the SEC said the traders were unknown because they used accounts located in the UK and Cyprus, making a series of ‘large, unprecedented purchases’ of call option contracts in Anadarko days after the company began acquisition talks, and weeks before the potential agreement was made public. The SEC declined to comment beyond its complaint, while Anadarko could not immediately be reached for comment.

Reuters reported that SEC member Robert Jackson criticized a settlement between the agency and Tesla CEO Elon Musk over his use of Twitter. Musk had reached a deal with the SEC agreeing to submit his public statements about the company’s finances and other topics to vetting by its legal counsel. But Jackson registered his dissent after the deal was approved by a federal judge.

The new deal spells out in more detail what types of statements by Musk must be reviewed by Tesla’s legal counsel before publication, such as financial statements and previously unreported production or delivery numbers.

– The WSJ noted that the largest US companies are beginning to pay heed to the demands of investors focused on environmental and social issues. Corporate governance advisers say more boards are acquiescing to shareholder demands that they improve disclosures on topics ranging from greenhouse-gas emissions to gender pay disparities.

It is difficult to measure the effect of private conversations between shareholders and companies. Boards often argue that the changes they agree to, or similar ones, were already under way, even without shareholder pressure. In addition, many companies continue to push back against shareholder proposals, and most environmental and social proposals that do go to a vote are opposed by management and fail to attract majority support. But there are signs companies are becoming more responsive to investor demands before annual meetings.

The Guardian reported that Microsoft has joined a group that aims to get legal immunity for fossil fuel companies from efforts to claw back damages from the climate change they helped cause. The Climate Leadership Council’s (CLC) aims include a $40-a-ton fee on carbon dioxide emissions in return for cutting climate change regulations and ‘protecting companies from federal and state tort liability for historic emissions.’ Microsoft has become the first technology company to join the CLC.

‘We are getting extremely impatient, frankly, for policy action on climate change,’ said Lucas Joppa, chief environmental officer at Microsoft. ‘We support a carbon fee because we believe it’s a policy mechanism that works and accords with economic principles. For us, joining the CLC gives us the opportunity to have this debate at a federal level.’ But he would not be drawn on Microsoft’s backing of legal immunity for fossil fuel producers. ‘There are a lot of details involved and we are interested in being part of the conversation,’ he said.

– According to Reuters, activist investor Edward Bramson admitted defeat in his efforts to gain a seat on Barclays’ board, saying he knows leading shareholders have voted against his plan to revamp the investment bank as a director. Bramson said fellow investors had been swayed by personal appeals from Barclays’ incoming chair Nigel Higgins for the opportunity to resolve the investment bank’s long-standing problems.

Bramson said his investment fund Sherborne Investors disagreed with giving the bank more time. Barclays’ departing chair John McFarlane told shareholders at the bank’s AGM that the board unanimously rejected Bramson’s resolution, which it believed would ‘destabilize’ the bank.

– The US Department of Justice released new evaluation guidelines that aim to provide more clarity about what prosecutors want to see from the compliance programs of companies under investigation, according to the WSJ. The department considers the strength of compliance programs when deciding whether to bring charges against a company or appoint an independent monitor.

The new guidance provides more clarity to compliance officers and general counsel about the department’s priorities and could help them push for their budgets and priorities, said Nathaniel Edmonds, a lawyer at Paul Hastings.

– The WSJ reported that the US Department of the Treasury has given more insight into its expectations for companies’ sanctions compliance programs. Guidance released by the Treasury’s Office of Foreign Assets Control (Ofac) indicates that it wants companies to have an active sanctions compliance program, rather than simply a written policy.

Ofac does not require companies to have a sanctions compliance program, but the agency says having a program is an important issue when it considers settlement agreements. Ofac may impose a smaller penalty if a company has an effective sanctions compliance program at the time of an alleged violation and is able to improve it.

– According to CNN, Uber is facing pressure to remove former Merrill Lynch CEO John Thain from its board ahead of the company’s IPO. Thain chairs Uber’s audit committee, giving him the lead in oversight of the company’s financial reporting, legal compliance and corporate governance. CtW Investment Group, an adviser to pension funds, says it is worried about Thain due to his role in the financial crisis and his ‘close relationship’ with Uber CFO Nelson Chai.

‘Based on his past record of poor decision-making, Thain is an unsuitable steward of shareholder funds,’ Dieter Waizenegger, CtW’s executive director, wrote to Uber chair Ronald Sugar. Uber declined to comment. Thain did not respond to inquiries. ‘Mr Thain was selected to serve on our board of directors because of his experience as chief executive officer of several global companies and his financial expertise’ from his previous roles, Uber says in its IPO filing.

– PG&E said the SEC is investigating the company regarding public disclosures and losses related to wildfires, Reuters reported. PG&E said in a regulatory filing that it learned on March 20 that the SEC was investigating it in relation to its public disclosures and accounting for losses associated with the 2017 and 2018 Northern California wildfires and the 2015 Butte fire.