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Dec 10, 2021

The week in GRC: Elliott presses SSE on energy transition strategy and FinCEN plans shell company clampdown

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

CNBC reported that Lucid Group disclosed an SEC probe into the electric vehicle company’s special purpose acquisition company deal to go public. The company said it received a subpoena from the SEC ‘requesting the production of certain documents related to an investigation,’ according to a filing. Lucid said that although there is ‘no assurance as to the scope or outcome of this matter, the investigation appears to concern the business combination’ between the automaker and blank-check company Churchill Capital Corp IV.

‘The company is co-operating fully with the SEC in its review,’ Lucid said in the filing.

– According to Reuters, hedge fund firm Engine Capital is pushing Kohl’s Corp to consider a sale of the company or separate its e-commerce division to improve its stock price. Engine Capital said the department store has underperformed both the S&P 500 and other retailers in recent years, despite its large retail footprint and real estate holdings. The New York-based hedge fund added that Kohl’s should consider a strategic review of the whole company, including a sale. In response, Kohl’s said the company continues to examine all opportunities for maximizing shareholder value.

– New York Mayor Bill de Blasio said the city is imposing a vaccine mandate for all private sector employers as a pre-emptive measure to fight a surge of Covid-19 cases this winter, CNBC reported. The mandate covers 184,000 businesses and will go into effect on December 27, de Blasio said. Everyone aged 12 and older, workers and customers, will be required to show proof of two vaccine doses by that date, unless they received Johnson & Johnson’s single-dose vaccine.

‘We’ve got Omicron as a new factor, we’ve got the colder weather, which is really going to create additional challenges with the Delta variant, we’ve got holiday gatherings,’ de Blasio said. He said the purpose of the vaccination requirements is to avoid the shutdowns imposed in March 2020 when Covid-19 devastated New York and its economy.

Reuters reported that American Airlines Group CEO Doug Parker will hand over the reins of the company to president Robert Isom on March 31, 2022. Parker will continue as board chair and Isom will join the board after he takes over as CEO. Isom took over as president in 2016 and has overseen operations, planning, marketing and pricing. In a letter to employees, Parker said the transition was the result of a ‘thoughtful and well-planned multi-year process’ dating back to Isom’s elevation to president in 2016. ‘While we still have work to do, the recovery from the pandemic is under way and now is the right time to make the transition,’ Parker said.

– The Financial Crimes Enforcement Network (FinCEN) said it wants to enact a new rule that would crack down on criminals who use businesses and shell companies to hide illegal funds behind webs of opaque corporate structures, CNBC reported. FinCEN said the proposed rule would require a wider range of companies to provide details on their investors.

‘Millions of corporations, limited liability companies and other entities are formed within the [US] each year. While such entities play an essential and legitimate role in the US and global economies, they can also be used to facilitate illicit activity,’ the US Department of the Treasury said in a factsheet.

– According to The Guardian, US activist investor Elliott Management launched an attack on UK company SSE’s energy transition strategy and called for two new independent directors. The company has rejected the idea from the hedge fund firm that it should spin off its renewables arm and on Tuesday issued a further rebuff of Elliott’s demands.

In a letter addressed to SSE chair Sir John Manzoni, Elliott said the company’s investment strategy lacked ambition and called on the firm to provide a detailed and credible plan ‘to address investor concerns around SSE’s corporate governance, its ability to fund its growth in the long term and its persistent undervaluation.’

SSE chief executive Alistair Phillips-Davies defended the company’s investment plan and rejected Elliott’s criticism. He said SSE had conducted a ‘rigorous’ review including input from shareholders, and said the plan was ‘the optimal pathway to accelerate clean growth, lead the energy transition and create value for all stakeholders.’

The Wall Street Journal reported that Marcus Pleyer, president of the Financial Action Task Force (FATF), said governments need to recognize and take action against money laundering linked to environmental crimes, which can also help mitigate climate change. Pleyer said tracking down illicit profits stemming from environmental crimes should be seen in the context of climate change, but the issue is often overlooked as nations give priority to other crimes.

Environmental crimes such as illegal logging and wildlife trafficking generate up to $281 bn in criminal gains each year, according to the FATF.

– According to the WSJ, Lee Enterprises said its board rejected an unsolicited proposal from New York hedge fund firm and US newspaper consolidator Alden Global Capital to purchase the company. The local news, information and advertising services company said its board determined that Alden’s proposal undervalues the company and isn’t in its best interest.

‘The Alden proposal grossly undervalues Lee and fails to recognize the strength of our business today, as the fastest-growing digital subscription platform in local media and our compelling future prospects,’ said Lee CEO Mary Junck, adding that the company is confident in its ability to create value as an independent company.

CNBC reported that Kohl’s CEO Michelle Gass said the retailer is doing due diligence after it received a letter from activist group Engine Capital urging the company to either consider a sale of its business or a separation of its e-commerce division.

‘My number one priority, the number one priority of the board, is to drive shareholder value,’ Gass said. ‘We are very aligned with all of our investors in doing that. We have ongoing dialogue with lots of investors. We listen to them. We hear their ideas. And we take that very seriously.’

As it relates to Engine Capital’s proposal, Gass said the company has been doing ‘a lot of work and will continue to do a lot of work on it to understand what this means for our business.’

– A coalition of ExxonMobil investors wants the company to replace its CEO and move more aggressively to cut greenhouse gas emissions, saying its newly appointed board members and management team have not done enough to transition to clean energy or overhaul spending, according to Reuters. Six months after Engine No 1 successfully placed three new directors on Exxon’s board, the Coalition for a Responsible Exxon said management and the board have been too slow to reshape the company. The group said Exxon’s plans up to 2027, released earlier this month, do not meet a climate transition plan consistent with holding the rise in the world’s temperature to 1.5°C.

The company said its plans increase spending to $15 bn on greenhouse gas emission-reduction projects over the next six years while maintaining disciplined capital investments in its industry-leading portfolio. ‘The plans support the corporate strategy of continued structural cost savings, investment in low-cost-of-supply and lower-emission products and further portfolio high-grading, positioning the company to double earnings and cash flow by 2027 versus 2019,’ an Exxon spokesperson said.

The spokesperson added that the company is on track to meet its 2025 greenhouse gas emission-reduction plans by the end of 2021 and said the company developed more aggressive plans for further Scope 1 and Scope 2 reductions through 2030, consistent with Paris Agreement pathways.

CNBC reported that Royal Dutch Shell shareholders voted to approve plans for the company to overhaul its legal and tax structure and move its headquarters to the UK from the Netherlands. The Anglo-Dutch company has said the simplification of its dual tax structure is designed to strengthen its competitiveness, accelerate its energy transition plans and help to make distributing profits to shareholders more straightforward. Shell has said its environmental policy would not be affected by the move.

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...