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May 31, 2019

The week in GRC: ExxonMobil shareholders reject climate proposals, and ruling raises concerns over SEC whistleblower policy

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

The Guardian said that Democratic presidential candidate Bernie Sanders is planning to gatecrash Walmart’s shareholder AGM to demand that the company increase its 2.2 million workers’ ‘poverty wages’. Sanders, a long-time critic of working conditions at Walmart, will introduce the workers’ proposal at the AGM on June 5, although there is very little chance of the proposal gathering enough votes. Sanders will speak as a proxy for Cat Davis, a Walmart employee who filed the proposal.

A Walmart spokesperson said: ‘If Senator Sanders attends, we hope he will approach his visit not as a campaign stop, but as a constructive opportunity to learn about the many ways we’re working to provide increased economic opportunity, mobility and benefits to our associates.’

CNN reported that Renault was considering a merger with Fiat Chrysler. The French company said on Monday that it would ‘study with interest’ a proposal from Fiat Chrysler that would give its shareholders 50 percent ownership of a combined business with annual vehicle sales of 8.7 million. If completed, the merger would create the world’s third-largest carmaker.

Reuters reported that French finance minister Bruno Le Maire said the nation’s authorities will seek protection of local jobs and other guarantees in exchange for supporting the proposed Renault-Fiat Chrysler merger. He said the French government would seek four guarantees in exchange for backing a deal that would see its 15 percent stake in Renault reduced to 7.5 percent of the combined entity.

‘The first: industrial jobs and industrial sites. I told the Renault chairman very clearly that it was the first of the guarantees I wanted from him in the opening of these negotiations: a guarantee on the preservation of industrial jobs and sites in France,’ Le Maire said. He added that France wanted to be well represented on the board of the new company, for it to be a leader in developing electric batteries and for the deal to take place ‘within the framework of the alliance between Renault and Nissan.’

– According to The Wall Street Journal, Avis Budget Group has begun seeking a new leader after CEO Larry De Shon said he would leave the company. Avis said De Shon will remain in his job until the company names a successor and will be employed by the company until the end of the year to ensure a smooth transition to new leadership. Avis said its board has formed a committee to find a new CEO.

‘Larry has played an instrumental role in positioning Avis Budget for the future of mobility, while navigating through unprecedented industry challenges,’ Leonard Coleman, chair of the Avis board, said in a statement.

– The WSJ reported that the US Department of the Treasury said a State Street subsidiary violated Iranian transactions and sanctions regulations, although the government stopped short of issuing a monetary penalty. The Treasury’s Office of Foreign Assets Control (Ofac) said custodian bank State Street Bank & Trust Co violated US Iranian sanctions regulations by processing payments on behalf of a person in Iran.

State Street Bank, acting as a trustee for a customer’s employee retirement plan, processed at least 45 pension payments totaling more than $11,000 to a plan participant between 2012 and 2015, according to Ofac, which said the person was a US citizen with a US bank account but was residing in Iran. The bank disclosed the violations and improved its compliance program, Ofac said in explaining its decision to not impose a monetary penalty.

‘We take our [anti-money laundering] and sanctions responsibilities seriously and we have co-operated fully with Ofac throughout the process,’ State Street said in a statement. ‘In the four years since we reported this issue, we have made a number of enhancements to our global sanctions compliance program.’

– The SEC has appointed Erin Schneider as director of the agency’s San Francisco regional office. Schneider joined the SEC in 2005 as a staff attorney in the San Francisco office. She was promoted to assistant regional director of the enforcement division’s asset management unit in 2012 and then to associate regional director of the San Francisco office in 2015.

In her new role, she leads a staff of more than 125 enforcement attorneys, accountants, investigators and compliance examiners involved in the investigation and prosecution of enforcement actions and the performance of compliance inspections in the northern California and Pacific Northwest region.

– Bed Bath & Beyond named four new independent directors to its board and reached a settlement with the three activist investors that had been pushing the company to make leadership changes, according to the WSJ. Bed Bath & Beyond was facing pressure from three activist investors that thought the company hadn’t adapted to new consumer behavior and wanted to revamp the company’s board.

The company said it entered into an agreement with activists Legion Partners, Macellum Advisors and Ancora Advisors. All four of the directors the company appointed were part of the activist group’s slate of nominees, which had originally comprised 10 nominees. The investor group will now withdraw its slate and vote for those the company has recommended in the upcoming AGM.

‘Together with the existing board members, these four new independent directors will help the company navigate the current omnichannel retail environment and pursue our shared goal of enhancing shareholder value,’ the investor group said.

Reuters reported that ExxonMobil shareholders rejected a proposal to split the CEO and board chair roles. Two institutional investors had urged a vote in favor of the role split after Exxon got the SEC to remove a climate-change proposal from its proxy statement. Roughly 41 percent of the votes at the company’s AGM supported separating the roles, little more than the 38 percent approval that similar resolutions have reached in recent years.

Shareholders also defeated proposals calling for a special board committee on climate change and for a report on the risks of climate change to Exxon’s US Gulf Coast chemical plants.

At Chevron’s AGM, a proposal to create an independent chair received just 26 percent of votes, and only 8 percent of votes backed a board committee on climate change.

– According to the WSJ, JPMorgan Chase settled a discrimination charge by agreeing to make sure its parental-leave policy applies equally to male and female employees. The bank will also create a $5 million fund to compensate men who were denied, or deterred from asking for, parental leave as a primary caregiver. As part of the settlement, JPMorgan maintains that it broke no laws and it admits no liability.

‘We are pleased to have reached an agreement in this matter and look forward to more effectively communicating the policy so that all men and women employees are aware of their benefits,’ said Reid Broda, associate general counsel at JPMorgan.

– The WSJ said lawyers fear that a US Supreme Court decision will undermine the SEC’s whistleblower policy because tipsters may now be more reluctant to report information to compliance officers. If a whistleblower chooses to report alleged wrongdoing to the SEC within 120 days of reporting it to a company, the policy says the tipster’s case for receiving an award will benefit from information the company uncovers in internal probes resulting from the tip and gives to the SEC. The provision says that reporting to the company isn’t required, but it encourages internal reporting first.

The Supreme Court last year issued an opinion that said anti-retaliation protections for whistleblowers provided by the Dodd-Frank Act apply only to those who provide tips directly to the SEC – regardless of whether they report to the company. The decision increases retaliation risks for whistleblowers who only report alleged wrongdoing to the company and not the agency, said Sean McKessy, who led the SEC’s office of the whistleblower between 2011 and 2016.

SEC chief accountant Wesley Bricker plans to leave the agency. He took up the role in 2016 after serving as the deputy chief accountant. Earlier, he served as a professional accounting fellow. As chief accountant, Bricker is the principal adviser to the commission on accounting and auditing matters, and leads the commission’s office of the chief accountant.

‘Wes is both the consummate professional and a model public servant,’ SEC chair Jay Clayton said in a statement. The SEC named Sagar Teotia as acting chief accountant following the departure of Bricker in June. Teotia has served as deputy chief accountant since 2017.

CNN reported that major UK companies are pressing the government to set emission-reduction targets that would be among the world’s strictest. A group of more than 100 companies, investors and lobby groups sent an open letter to Prime Minister Theresa May asking the departing leader to ‘leave a legacy of clean growth’ and legislate a commitment to cut the country’s emissions to net zero by 2050.

‘We see the threat climate change poses to our businesses and to our investments, as well as the significant economic opportunities that come with being an early mover in the development of new low-carbon goods and services,’ the business leaders’ letter said. It was signed by a number of global companies, including Siemens, Unilever, Shell and Nestlé.


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...