Resource Center

ISSB launches consultation on first two sustainability standards The International Sustainability Standards Board (“ISSB”) has published the exposure drafts for its first two standards. The proposals set disclosure requirements for 1. general sustainability-related financial disclosure, and 2. specific climate-related disclosure on Scope 1-3. Based on TCFD recommendations and derived from SASB Standards, the standards comprise all relevant sustainability topics – governance, strategy, risk management – as well as metrics and targets.

Evergrande discloses USD 2.1 billion cash seizure China Evergrande Group has established an independent committee to investigate a USD 2 billion hole in the accounts of its primary operating subsidiary, Evergrande Property Services. While preparing its FY2021 accounts, the subsidiary discovered that a group of undisclosed banks had seized RMB 13.4 billion (USD 2.1 billion) of its deposits, approximately equivalent to its cash holdings as of June 2021, as security for third-party pledge guarantees.

Shell directors face legal action over climate change Environmental law charity ClientEarth is preparing legal action against the directors of Shell over the company's climate transition plan. ClientEarth wishes, in its capacity as a shareholder, to hold the directors personally liable for having breached their legal duties by mismanaging climate risk.

SEC proposes heightened cybersecurity risk disclosure The U.S. SEC has proposed amendments to existing rules on public companies’ disclosure of cybersecurity, risk management, strategy, governance, and incident reporting. The amendments would, inter alia, require public companies to report on material cybersecurity incidents and periodic updates on past incidents, as well as the companies’ policies and procedures on cybersecurity risk management, board oversight of cybersecurity risks and directors’ cybersecurity expertise. SEC Chair Gary Gensler issued a statement in support of the amendments, considering cybersecurity an emerging risk that must be addressed by public companies. Gensler stated that standardized and periodic cybersecurity risk disclosure would enable investors to assess cybersecurity risks more effectively. SEC Commissioner Hester Price released a dissenting statement arguing the proposed rules would pressure companies to “adapt[] their existing policies and procedures to the Commission’s preferred approach”, while noting that securities regulators are not “best suited to design cybersecurity programs.”

Toshiba CEO resigns amid internal opposition to planned reorganization Satoshi Tsunakawa has unexpectedly resigned from his post as Toshiba CEO, amid alleged internal opposition to the restructuring plan that will be put to vote at an upcoming March 24 EGM. Tsunakawa will stay on as interim Chairman, while senior executive Taro Shimada has taken over as interim CEO. Additionally, Toshiba has appointed two new executives.

McDonald’s faces proxy fight over pig treatment Activist investor Carl Icahn has nominated two candidates to the McDonald’s board, in a proxy fight over the firm’s treatment of pigs. Icahn, who owns 200 shares of McDonald’s stock, also requests that the fast-food giant source its meat from crate-free pork suppliers within a specific timeframe.

SEC continues work on climate risk disclosure rules U.S. SEC Chair Gary Gensler has responded to criticism from senators over the delayed publication of the agency’s mandatory climate risk disclosure draft, noting that “it’s essential [that the SEC] get this right”. In a letter sent to Gensler, Senator Elizabeth Warren called for the “release of the strongest requirements possible” amid reports that the delay stems from disagreements between SEC Commissioners over whether Scope 3 emissions should be included among disclosure requirements.

NVIDIA’s planned acquisition of Arm collapses NVIDIA and Softbank have called off the planned merger between NVIDIA and Softbank’s semiconductor segment Arm Ltd., which had been expected to take place later this year, citing “significant regulatory challenges” from several national and regional agencies.

FTC seeks to block Lockheed’s purchase of Aerojet Citing antitrust concerns, the U.S. Federal Trade Commission (“FTC”) has filed a suit seeking a preliminary injunction to block Lockheed Martin's USD 4.4 billion acquisition of rocket engine maker Aerojet Rocketdyne Holdings.

European Banking Authority releases ESG disclosure standards The European Banking Authority has published its “Implementing Technical Standards” (“ITS”), governing European banks’ Pillar 3 ESG risk disclosure. The framework, which is rooted in the EU Taxonomy and previous recommendations from the European Commission and the Financial Stability Board Task Force, is meant to provide a comprehensive basis for comparing banks’ incorporation of sustainability factors into their risk management, strategy, and governance. The framework will require European banks to disclose climate risks and mitigating actions, including information on two new ratios – the “green asset” ratio (“GAR”) and the “banking book taxonomy alignment” ratio (“BATR”). Other required metrics include exposure to fossil fuel and other carbon- and GHG-emitting activities, as well as alignment with 2050 net zero goals. Mandatory publication of climate risk exposure and corresponding mitigation measures will start in 2023, while disclosure of GAR and BATR will be required as of 2024.

Microsoft to buy Activision Blizzard for nearly USD 70 billion Microsoft has announced plans to acquire Activision Blizzard in a USD 68.7 billion all-cash transaction. The deal, which is pending approval from regulators and Activision Blizzard shareholders, is expected to be completed in FY2023. The deal will turn Microsoft, which has recently acquired a string of increasingly sizeable video game producers, into the world’s third-largest gaming company by revenue.

Toshiba investor requests shareholder vote on separation plan Singapore-based 3D Investment Partners (“3D”), Toshiba’s second-largest investor, has requested that the firm hold an EGM for shareholders to vote on its three-way separation plan originally announced in November 2021. 3D intends to vote against the proposal, but nevertheless wishes for this legally required vote to take place before additional plan- related expenses are incurred.

Alphabet increases executive remuneration Alphabet is to raise the base salaries of four of its top executives, soon after informing employees that there would not be a company-wide salary adjustment to match rising inflation. Four top executives, CFO Ruth Porat, SVP Prabhakar Raghavan, Chief Business Officer Philipp Schindler, and Chief Legal Officer Kent Walker, will have their annual salaries increased from USD 650,000 to USD 1 million.

Vivendi moves towards full control of Lagardère Vivendi has announced that it is acquiring activist investor Amber Capital’s 17.5% stake in French media and retail group Lagardère, at a price of EUR 24.10 per share. The transaction will result in Vivendi owning 45.1% of Lagardère, triggering a full bid for the company due to the 30% mandatory bid threshold having been breached. Accordingly, Vivendi plans to make an offer of EUR 24.10 per share for Lagardère’s remaining stake by February 2022. The deal marks the latest chapter in a multiyear dispute over Lagardère’s control and governance. Vivendi, today Lagardère’s largest shareholder, started building its stake in April 2020, as Lagardère’s managing partner Arnaud Lagardère clashed with Amber over the company’s governance structure. At the time, Lagardère was a French “partnership limited by shares,” which allowed Arnaud Lagardère to retain control despite only holding around 7% of capital. While Vivendi initially supported Arnaud Lagardère’s attempt to fend off a proxy contest from Amber at the 2020 AGM, it later joined Amber in requesting board representation. In April 2021, Arnaud Lagardère bowed to shareholder pressure by agreeing to convert Lagardère into a joint stock company.

Vivendi moves towards full control of Lagardère Vivendi has announced that it is acquiring activist investor Amber Capital’s 17.5% stake in French media and retail group Lagardère, at a price of EUR 24.10 per share. The transaction will result in Vivendi owning 45.1% of Lagardère, triggering a full bid for the company due to the 30% mandatory bid threshold having been breached. Accordingly, Vivendi plans to make an offer of EUR 24.10 per share for Lagardère’s remaining stake by February 2022. The deal marks the latest chapter in a multiyear dispute over Lagardère’s control and governance. Vivendi, today Lagardère’s largest shareholder, started building its stake in April 2020, as Lagardère’s managing partner Arnaud Lagardère clashed with Amber over the company’s governance structure. At the time, Lagardère was a French “partnership limited by shares,” which allowed Arnaud Lagardère to retain control despite only holding around 7% of capital. While Vivendi initially supported Arnaud Lagardère’s attempt to fend off a proxy contest from Amber at the 2020 AGM, it later joined Amber in requesting board representation. In April 2021, Arnaud Lagardère bowed to shareholder pressure by agreeing to convert Lagardère into a joint stock company.

Didi to move listing from New York to Hong Kong Didi Global will delist its American depository shares (“ADSs”) from the NYSE and pursue a listing on the Main Board of the HKEX, less than six months after its USD 4.4 billion U.S. IPO in June 2021. Didi’s decision comes as Chinese authorities finalize a cybersecurity probe into the company amid Beijing’s increased scrutiny of foreign-listed Chinese companies. In July, the investigation had led to a 20% drop in the ride-hailing giant’s market value. This in turn prompted two class-action lawsuits from investors alleging that Didi had failed to disclose Chinese regulatory calls for it to delay its IPO until after the conclusion of the cybersecurity review. Didi indicated that it will hold a shareholder meeting to approve the move and arrange for its ADSs to be convertible into freely tradable company shares on another global exchange of ADS holders’ choosing. With the delisting, Didi joins a growing exodus of Chinese companies from U.S. exchanges. Last week, the SEC finalized rules allowing it to forcibly delist those foreign companies that have failed to comply with U.S. regulatory audits for three consecutive years.

Activision Blizzard CEO considers departure Activision Blizzard CEO Bobby Kotick has reportedly signaled his potential resignation in case the company’s sexual harassment and cultural issues are not resolved with sufficient haste. Recently, around 1,330 employees petitioned Kotick to resign following media allegations that he had ignored and failed to disclose sexual harassment and gender discrimination complaints from female employees. Additionally, a group of shareholders has called for the CEO’s resignation, the retirement of the Chairman and the Lead Independent Director, and the nomination of a non-executive Activision Blizzard employee to the board. In response, the company announced that it had formed a fully independent “Workplace Responsibility Committee” tasked with overseeing the company’s progress on workplace culture improvement, adding that it “is working” on adding a “new, diverse” director. The controversy around Activision Blizzard emerged in July 2021, when the California Department of Fair Employment and Housing announced that a two-year investigation had revealed sexual harassment and discrimination practices at the company.

Toshiba prepares three-way split Toshiba has announced plans to split into three freestanding businesses, respectively focusing on 1. energy and infrastructure, 2. hard disk drives and power semiconductors, and 3. Toshiba’s current stake in Kioxia Holdings, Toshiba Tec Corp., and other assets. This plan is the result of a five-month review triggered by the resignation of former CEO Nobuki Kurumatani in April 2021. This resignation came a week after the company declined a USD 21 billion takeover offer by CVC Capital Partners and two months before a shareholder-commissioned investigation concluded that management had colluded with Japanese government officials to curb oversees shareholders’ influence at the 2020 AGM. The review had also considered the possibility of going private, although discussions to this end with private equity funds ultimately failed to bear fruit. An extraordinary meeting to approve the split is scheduled for March 2022, with the split expected to be finalized by March 2024. However, initial media reports suggest that the plan could face some degree of investor opposition when put to vote.

Boeing settles lawsuit over 737 MAX safety Boeing’s board has agreed to a USD 237.5 million settlement in a lawsuit brought by major investors over the board's safety oversight of the 737 MAX aircraft. Investors claimed that the board members “failed in their fiduciary responsibility” to protect the company and its stakeholders. Two fatal 737 MAX crashes in 2018 and 2019 killed 346 people and have cost the company around USD 20 billion. In September 2021, a Delaware court ruled that investors could bring claims against the board, as the directors ignored the first crash as “a red flag.” Nevertheless, the settlement is not expected to include admission of board wrongdoing, and the financial penalty will be paid by insurers. Going forward, Boeing will be required to adopt several measures to enhance its governance and oversight. Under the settlement, the company must appoint an additional director with safety oversight or aviation/aerospace expertise within one year, while ensuring that at least three directors have similar expertise. Additionally, the company must amend its bylaws to separate the CEO and Chairman positions and set up an ombudsperson program in charge of internal complaints from employees on behalf of the Federal Aviation Administration. Softbank announces USD 8.8 billion buyback program SoftBank has announced the repurchase of circa 15% of its own shares, estimated at JPY 1 trillion (USD 8.8 billion). CEO and founder Masayoshi Son states that the board approved the buyback in response to the firm’s estimated trading discount of 52%. The company also announced significant quarterly losses, mainly due to the poor performance of its Vision Fund, whose Chinese investments have suffered from regulatory pressure and a share price decline. Following the announcement, the company’s share price increased by more than 10%, after it lost 40% of its peak value from May 2021 when a JPY 2.5 trillion buyback program was completed. Reuters | Yahoo | City A.M. The Williams Cos. loses appeal on blocked poison pill plan The Delaware Supreme Court has upheld a February 2021 lower court ruling barring the continuation of the poison pill adopted by the Williams Cos. in March 2020. Earlier this year, the company appealed the initial decision of the Delaware Chancery Court that blocked the company’s plan on basis that it included “extreme” measures, most notably a 5% ownership trigger. In 2020, amid the beginning of the Covid pandemic and an oil price war that caused the company’s share price to plummet, the company’s board enforced a poison pill which was contested by shareholders and used as grounds for a shareholder lawsuit against the company and its board. Reuters | Bloomberg | Delaware Court Copyright ©2021 Sustainalytics. All rights reserved Reuters | WSJ | Market Watch | Seattle Times

SEC publishes new guidance on shareholder proposal exclusions SEC publishes new guidance on shareholder proposal exclusions The U.S. Securities and Exchange Commission (“SEC”) has published new guidance that will make it more difficult for companies to block ESG-related shareholder proposals from being included on proxy ballots. Under the previous guidance, corporations were able to exclude proposals that dealt with matters relating to the company’s ordinary operations unless they raised significant social policy issues for the company. Additionally, proposals related to operations accounting for less than 5% of the company’s assets and earnings were subject to exclusion. Under the revised guidance, the previous company-specific approach would be replaced by a broader societal impact analysis. Specifically, proposals that the SEC previously deemed excludable due to their lack of a significant company-level policy issue will no longer be viewed as such if they have a broad societal impact. Additionally, proposals related to operations not meeting the economic thresholds should not be excluded provided they raise issues of broad social concern related to the company’s business. Moreover, companies will not be able to exclude climate-related resolutions if they require timeframes or targets “so long as the proposals afford discretion to management as to how to achieve such goals.”