August 12, 2021 | Editor: Henry Hofman
Institutional investors call for corporate governance changes
Investors managing over USD 14 trillion of assets have released a set of expectations for companies through the Institutional Investors Group on Climate Change (“IIGCC”). These are set forth in a “position statement” calling for new corporate governance measures aimed at ensuring that companies can be held accountable for meeting their net zero emissions commitments. The coalition of investors has requested that listed companies deemed material to their portfolio disclose a Net Zero Transition Plan and provide shareholders with a routine advisory vote on the plan’s implementation. In jurisdictions where such votes are not possible, investors are encouraged to reflect their views on the plan’s implementation through votes on other relevant agenda items. Finally, the investors have urged companies to delegate the responsibility for the development and execution of the Net Zero Transition Plan to individual board members. Failure to meet with these measures may result in directors being voted out. The IIGCC noted that 10 companies - including Shell, Unilever, Nestle, Glencore, Iberdrola and Totalenergies - already adopted the measures highlighted in the statement following engagement with IIGCC members.
IIGGCC (1) | IIGCC (2) | IPE
Nelson Peltz to step down from P&G board
US consumer products giant Procter & Gamble Co (“P&G”) has announced that activist investor Nelson Peltz would step down from its board at the upcoming 2021 AGM. The founder and CEO of Trian Fund Management was appointed as director in 2017, following a months-long proxy fight labeled as the largest in history at the time. The contest saw the two sides collectively spend an estimated USD 125 million in proxy solicitation and related expenses, with Peltz named to the board despite narrowly failing to be elected by shareholders at the meeting. Now, Peltz has stated his confidence in “P&G’s continued success” and the upcoming leadership changes. P&G will separate the Chairman and CEO roles as of November 1, 2021, with COO Jon Moeller to take over as CEO and David Taylor to continue as Executive Chairman.
Frasers Group founder to step down as CEO
Frasers Group PLC, formerly Sports Direct International, has announced that its board is “in discussions” to have controlling shareholder Mike Ashley pass on the CEO role to his future son-in-law, Michael Murray. The latter currently serves as “head of elevation” and would assume the new role in May 2022. Ashley, who founded the firm in 1982 and retains 63% of its equity, would remain on the board as executive director. Ashley’s tenure as CEO began in 2016 and was marked by a series of high-profile scandals which prompted scrutiny over the company’s corporate governance. Most notably, these included the 2016 UK Parliament investigation which found “appalling working practices” at Sports Direct and the abrupt resignation of the firm’s auditor in 2019.Frasers Group | Reuters | BBC | House of Commons Report
EY charged with audit independence misconduct
Ernst and Young (“EY”) has agreed to pay USD 10 million to settle Securities and Exchange Commission charges alleging that it violated auditor independence in its pursuit to audit the FY2015 books of US packaging solutions company Sealed Air Corp. The regulator’s investigation found that, throughout 2014, three EY partners obtained “confidential competitive bids and audit committee materials” from Sealed Air Corp’s then-CAO in an effort to secure the audit contract. As a result, the SEC concluded that EY falsely certified that its FY2015 audit was conducted in accordance with accounting standards, “when in fact the firm lacked independence during that audit and professional engagement period”. EY did not admit nor deny the regulator’s findings.
SEC (1) | SEC (2) | Accounting Today | Reuters | Sealed Air
Governance in Brief – March 23, 2023
SVB Financial Group sued after the collapse of Silicon Valley bank unit SVB Financial Group, the parent company of Silicon Valley Bank, and two of its top executives, CEO Greg Becker and CFO Daniel Beck, are being sued by shareholders following the bank’s collapse. The lawsuit, filed by retail shareholder Chandra Vanipenta on behalf of a group of shareholders, accuses the bank and its two top executives of filing false and misleading financial reports.
Governance in Brief – March 16, 2023
Canada introduces climate reporting framework Canadian regulators have issued new guidance for the country's banks and insurance companies to better manage climate-related risks. The framework, which requires disclosure on governance, strategy, risk management, and metrics related to financial institutions’ greenhouse-gas emissions, was first drafted in 2022.
Governance in Brief – March 9, 2023
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.”
Governance in Brief – March 2, 2023
Indian regulator proposes enhancement to ESG disclosure rules India’s securities and market regulator SEBI has released a new ESG disclosure framework for public consultation. The proposed regulations impact India’s 1,000 largest companies by market capitalization, ESG funds and ESG ratings providers. For the largest companies, the regulator proposes areas of assurance of ESG disclosures and reporting and assurance of ESG footprint of the supply chain. The proposals expand on the 2021 Business Responsibility and Sustainability Report (“BRSR”) guidelines and propose mandatory assurance of certain KPIs under ESG disclosure. The KPIs contain intensity ratios such as GHG emissions, water consumption, and waste generation. For supply chain, SEBI will introduce a comply-or-explain approach for the top 250 companies starting in 2024, and assurance beginning in 2025. For ESG funds, SEBI proposes that at least 65% of AUM be invested in companies reporting on comprehensive BRSR and provide assurance on BRSR core disclosures. Under the proposed rules, ESG rating providers should also provide a “core ESG rating” based on assured information in addition to their own products.