Governance in Brief
May 2, 2019 | Editor: Martin Wennerström
Anadarko under scrutiny amidst bidding war
US oil company Anadarko Petroleum Corporation has become the target of one of the industry’s largest bidding wars in recent years, sending its share price skyrocketing while placing it under regulatory and investor scrutiny. Days after Occidental Petroleum Corporation attempted to sideline rival bidder Chevron Corporation by offering to buy the company for USD 38 billion, the US Securities and Exchange Commission announced that it had obtained an asset freeze in connection to previous alleged insider trading at Anadarko. On the same day, Anadarko disclosed its intention to resume negotiations with Occidental Petroleum Corporation, after its board unanimously determined that the latter’s proposal could potentially be superior to Chevron’s bid. Notably, Warren Buffett’s Berkshire Hathaway pledged to invest USD 10 billion in Occidental to back its takeover of Anadarko, following speculations that Occidental shareholders could oppose the deal. Furthermore, concerns have also been raised in relation to Anadarko’s decision to alter the severance agreements entered with the CEO and other executives one day before Chevron announced it would buy the company. Per the new terms, Chairman and CEO R. A. Walker stands to pocket up to USD 66.8 million upon termination.
Equinor to link executive pay to climate goals
Equinor is the latest major oil producer to hitch its executive remuneration to climate targets, as part of a broader alignment of its strategy with the goals set forth by the Paris climate agreement. The precise performance metrics have not been revealed, but will instead be announced in 2020. The decision comes after pressure from a group of at least 320 institutional investors with an aggregate of USD 33 trillion in assets under management. In addition to the new remuneration targets, Equinor has committed to reporting the estimated carbon intensity of its products and services starting in 2020. Nevertheless, the board has recommended against a shareholder resolution at the company’s May 15 AGM, which proposes setting medium- and long-term Scope 1, 2 and 3 targets.
Tesla announces board overhaul; Musk allies to depart
On April 18, 2019, electric carmaker Tesla announced sweeping changes to its board, in an apparent response to growing investor pressure over its governance. Tesla will cut director terms to two years from three, and will reduce the size of its 11-strong board to nine in a phased manner, with Brad Buss and Linda Johnson Rice not standing for election at the 2019 AGM, and Stephen Jurvetson and Antonio Gracias to leave at the 2020 AGM. The two latter directors have long been perceived as allies to Musk, in light of their service on the board of SpaceX.
The board’s overhaul occurs against the backdrop of mounting scandals, with Tesla and the US Securities and Exchange Commission having reached an agreement on April 26 over Elon Musk’s Twitter use.
Fed floats new control definition
On April 23, 2019, the US Federal Reserve Board launched a public comment period for a new proposal concerning the framework for determining control of a banking entity. The project aims to improve the banks’ capital raising process by addressing the uncertainties and differing interpretations that have sprung up around the subject of control. Currently, upon acquiring a controlling stake in a financial institution, a company falls under the Federal Reserve’s stricter supervisory framework, particularly in relation to its other business endeavors. The proposed framework considers factors such as the presence of interlocking directors and officers between the company and the targeted financial institution, the voting and non-voting equity held by the company in the bank, and the nature of the business transactions between the two entities.