Corporate governance - Vigil

In our recent study, Common ownership, executive compensation, and product market competition, we examine executive compensation as a plausible potential mechanism whereby common ownership could incentivize managers to pursue anticompetitive strategies. Executive compensation is a plausible mechanism both because managers take actions based on the benefits to themselves, and because institutional owners have significant influence over executive compensation through a variety of channels (e.g., voice, exit, say-on-pay votes, and indirect influence through proxy advisory firms).

The American chief executive of Barclays (BCS), Jes Staley, is stepping down with immediate effect following an investigation by British regulators into his relationship with disgraced financier Jeffrey Epstein, the bank said on Monday.

The investigation by the Financial Conduct Authority (FCA) and the Bank of England's Prudential Regulation Authority (PRA) was disclosed by Barclays in early 2020 and focused on how Staley had characterized the relationship to his employer.

In the boardroom especially, directors are increasingly tasked with overseeing ESG. Issues that normally would not have risen to the board level are being discussed at every meeting and need to be considered when thinking about the long-term future of the company. As pressure mounts, how are boards grappling with ESG, and how are they feeling about it? What are some of the things boards can do to get ESG right, and quickly?

Imagine if you could get a lower mortgage rate every time you made some effort - perhaps by swapping out your incandescent light bulbs for LEDs or slapping some solar panels on your roof - to lower the carbon footprint of your home.

For the corporate world, the rapid rise of sustainability-linked debt products have made that their reality. Despite being around globally for less than a decade -- and less than two years in Canada -- loans, bonds and credit facilities with interest rates that are adjusted up or down each year depending on how much progress the company makes (or doesn’t) against pre-established sustainability targets are becoming so popular that experts expect they will soon become standard clauses in all corporate debt.

In a new paper, Berk and Jules van Binsbergenopen in new window, a colleague at the Wharton School, demonstrate that one of the most popular impact-investing strategies — divesting from “dirty” companies that fail to meet ESG criteria — is not nearly as impactful as its practitioners might like to believe.

They find that an overwhelming majority of investors would have to divest to have a significant impact on these companies’ bottom lines. But that hasn’t happened yet, and with just 2% of U.S. stock market wealth currently in “socially conscious” investments, it seems unlikely to occur in the near future.

The G-20 and COP26 could be “mutually reinforcing or mutually weakening,” said one senior official involved in the talks.

Italian Prime Minister Mario Draghi told Italy’s Parliament earlier this month that his country, which holds the G-20 presidency this year, hoped to achieve consensus among the group’s leaders before the Glasgow conference.

The chief executive of ExxonMobil, Darren Woods, was accused of lying to Congress on Thursday after he denied that the company covered up its own research about oil’s contribution to the climate crisis.

For the first time, Woods and the heads of three other major petroleum companies were questioned under oath at a congressional hearing into the industry’s long campaign to discredit and deny the evidence that burning fossil fuels drove global heating. When pressed to make specific pledges or to stop lobbying against climate initiatives, all four executives declined.

French insurer Covea has revived an agreement to buy Bermuda-based reinsurer PartnerRe from Italy’s Exor for $9bn, returning to the price it had agreed to pay before unsuccessfully trying to renegotiate the deal in the early months of the Covid-19 pandemic.

The pursuit of carbon neutrality has forced challenging board discussions about companies’ medium and long-term strategies. Increasingly, investors, customers and other stakeholders expect companies to set—and meet—carbon reduction goals. Investors, in particular, are pushing for standardized climate and sustainability metrics from companies. Forthcoming SEC rulemaking is likely to mandate such disclosures, including with respect to greenhouse gas emissions. Looking ahead, as climate metrics become widely available, and as carbon reduction commitments become operational requirements, boards will need to proactively communicate how climate change and the transition away from carbon will impact their business outlook and planning. Already, the market has rewarded companies that are well-positioned to transition to a carbon-constrained operating environment, and is starving fossil fuel production projects of necessary capital.

The chief executive of ExxonMobil, Darren Woods, was accused of lying to Congress on Thursday after he denied that the company covered up its own research about oil’s contribution to the climate crisis.

For the first time, Woods and the heads of three other major petroleum companies were questioned under oath at a congressional hearing into the industry’s long campaign to discredit and deny the evidence that burning fossil fuels drove global heating. When pressed to make specific pledges or to stop lobbying against climate initiatives, all four executives declined.

How an inadvertent phone call exposed the plan that has plunged the telecom giant into chaos

ESG has risen to become a dominant issue over the last two years.  This has been driven by many factors including greater transparency; the growing demand for climate action; increasing regulation; and the need for companies to demonstrate a clear licence to operate.  However, there has been very little analysis of how ESG is influencing the behaviour of mid and small cap companies.  Most of the debate and commentary concentrates on large, global companies.  Does this mean that the capital markets are not engaging with these companies about their ESG performance?  Are the senior management of these companies ignoring their environmental and social responsibilities?  Our recent research shows that the short answer is “NO”.

CAE Inc. has signed a deal to buy the AirCentre airline operations business from Sabre Corp. for US$392.5-million.

The Montreal-based company says the acquisition will help further expand its reach across its customer base beyond pilot training.

Sabre’s AirCentre business includes software used by airlines to help in crew and flight management as well as the optimization of aircraft use and airport management.

It has more than 150 airline customers.

Among the many ESG developments bubbling to the forefront of the markets in recent years is the desire of investors to see companies address social justice concerns. In particular, shareholders have begun to request that companies conduct racial equity audits (“Racial Equity Audits”), which generally seek an independent, objective and holistic analysis of a company’s policies, practices, products, services and efforts to combat systemic racism in order to end discrimination within or exhibited by the company with respect to its customers, suppliers or other stakeholders. We anticipate greater interest in Racial Equity Audits and similar initiatives in the upcoming proxy season and accordingly believe companies will be pushed to critically and objectively examine their current internal practices and policies relating to equity and inclusion to identify areas in need of improvement.

The Federal Trade Commission, led by new Democratic Chairwoman Lina Khan, has adopted a series of policy changes aimed at cracking down on corporate mergers, sparking deep partisan disagreement at the agency.

The latest initiative came this week when Democrats who control the five-member FTC announced a policy that would give the commission veto power over a company’s future transactions once it attempts an allegedly anticompetitive merger or acquisition.

The traditional skills of accountants are more relevant than ever in meeting market expectations and business needs arising from environmental and social issues and the need to integrate sustainability into an organization’s strategy, risk management, operations and reporting. The A4S Essential Guide to Engaging the Board and Executive Management (EM) aims to help CFOs and finance teams provide guidance and practical examples to engage their board and executive management team in these areas.

Nearly half (49%) of investors say a company’s failure to address ESG issues might prompt them to divest their investment in the company, according to PwC’s 2021 Global Investor ESG survey.The survey, which sampled more than 350 institutional investors globally, found that 82% believe ESG needs to be embedded in a firm’s corporate strategy, with nearly three-quarters, or 74%, of investors saying decision-making would be better informed if companies applied a single set of ESG reporting standards.

For decades, the process that private companies in the United States have used to get listed on public markets has followed a familiar script, using bankers as intermediaries to price and sell their offerings, primarily to preferred clients. As the number of public offerings has surged in the last few years, there have also been disruptions at three levels.

Third Point’s founder, billionaire investor Daniel Loeb, wants the Anglo-Dutch company to separate its oil and gas business from its renewable-energy and liquefied-natural-gas operations. His team has had conversations with the company and Shell was given a heads up on Third Point’s announcement, sources familiar with the matter said.

When Shell pushed back on Loeb on Thursday, he did not follow up with a white paper detailing company missteps, as activists often do. He did not unveil a website with videos laying out his case or go on television to discuss the matter.

Facebook is changing its name to Meta, reflecting the company’s push to build an avatar-filled virtual world known as the metaverse as it battles a deepening public relations crisis and growing regulatory scrutiny.

Speaking at Facebook Connect, the company’s annual virtual and augmented reality conference, on Thursday, Mark Zuckerberg, chief executive, said Facebook was “an iconic social media brand but increasingly, it just doesn’t encompass everything that we do”.

Satellite maker Terran Orbital Corp. is merging with a special-purpose acquisition company to go public at a $1.58 billion valuation, the companies said, the latest in a string of space-related companies to list through a SPAC.

Through our work with companies and our ongoing dialogue with many different parties who touch on the ESG debate, we felt there was an information void. There are multiple case studies and insight into how ESG has been implemented by the large, global companies - many of whom identified the importance of ESG a number of years ago and have had the necessary resources to build it into their business models. However, there is very little evidence on how other UK companies, who make up the backbone of our economy and stock market, are dealing with this step change in the relevance of ESG.