Corporate governance - Vigil

Top executives from four of the largest Western oil companies— Exxon Mobil Corp., Chevron Corp. , BP PLC and Royal Dutch Shell PLC—are set to face lawmakers Thursday for questioning on the sincerity of their pledges to cut emissions and support other measures to address climate change.

Top Democrats on the House Oversight and Reform Committee have asked the chief executives of Exxon and Chevron and the heads of the U.S. units of BP and Shell to testify about what the lawmakers say is a yearslong campaign by the oil industry to spread disinformation about the role of fossil fuels in causing global warming.

Money manager T. Rowe Price Group Inc. agreed to buy Oak Hill Advisors for as much as $4.2 billion to enter the private-debt investing business, people familiar with the matter said.

Oak Hill has been an active player in distressed-debt deals for decades, and last year provided rescue financing to companies whose businesses were ravaged by the coronavirus pandemic.

“This reform will increase our energy security...and it will help us combat the threat posed by climate change.” Those hopeful words were uttered by Barack Obama, then America’s president, at the end of a meeting of the g20 group of countries in Pittsburgh in 2009. The gathered leaders had agreed to phase out subsidies for fossil fuels, which, by encouraging the use of polluting fuels, tilt the playing field against cleaner alternatives. Twelve years later, however, fossil-fuel subsidies are still hanging on. And as a severe energy-supply crunch leads to soaring prices around the world, they are making something of a comeback.

In our paper, A Test of Stakeholder Capitalism, we argue that companies turn to stakeholders to obtain more information about how to deal with looming risks. Many corporate choices affect stakeholders, whose reaction, if assessed beforehand, can help the company in its decisionmaking. When management realizes that stakeholder feedback can help it prepare a more effective response to a business challenge, it launches initiatives seeking to better understand stakeholders’ perspectives and, if pertinent, adjust its choices.

New technologies represent a critical part of the world’s decarbonization tool kit—and the world does not yet have all the technologies that it would need to solve the net-zero equation by balancing sources and sinks of greenhouse-gas (GHG) emissions. The good news: McKinsey research on Europe’s net-zero pathway suggests that climate technologies that are already mature could, if deployed widely, deliver about 60 percent of the emissions abatement that will be needed to stabilize the climate by 2050. The challenge is that further abatement must come from climate technologies that aren’t quite ready, including 25 to 30 percent from technologies that are demonstrated but not yet mature and another 10 to 15 percent from those still in R&D.

On October 13, 2021 the Ontario Securities Commission (“OSC”) hosted a virtual roundtable titled “Rethinking Diversity in Capital Markets” (the “Roundtable”). The Roundtable was moderated by Wendy Berman, Vice-Chair of the OSC, and discussed diversity beyond gender on corporate boards and in executive officer positions. In particular, the Roundtable considered broader diversity with a focus on targets, term limits, and diversity data.

The economic recovery from COVID-19 has produced many tales of people quitting jobs or switching careers as part of a broader re-evaluation of work and what’s truly important amid a deadly pandemic.

Stories abound of workers who simply had enough – say, the stressed-out waiter who turned a passion project into a small business, or the overworked lawyer who quit to recharge, indulge in hobbies and spend time with family. Some commentators have dubbed it the “Great Resignation,” a collective rush for the workplace exits.

It’s a complicated drama, with various board members, including Toronto Mayor John Tory, also taking sides, but it essentially boils down to Ed wanting to replace current Rogers CEO Joe Natale with the company’s now former CFO, Tony Staffieri. Ed’s mother and sisters want to keep Natale in place—and ensure that Ed doesn’t assume all decision-making power. 

As the pandemic lingers, matters expected to demand the attention of boards of directors reflect much uncertainty.

Coronavirus variants have prolonged the pandemic despite available vaccines. Some of the worst global supply chain disruptions in decades are idling or delaying production and leaving retail shelves empty. The economic recovery is choppy. And some countries are experiencing labour shortages.

In the UK, "boards are feeling a little bit under the weather", said Simon Laffin, FCMA, CGMA. "They're uncertain about the pandemic. They're uncertain about getting enough labour. They're uncertain about the recovery, and they don't trust the government." 

A pair of opinions released by the Delaware Supreme Court in a single week have revisited longstanding precedent governing shareholder suits that claim corporate wrongdoing. As discussed in a companion post on this blog, the first of those opinions, Brookfield Asset Management Inc. v. Rosson, restricted the ability of shareholders to bring direct claims under certain circumstances, instead forcing them to pursue more procedurally challenging derivative suits. In the second case, United Food & Commercial Workers Union & Participating Food Industry Employers Tri-State Pension Fund v. Zuckerberg, the Delaware Supreme Court adopted a new three-part demand-futility test that clarifies the standard shareholders must meet to file such derivative suits, without first taking their complaints to the company’s board of directors.

The Financial Times has created a searchable dashboard of 193 countries’ historical emissions and future climate targets, as well as information on the energy mix that indicates their progress on renewable energy, using data from Climate Watch and the International Energy Agency.

François Dauphin, president and chief executive of the Institute for Governance of Private and Public Organizations, says his organization is in favour of dual-class share structures because they can protect startup or visionary companies from being pressured by large, institutional shareholders, who typically only hold shares in a company for a short period of time and are only interested in short-term returns.

"It's also a way to protect companies from hostile takeovers. We are really subject to that in Canada, so we need to protect our companies and family businesses," he said.

Toronto-Dominion Bank has announced a major executive shuffle, replacing the heads of its retail banking operations in Canada and the United States.

Group head of Canadian personal banking Teri Currie will retire from the role at the end of January, and join board of directors for the bank’s U.S. arm.

Every CEO is different, as is every company. So why does one executive compensation package tend to look just like another? The answer lies in the prevalence of interlocking directorates and the use of compensation consultants, according to research by Susanna Gallani.

Royal Dutch Shell’s chief executive has warned that replacing long-term shareholders with hedge fund investors risked derailing the energy sector’s transition plans at a critical moment in the climate crisis.

The comments by Ben van Beurden follow a decision this week by one of the world’s largest pension funds to sell its entire holdings in fossil fuel companies and come a day after it was revealed that Daniel Loeb’s activist fund Third Point had called for Shell’s break-up.

We have long been advising and defending companies attacked or threatened by raiders and activists seeking to profit by bust-up takeover, greenmail extortion or increase in stock price by financial engineering and excess leverage. Those attacks and pressures have often involved reducing wages and/or firing employees, cutting CAPEX and compromising the long-term outlook, competitiveness and sustainability of the enterprise— all to the detriment of the value of the company and the shareholders who are left holding the bag after the raider/activist has emptied it.

As public company board service has become increasingly imperative and time-consuming, proxy advisory firms and institutional investors have sharpened their focus on directors who serve on an excessive number of boards. Overboarding concerns have become a key driver for recommendations or votes against director elections in recent years. This Sidley Update summarizes the overboarding policies of proxy advisory firms Glass Lewis and Institutional Shareholder Services as well as several large institutional investors. 

Royal Dutch Shell is under pressure to break itself up after the activist hedge fund Third Point built a large stake and accused the oil supermajor of being bogged down by an incoherent strategy.

Third Point, which is led by Daniel Loeb, urged Shell to split itself into “multiple standalone companies”, including a “legacy” arm focused on oil and gas that could “slow capex beyond what it has already promised”. Its stake is worth close to $750m, according a source familiar with the matter.

China’s economic planning agency encouraged the country’s companies to repay their international debts days ahead of another payment deadline for property developer Evergrande after it narrowly avoided a default last week.

The National Development and Reform Commission, the state’s economic planning agency, said late on Tuesday that companies should prepare to pay the principal and interest of offshore bonds to maintain their reputation and the order of the market.

Apple is fighting to prevent shareholder votes calling for more transparency about the use of forced labour in its supply chain and about how it decides which apps to delete from its App Store.

The sensitive issues are among six petitions from shareholders, described here for the first time, that also call for the company to take action on how easy it is for its devices to be repaired, its use of non-disclosure agreements and on incorporating more sustainability measures.

Evercore Inc. is naming John Weinberg as its sole chief executive, five years after recruiting the former Goldman Sachs Group Inc. banker—and scion of a Wall Street dynasty—to the investment bank.

Friendly sales of control are a well-known breeding ground for corporate agency costs. Managers, for instance, might be tempted to push through a transaction with a favored bidder instead of exploring an overture organized by a party against whom they hold a grudge. Or they might offer the buyer a sweetheart deal with the anticipation (if not expectation) of lavish compensation from the newly-sold entity. Both situations leave shareholders shortchanged.

In this report, Diligent Institute sought to learn more about the steps companies are taking to become better prepared for shareholder activism. The paper evaluates the number of companies that faced activism in 2020 and 2021, while attempting to draw the comparison between the two years. Our data suggests that activist investor momentum will continue throughout the rest of 2021 and into 2022. The paper also touches on some of the governance characteristics and fundamentals of targeted companies. Additionally, we undertook a case study of three oil companies that received extensive press, as they were the targets of successful activism campaigns in 2021. The goal of the case study provides instructive insights on how shareholder activism is evolving and how issuers can best prepare.

According to the Financial Times, “[p]ension funds and retail investors have complained for years over their lack of ability to vote at annual meetings when using an asset manager.” Last week, BlackRock, the largest asset manager in the galaxy with $9.5 trillion under management, announced that, beginning in 2022, it will begin to “expand the opportunity for clients to participate in proxy voting decisions.” BlackRock said that it has been developing this capability in response “to a growing interest in investment stewardship from our clients,” enabling clients “to have a greater say in proxy voting, if that is important to [them].” BlackRock will make the opportunity available initially to institutional clients invested in index strategies—almost $2 trillion of index equity assets in which over 60 million people invest across the globe. It is also looking at expanding “proxy voting choice to even more investors, including those invested in ETFs, index mutual funds and other products.” Will this be a good thing?