Corporate governance - Vigil

HOW CAN BUSINESS HELP MEND the broken U.S. political system—and even step up to fulfill the social needs government fails to meet? Lawrence University Professor Michael Porter, perhaps the best-known scholar of corporate strategy, turned his attention to these problems a decade ago. Harvard Magazine devoted much of its September-October 2012 issue to this pioneering and important work, and has continued to cover its evolution, most recently in this current article on election reform. Harvard Magazine spoke with Porter to discuss his new overview paper on the continuing political problems that are holding back socioeconomic progress in America, and how they’ve given businesses an opportunity to get involved. 

Ottawa struck a $5.2-billion deal with Newfoundland and Labrador to help complete construction of the debt-plagued Muskrat Falls hydroelectric project, a tentative agreement that would keep electricity rates from almost doubling while alleviating pressure on a province in the midst of a deep fiscal crisis.Muskrat Falls, which started with great optimism in 2013 on Labrador’s lower Churchill River, has ballooned into a financial albatross that’s now more than $6-billion overbudget and years behind schedule. The details of the deal still need to be finalized by both governments. The proposed agreement would reduce the province’s cost of financing the project and keep Newfoundland’s electricity rates from spiking this fall when the hydro dam is fully online.

LONDON — Britain’s financial watchdog has proposed changing the rules for companies listed on the U.K. stock market to include a “comply or explain” requirement for not meeting diversity targets. The U.K.’s Financial Conduct Authority put forward its proposals on diversity and inclusion in a consultation paper published Wednesday.  It proposed that at least 40% of company boards should consist of women, including those who self-identify as a woman. As of January 2021, women accounted for 36% of company board positions on the U.K.’s main FTSE 100, according to data from the Hampton Alexander review. In addition, the FCA said companies should have at least one woman holding the senior board positions of chair, CEO, senior independent director or chief financial officer. The FCA also proposed that at least one member of a company’s board be from a non-White ethnic minority background. A report by Green Park Business Leaders, published in February, found that just 10 of the 297 people in the top three roles of FTSE 100 companies had ethnic minority backgrounds. 

As companies face growing hacking risks, corporate cybersecurity chiefs are earning more money compared with last year, but in many cases are still reporting to IT leaders. Many companies that previously didn’t have chief information security officers have hired one in the past few years, driving the need for professionals with experience, technical skills and business knowledge, experts say. Security leaders with these qualifications can be difficult to find, which has pushed salaries higher. CISOs in the U.S. earned a median salary of $509,000 this year, compared with $473,000 in 2020, according to a new survey of 354 CISOs, published Thursday by executive search firm Heidrick & Struggles International Inc. Total compensation, including equity grants and bonuses, rose to $936,000 from $784,000 in 2020. Last year’s survey included responses from 372 CISOs.

(Bloomberg) -- ESG asset managers are accelerating their use of new climate-investing benchmarks created by European authorities, in a development that’s set to make it harder to get away with greenwashing. While only about $1.2 billion is now tied to gauges that meet European Commission requirements -- a tiny fraction of the $35 trillion of ESG assets worldwide -- inflows have more than doubled since January, according to the European Securities and Markets Authority. That suggests investors are looking for some guardrails as they navigate a market rife with anxiety about greenwashing, which is the term that’s been given to exaggerated, false or deceptive claims about a product’s fidelity to climate goals, such as those set in the landmark 2015 Paris agreement. [...] Under the new rules, an index can’t be labeled as being climate-transition or Paris-aligned if it doesn’t include a broad universe of investible assets that starts with a smaller carbon footprint and that requires annual emission reductions.

Inter Pipeline Ltd.’s board of directors is throwing its support behind a takeover bid from Brookfield Infrastructure Partners, capping off a tense battle that saw both companies take each other to court. Inter Pipeline’s support follows the decision Monday to abandon its backing of a friendly merger with Pembina Pipeline Corp., which triggered a $350-million termination fee to be paid to Pembina, and also comes after Brookfield raised its takeover bid for a second time. “After thoroughly considering the alternatives, the board has concluded that the value and flexibility inherent in the revised Brookfield offer, including the significant cash component of the offer and the option for a potential tax-deferred rollover for certain Canadian shareholders, makes it appropriate to recommend acceptance of the revised Brookfield offer to our shareholders,” Margaret McKenzie, Inter Pipeline’s board chair, said in a statement late Tuesday. The board’s support comes nearly one year after Brookfield was privately rebuffed by Inter Pipeline after floating a takeover, and five months after Brookfield went hostile with its bid. Inter Pipeline’s board had also backed a friendly merger with Pembina in late May.

Boards of directors in Alberta may find there is a lack of clarity in Alberta’s Business Corporations Act (the “ABCA”) when it comes to voting on resolutions where a conflict of interest exists. [...] Due to an apparent lack of case law on the issue, and inconsistencies in secondary sources, directors should take a cautious approach in passing any such resolution. To ensure the validity of any such resolution, whenever a director is precluded from voting under section 120(6) of the ABCA, the remaining directors should hold a formal meeting to vote on the resolution.

The biggest names in asset management are preparing for a major shift to an era when investors demand customised equity portfolios that have traditionally been the preserve of wealthier clients. Vanguard, JPMorgan, BlackRock and Morgan Stanley have all done deals since 2020 to bolster their offerings in so-called direct indexing — a more bespoke approach to off-the-shelf investment products. Fund managers expect this will mark the next stage in the democratisation of finance, and will probably put pressure on traditional products such as mutual funds and exchange traded products. By the middle of this decade, direct indexing is forecast to account for $1.5tn of global assets, up from less than $500bn now, “by taking share from other passive products such as mutual funds and ETFs”, according to a recent report from Morgan Stanley and Oliver Wyman. Direct indexing represents a “do-it-yourself arms race among wealth managers” Neal Sheehan, analyst at Celent, wrote in a recent report.

Lawmakers in China plan to clear remaining legal barriers to encourage couples to have more children, as the country faces another year of fewer births. [...] Communist Party leaders had recently approved a three-child policy and agreed to remove penalties imposed on people for having too many children. The revised law expected next month would codify that. Beijing last amended the 2001 law in 2015 to allow for two children but kept provisions for birth-limit-violation penalties including fines known as “social-maintenance fees.” All remaining penalties for violating birth limits should be removed in the revision to provide a legal framework to encourage births, said He Yafu, an independent demographer based in Guangdong. China’s fertility rate, the number of children a woman has over her lifetime, fell to 1.3 in 2020, census data showed. The rate has been below the replacement level of 2.1 since the early 1990s. Initial local birth data for the first half of the year point to another lower number of newborns this year.

Online interior-design startup Havenly can’t compete with Silicon Valley heavyweights when it comes to compensation, but it used to have an effective weapon in the battle for tech talent: the Rocky Mountains. The 150-person company counted on Denver’s outdoorsy lifestyle to help lure people from more-expensive places. Since the pandemic spurred leading tech companies to embrace “work from anywhere” policies, that advantage is fading fast. Now that a software engineer or marketing guru can work from a creekside cabin while still pulling down big bucks from Facebook or Salesforce, smaller firms far from the coasts are feeling the pinch. [...] Some of the biggest names in tech aren’t just allowing existing workers to relocate out of the Bay Area, they are also starting to hire in places they hadn’t often recruited from before. The result is the most geographically distributed tech labor market to date. That’s leading to above-market rates for workers in smaller hubs, forcing local companies to raise wages to keep up with the cost of living and fend off deeper-pocketed rivals from California, Seattle and New York.

Labor-management relations are drawing the attention of environmental, social and governance investors, who are urging companies toward more transparency on topics such as executive-to-worker compensation ratios, racial and gender pay disparities, and the treatment of all workers.[...]  “It’s long overdue,” Leo Strine Jr., former chief justice of the Delaware Supreme Court, said in an interview with CQ Roll Call. Strine, now in private practice at Wachtell, Lipton, Rosen & Katz in New York, has closely tracked labor issues in corporate governance for a generation. Companies that pay low wages or send their workforces offshore externalize long-term costs on to the markets and taxpayers, he said. These moves don’t grow the economy, instead they just shift costs while taxpayers, workers and creditors often are left to “pick up the wreckage,” Strine said.

Danone said it would replace almost its entire board months after activist investors forced the ousting of the French food and beverage giant's CEO. Among the casualties is former CEO Franck Riboud, who is the son of Danone's founder, and whose successor Emmanuel Faber was summarily dismissed in March under pressure from rebelling shareholders. m"The renewal will be completed by the general shareholders meeting of the spring of 2023," the group said in a statement published alongside half-year results. Only the recently-appointed chairman of the board Gilles Schnepp and two staff representatives on the 12-person body would remain, it said. [...] US fund Artisan Partners and London-based Bluebell Capital were among shareholder rebels building up stakes in Danone as ammunition to force change. [...] The hedge funds also took aim at former finance director Cecile Cabanis, who will now also leave the board, having only recently been appointed as its vice president.

he U.K.’s Department of Transport has commissioned a consortium to look into the viability of using overhead wires to power long-distance trucks. Headed up by construction and engineering group Costain, it includes companies such as Scania and Siemens Mobility, among others, and represents the latest example of how industry and government are trying to develop solutions focused on decarbonizing transportation. [...] According to Siemens Mobility, when using the eHighway, “trucks can operate completely electrically and at the same time charge their batteries without using fuel.” [...] While the U.K.-based project will be looking into the potential of using overhead wires to power road-based transportation, the tech has already been deployed in other parts of the world. Siemens Mobility says tests of the eHighway are underway in Germany on three public routes.

HONG KONG—A Chinese court sentenced an outspoken farming magnate to 18 years in jail for allegedly causing public disorder and a multitude of other offenses, dishing out heavy penalties in a case seen as a bellwether of the growing political risks that confront private businesses in China. Sun Dawu, 67 years old, was convicted Wednesday of crimes that included agitating crowds against state organs, illegal fundraising and unlawful occupation of farmland, a municipal court in the northern city of Gaobeidian said in a notice published on its website. [...] Mr. Sun’s company, Dawu Agricultural and Animal Husbandry Group, had been publicly feuding with a state-owned farm in China’s northern city of Baoding over a long-running land dispute when police detained him, members of his family and other senior Dawu executives in November. [...] The case against Mr. Sun, who has gained prominence in China speaking up for farmers and rural businesses, has rippled through Chinese social media and unnerved many within the country’s legal and business circles.

Increasingly, businesses globally are using lawsuits to try and silence their critics, says a recent report from the Business and Human Rights Centre (BHRC). Such lawsuits are often referred to as SLAPP suits — Strategic Lawsuits Against Public Participation. BHRC notes, “SLAPPs masquerade as ordinary lawsuits but in essence constitute an abuse of the legal system… SLAPP can take the form of criminal or civil lawsuits brought to intimidate, bankrupt and silence critics.” Most people may have never heard the term SLAPP, but they are likely feeling its chilling effects, as public debate over the social and environmental impact of global businesses is significantly impaired by both the threat and actuality of such lawsuits.

FACEBOOK HAS always had two faces. One is the grimace of a company that many people, in particular politicians, love to hate. President Joe Biden recently accused the social-media giant of “killing people” by spreading misinformation about vaccines against covid-19. (He later rowed back a bit after Facebook pointed out it does quite a lot to stop the spread of such content and to promote legitimate vaccine tips.) The other face is a happy one of a firm that users, advertisers and investors cannot live without. Analysts predict it will be grinning again on July 28th, when it presents second-quarter results. Revenues are expected to rise by nearly 60%, year on year, to around $28bn—despite Apple’s update in April to its iPhone operating system that allows users easily to opt out of being tracked around the web by apps like Facebook. That would put it on track to exceed $100bn in sales this financial year. Quarterly net profit could come in just shy of $10bn, double that of a year ago. No wonder Facebook looks poised to become a long-term member of the exclusive club of companies with a market value above $1trn, which it joined earlier this year

The offering, expected this week, will be a test of whether individual investors want to stay on the sidelines or jump into this type of investing. Robinhood Markets Inc.’s initial public offering is stirring interest among individual investors. The trading app, which now has 22.5 million funded accounts and fueled a number of meme stock rallies in the past year, is urging its own customers to invest. The company plans to sell its users up to 35% of its IPO shares, or up to 18.3 million shares. This past Saturday, the company’s executives held a virtual roadshow specifically for mainstream investors. There is plenty to know if you’re watching this hotly anticipated IPO, which will be a test of whether individual investors want to stay on the sidelines or jump into this type of investing. What’s unique about Robinhood’s IPO? Typically, nearly all shares of a company aren’t available to individual investors before they start trading and the bulk of shares in an initial public offering are given to institutions. Recently, firms such as Robinhood and SoFi have started to offer IPOs at offering price to their customers as part of their mission to make markets accessible.

One of Just Eat Takeaway.com’s largest shareholders has called for the food delivery group to take urgent action to prop up its share price, to avoid a hostile takeover. Cat Rock Capital, which owned stakes in both Just Eat and Takeaway.com before the UK and Dutch companies joined in a £6bn merger last year, blamed the 27 per cent drop in the group’s share price this year on “broken communication” with investors. The activist investor, which first pushed for the Just Eat merger in 2019, is now calling on the Amsterdam-based food delivery group to explore “strategic options”, including divestments or a merger with a larger rival.