Corporate governance - Vigil

The New York Times Co. for the first time Wednesday reported higher revenues from its digital business than its print operations, a “watershed moment” in the newspaper’s nearly 170-year history, according to CEO Mark Thompson. “And we don’t think it’s likely we’re going to go back from this moment,” Thompson said on CNBC’s “Power Lunch.” The Times reported $185.5 million in revenues from digital subscriptions and advertisements, compared with $175.4 million in revenues from print subscriptions and advertisements. In the year-ago quarter, the company reported $220.56 million in print subscription and ad revenues and $170.66 million in digital subscription and ad revenues. [...] The Times, and the media industry in general, has needed to overcome declining print newspaper circulation in recent years by harnessing the expanded reach of the internet into a formidable business operation. “The Times’ physical paper ... remains very strong, which is why it’s taken a while to see this crossover point. But digital has grown enormously over the last eight years when I’ve been chief executive,” said Thompson, who is leaving the job in September. “We had something like 650,000 digital subscribers back in 2012 when I arrived, and we’re getting pretty close to 10 times that.” 

OAKLAND, Calif. (Reuters) - Self-driving truck entrepreneur Anthony Levandowski on Tuesday received an 18-month prison sentence in the highest-profile trade secrets theft case in Silicon Valley in recent years. What was Levandowski convicted of? Prosecutors said Levandowski deliberately moved over 14,000 sensitive files to his personal computer while working at Google with a goal of eventually benefiting his future employer, Uber Technologies Inc. Levandowski was indicted for stealing 33 documents deemed trade secrets, but pleaded guilty to taking just one document. He agreed that the document, a weekly project-tracking spreadsheet, was a trade secret. What is a trade secret? Companies have sought to protect increasing amounts of private information such as formulas and processes from leaving their walls by deeming them trade secrets. Disputes over whether something is a trade secret often hinge on whether others in the field know about it and whether it is independently valuable. “The line is often drawn by the company you’re leaving, and they often declare things to be trade secrets that aren’t trade secrets,” said Ed Swanson, a San Francisco criminal defense attorney. Is it safe to take anything before leaving a company? Attorneys on both sides of these battles said the safest route is to ask permission to take any desired files.

As discussed in further detail below, based on the results of the 2020 proxy season, there are several key takeaways to consider for the coming year:
(1) Shareholder proposal submissions continue to decline. The number of proposals submitted decreased by 9% from the prior year to 720, which was 11% lower than the five-year average of 809.
(2) The number of social and environmental proposals significantly decreased, leading to governance proposals being the most common. [...] The five most popular proposal topics, representing 36% of all shareholder proposal submissions, were (i) written consent, (ii) climate change, (iii) anti-discrimination and diversity (although board diversity proposals were down more than 51% from 2019 levels), (iv) independent chair, and (v) lobbying spending.
(3) Overall no-action request success rates held steady, but Staff response letters declined significantly. The overall success rate for no-action requests held steady at 70%, driven primarily by substantial implementation, procedural, and ordinary business arguments. [...]

Institutional Shareholder Services (ISS) has launched its Annual Benchmark Policy Survey signaling potential changes to ISS’s proxy voting policies for 2021. Below we discuss the Global and North American Survey, which highlight the many key corporate governance issues that are top of mind for boards of directors and management today. The Global Survey covers questions relating to maintaining ISS’s COVID-19 guidance, racial and ethnic diversity on boards, executive compensation adjustments in light of the pandemic, oversight of climate change risk, sustainability frameworks, auditor independence and oversight and audit committees, and the annual meeting format. The North America Survey focuses on independent board chairs. Institutional investors, companies, corporate directors and other market constituents participate in the survey. The survey will close on August 21, 2020, at 5pm ET. ISS will then review the results along with input obtained from investors, company executives, directors and others through its various regional, topic-specific roundtables and conference calls to advise and assist ISS with updating its policies ahead of 2021 annual shareholder meetings. The survey is available here.

Proposed rule treats ‘do-good’ investing differently, critics say. Supporters say proposal resolves conflicting ESG guidance. A proposed record-keeping rule for socially conscious retirement investments must go unless plan sponsors want to spend more time in court, benefits advisers told the Labor Department. The regulation would require plan fiduciaries to fully document their reasoning for investing in environmental, social, and corporate governance (ESG)-focused funds. That change would create a separate standard for evaluating ESG-related funds than other investments, something plan participants could latch onto in cases challenging the financial management of work-sponsored retirement accounts. “The documentation of ESG considerations creates a possible litigation roadmap,” Aliya Robinson, an ERISA Industry Committee retirement policy adviser, said in a comment letter. Challenges “could be brought for any alternative that is not considered by the fiduciary,” she said. The Employee Benefits Security Administration maintains the scrutiny on retirement investing is warranted to preserve the financial security of plan participants, as mandated by the Employee Retirement Income Security Act of 1974. But critics questioned the need to single out ESG funds.

Employees at Blizzard Entertainment, a division of Activision Blizzard Inc., began circulating a spreadsheet on Friday to anonymously share salaries and recent pay increases, the latest example of rising tension in the video game industry over wage disparities and executive compensation. Blizzard, based in Irvine, California, makes popular games including Diablo and World of Warcraft. In 2019, after an internal survey revealed that more than half of Blizzard workers were unhappy with their compensation, the company told staff it would perform a study to ensure fair pay, according to people familiar with the situation. Blizzard implemented the results of that study last month, which led to an outcry on the company’s internal Slack messaging boards. One employee then created a spreadsheet and encouraged staff to share their compensation information. The anonymous document, reviewed by Bloomberg News, contains dozens of purported Blizzard salaries and pay bumps. Most of the raises are below 10%, significantly less than Blizzard employees said they expected following the study. [...] In internal messages reviewed by Bloomberg News, Blizzard employees said they were struggling to make ends meet while watching Activision Blizzard revenue grow year after year. Some producers and engineers at Blizzard can make well over $100,000 a year, but others, such as video game testers and customer-service representatives, are often paid minimum wage or close to it.

Alphabet Inc borrowed $10 billion in the investment-grade corporate debt market on Monday, the Google parent’s largest ever bond issue, which it secured at its lowest-ever cost of financing. Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen at that maturity since Apple Inc (AAPL.O) issued a $1.5 billion five-year note at 0.45% in 2013. Investor appetite was fierce for the tech giant’s six-part bond, as low interest rates and corporate bond buying from the Federal Reserve continues to support issuance. The deal garnered more than $31 billion in demand, according to Refinitiv IFR. Previously, Alphabet’s lowest coupon was 1.25% on a $1 billion May 2014 note. “We’re at a stage where these extremely high-quality issuers - of which Alphabet is one - are going to price very very tight. That’s because there are a lot of buyers who need short-term, don’t-need-to-think-about-it money. You’re getting two times the yield on the five-year Treasury,” said Tom Graff, head of fixed income at Brown Advisory. Last week Alphabet reported its first quarterly sales drop in its 16 years as a public company. Its share price was largely unmoved however, as the loss in sales was offset by a recovery in Google’s ads business. “There is a very narrow set of companies that were already super high quality, that are not impacted by this recession we’re going through right now. And Google is one of them,” said Graff.

A multibillion-dollar industry offering unusual data such as satellite imagery and measurements of social media sentiment is enjoying a boom in demand as hedge funds and companies hunt for clues on how to tackle the coronavirus crisis. Many investors have turned to so-called alternative data — niche information beyond standard financial market indicators or statistical releases — after finding official numbers too slow in reflecting the collapse in economic activity due to Covid, and the recovery. Providers argue it can provide precious, real-time glimpses into how a company or economy is faring. [...] Alternative data is not a new concept. Merchants in ancient Babylon measured the depth and flow of the Euphrates river to try to get an edge in their trading, after discovering a correlation with the supply of commodities, according to Andrew Lo and Jasmina Hasanhodzic’s The Evolution of Technical Analysis. However, the sector came to widespread attention several years ago during an investor craze for computer-driven trading funds. Even before coronavirus struck, total annual spending on such information by fund managers alone was predicted to reach more than $1.7bn this year, up from $400m three years ago, according to Alternativedata.org. There are nearly 1,500 providers of alternative data, according to Neudata, another seller of such information, which says it has been around four times busier than normal handling client queries in March, April and May.

A group of creditors holding about one-quarter of the junior-ranked debt of Cirque du Soleil is challenging in a U.S. bankruptcy court the way the sales process for the entertainment company is playing out, saying its interests are being trampled by larger lenders. A small ad hoc group of second-lien lenders holding about US$40-million in debt filed an objection in the United States Bankruptcy Court for the district of Delaware late Tuesday, protesting the way Cirque’s restructuring under creditor protection in Canada is progressing and arguing the U.S. court should not recognize certain decisions made here without a fair hearing. They’re being represented by U.S.-based law firms White & Case LLP and Farnan LLP, and by Montreal-based Langlois Lawyers LLP. Lawyers for the group, which calls itself the Ad Hoc Committee of Independent Second Lien Holders, argue the Delaware court should not automatically rubber-stamp the rulings made by the Superior Court of Quebec, the main jurisdiction in which the case is being heard. They say that under U.S. bankruptcy law, they are being short-changed by terms of the stalking horse bid for Cirque approved by a Quebec judge last month. “Second-lien lenders will get nearly nothing” for their contribution of approximately US$154-million to the US$1.2-billion credit bid, the group says in its objection to the stalking horse offer. “This makes no economic sense.”

A growing number of younger Canadians are buying life insurance coverage online as the novel coronavirus pandemic spurs worries about economic uncertainty and puts a spotlight on potential health risks. Since the onset of COVID-19 in early March, Sun Life Financial has seen its online life insurance sales grow by more than 40 per cent compared to the same period last year. The increase in demand for its online product – called Sun Life Go – has largely been driven by clients under age 40, with sales climbing by more than 50 per cent among this younger demographic. TD Insurance has seen similar spikes in interest among 30- to 40-year-old clients who purchase policies digitally, with sales up by more than 50 per cent year over year. Sales have also jumped by 30 per cent for clients under age 30 – a group traditionally less likely to buy life insurance. “With more time at home – people have now begun to pay closer attention to their monthly costs, which includes insurance premiums,” said TD Insurance chief executive officer Raymond Chun in an interview. “At the same time, they are able to see if they have gaps in coverage – especially when it comes to their health and protecting their family.” A life insurance policy provides a lump-sum payment upon the death of an individual. Term life insurance pays a death benefit if the insured person dies within a specific period – usually within 10 to 20 years of the issue of the policy. Permanent life insurance is set up for the lifetime of an individual. Premiums are typically higher for permanent life, but it appeals to some buyers because there is a set price tag for the duration of the contract that does not increase with age.

Hedge funds with artificial intelligence capabilities showed a huge competitive edge over investors that didn’t use AI, new research indicates. AI-led hedge funds produced cumulative returns of 34 percent in the three years through May, a report Tuesday from consulting and research firm Cerulli shows. That compares with a 12 percent gain for the global hedge fund industry over the same period.  “There has long been suspicion of the ability of AI to react to unexpected events, such as the coronavirus pandemic,” said Justina Deveikyte, associate director of European institutional research at Cerulli, in a statement Tuesday. “But there is now a sense that the technology has advanced to the point where it is better able to adapt to unforeseen scenarios via the ever-growing amount of market data available.”  Machine-learning algorithms in finance tend to recognize patterns in historical data, making it tough to adapt to economic lockdowns caused by a one-in-a-century pandemic, according to the report. Still, factors used in machine learning draw from sources such as newspaper stories to collect information daily, spotting trends for investors amid the Covid-19 turmoil, according to Cerulli. 

The public pension funds of New York and Colorado are best positioned to lead a consolidated shareholder lawsuit blaming Boeing Co.'s board and management for the fallout from two catastrophic 737 Max 8 crashes, a Delaware judge ruled Tuesday. The states’ complaint “more cogently focuses on, and contains more factual allegations relevant to, board knowledge,” Chancellor Andre G. Bouchard wrote for the Chancery Court in a brief order, citing “the massive disparity in stock ownership and the unique internal resources” the pension funds could marshal. Moreover, the states’ earlier records suit, though filed later than those brought by other investors, “obtained meaningful additional documents regarding” the firing of ex-CEO Denis A. Muilenburg in December, the judge said. The suits accuse Boeing’s board and senior leadership of engaging in virtually no oversight as it developed and rolled out the Max 8. That “epochal corporate governance failure” makes them responsible for commercial crashes in Ethiopia and Indonesia that killed 346 people in total and led to the jet model’s worldwide grounding, the suits claim.

The Securities and Exchange Commission is investigating how Eastman Kodak handled the announcement of a $765 million deal with the U.S. government to produce COVID-19 drug ingredients, the Wall Street Journal reported Tuesday, increasing scrutiny of a blockbuster deal beset by allegations of insider trading and suspicious transactions. [...] The SEC is early in its investigation and it’s unclear if the probe will result in allegations of wrongdoing, according to the WSJ. The SEC declined to comment while Kodak shares fell 9% following news of the investigation. In a statement to Forbes, an external spokesperson said Kodak’s internal communications team never intended for the announcement to be published ahead of time, and the WSJ reported that journalists were told to delete the information after it went public. As for Continenza’s stock options, a spokesperson said the grant was intended to prevent his shares from being diluted in the future and was given to him the day before the official announcement because it was the first time the compensation committee met after the grant was approved by shareholders in May 2020. Kodak’s move into pharmaceuticals is a dramatic pivot for the company, which dominated photography for over a century after its founding in 1888. But after failing to capitalize on the rise of digital photo sharing and cell phone cameras, Kodak filed for Chapter 11 bankruptcy in 2012 and briefly flirted with the idea of pivoting to cryptocurrency in 2018. 

Early hopes of a rapid, V-shaped recovery—a deep drop but swift pickup of growth in Q3—have been dashed world-wide. Most CEOs around the globe believe the economic recovery will be slow, and it could take considerable time before output recovers to prepandemic levels. In China, Europe, and the US, between 42 and 55 percent of CEOs envision a U-shaped pattern: partial shutdown measures control localized outbreaks with countries gradually succeeding in managing the pandemic. Growth would be sluggish and wouldn’t reach prepandemic levels until the final quarter of 2020. Other CEOs, especially those in Japan and the US, envision a W-shaped scenario: the continued risk of new outbreaks and a second resurgence of the virus lead to more stringent containment measures and a new contraction of output during the second half of the year. Output would see another drop in the second half of 2020, and any further recovery will be put off until well into 2021.

Any shareholder who's ever endured hours of travel to attend a company's annual meeting is in for good news in the wake of the COVID-19 pandemic. Experts say the success of AGMs taken virtual this year will likely translate into more options for online and teleconference participation at future events — provided that some technical bugs can be ironed out and with the caveat that full shareholder participation is necessary. Most corporations are required to meet once a year with their shareholders to deal with routine matters such as electing the board of directors, choosing an auditor and approving the minutes of the last meeting. [...] "The challenge is that participation at some of these (virtual) meetings has been limited — the ability to ask questions has been limited by the company to either written questions in advance or sometimes no questions," he said. "In some cases, the ability to log in has been quite complicated." [...] As of July 28, 583 AGMs had been held by companies listed on the Toronto Stock Exchange, according to figures compiled by Hansell LLP of Toronto, a corporate advisory law firm. That's down almost 22 per cent from the same time last year, as some companies took advantage of pandemic-related deadline extensions offered by regulators. [...] In Canada, Hansell found 54 per cent of the meetings were virtual only, which means that shareholders could attend remotely by phone or computer but couldn't vote or ask questions in real time. Votes were collected ahead of the meeting. About a quarter — 26 per cent — were traditional physical AGMs, where shareholders could vote ahead of time or attend in person to vote or ask a question.

Au cours des 18 derniers mois, 73 patrons de 500 groupes cotés ont quitté leurs fonctions. La plupart du temps, formellement, ils ont démissionné. Mais la réalité est parfois différente, surtout quand un actionnaire activiste est au capital. En 1988, Warren Buffet, le légendaire investisseur à la tête de Berkshire Hathaway, disait qu'« un PDG qui n'est pas performant est souvent renouvelé indéfiniment, parce que personne ne dispose d'outils pour mesurer sa performance ». Trente ans après, ces critiques sont-elles toujours valables ?