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CHICAGO (Reuters) - Employer retirement plans are not known for their flashy investments - a majority of 401(k) investors these days use target date funds that invest in broad, diversified equity and fixed income mutual funds that automatically rebalance to minimize risk as retirement approaches. That has been a healthy, if unexciting, trend. But in the years ahead, some plan sponsors may start spicing things up. Last week, the federal government opened the door for plan sponsors to add private equity funds to their 401(k) plans. Private equity funds invest in everything from buyouts of mature non-public companies to firms getting ready to go public - and even venture capital startups. Until now, these investments have been available only to wealthy and institutional investors. The private equity industry has been knocking on the 401(k) door for a number of years, and the attraction is not difficult to understand. Defined contribution plans represent a huge pool of investable funds, holding $8.9 trillion in assets at the end of 2019, according to the Investment Company Institute. [...] Private equity advocates argue that these funds can produce higher returns over time than the stock of publicly held companies, even net of fees. “If you think of the stock market as a way for investors to harness the economic power of gross domestic product and capitalizing on that, a growing portion of that activity today is being held by private investors today as opposed to being in the public markets,” said David O’Meara, senior defined contribution strategist at consulting firm Willis Towers Watson.
When Tevin Tobun launched his food distribution company, Gate Ventures, in 2001, he knew his leadership team had to be different. As a young black man fresh out of London’s Middlesex University, he wanted the top team to reflect both his workforce and the customers they served. Today, Gate Ventures – which counts Iceland and Fortnum & Mason among its clients – is led by a six-person boardroom with three BAME directors, one of whom is female. “It allows for a very engaged board, allows for us to be on everybody’s radar within our workforce, and allows for everybody’s voice to be heard within our workforce. I think it has contributed hugely to the success that we’ve had,” says Tobun, 44. But Tobun’s team is still the exception when it comes to diversity across British boardrooms. While Sharon White’s recent appointment as chairman of the John Lewis Partnership was widely applauded, even the boss of one of Britain’s largest retailers was quick to acknowledge that change has been slow. In her maiden speech in February, White told senior managers the company needed to “improve the diversity of the partners we are hiring”, and after the recent Black Lives Matter protests wrote an open letter to staff making clear there was “no place in the partnership for discrimination”.
On May 21, 2020, the Securities and Exchange Commission adopted changes to the financial disclosure requirements relating to the acquisition and disposition of businesses. [1] As set forth in greater detail below, these changes will greatly assist SEC reporting companies in terms of streamlining and eliminating immaterial information relating to acquisitions and dispositions and will provide additional flexibility in terms of presenting pro forma adjustments relating to such transactions. Of note, the rule amendments: (A) Reduce the maximum number of years of required audited financial statements from acquired businesses from three years to two;
(B) Eliminate the requirement that financial statements of certain “major” acquisitions continue to be presented once the acquired company has been reflected in the registrant’s operations for a full fiscal year;
(C) Modify the significance tests used to determine whether historical and/or pro forma financial statements for acquisitions and dispositions are required, which will reduce the likelihood of anomalous results; and
(D) Adopt new criteria for the presentation of pro forma adjustments, including the ability for registrants under certain circumstances to voluntarily include the impact of synergies and other adjustments that are not permitted under current SEC guidance.
Timed to the 2020 Annual General Meeting (AGM) season, shareholder advocacy non-profit As You Sow filed seven shareholder resolutions, on behalf of individual proponents, that specifically requested material disclosure compliant with environmental and social corporate reporting standards published by the Sustainability Accounting Standards Board (SASB). SASB standards are explicitly designed to reflect financially material aspects of corporate behavior as it pertains to sustainability topics. Large investment advisors have committed to SASB, even to the extent that BlackRock and State Street Global Advisors, the world’s largest and third-largest asset managers, announced in January that they would use SASB disclosure to frame their proxy voting policies. Resolutions calling for SASB disclosure should be expected to enjoy widespread support from both investors and corporate managements. Indeed, the results produced by these resolutions have suggested that this is the case. [...] SASB standards represent a minimum for corporate sustainability reporting, and should be augmented by broad stakeholder-focused standards such as those published by the Global Reporting Initiative. It is gratifying for socially responsible investors to note that as of this writing, 215 companies have adopted SASB-compliant reporting, despite the standards having existed in their final form for only eighteen months. This number is growing rapidly. We recommend that investors interested in sustainability disclosure demand that all public companies meet at least this baseline for the topics that concern them. Submission of future SASB-based resolutions will ensure that these investors achieve a high level of success.
Pershing Square founder Bill Ackman (Trades, Portfolio) is perhaps one of the best-known activist investors in the world. Activists, as their name suggests, take an active role in managing the companies that they own. Of course, any shareholder has the right to involve themselves in the running of their business in theory, but in practice, many investors are happy to leave the running of their companies to management. In a recent interview with The Knowledge Exchange, Ackman stated his opinion that index funds could take on a more activist role in the future. Here's what that might mean for investors, if it came to pass. Over the last few decades, index funds have come to control larger and larger sections of corporate America. For activist investors like Ackman, this is significant because an index fund's vote can become the deciding one in matters of corporate governance. Traditionally, index funds have taken a laissez faire approach to running the businesses that they own, but Ackman thinks that this may begin to change: "Because of their growing influence, index funds are under a fair amount of pressure from their shareholders to oversee the businesses that they own. People thought about the index fund businesses as one with almost no governance, but their increasing ownership of corporate America puts more pressure on them to be more thoughtful. Now, they don't have the resources to lead an activist campaign - I think that requires a more entrepreneurial type of investor - so there has to be a partnership between activist and index funds."
On October 12, 2015, an activist hedge fund we’ll call John Doe Management filed a Form 13D, disclosing 5.5 percent ownership and an intent to pursue an activist campaign in a target firm we’ll call Industrial Corp (IC). The next day, IC’s stock rose 7 percent. John Doe Management’s last purchase of IC prior to filing the 13D occurred on October 3. The following day, an IP address owned by a different hedge fund, referred to here as AAA Group, suddenly became interested in IC, logging onto the Securities and Exchange Commission’s EDGAR database and downloading IC’s financial statements. [...] Why might an activist be willing to leak their pending campaign information? Over the course of a campaign, activists need to build a coalition of shareholders to win any voting disagreements with the incumbent management team. By leaking this information, and allowing the informed shareholders to build positions in the targeted stock ahead of the disclosure-related price jump, activists have added a friendly base of voting support to their campaign, increasing their likelihood of winning any fight with managers (Dimson, Karakas, and Li, 2015; Crane, Koch, and Michenaud, 2019; Brav, Jiang, Li, and Pennington, 2019; Li and Hi, 2020).
The National Association of Corporate Directors (NACD) released the NACD May 2020 COVID-19 Pulse Survey, which revealed the trends and governance challenges that corporate directors expect to tackle over the next three months.
he labor market will fare better than previously expected, economists say
Statistics Canada says a key measure of household debt rose in the first quarter as the COVID-19 pandemic began to take hold of the economy. The agency says that household credit market debt as a proportion of household disposable income rose to 176.9 per cent from 175.6 per cent.
Net revenue fell to US$652 million in the first quarter ended May 3 from US$782.3 million a year earlier
Italian Economy Minister Roberto Gualtieri said on Friday that the country’s economic contraction this year may be worse than the 8% decline currently forecast by the government.
How much harm has covid-19 done to large Western cities?
More than a third of investors voted against the supermarket’s pay policy at the company’s annual shareholder meeting on Thursday, with the generous pension deals enjoyed by the chief executive, David Potts, and the chief operating officer, Trevor Strain, a major source of anger.
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Post analysis of CBCA data finds that of 23 boards and 255 director positions, only 14 directors identified as belonging to a visible minority. Canadian companies may be making progress on gender diversity, but a Financial Post analysis suggests that the boardrooms of some of the biggest businesses in the country have much further to go when it comes to including members of visible minorities, Indigenous peoples and people with disabilities. That analysis is based on a relatively new source of data. Starting this year, publicly traded companies incorporated under the Canada Business Corporations Act (CBCA) are required to report, among other things, the number of women, Indigenous people, persons with disabilities and members of visible minorities on their boards and in their senior-management ranks. The disclosures must be made for their annual shareholder meetings. [...] Combined, however, the Post found that, out of the 23 boards and 255 director positions total, only 14 directors — or approximately 5.5 per cent — identified as belonging to a visible minority. The Post also found only three Indigenous directors (or about one per cent of all directors in the sample) and two directors with disabilities (less than one per cent) among the 23 boards.
Environmentalists cheered by huge improvements in air quality during the lockdown – and the collapse in coal power generation – have another reason to celebrate. Even the stock market has gone in their favour. A detailed number-crunching of environmentally sustainable funds has revealed that they have outperformed traditional funds across the board – beating them during the pandemic as well as during the 10 years up to and including the coronavirus sell-off. The data, from the global research agency Morningstar, comes amid growing evidence that environmentally focused investing – once pigeonholed by City traditionalists as only for a vegan/hippy minority – is becoming mainstream. This week, Vanguard, one of the world’s biggest fund managers, launched two ethical index funds aimed at UK investors, while Aviva, Britain’s biggest insurer, unveiled a “climate transition” fund. Morningstar examined 745 sustainable funds and compared them against 4,150 traditional funds, and found they matched or beat returns in all categories – whether bonds or shares, UK or abroad. The outperformance continued during the coronavirus crisis
“Average returns and success rates for sustainable funds suggest that there is no performance trade-off associated with sustainable funds. In fact, a majority of sustainable funds have outperformed their traditional peers over multiple time horizons,” it says. Over 10 years, the average annual return for a sustainable fund invested in large global companies has been 6.9% a year, while a traditionally invested fund has made 6.3% a year.
In a potentially significant reversal of a prior Securities and Exchange Commission (SEC) staff position that could enhance the ability of closed-end funds to defend against activist shareholders, the Division of Investment Management of the SEC on May 27, 2020, withdrew a 2010 no-action letter that criticized the use by closed-end funds of certain defensive measures permitted under state corporate law. The 2010 letter, issued to Boulder Total Return Fund (Boulder Letter), [1] had long been an impediment to a closed-end fund opting in to state statutes that permit companies to restrict the ability of certain shareholders to vote control shares. The Boulder Letter stated that the SEC staff believed such a statute would be “inconsistent with the fundamental requirements of Section 18(i) of the Investment Company Act that every share of stock issued by [a fund] be voting stock and have equal voting rights with every other outstanding voting stock.”
In an era of sacrifice, risk, and despair for many employees, one group of employees has yet again defied the norm, often with significant increases in actual compensation and wealth during the COVID-19 pandemic and resulting economic and societal turmoil. [...] It would be bad enough if these ridiculous, consistent, and ever-increasing payouts were the extent of the problem, but they are not. In many cases we find compensation disclosure to be far beyond “smoke and mirrors” with techniques that can only be on purpose, to confuse and deceive shareholders and the analysts that serve them. Examples include compensation tables with an extra column floating but not attached to the table, which contains lower numbers than the actual final numbers, which does a really good job of fooling the data extracting scripts. Indeed, just this week I had to explain to a junior analyst why a proposal to “save the shareholders taxes” was actually a stock option plan fleecing shareholders in order to continue richly compensating executives. [...] If people with arguably much more responsibility make so much less, how can we justify paying our CEOs so much more, especially at the expense of taxpayers, shareholders, and employees? Maybe the government should impose a compensation cap of $100,000 to $500,000 on any company that receives or takes advantage of a Treasury or other government bailout program or has more than $10,000,000 in government contracts. Cutting a million from a $2 million plus salary while keeping or increasing the stock option payouts is not going to get you anywhere near this suggestion.
The seller’s focus on three key interrelated activities—defining, marketing, and disentangling—can help expedite the transfer of divested assets and increase total deal value. The decision to divest a business unit or other asset can be painstaking and protracted: leaders ruminate about sunk costs, the size and scope of their portfolios, and the status of their strategic objectives. But once all sides have been heard and the choice is finally made, leaders face an even more daunting challenge—executing the divestiture. To successfully part with an asset, management teams must choreograph a range of critical tasks and consider the perspectives of dozens of internal and external resources and advisers—potential buyers, current employees, boards of directors, and so on. And they need to do these things quickly: McKinsey research reveals that, on average, separations completed within 12 months of announcement deliver higher excess total returns to shareholders (TRS) than those that take longer. In most cases, however, business leaders allocate more time to the question of whether rather than how to divest. So, when they get the green light from the board, many find themselves stuck in neutral—unsure about where to put their energy, which decisions to make first, and which tasks to prioritize. Meanwhile, delays can diminish an asset’s value or scuttle deals altogether. Our research and experience in the field suggest that, to get unstuck, business leaders need to break the divestiture process down into three interdependent but distinct activities: defining, marketing, and disentangling the asset in question (see sidebar, “Parting words and deeds: Critical separation activities”). For instance, a company that wants to sell a business unit must identify key characteristics of the asset in question so it can consider how to disentangle it from others in the company’s portfolio while simultaneously deciding on the valuation story to tell potential buyers.
Wm Morrison Supermarkets Plc has appointed KPMG to review its corporate governance following the resignation of two non-executive directors, according to people familiar with the matter.
Chris Cox was one of the social-media giant’s earliest engineers
EU antitrust regulators have set a July 16 deadline for a decision on whether to clear French TGV high-speed train maker Alstom’s bid for Bombardier Inc’s rail division, according to a filing on the European Commission website.
Car rental firm Hertz Global Holdings Inc said it would sell up to $1 billion in shares, cashing in on a huge speculative rise in its share price since filing for bankruptcy late last month.
Following the death of the founder of Canadian digital currency platform QuadrigaCx, investigators at Canada’s biggest securities regulator dug into the mysterious case that had stranded more than $200 million of investor funds and assets.
And that makes for differing attitudes to politics
That is partly by design, and partly through luck
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