– The Wall Street Journal (paywall) reported that Starbucks appointed Chipotle Mexican Grill CEO Brian Niccol as its next leader. The company said Niccol would start as CEO and executive chair of its board on September 9. Current Starbucks chief Laxman Narasimhan has stepped down as CEO and board director after roughly 16 months on the job.
Mellody Hobson, Starbucks’s executive chair since 2021, said the company started discussing a leadership change roughly two months ago and contacted Niccol. Hobson, who will become lead independent director, said the decision to choose Niccol was one made strictly by Starbucks’s board.
Starbucks has been in negotiations with activist investor Elliott Investment Management on ways it can address slowing sales and operating problems. The WSJ recently reported that another activist, Starboard Value, had taken a stake in Starbucks. Representatives for Elliott and Starboard didn’t immediately respond to requests for comment.
Hobson said the activist shareholders weren’t part of the discussions around hiring Niccol.
– According to The Guardian, Amazon has argued the National Labor Relations Board (NLRB) is violating the constitution as the company tries to dismiss unfair labor practice charges, leaning on a recent conservative US Supreme Court ruling. In a filing last month, attorneys representing Amazon pushed back against a complaint issued by the NLRB after two workers alleged that they faced retaliation, surveillance and interrogation after exercising their right to organize.
Amazon, which denies the allegations, is seeking to dismiss the complaint on constitutional grounds. Amazon’s July filing came a month after the Supreme Court overturned the Chevron doctrine, undermining the authority of federal agencies to interpret the laws they administer and deferring to the courts whether a federal agency’s interpretation of a law should stand.
The NLRB’s ‘concurrent exercise of legislative, executive and judicial power in this proceeding violates the separation of powers established by the [US] Constitution,’ the Amazon attorneys claimed.
The NLRB declined to comment on the arguments made by Amazon, but its general counsel, Jennifer Abruzzo, recently condemned arguments made by employers challenging the agency’s constitutionality.
– According to the WSJ, board members say the rapid rise of AI in the workplace is an issue keeping them up at night. Some point to recent concerns around employees putting proprietary code into ChatGPT, companies using generative AI to incorrectly source content or worries about ‘hallucinations’ where generative AI produces false or inaccurate information.
Board members also worry that they could be held liable in the event AI leads to company problems. In recent years, some legal actions from shareholders have focused on whether board members – not just executives – exercised sufficient oversight of company risks.
– The growing presence of conservative groups at AGMs is simultaneously disrupting management plans and generating headlines, even as their proposals to end corporate diversity programs attract little support from investors, Bloomberg (paywall) noted. There were 42 proposals filed this year by prominent conservative investors that are considered anti-diversity, equity and inclusion (DE&I), compared with just one in 2021, according to data compiled by Bloomberg. Although they make up more than a third of the resolutions related to social issues filed in 2024, overall support for anti-DE&I resolutions averaged 2 percent this year — a fraction of the 18.5 percent backing for pro-DE&I proposals.
But the conversations the resolutions generate can have ‘as much of an impact’ as the vote itself, says Luke Perlot, whose National Legal Policy Center was one of the leading anti-DE&I filers this year. The efforts of conservative proponents come as US companies face complaints and lawsuits that have taken aim at diversity practices following the US Supreme Court’s decision last year to ban affirmative action programs in college admissions.
– CNBC reported that Elliott Management will launch a proxy fight at Southwest Airlines and intends to nominate 10 directors to the company’s 15-person board. Elliott plans to call a special meeting, rather than waiting for the company’s AGM. Southwest said in a statement that it is confident it has the right leadership in place and had made consistent efforts to reach out to Elliott since the campaign began. The activist investor had agreed recently to further discussions scheduled for September, the airline said, until it ‘unilaterally’ decided to announce it would launch a proxy fight.
Elliott disclosed its Southwest investment in June, writing to the company’s board to say it believed CEO Bob Jordan and chair Gary Kelly were responsible for a drop in the company’s fortunes and that Southwest should move to replace them. The company rejected those requests and CEO Jordan has since told CNBC that Elliott’s engagement with the company had not been meaningful.
– T-Mobile US has agreed to pay about $60 mn to settle allegations that it failed to promptly report incidents of unauthorized data access in violation of a national security agreement that allowed its merger with rival Sprint, according to the WSJ. The civil penalty, announced by the Committee on Foreign Investment in the US (CFIUS), is the largest fine to date imposed by the regulatory panel that reviews deals for US national security risks. It is also the first enforcement action taken by CFIUS that publicly named the targeted company, the officials said.
T-Mobile entered into a national security agreement with CFIUS after it won approval from the panel for its planned takeover of Sprint because of foreign ownership of the entities. CFIUS said that between August 2020 and June 2021 T-Mobile failed to take appropriate action to prevent unauthorized access to certain sensitive data, in violation of its national security agreement. T-Mobile also failed to report some of the incidents in a timely manner to CFIUS, the panel said.
T-Mobile said the incidents were related to unauthorized access of information shared from law enforcement requests, which happened because of technical issues the company experienced during its post-merger integration with Sprint, and the information didn’t leave the law enforcement community, a spokesperson for T-Mobile said. ‘We reported this in a timely manner, and the issue was quickly addressed. We are glad to have reached a resolution and look forward to continuing to work cooperatively with the law enforcement community to help keep the country and our customers safe,’ the spokesperson said.
– Reuters (paywall) reported that a federal judge in Florida has temporarily blocked a US Federal Trade Commission (FTC) rule that would ban agreements commonly signed by workers not to join their employers' rivals or launch competing businesses, becoming the second judge to rule that the ban is likely invalid.
US District Judge Timothy Corrigan blocked the FTC from applying the rule to real estate developer Properties of the Villages, pending the outcome of the company's lawsuit claiming the commission lacked the power to adopt the ban. Corrigan said at a hearing that the rule implicated a question of ‘extraordinary economic and political significance’ that Congress did not empower the FTC to address, according to a court transcript.
Corrigan cited the ‘major questions doctrine,’ a legal theory embraced in recent years by conservative lawyers and judges - including the US Supreme Court - in challenges to many Democratic and progressive policies.
An FTC spokesperson said the limited nature of Corrigan's ruling meant that the non-compete ban will still go into effect for most Americans on September 4. ‘The FTC will continue its fight to free hardworking Americans from unlawful non-competes, which reduce innovation, inhibit economic growth, trap workers and undermine Americans’ economic liberty,’ he said.
Lawyers for Properties of the Villages did not immediately respond to Reuters’ requests for comment.
– The WSJ reported that, according to latest annual inspection reports, the overall rate of Big Four accounting firms’ deficiencies in their audits of public companies’ 2022 financial statements stabilized compared with the previous year. The firms collectively had an average deficiency rate of about 26 percent, the same as a year earlier. Public Company Accounting Oversight Board chair Erica Williams said the findings from the inspections, which covered audits of 2022 financials, were unacceptable.
Deloitte and PwC’s US units had rates of 21 percent and 18 percent, respectively, up from 17 percent and 9 percent a year earlier. EY had the highest deficiency rate among the Big Four in the US, at 37 percent, down from 46 percent the year before. KPMG’s rate fell to 26 percent from 30 percent.
KPMG said it is proud of its efforts to enhance audit quality. ‘Our focus remains on investing in our system of quality control, people and technology to support the capital markets,’ a KPMG spokesperson said. Deloitte continues to make substantial investments to improve audit quality and meet investors’ evolving needs, a spokesperson for the firm said. PwC is continuously seeking to improve its ‘culture of quality, transparency, integrity and independence,’ a spokesperson said.
‘While we have seen improvement in our inspection findings in the 2023 report, the majority of our transformation initiatives occurred during the 2023 audit cycle,’ an EY spokesperson said, adding that the firm expects its inspection results to show continued progress in part due to related investments.
– Reuters reported that Carine Smith Ihenacho, Norges Bank Investment Management’s (NBIM) chief governance and compliance officer, said companies need to do more to get to grips with AI at the board level to govern how it is being used and to minimize risks. NBIM last August issued guidance to companies it invests in, calling on them to engage with AI as a way to drive profits but to do so responsibly.
A year on, companies generally need to do more, Smith Ihenacho said. ‘Overall, a lot of competence building needs to be done at board level,’ she said. ‘It doesn't mean we need one AI person that's an expert on AI... We need the board to understand, as a group, how AI is being used... have a policy at board level and whether or not it is being used responsibly.’
She added: ‘They should know: 'What's our policy on AI? Are we high risk or low risk? Where does AI meet customers? Are we transparent around it?' It's a big picture question they should be able to answer.’
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
