The week in GRC: Supreme Court declines to hear oil companies’ appeal of climate case and Republicans try to repeal Corporate Transparency Act

– Reuters reported that the US Supreme Court declined to hear a bid by oil companies to scuttle a lawsuit by Honolulu accusing them of misleading the public for decades about the dangers of climate change brought about by the burning of fossil fuels. The justices turned away an appeal by the oil companies of a decision by Hawaii's top court allowing the suit, which alleged violations of state law, to proceed.

The suit was filed in 2020 by the city and county of Honolulu and the Honolulu Board of Water Supply. The plaintiffs said misleading statements made by the companies about the impact of their fossil fuel products opened the door for property and infrastructure damage caused by human-induced climate change.

Ben Sullivan, an official at the City and County of Honolulu's Office of Climate Change, Sustainability and Resiliency, said: ‘This is a significant day for the people of Honolulu and the rule of law. This landmark decision upholds our right to enforce Hawaii laws in Hawaii courts, ensuring the protection of Hawaii taxpayers and communities from the immense costs and consequences of the climate crisis caused by the defendants’ misconduct.’

– ISS recommended that Air Products and Chemicals shareholders elect three of activist investor Mantle Ridge’s four director candidates to the company’s nine-member board, Reuters reported. Glass Lewis has said investors should elect all four of the dissident’s nominees at the January 23 AGM. Mantle Ridge argues that the company needs to lay out a succession plan for its octogenarian CEO, who has served at the helm for a decade, allocate its capital differently and scale back on risky projects.

ISS expressed concerns with the board’s oversight of the company’s strategy and succession planning for its CEO. ‘A reconstituted board would need to focus on de-risking the existing project commitments, evaluating underperformance, rebuilding credibility with investors and developing and executing an effective succession plan,’ ISS wrote.

– CNBC reported that Adebayo Ogunlesi, a senior managing director at BlackRock, is joining OpenAI’s board. Ogunlesi is a founding partner of Global Infrastructure Partners, an infrastructure investing firm that was acquired by BlackRock last year for $12 bn.

‘The rapid advancement and development of AI offers a unique opportunity to build a better future,’ Ogunlesi said in OpenAI’s announcement. ‘As part of this, thoughtful strategies and investment in infrastructure will be key to unlocking AI’s full potential and delivering its benefits responsibly. I’m excited to contribute to this effort and look forward to being a part of the OpenAI board.’

The addition of Ogunlesi to OpenAI’s board marks another step in its transformation toward a for-profit company. The board has been almost entirely revamped since late 2023, when CEO Sam Altman was ousted before being quickly reinstated.

– The Consumer Financial Protection Bureau (CFPB) announced that it was suing Capital One for allegedly misleading consumers about their savings account interest rates and ‘cheating’ them out of more than $2 bn in interest, according to CNBC.

The agency said Capital One deceived holders of its ‘360 Savings’ account by conflating it with its newer and higher-yield savings account option, the ‘360 Performance Savings’ account. The bank allegedly failed to notify 360 Savings account holders of the newer option and marketed the two products similarly to lead customers to believe they were the same. But the interest rates of the two options were substantially different, according to the CFPB.

Capital One denied the allegations and said it transparently marketed its 360 Performance Savings account. ‘We are deeply disappointed to see the CFPB continue its recent pattern of filing eleventh-hour lawsuits ahead of a change in administration. We strongly disagree with their claims and will vigorously defend ourselves in court,’ the company said in a statement. It added that the 360 Performance Savings product was ‘marketed widely, including on national television, with the simplest and most transparent terms in the industry.’

– The Wall Street Journal reported that, ahead of its upcoming AGM, Costco Wholesale has recommended that its shareholders reject a proposal asking the company to assess the risks that its diversity initiatives pose to the company’s stock price. (Apple’s board has made a ‘vote against’ recommendation on a similar proposal.) Although boards typically recommend rejecting such proposals, Costco’s directors made a vigorous case for how its diversity, equity and inclusion measures contribute to its bottom line.

Costco’s efforts to diversify its workforce and supplier base help attract talent and encourage innovation in its merchandise, ‘promoting the ‘treasure hunt’ that our customers value,’ the board wrote. ‘Our commitment to an enterprise rooted in respect and inclusion is appropriate and necessary.’

Conservative activist group the National Center for Public Policy Research is pushing Costco to compile a report on the risks posed by its initiatives. ‘It’s clear that [DE&I] holds litigation, reputational and financial risks to the company,’ the center wrote in its shareholder proposal.

– The SEC filed a lawsuit against Elon Musk, alleging that he committed securities fraud in 2022 by failing to disclose he had amassed an active stake in Twitter, in doing so allowing him to buy shares at ‘artificially low prices,’ CNBC reported.

Before the acquisition of Twitter, now X, Musk had built a position in the company of greater than 5 percent, which would have required disclosing his holdings to the public within 10 calendar days of reaching that threshold, the SEC said. According to the agency’s civil complaint, Musk was more than 10 days late in reporting that material information, ‘allowing him to underpay by at least $150 mn for shares he purchased after his financial beneficial ownership report was due.’

Musk’s lawyer said in a statement that the SEC’s action is an admission that ‘they cannot bring an actual case.’ The lawyer added that Musk ‘has done nothing wrong’ and called the suit a ‘sham’ and the result of a ‘multi-year campaign of harassment.’

An SEC spokesperson declined to comment.

– According to the WSJ, a group of Republican lawmakers are trying to repeal the Corporate Transparency Act (CTA), which requires companies to disclose their true ownership, claiming the law is ‘a big government overreach.’ Senator Tommy Tuberville, R-Alabama, reintroduced the Repealing Big Brother Overreach Act, a bill that aims to repeal the CTA with a stated goal of protecting small-business owners. The bill has so far received support from roughly 21 Republican senators but no Democrats have yet signed on, according to Tuberville’s office.

Rep Warren Davidson, R-Ohio, reintroduced companion legislation in the US House of Representatives. The bill has 66 Republican co-sponsors in the House. Davidson said in a statement that the CTA’s disclosure requirements infringe ‘on American small-business owners’ privacy rights by forcing them to disclose sensitive information to the government.’

The CTA is also facing legal challenges in federal courts. US Supreme Court justice Samuel Alito is due to rule soon on the national injunction issued by a lower court that paused the implementation of the law last month.