The week in GRC: Companies to defy Trump over leaving Paris accord, while Taubman wins proxy fight

– Business representatives and analysts have warned that China’s first cyber-security law will increase costs for multinationals, leave them vulnerable to industrial espionage and give Chinese companies an unfair advantage, the Financial Timesreported. The measure has been widely welcomed as a milestone in introducing data privacy. But analysts have expressed concerns it could help the Chinese government steal trade secrets or intellectual property from foreign companies.

Foreign companies had petitioned the authorities to delay the legislation. ‘It is vitally important that [these measures are] proportionate, consistent, non-discriminatory and formulated in a transparent manner. Regretfully, this is not yet the case,’ said Michael Chang, vice president of the European Chamber of Commerce in Beijing.


– Firms with assets in excess of $50 billion face stricter rules on capital, mergers and other business under the Dodd-Frank Act. The Wall Street Journal reported that, as President Donald Trump and Republican-controlled Congress look to overhaul Dodd-Frank, one of the few points of bipartisan agreement is that $50 billion isn’t the right number, but that lawmakers can’t agree on a better one.

To many banks and industry analysts, change seems commonsensical. But banks over the threshold are getting used to the fact that, despite Trump’s promises to deregulate the banking industry, even an unpopular provision is hard to overturn in the polarized political environment.


– Banks in Europe have just under a year to overhaul the way they handle customer data if they are to avoid big fines, but many are privately warning that the challenge looks insurmountable, according to the FT. Under a new EU data protection law that comes into force on May 25, 2018, all companies will need to work out what data they hold on their customers, where they hold it, whether they have permission to do so, whether it is stored safely and how they can extract it in an easily ‘portable’ form or delete it if requested. 

But consultants say banks face the biggest challenges to comply in time because of the difficulty of changing their ageing and complex IT systems. 


– The WSJ reported that US activist investor Elliott Management lost a legal battle to remove AkzoNobel chair Antony Burgmans. Elliott took AkzoNobel to court in the Netherlands to force the company to hold a special shareholder meeting on the dismissal of Burgmans. Akzo, citing Dutch law, previously rejected the shareholder request for such a meeting. The company supports Burgmans.

Siding with Akzo, the Dutch business court rejected Elliott’s request to allow the vote to take place. Elliott, which can appeal the decision to the Dutch Supreme Court, was ‘surprised and disappointed’ with the ruling, according to a spokesperson. ‘Elliott is considering the implications of this judgment for shareholder rights in the Netherlands and for its next steps in relation to AkzoNobel,’ the spokesperson added.

‘AkzoNobel is very pleased the [court] has decided that its boards have acted in accordance with the highest standards of Dutch corporate governance and it confirms the position and actions of the chairman,’ a company spokesperson said, adding that AkzoNobel will continue to engage in a constructive dialogue with its shareholders.


– According to a WSJ analysis of S&P 500 firms, the median pay for CEOs at the biggest US companies was $11.7 million in 2016, up from $10.8 million the year before and a post-recession record. Most CEOs received a pay raise of at least 7 percent amid a surging stock market and rising corporate profits. CEOs at technology, communications and entertainment companies continued to claim most of the top spots by pay.

The WSJ analysis also found that, in an unusual reversal of the gender pay gap, female CEOs at some of the largest US companies repeatedly earn more than their male counterparts. Last year, 21 female CEOs received a median compensation package of $13.8 million, compared with the $11.6 million median for 382 male chief executives.

Women in the corner office at the biggest US firms earned more than men in six of the past seven years, though the gap has narrowed since 2014. The trend reflects strong performances by S&P 500 businesses run by women – and that women tend to land such top jobs, according to executive pay and leadership experts.


– The UK’s Financial Conduct Authority (FCA) has sent letters to several of the country’s largest asset management firms requesting detailed information about their Brexit contingency plans amid growing concerns about the impact leaving the EU will have the City of London financial center, according to the FT.

The FCA letter contains 30 questions about the effect of Brexit on asset managers’ business models, including whether or not UK-based firms are planning to relocate staff or operations to the EU. Asset managers have also been asked to explain whether their Brexit contingency plans will affect their capital base or IT systems, and whether they have applied for new licenses from foreign regulators. The FCA declined to comment.


– The WSJ reported that a group of institutional investors unhappy over high executive pay at Mylan are taking aim at six board members at the EpiPen maker. Four major pension funds launched a campaign urging fellow Mylan shareholders to oppose the re-election of chair Robert Coury and five other directors at the company’s June 22 annual meeting. Former CEO Coury received nearly $100 million in 2016, when the company faced a public backlash over steep price increases on its life-saving allergy medicine.

Mylan directors ‘designed executive compensation programs to drive continued execution against our strategy’ and aligned the compensation ‘with company performance and long-term shareholder value creation,’ a spokesperson said. The company previously said Mylan delivered strong financial performance during Coury’s tenure and that his new compensation package is aligned with the company’s stock performance. Coury declined to comment.


– The European Securities and Markets Authority (ESMA) sought to prevent EU member states loosening oversight to attract business after Brexit, warning that firms shouldn’t be allowed to set up shell offices in the EU that still conduct critical business in London, Bloomberg said. ESMA published guidance to the 27 countries that will comprise the EU after the UK quits in an effort to root out supervisory arbitrage risks that could result if consistent and rigorous standards aren’t maintained. These are necessary to prevent institutions from setting up ‘letterbox entities’ in an EU country that in reality outsource or delegate significant business to London.


– The New York Times reported that US paint and chemicals company PPG Industries said it had dropped its pursuit of AkzoNobel after failing to persuade its rival’s management to engage in merger talks. PPG had faced a deadline on Thursday under Dutch takeover rules to make a formal offer for AkzoNobel, which had repeatedly rejected PPG’s overtures. AkzoNobel had said PPG’s offers undervalued the company and that PPG had done little to address its concerns about potential antitrust issues that could have derailed a merger.

The decision was a victory for the Dutch company’s management, which had also faced pressure to participate in takeover talks from Elliott Management and other shareholders. ‘We were hopeful throughout this process that AkzoNobel’s board would see the merits of our compelling proposal to combine our two great companies and create significant shareholder value and a more sustainable business for the future,’ said Michael McGarry, PPG chair and CEO.


– Consumer Financial Protection Bureau (CFPB) director Richard Cordray defended the need for the agency, which has been under attack from Republicans this year, saying it provides important protections for consumers, Reuters reported. Cordray did not mention names or specifics but he argued for maintaining the CFPB’s rulemaking work, its enforcement powers and its public database of consumer complaints – all of which are at the heart of assaults on the agency.

‘Consumers want and need to have someone stand on their side to see that they are treated fairly. We seek to protect them against unfair surprises, frustrating runarounds and bad deals that ruin their credit, cost them their homes and saddle them with further problems,’ Cordray said.


– Taubman Centers was victorious in a proxy fight, as shareholders voted in support of the mall operator’s three board nominees, fending off opposing candidates from activist hedge fund Land and Buildings, according to Reuters. One key step the company took before the vote was announcing that it would increase the speed of its board refreshment and transition to an annual election of directors. ‘On behalf of Taubman’s entire board and management team, we sincerely thank our shareholders for their support and valuable feedback throughout this process,’ Taubman said.

‘Land and Buildings expresses gratitude to all Taubman shareholders that voted to support Land and Buildings’ case for change at Taubman,’ the hedge fund said.


– The Washington Post reported that 30 states and scores of companies said they would press ahead with their climate policies and pursue lower greenhouse gas emissions, breaking with Trump’s decision to exit the Paris climate accord. More than two dozen big companies – including Apple, Morgan Stanley and Royal Dutch Shell – had urged Trump not to do so. He framed his renunciation of the climate accord as defense of US workers and the economy, but the actions of state capitals and corporate boardrooms offer a counterpoint to that rationale.

Renewable energy technologies have taken root and gathered momentum of their own while creating thousands of new jobs, state and corporate officials said. And the pressure on executives of companies to address the issue has grown as major financial firms press the issue for the first time.


– Three shareholder activist groups have asked the French market regulator AMF to investigate Renault-Nissan over what they say are boss Carlos Ghosn’s potential conflicts of interest and possible breaches of governance by the company, Reuters said. The groups point to potential conflicts of interest arising from Ghosn’s various roles: he is chair and CEO of Renault as well as chair of both Mitsubishi and Nissan, where he also served as CEO until earlier this year. The AMF said it had no immediate comment on the groups’ letter. A Renault spokesperson could not be reached for comment.


– The Guardian said thousands of workers have been granted a 5 percent stake in British Steel after the Scunthorpe steelworks, one of only two left in the UK, returned to profit. Roland Junck, executive chairman of British Steel, said: ‘The transformation in this business is remarkable and that is down to our remarkable people who have embraced, engineered and led change. They are the reason we can today reveal the best financial performance in the long products business since 2007 and they are the reason I have great optimism for the future of British Steel.’


– The FT reported that Royal Bank of Canada (RBC) has put a freeze on acquisitions in the US, saying the political climate under Trump is making deals south of the border a ‘struggle’. Dave McKay, president and CEO of RBC, said he was reluctant to make a case for an acquisition to the bank’s board, given doubts over the pace of economic and fiscal reforms under the new president. An early setback over healthcare has cast doubt over Trump’s ability to implement other big ideas, such as a shake-up of the tax code and an infrastructure spending plan.


– UBS Group is changing the way it pays US financial advisers on retirement accounts before the US Department of Labor’s fiduciary rule goes into effect next week, and is halting the sale of a small number of non-compliant products, according to Reuters.

Advisers in the Swiss bank’s Americas wealth management business now will be paid based solely on the amount of assets and not the volume of transactions or the products they recommend for retirement accounts, said Tom Naratil, who runs the operation. UBS also will stop selling a ‘small list’ of products that do not comply with the rule, such as exchange-traded notes it issues itself.