The week in GRC: Court axes Nasdaq’s board-diversity rules and Elizabeth Warren introduces ‘accountable capitalism’ bill

– The Wall Street Journal (paywall) reported that activist investor Barington Capital has built a position in Macy’s and is pressing the company to make changes to boost its stock – including the creation of a separate real-estate unit within the firm. Barington disclosed its position in a PowerPoint presentation to Macy’s shareholders. Barington has teamed up with property-owner Thor Equities on its investment, according to the presentation. Barington and Thor also want their representatives added to Macy’s board, the presentation said.

Macy’s said in a statement that it remains confident in its strategy and that it looks forward to engaging with its shareholders, including Barington and Thor. The company earlier this year avoided a proxy fight for control of its board. It added two new directors while resisting a takeover bid.

– Matthew Axelrod, the assistant secretary for export enforcement at the US Department of Commerce, will be leaving his position on January 3 but told the WSJ’s Risk & Compliance Journal that he expects the enforcement of US export-control regulations to continue despite the ideological differences between presidents Joe Biden and Donald Trump.

At the Commerce Department, Axelrod has been instrumental in raising the profile of the Bureau of Industry and Security, whose role has expanded in recent years amid growing tensions with China and following Russia’s invasion of Ukraine.

– The Guardian reported that Senator Elizabeth Warren, D-Massachusetts, introduced a bill in Congress aimed at moving companies away from maximizing shareholder value and toward giving more support to workers and other stakeholders. The Accountable Capitalism Act proposes a series of reforms to increase corporate responsibility, strengthen the voices of workers and others in corporate decisions and move companies away from their focus on shareholders.

The bill would require that companies with more than $1 bn in annual revenue obtain a federal charter as a ‘United States Corporation’ under the obligation to consider the interests of all stakeholders. Companies engaging in repeated and egregious illegal conduct can have their charters revoked. All political expenditures by companies would also have to be approved by at least 75 percent of shareholders and directors.

‘Workers are a major reason corporate profits are surging, but their salaries have barely moved while corporations’ shareholders make out like bandits,’ Warren said in a statement. ‘We need to stand up for working people and hold giant companies responsible for decisions that hurt workers and consumers while lining shareholders’ pockets.’

– According to CNBC, Albertsons formally terminated its proposed $25 bn merger with Kroger and filed a lawsuit against its supermarket competitor, alleging that Kroger violated its contract and didn’t follow through on commitments to help get the deal approved. The action came a day after a judge blocked the planned tie-up.

Albertsons said Kroger broke its merger agreement ‘by repeatedly refusing to divest assets necessary for antitrust approval, ignoring regulators’ feedback, rejecting stronger divestiture buyers and failing to co-operate with Albertsons.’

Tom Moriarty, Albertsons’ general counsel and chief policy officer, said in a statement: ‘Kroger’s self-serving conduct, taken at the expense of Albertsons and the agreed transaction, has harmed Albertsons’ shareholders, associates and consumers. We are disappointed that the opportunity to realize the significant benefits of the merger has been lost on account of Kroger’s willfully deficient approach to securing regulatory clearance.’

In a responding statement, Kroger called the allegations in the lawsuit ‘baseless and without merit.’

‘This is clearly an attempt to deflect responsibility following Kroger’s written notification of Albertsons’ multiple breaches of the agreement and to seek payment of the merger’s break fee, to which they are not entitled,’ the company’s statement said.

– The Fifth US Circuit Court of Appeals rejected Nasdaq’s yearslong push to set racial and gender targets for the boards of its listed companies, in a major blow to one of most prominent efforts to promote diversity in corporate America, the WSJ reported. The court ruled that the SEC had erred in 2021 when it approved two Nasdaq listing rules focused on boardroom diversity.

One rule required Nasdaq-listed companies to disclose statistics about the gender and racial composition of their boards. The other rule, which was being phased in over several years, required companies to meet certain minimum targets for diversity, or explain in writing why they had not done so. For most US companies, the goal at the end of the phase-in period was for boards to have one female director and one director who identifies as a racial minority or as LGBTQ+.

A spokesperson for the SEC said the agency was reviewing its options and would determine its next steps, leaving the door open to a potential long-shot appeal to the US Supreme Court.

Nasdaq said in a statement: ‘We maintain that the rule simplified and standardized disclosure requirements to the benefit of both corporates and investors. That said, we respect the court’s decision and do not intend to seek further review.’

– The WSJ reported that, according to people familiar with the matter, activist investor Starboard Value has built a significant position in Riot Platforms and is pressing for changes at the bitcoin-mining operator. As a crypto miner, Riot uses high-powered computers to process bitcoin transactions by solving complex mathematical problems, receiving bitcoin as payment.

Starboard has been in discussions with Riot’s management team to push the company to convert some of its bitcoin-mining facilities into capacity for so-called hyperscalers, or large data-center users, the people said.

In a statement, Riot said it had spoken with Starboard on several occasions and welcomed its input as well as the views of other shareholders. ‘We are committed to creating value for all shareholders and we look forward to constructive dialogue with Starboard on ways to achieve this shared goal,’ the company said.