The week in GRC: Uber wins ruling on customer agreements, and CEOs exit Trump business panels

- The Financial Times reported that, according to people familiar with the matter, European Commission president Jean-Claude Juncker will next month announce measures to tackle perceived gaps in the EU’s armory compared with the US and other major economies in vetting foreign takeovers in strategic industries.

The measures are intended to address growing concerns about a surge of Chinese investment into the EU’s high-tech manufacturing, energy and infrastructure sectors. The issue has risen up the EU’s political agenda due to fears that China may gain a technological edge by buying European know-how while heavily restricting the role it allows EU investors in its domestic market. 

- The Wall Street Journal said efforts to bring about financial deregulation are beginning to take shape on rules governing trading desks, bank boardrooms, corporations’ financial disclosures and other issues. Several agencies are reviewing the Volcker rule; some regulators recently dropped a plan to restrict bonuses on Wall Street that had been opposed by banks and brokerage firms; and the US Department of Labor Department has granted an 18-month delay for compliance with the fiduciary rule that requires brokers to act in retirement savers’ best interests.

So far, the rule book for Wall Street hasn’t been rewritten in major ways, in part because nominees for some key posts haven’t been named or are awaiting Senate confirmation. But officials who are in place are laying the groundwork.

- Catherine Livingstone, chair of Commonwealth Bank of Australia, said CEO Ian Narev would step down next year, as the lender faces accusations that criminals used its cash machines to launder nearly $35 million, according to The New York Times. The bank was accused of failing to report more than 53,000 ‘serious and systemic’ breaches of anti-money laundering laws that involved at least four criminal syndicates.

In its announcement, the bank played down the issue’s role in Narev’s departure. The board has ‘decided to provide details of its planned chief executive succession process to ensure the market is fully informed and to provide certainty for the business,’ Livingstone said in the statement. Narev’s pay had already been cut in response to the allegations. Austrac, the country’s financial intelligence agency, began a civil court action this month. Commonwealth Bank said it would fight the lawsuit.

- Nicholas Benes, who proposed Japan’s Corporate Governance Code and is representative director of The Board Director Training Institute of Japan, wrote in the FT that although the country’s investing institutions are in the initial ‘fad stage’ of integrating ESG factors into their investment analysis, the ‘corporate governance driver is still largely asleep at the wheel.’ Japan has made substantial progress since 2014, but the biggest problem remains in that many of the asset owners at the top of Japan’s investment chain have not been mobilized to hold boards and executives accountable, he said.

- Bloomberg reported that Tudor Investment Corp and Brevan Howard Asset Management dropped their Mifid licenses, allowing the hedge fund firms to sidestep the EU’s impending Mifid II rules. Both firms instead secured alternative investment fund manager licenses, regulatory filings show. The Alternative Investment Fund Manager Directive regime has been around since 2013 and may be viewed by some fund managers as less onerous than the new Mifid rules, which come into force in January. Spokespeople for Brevan Howard and Tudor declined to comment.

- Days after it sued former Uber Technologies CEO Travis Kalanick, investor Benchmark Capital sent a letter to the company’s employees saying it took action in part to prevent him from undermining the search for his replacement, according to the WSJ. Benchmark has sued Kalanick, alleging that he defrauded investors by keeping secret bad business practices. The firm said it hopes to push Kalanick off the board of directors and free up three board seats he effectively controls. A spokesman for Kalanick had earlier said the lawsuit is without merit and ‘riddled with lies and false allegations.’

- Reuters reported that Wells Fargo vice chair Betsy Duke will replace retiring chair Stephen Sanger next year. Sanger will retire at year-end, earlier than his previous plans to depart in April upon reaching a mandatory retirement age of 72. The board’s two longest-serving directors, Cynthia Milligan and Susan Swenson, will retire at the same time. Juan Pujadas, a former PwC principal, will join as an independent director on September 1.

The board also explained changes to four of its committees and said it would make more changes over time, trying to balance competing needs for directors with Wells Fargo experience and those with new perspectives on the company.

- Stanley Fischer, the vice chair of the Federal Reserve’s board of governors, told the FT that a decade after the financial crisis there are troubling signs of a drive to return to the status quo that preceded it. Although he endorsed efforts to ease up on small banks, he said political pressure in Washington, DC to curtail regulatory burdens on large institutions was very hazardous.

Fischer criticized calls to ease up on stress testing, saying pressure to loosen standards on big banks was ‘very, very dangerous.’ He said: ‘It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude. And now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really, extremely dangerous and extremely short-sighted.’

- KPMG agreed to pay $6.2 million to settle SEC allegations that the accounting firm botched its audit of an oil and gas company, the WSJ said. The agency said KPMG failed to properly audit the financial statements of Miller Energy Resources in 2011, leading to investors being misinformed that properties Miller had purchased for $4.5 million were worth $480 million.

The audit firm agreed to pay a $1 million fine and disgorge nearly $4.7 million in fees it had received from Miller Energy, and agreed to pay more than $558,000 in interest. KPMG did not admit or deny wrongdoing. In a statement, KPMG said the settlement was related to audit work from six years ago and that it ‘fully co-operated with our regulators to reach a resolution.’

John Riordan, KPMG’s lead partner on the audit, also settled charges against him, agreeing to a $25,000 fine and a suspension from auditing public companies for at least two years. He didn’t admit or deny the SEC’s findings. An attorney for Riordan couldn't be reached for comment. Miller Energy filed for bankruptcy in 2015, after the SEC filed accounting fraud charges against it. The company agreed in 2016 to settle the charges for $5 million. It did not admit or deny wrongdoing.

- FT reported that Akzo Nobel ended a feud with its largest shareholder, US activist hedge fund firm Elliott Advisors, by agreeing to appoint three new directors to its board. Akzo said that in exchange, Elliott’s UK arm had agreed to support the company’s plan to split itself into two separate entities, as well as back the recent appointment of Thierry Vanlacker as CEO. As part of the peace deal, both sides also agreed to suspend all pending litigation for at least three months.

‘I am pleased our recent constructive discussions with Elliott improved understanding between both parties,’ said Akzo chair Antony Burgmans. Gordon Singer, the son of Elliott’s founder and head of its European operations, said: ‘Elliott is pleased to have entered into today’s standstill agreement with Akzo Nobel.’

- The UK’s largest companies are having fewer confrontations with investors over executive pay, after many firms responded to demands that they curb excessive practices, according to Bloomberg. Only nine members of the FTSE 100 Index endured rebellions over executive compensation that garnered more than 20 percent shareholder support at annual meetings so far in 2017 - a 36 percent decrease from 2016, when 14 revolts met the same threshold, according to The Investment Association study.

‘Executive pay among the UK’s largest companies is starting to decline to a level more in line with shareholder expectations,’ said Chris Cummings, the Investment Association’s CEO. ‘There is still some way to go, but a strong signal has been sent to boardrooms around the country.’

- Trump’s high-level business advisory groups fell apart after CEOs walked away in protest against the president’s failure to clearly denounce white supremacist violence in Charlottesville at the weekend, theFTreported. The president reacted to the controversy by saying he would wind up both his manufacturing and jobs council, and his strategy and policy forum, ‘rather than putting pressure on the businesspeople’ involved.

Roughly a dozen chief executives on the strategy forum joined a call scheduled by Stephen Schwarzman, CEO of Blackstone, where a large majority told him that they would resign from the group if it was not disbanded. Eight chief executives and other industry leaders on the president’s manufacturing and jobs initiative group had stepped down before his announcement disbanding the council. Executives were finding themselves under increasing commercial pressure to distance themselves from Trump after threats of boycotts and campaigns on social media.

- The WSJ reported that UnitedHealth Group said company president David Wichmann will next month succeed Stephen Hemsley as CEO, a widely expected transition. Wichmann will take over the CEO job on September 1, and Hemsley, who has held the title since 2006, will become executive chair. UnitedHealth Group’s present board chair, Richard Burke, will then take the title of lead independent director.

Burke said the succession was ‘the culmination of almost four years of discussion, careful planning, leadership development and execution,’ noting that Wichmann was among Hemsley’s first hires at the company and ‘has been preparing for the CEO role for many years.’

- The WSJ also reported that the US 2nd Circuit Court of Appeals found that Uber customers sign over their rights to sue in court when they click to agree to the company’s terms of service, which include a provision requiring arbitration. The ruling mean that the often-lengthy online agreements customers face when registering for sites and apps are binding, even if customers don’t fully understand or take the time to read them – in a boost to companies that wish to avoid class action lawsuits.