The week in GRC: Wells Fargo directors face shareholder rebellion and WPP appeases investors over CEO pay

– The Financial Times said a shareholder vote against Wells Fargo directors was larger than anything seen at a big US bank during the financial crisis, and that without Warren Buffett’s help the rebellion would have been even bigger. Only the support of Buffett’s Berkshire Hathaway prevented four board members from being removed from office in the wake of the bank’s sales practices scandal.

Speaking after the vote, chair Stephen Sanger said the board had no immediate plans to replace directors but pledged a longer-term ‘refresh’. Over the next four years, six directors are in any case due to leave as they reach retirement age. That is apparently too slow for some critics.


– US President Donald Trump, seeking to show a solid record in his first 100 days, was drawing attention to the rolling back of regulations that he says strangle job creation, according to The Wall Street Journal. With no major legislative achievement in hand and the collapse of his plans to repeal and replace the Affordable Care Act, officials have been emphasizing little-publicized acts that they contend are rippling through the economy.

‘We are anxious to tell the story of the impact this administration has had on the regulatory burden and what we believe was a burden left by the previous administration on our economy,’ said Marc Short, head of the White House’s legislative affairs office. A new report from the Center for American Progress said the repeal of the 13 regulations via the Congressional Review Act will save businesses more than $7 billion over the coming decade, while reducing wages and leading to a net decrease in jobs.


– Palantir settled a claim that it had discriminated against Asians when recruiting new engineers, the FT reported. Under the consent decree, which does not involve an admission of wrongdoing, the private data analytics company agreed to pay $1.6 million and offer positions to eight extra Asian job applicants.

The case is a sign of wider efforts by the US Department of Labor to tackle claims of persistent bias against women and racial minorities in the technology industry. In a statement, Palantir said it ‘disagreed’ with the regulator’s allegations and continued to ‘stand by our employment record’. It added that it had settled ‘in order to focus on our work.’


– The WSJ reported that Jay Clayton, Trump’s pick as SEC chair, was assembling a group of top staff members who spent their careers on Wall Street or advised companies on big deals, foreshadowing the commission’s likely shift toward a deregulatory agenda. Aides to Clayton have interviewed or offered positions to people who would run the divisions that investigate wrongdoing and fraud, regulate public companies and oversee stock exchanges, according to people familiar with the matter. The full Senate is expected to vote on Clayton’s nomination as soon as early May. A spokesperson for Clayton declined to comment on any hiring efforts, saying the nominee ‘remains focused on the Senate confirmation.'


– More than a dozen state prosecutors urged Trump not to withdraw from the Paris Climate Agreement, which commits the US and 200 other countries to reducing its greenhouse gas emissions in an attempt to slow global warming, Reuters reported. Attorneys general from 12 states as well as the District of Columbia and American Samoa have joined a chorus of voices that include major fossil fuel energy companies and environmental advocates to condemn the idea of exiting the agreement.


– The SEC announced the award of nearly $4 million to a whistleblower who tipped the agency with detailed and specific information about serious misconduct and provided additional assistance during the ensuing investigation, including industry-specific knowledge and expertise.

‘Not only did this whistleblower step forward and report suspicious conduct, but [the person] also continued to help after we opened our investigation,’ said Jane Norberg, chief of the SEC’s office of the whistleblower. By law, the agency protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal their identity.


– The WSJ reported that European bank executives told regulators they were taking too long to complete the post-crisis financial rulebook in a shifting political environment, leaving lenders at a competitive disadvantage and putting the region’s economic recovery at risk. ‘I don’t care what you do, but get it done and don’t change it for the next 10 years,’ said Erste Group Bank CEO Andreas Treichl at a European Parliament hearing. ‘You’re not making it very easy for us to create prosperity.’

Frédéric Oudéa, CEO of Société Générale, told lawmakers Europe needed to stop creating new rules given the global political landscape – notably Brexit and a new US administration.


– Allied Irish Banks (AIB) was fined more than €2 million ($2.2 million) by the Central Bank of Ireland over alleged compliance failures in relation to anti-money laundering (AML) and terrorist financing laws, Bloomberg reported. The central bank fined AIB about €2.3 million and reprimanded it for six breaches of the law, which the lender has admitted to, the regulator said.

AIB said separately that the settlement related to issues occurring between July 2010 and July 2014. During that period, AIB failed to ‘report suspicious transactions without delay’ to police and tax authorities and didn’t conduct due diligence on customers whose accounts predated the first Irish AML laws in 1995, the central bank said. It also said it found breaches regarding AIB’s policies and procedures concerning AML and anti-terror financing in ‘a number of areas’, including its trade finance business. ‘A comprehensive risk-mitigation program was put in place to resolve all the issues,’ AIB said. The bank ‘fully co-operated with the central bank at all stages of this investigation, which has now concluded.’


– The WSJ looked at Trump’s call for steep reductions in business tax rates and major changes to the individual tax system. The proposals include a 15 percent tax rate for all businesses, lower individual rates, a bigger standard deduction to benefit middle-income households and the repeal of the estate and alternative minimum taxes. The plan departed in important ways from congressional Republican proposals and alienated Democrats, giving the president a narrow path to victory through Congress.


– The White House announced that the US will not unilaterally withdraw from the North American Free Trade Agreement (Nafta) despite multiple reports that Trump was planning to pull out of the deal, the Guardian said. In a readout of calls between Trump, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto on Wednesday, the White House said: ‘President Trump agreed not to terminate Nafta at this time.’

The statement added, however, that ‘the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the Nafta deal to the benefit of all three countries.’ The news came after reports Trump was planning to sign an executive order that would trigger the process for the US to withdraw from the deal.


– The FT reported that, according to Verizon’s closely watched annual data breach report, the number of cyber-attacks deploying ransomware to demand money from victims has increased by 50 percent in the last year, hitting financial services firms, healthcare companies and the public sector the hardest.

Hackers are increasingly using ransomware software, which quietly encrypts files before freezing a computer or server and demanding money to decrypt a company’s or individual’s data, because victims are paying up. Healthcare entered the top three industries targeted by ransomware last year, as hackers found hospitals would pay ransoms to get back access to vital health data.


– According to The Guardian, senators and activists warned that Federal Communications Commission chair Ajit Pai’s plans to overturn open-internet protections face ‘a tsunami of resistance from a grassroots movement of Americans from every walk of life.’ Pai has vowed to ‘fire up the weed-whacker’ and cut Obama-era net neutrality rules meant to enforce an open internet where all traffic is treated equally online.

In a press conference, senators Edward Markey, D-Massachusetts, Richard Blumenthal, D-Connecticut, and Ron Wyden, R-Oregon, were joined by internet activists to warn Pai and Trump that efforts to undermine the rules would be met with stiff resistance.


– Reuters reported that the Senate Health, Education, Labor and Pensions Committee voted to advance the nomination of Dr Scott Gottlieb to lead the Food and Drug Administration. The vote means Gottlieb’s nomination will now be voted on by the full Senate, where he is expected to be confirmed. In other confirmation news, Reuters reported that R Alexander Acosta was confirmed by the Senate to head the US Department of Labor. Acosta is a former member of the National Labor Relations Board and dean of the Florida International University College of Law in Miami. Acosta told a panel during his confirmation hearing that he had reservations about key Obama-era labor regulations.


– WPP will appease investors by introducing a new pay policy for CEO Sir Martin Sorrell that will limit his annual pay package to just over £13 million ($16.8 million) from 2021, according to the FT. The move follows talks with some of the company’s largest shareholders and will be voted on at the advertising group’s AGM on June 7. Sir John Hood, chair of WPP’s compensation committee, said: ‘Notwithstanding the company’s superior performance, we understand shareowners’ increasing discomfort with the levels of our program’s reward opportunities.’ Last year a third of shareholders voted against the remuneration policy.

With companies facing a series of AGM showdowns over pay, investor groups and politicians are piling pressure on boards to show restraint. The average total pay for FTSE 100 CEOs is 129 times that of the average worker, according to the High Pay Centre.


– Neuberger Berman, which owns a 2.7 percent stake in Whole Foods Market, sent a letter to the company’s board urging it to ‘immediately engage advisers’ to review options including a sale or joint venture, the WSJreported. The letter came a few weeks after activist investor Jana Partners disclosed a nearly 9 percent stake in Whole Foods and called for a similar review. Neuberger has been in talks with Whole Foods since last year but hasn’t previously gone public with its suggestions for the chain.

A Whole Foods spokesperson said the company welcomes shareholder input, adding: ‘We remain committed to continuing to take actions to drive shareholder value and position Whole Foods Market for the future.’