The week in GRC: Whole Foods revamps board and SEC appoints new head of corporation finance

– The New York Times reported that Dutch chemicals company AkzoNobel rejected a merger offer from US rival PPG Industries, its third such rejection since early March, saying it preferred to go it alone. The denial could set up a hostile takeover fight. PPG said it would make a public offer for AkzoNobel and submit a draft offer to Dutch regulators by June 1. AkzoNobel had declined to take part in merger talks, but said its officials met Michael McGarry, the PPG chair and CEO, and Hugh Grant, PPG’s lead independent director, before rejecting the most recent offer.

‘After extensive consideration, the company has concluded that the interests of shareholders and other stakeholders are best served by its own strategy to accelerate growth and value creation,’ AkzoNobel said. PPG said it was ‘disappointed’ that AkzoNobel had declined to enter takeover talks.


– Goldman Sachs has emerged as a big beneficiary from US regulators’ decision to grant banks more time to comply with parts of the Volcker Rule, according to the Financial Times. While best known for its clampdown on banks’ proprietary trading, the rule also restricted them from owning hedge funds and private equity assets.

Several big banks have disclosed in their most recent quarterly filings that the Federal Reserve has granted them extra time to sell ‘illiquid’ investments, and none has expressed greater relief than Goldman. For critics, the regulatory concession is the latest example that the Volcker Rule has been watered down. But banking lobbyists are trying to persuade the US government to reconsider the rule.


– Reuters said the Federal Bureau of Investigation (FBI) warned businesses that attempts at cyber-wire fraud globally, via emails purporting to be from trusted business associates, surged in the last seven months of 2016. Fraudsters sought to steal $5.3 billion through schemes known as business email compromise from October 2013 through December 2016, the FBI said. The figure is up sharply from the FBI’s previous report, which said thieves tried to steal $3.1 billion from October 2013 through May 2016, according to a survey of cases from law enforcement agencies around the world.

The number of business email compromise cases, in which criminals request wire transfers in emails that look like they are from senior corporate executives or business suppliers that regularly request payments, almost doubled from May to December last year, rising to 40,203 from 22,143, the FBI said. The survey does not track how much money was lost to criminals.


– The FT reported that Federal Reserve chair Janet Yellen had urged US policymakers to work to bridge the gap between men and women in the workplace, in case it takes a ‘substantial’ toll on the economy at a time when the US is already facing demographic challenges. Women faced a ‘lack of equal opportunity’ in the jobs market, and the government should work toward implementing policies that made it easier for Americans to balance their work and family lives, Yellen said.


– The Washington Post reported that Sinclair Broadcast Group said it would pay $3.9 billion to buy Tribune Media Company and its 42 local TV stations. Sinclair already has 173 local news stations. The combined operations of the two companies will create the largest single group of local TV stations. Tribune Media owns local stations across the country, including WGN in Chicago, WPIX in New York, KTLA in Los Angeles and WDCW in Washington. It also has minority stakes in Food Network and CareerBuilder.


– Charles Munger, vice chairman at Warren Buffett’s Berkshire Hathaway, said the leaders of his political party risk going too far in their efforts to reduce oversight of banks, according to Bloomberg. ‘My fellow Republicans – the ones taking away all this regulation of major finance – I think that’s bonkers,’ Munger said. Buffett and Munger have been saying for years that the financial system benefits when government oversight prevents excesses. Banks that benefit from government backing of customer deposits should be obliged to ‘behave in a pretty careful, standardized way,’ according to Munger.


– Reuters reported that, according to people familiar with the matter, the US government’s review of the Dodd-Frank Act will not be complete by early June as originally targeted and officials will now report findings piece-by-piece, with priority given to banking regulations. In February, US President Donald Trump ordered Treasury secretary Steven Mnuchin to review the law and report back within 120 days, saying his administration expected to be cutting large parts of it. But the Department of the Treasury is still filling vacancies after the transition from the Obama administration and there are not enough officials to get the full review done by early June, people said.

A Treasury spokesperson dismissed the idea the report would be broken up because the department is short-handed, saying the reach of the project could require several separate reports, as permitted under the executive order.


– A key part of Dodd-Frank was the Volcker Rule, and Reuters said the Financial Stability Oversight Council held a closed-door meeting on Monday, then posted a brief statement saying in part it had ‘discussed efforts to assess the efficacy of the Volcker Rule’. Banks have complained about how the rule has been implemented and have called for regulators to co-ordinate more and make its execution simpler. Any further reforms would likely require Congress to change the law.


– Hedge fund firm Elliott Advisors launched legal action to remove AkzoNobel chair Antony Burgmans as it seeks to force the Dutch paint company to enter takeover talks with US rival PPG Industries, the FT reported. In a letter, the firm said Akzo’s rejection of PPG’s third takeover proposal was a ‘flagrant breach of AkzoNobel’s board’s fiduciary duties and of Dutch corporate law.’ The Akzo board argues that the offer fails to address a number of concerns, including value and the impact for its workers.

Elliott said it had filed a suit with Amsterdam’s Enterprise Chamber, asking a judge to order an extraordinary meeting of shareholders to debate the removal of Burgmans. Akzo has expressed support for Burgmans and argued a general meeting would not be in the company’s best interests.


– The WSJ reported that, according to people familiar with the matter, Ford’s directors are pressing CEO Mark Fields to sharpen his strategy. Company directors, gathered this week ahead of the annual shareholders meeting on Thursday, scheduled an additional day of talks to discuss the auto maker’s course, the people said.

Ford has been solidly profitable since Fields became CEO in July 2014 but its stock price has fallen during that period. While chair Bill Ford and other directors support Fields, they are urging him to heighten his focus on growth opportunities, the people said. ‘We do not share details or discussions from our board meetings for competitive reasons,’ a Ford spokesperson said. ‘We also are unable to comment on rumors or speculation.’


– The SEC said William Hinman would be the new director of the agency’s division of corporation finance. Hinman recently retired as a partner in the Silicon Valley office of Simpson Thacher & Bartlett, where he advised public and private companies in corporate finance matters. He has also counseled issuers and underwriters in capital-raising transactions and corporate acquisitions, including in the technology, e-commerce, healthcare and biopharmaceutical industries.


– The Senate confirmed Scott Gottlieb as US Food and Drug Administration (FDA) commissioner, Politico reported. Gottlieb, a former FDA and Centers for Medicare and Medicaid Services official in the George W Bush administration, was confirmed on a 57-42 vote.

The position will make Gottlieb an important player in the Trump administration’s plans to speed up the drug approval process and cut back on regulations and red tape, which the president has argued will bring down drug prices. Mark Mansour, who specializes in FDA law at Mayer Brown, wrote in a note to clients that Gottlieb will likely be a more ‘nuanced reformer’ than other candidates Trump considered.


– The window for Republican members of Congress to use an obscure law to rescind regulations enacted in the last six months of former president Barack Obama’s administration is closing, although at least one lawmaker is hoping a loophole may allow for an extension, according to the WSJ. Since February, Republicans have used the Congressional Review Act to revoke 13 rules on issues such as workplace safety.

The law gives Congress about 60 days to vote by a simple majority to overturn agency rules passed late in Obama’s administration. That is a lower-than-usual threshold to pass legislation in the Senate, where 60 votes are often needed. The 60-day deadline is looming this month.


– The Times reported that, one month after an activist hedge fund took a stake in Whole Foods Market and began to push for change, the company unveiled a sweeping overhaul of its board, replacing five directors, naming a new chair and bringing in a new CFO. It also laid out plans to improve operations and cut costs. The changes underline the growing influence of activist shareholders, which continue to press corporate executives.

‘We pay attention to what our shareholders tell us,’ CEO John Mackey said. ‘We’ve been told for some time that we needed to address governance issues.’ He added that a main concern from shareholders was that the board was not independent enough.


– The FT said Barclays will pay more than $97 million to resolve SEC allegations it overbilled clients by nearly $50 million. The overcharging allegations concern the bank’s US wealth management business, which was sold to Stifel Financial in 2015. The SEC’s order covers three sets of alleged violations. The first involves two Barclays advisory programs that the agency said charged more than 2,000 clients fees for due diligence and monitoring third-party investment managers and strategies, when those services were not performed as promised.

The second involved Barclays’ alleged collection of ‘excessive’ mutual fund sales charges or fees from more than 60 brokerage clients, the SEC said. The third involved alleged miscalculations and billing errors that resulted in more than 22,000 accounts overpaying fees to the bank, according to the commission. Barclays did not admit or deny the SEC’s findings. The bank declined to comment.


– The FT reported that, according to a non-binding opinion by the advocate general at the EU’s top court, Uber should be regulated as a transport company and be subject to the same rules as normal taxis. The opinion, stating that the US ride-hailing app ‘must be classified as a ‘service in the field of transport’, would deal a major blow to the company if followed with a final judgment by the European Court of Justice later this year.

The company had argued that it was providing ‘information society services’, a classification subject to looser rules in the EU. But this was dismissed, in an opinion that will reverberate among digital companies that offer peer-to-peer services in industries such as accommodation and transport. ‘Being considered a transportation company would not change the way we are regulated in most EU countries as that is already the situation today,’ an Uber spokesperson said. ‘It will, however, undermine the much-needed reform of outdated laws that prevent millions of Europeans from accessing a reliable ride at the tap of a button.’


– The SEC appointed Lucas Moskowitz as the agency’s chief of staff. Moskowitz served as chief investigative counsel of the Senate Committee on Banking, Housing and Urban Affairs, where he led the committee’s investigative and oversight activities. He previously served as a counsel on the House Financial Services Committee, where he worked on legislative and oversight matters related to the US capital markets.


– Reuters reported that Bank of America’s brokerage, Merrill Lynch, said it will roll out a commissions-paying retirement account compatible with the new US Department of Labor fiduciary rule. The new account, which will launch on June 12, days after the start of the rule, will initially accept only cash and bank deposits. But the firm will later allow clients to have access to money funds, brokered certificates of deposit and concentrated stock positions, according to a memo Merrill Lynch sent to advisers.


– German regulator BaFin has fined Deutsche Bank for allegedly being too slow to explain why it had delayed announcing the departure of its co-CEOs, Anshu Jain and Jürgen Fitschen, in 2015, according to the FT. BaFin said it had imposed a fine totaling €550,000 ($600,700) for this and three other alleged breaches of ad-hoc rules. A spokesperson for Deutsche Bank confirmed the size of the fine, but declined to comment further.