–Four leading artificial intelligence (AI) companies launched a new industry group to identify best safety practices and promote the technology’s use toward great societal challenges, according to CNBC. Anthropic, Google, Microsoft and OpenAI said the Frontier Model Forum has four key goals, which Google said include advancing AI safety research to promote responsible development of frontier models, minimize risks and enable independent, standardized evaluations of capabilities and safety.
Organizations that meet several criteria can join the group. Those include developing or using frontier models, or ‘large-scale machine-learning models that exceed the capabilities currently present in the most advanced existing models, and can perform a wide variety of tasks,’ Google said. They also must show a commitment to safety ‘through technical and institutional approaches.’ The group it would create an advisory board of diverse backgrounds to guide its priorities.
–The Public Company Accounting Oversight Board (PCAOB) has seen an increase in the number of flawed audits carried out by global accounting firms, according to the Financial Times (paywall). The PCAOB said its inspectors found deficiencies in 30 percent of audits carried out by the US businesses of Deloitte, PwC, KPMG, EY, Grant Thornton and BDO last year. That was up from 21 percent of audits inspected in 2021. There was an even steeper increase in failures in the work of the firms’ non-US businesses, where the deficiency rate rose to 31 percent from 17 per cent.
‘Audit reports are critical to keeping investors protected and audit quality is not where it should be... [The] deficiency rate is completely unacceptable,’ PCAOB chair Erica Williams said. Some firms have told the PCAOB their worsening scores are down to higher-than-normal staff turnover and remote work, but Williams said the excuses were wearing thin.
–US regulators revealed proposed changes to banks’ capital requirements to address evolving international standards and the recent regional banking crisis, CNBC reported. The changes, which are designed to increase the accuracy and consistency of regulation, will revise rules tied to risky activities such as lending, trading, valuing derivatives and operational risk, according to a notice from the Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.
The proposed rules seek to toughen regulation of the industry after two of its biggest crises in recent memory — the 2008 financial crisis, and the March upheaval in regional lenders. They incorporate parts of international banking regulations known as Basel III, which was agreed to after the 2008 crisis and has taken years to roll out. The changes will broadly raise the level of capital banks need to maintain against possible losses, depending on their risk profile, the agencies said.
–Reuters reported that the UK’s High Court dismissed a case brought by environmental law charity ClientEarth against Shell over its climate strategy. ClientEarth alleges the company cannot achieve its aim of net-zero carbon emissions by 2050 with its existing climate transition strategy and its directors are therefore breaching their duties to shareholders.
The group had wanted to bring a derivative case on behalf of Shell against its directors. But Judge William Trower refused permission to bring the case. He ruled that ClientEarth's case ignored that managing large businesses requires directors to ‘take into account a range of competing considerations,’ in which courts should not interfere. A Shell spokesperson welcomed the ruling and described ClientEarth's case as ‘fundamentally flawed.’
Paul Benson, a senior lawyer at ClientEarth, said the charity was disappointed and intended to pursue an appeal.
–According to the WSJ, the types of pandemic-era pay cuts that affected many C-suites are now a regular part of some companies’ responses to tough times. Compensation experts say that before the pandemic executives’ base salary typically had been left alone during periods of corporate belt-tightening. And as was the case during the pandemic, the cuts to base pay have not just affected CEOs but also CFOs, operations leaders and corporate attorneys. In response to the pandemic, 20 percent of companies in the Russell 1000 announced pay cuts for leadership in 2020, according to Just Capital.
‘Executives felt a real obligation to send a message to the world, ‘Hey, we’re in this with you, we’re going to feel the pain along with you,’ and so that’s why they’ reduced salaries during the pandemic, said Don Lowman, who advises on executive compensation as global leader of consulting firm Korn Ferry’s total rewards practice. ‘Now, companies are doing layoffs again, and maybe they’re using the playbook that they established back in the early stage of the pandemic.’
–Unilever has confirmed it will comply with legislation that could see its employees in Russia conscripted into the war in Ukraine, according to CNBC. In a letter to campaign group B4Ukraine published by the BBC, chief business operations and supply chain officer Reginaldo Ecclissato notes the Russian law requiring firms to ‘permit the conscription of employees should they be called,’ and says Unilever will ‘always comply with all the laws of the countries we operate in.’ The company has around 3,000 employees in Russia, working across four manufacturing sites and one head office.
Unilever confirmed the veracity of the letter to CNBC and declined to provide further comment.
Ecclissato said Unilever runs its Russia business ‘in alignment with our global principles including the safety and wellbeing of our employees.’
–Bloomberg reported that Goodyear Tire & Rubber Co said it will appoint new board members and start a review of its business as part of a settlement with Elliott Investment Management. The company is setting up a board committee to oversee a review of strategic and operational alternatives to maximize shareholder value, it said in a statement.
‘We have been encouraged by Goodyear’s openness to taking actions necessary to realize its full potential,’ Elliott senior portfolio manager Marc Steinberg and portfolio manager Austin Camporin said in the statement. ‘We are confident that our agreement enhances governance at Goodyear and ensures that the company will remain focused on long-term shareholder-value creation.’
Goodyear is naming three new independent directors supported by Elliott including Joseph Hinrichs, an automotive industry veteran who is now CEO of CSX Corp. The other appointees are Max Mitchell, CEO of aerospace and defense supplier Crane Co, and Tenneco’s former co-CEO Roger Wood.
–The Wall Street Journal (paywall) reported that Chevron’s board is waiving the company’s fixed retirement age for CEO Mike Wirth, allowing him to remain in the role for a longer period as it considers its C-suite strategy. Wirth would reach the company’s fixed retirement age of 65 in late 2025 and additional time would allow him to prepare a successor, according to people familiar with the matter.
The board ‘concluded it has the right leader and strategy in place to continue the company’s successful trajectory,’ Wanda Austin, Chevron’s lead independent director, said in a statement. Wirth, who will turn 63 later this year, is an engineer and Chevron employee for more than 40 years. He became chair and CEO in 2018.
–The WSJ also reported that new Financial Accounting Standards Board (FASB) requirements, seeking to give investors a clearer view of financial performance, will mean that public companies have to break out big-ticket expenses incurred by their business divisions. Companies usually split their operations into segments by business line or geography. They must report a measure of their profits or losses by operating segment in their financial statements, but don’t have to go into much additional detail.
On Wednesday, the FASB adopted an update that will require publicly traded companies to disclose significant expenses in those divisions on a quarterly and annual basis. These expenses could include labor, technology fees and rent. The information is limited to companies that already provide segment information to a chief operating decision maker.
–According to Reuters, Elon Musk plans to ask the US Supreme Court to consider whether the SEC overstepped its authority in enforcing a consent decree that he has called a ‘muzzle’ on his free speech. Musk would be appealing a decision by the 2nd US Circuit of Appeals to uphold the decree, which arose from his August 2018 tweet that he had ‘funding secured’ to take Tesla private. A three-judge panel rejected Musk's claim that the SEC exploited the decree to conduct harassing investigations into his use of Twitter.
In an order on Monday, the appeals court denied Musk's request that the panel or all 13 active judges revisit the case. Alex Spiro, a lawyer for Musk, confirmed on Tuesday that Musk plans an appeal to the Supreme Court.
–Reuters reported that Gap named Mattel's COO, Richard Dickson, as its CEO following a year-long search. Dickson, who joined Mattel more than 20 years ago, revived the Barbie brand by adding more diverse fashion dolls and in his current role was also responsible for franchise management. Dickson, who has been on the Banana Republic-owner's board since November 2022, is leaving when Mattel is riding high following the success of the ‘Barbie’ movie. He will take charge later next month, Gap said.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
