– The Wall Street Journal (paywall) reported that activist investor Starboard Value said News Corp should eliminate its dual-class share structure, saying it gives too much influence to Rupert Murdoch’s family. The dual-class structure isn’t in the best interest of shareholders and doesn’t reflect best-in-class corporate governance practices, Starboard said in a letter to shareholders. It cited dynamics between chair emeritus Murdoch and his children, who are in a legal fight over control of the media company, as an example of problems related to the structure.
‘This uncertainty represents a risk to shareholders that is only amplified by the Murdoch family’s super-voting shares and the poor governance and oversight that stems from the dual-class share structure,’ said Starboard managing member Jeffrey Smith in the letter. Starboard said it believes there is a path to achieve majority support for its proposal. ‘If the board refuses to listen, we can then take further action,’ it added.
News Corp said its board believes the company’s ‘dual-class capital structure promotes stability and has facilitated the successful implementation of News Corp’s transformational strategy.’
– Reuters (paywall) reported that the SEC approved new Public Company Accounting Oversight Board (PCAOB) standards. The PCAOB has moved to tighten accounting rules and standards this year. ‘The [board] found that 46 percent – nearly half – of the auditing engagements it reviewed in 2023 fell short of obtaining sufficient, appropriate audit evidence,’ said SEC chair Gary Gensler.
The new standard, which the PCAOB adopted in May, will require registered accounting firms to identify, manage and continuously monitor risks to audit quality control and will hold audit-firm leadership accountable if the firm falls short of requirements. Republican members on the commission opposed the measure, saying it had been hastily produced and would create unnecessary burdens on smaller audit firms.
– The WSJ reported that according to a new report from Bain & Co, sustainability and other environmental issues are dropping down the list of priorities for CEOs even while consumers’ climate concerns are increasing. AI, growth, inflation and geopolitical uncertainty are now the top issues for CEOs as they plan their strategies, Bain & Co said in the report. At the same time, 60 percent of consumers are more concerned about climate change than they were two years ago, mainly due to their own personal experiences of extreme weather, the report found.
‘When you look at the importance of ESG efforts, you can clearly see a huge peak in 2021 to 2022 where there was also a lot of action off the back of [the Glasgow COP26 climate conference in 2021]’, said Torsten Lichtenau, Bain’s global carbon-transition practice lead. ‘Now it’s dropped back to 2019 levels.’ He added that many companies set very ambitious goals when it came to climate and ESG in past years and were now becoming more realistic when setting targets, noting how hard and expensive it is to decarbonize.
– The WSJ reported that Southwest Airlines executive chair Gary Kelly will step down next year in a board change amid pressure from an activist investor to overhaul its leadership and business strategy. Kelly said he would voluntarily retire after next year’s AGM. He has been Southwest’s CEO for 18 years and has been its board chair since 2008. Kelly said he had intended to consider retiring next year but decided to expedite his plans in an effort to address questions about the airline’s governance and demonstrate his confidence in the airline’s other leaders.
Elliott Investment Management earlier this summer announced it had built a big position in Southwest with the aim of changing what it said was the airline’s entrenched leadership, including Kelly. The investor last month announced its intention to launch a proxy fight at Southwest, including plans to nominate 10 directors. Six other Southwest directors intend to retire in November as the airline looks to refresh its board.
Southwest said it would appoint four new directors in the near future and will consider filling as many as three of those spots with candidates from the slate Elliott put forward last month. But Southwest and its board continued to defend CEO Bob Jordan, another of Elliott’s targets.
Elliott partner John Pike and portfolio manager Bobby Xu said they were pleased that the airline’s board is ‘beginning to recognize the degree of change that will be required at Southwest.’ They said they hope to engage with the remaining directors on further changes.
– According to CNBC, Norfolk Southern’s board announced that it had fired CEO Alan Shaw after determining he engaged in a consensual relationship with chief legal officer (CLO) Nabanita Nag. He will be replaced by CFO Mark George. The company said Nag would be terminated as well, based on the board’s preliminary investigation. She had been Norfolk’s CLO since 2022. Jason Morris will be interim corporate secretary.
George has been Norfolk Southern’s CFO for nearly five years and was integral to the company’s efforts to fend off activist investor Ancora. ‘The board has full confidence in Mark and his ability to continue delivering on our commitments to shareholders and other stakeholders,’ said board chair Claude Mongeau in the statement.
A representative for Ancora didn’t respond to a Reuters request for comment.
– Reuters reported that the Office of the Comptroller of the Currency (OCC) said it has issued an enforcement action against Wells Fargo due to what it says are deficiencies in the bank’s risk-management practices. The OCC said it had identified deficiencies relating to the bank’s financial crimes risk-management practices and anti-money-laundering internal controls. An agreement under the enforcement action requires Wells Fargo to receive permission from the OCC before launching new business in medium or high-risk areas for money laundering or sanctions. The regulator is not seeking any monetary penalty, however.
‘We have been working to address a substantial portion of what’s required in the formal agreement and we are committed to completing the work with the same sense of urgency as our other regulatory commitments,’ the bank said in a statement.
– CNBC reported that activist investor Engine Capital has a roughly 4 percent stake in freelance marketplace Upwork and is pushing for change on the company’s board. In a letter to Upwork’s board, Engine said the company needs to fix ‘foundational issues’ that are affecting the platform. Engine questioned whether Upwork’s board has been adequately overseeing management and singled out several Upwork directors for their lengthy tenures. None of the company’s directors have any apparent experience in staffing industry, the activist said.
A representative for Upwork didn’t immediately return a CNBC request for comment.
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...
