Car park conversations
Business should be, well, businesslike; professional. Sometimes, however, it can be a little strange. This week £2.5bn JD Sports hit fresh controversy over an alleged meeting in a car park between executive chair Peter Cowgill and Barry Bown, executive chair of Footasylum, another sports retailer and merger partner. The Sunday Times has footage of the July meet and reports that it has prompted a probe by the Competition and Markets Authority (CMA) to see if it breaches any rules.
The CMA recently concluded that merger between the two companies would cause a “substantial lessening of competition”, reduce competition in the market for sports clothing and concludes a “full divestiture” of Footasylum is the “remedy”. JD Sports has refuted any breach of governance guidance.
Rumours of ‘business friendly’ reforms
Speculation continues to circle prospective legislation to reform the UK’s audit market and audit regime. This week it once again centred on measures floated in a white paper to beef up internal controls. Business news outlets reported that the new legislation is to be watered down and directors will not be required to sign off on their internal controls as US director’s currently manage under the Sarbanes Oxley Act, UK reforms are to be more “business friendly”.
Even the Financial Times was disappointed, with leader writers saying the junked measures would “add more legal teeth” to government attempts to bolster internal controls and risk management. A letter in the FT from shareholder advisers reveals concerns too. As usual, they write, “the UK seems likely to fall back on the corporate governance code, which the good follow and the bad neglect.”
However, while significant, and a loss, the internal controls proposals form only a fraction of the measures laid out in the white paper. The full legislative programme is yet to emerge.
Tesla boss hits Twitter again
Corporate governance at electric car manufacturer Tesla is never far from the headlines given Elon Musk’s propensity for Twitter outbursts. This week saw a fresh one. Musk polled his followers on whether he should sell 10% of his shareholdings in the company following intense US debate over the taxation of unrealised gains in stock values.
Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this?
— Elon Musk (@elonmusk) November 6, 2021
His 62.5 million followers voted 57.9% in favour. The share price in Frankfurt fell on Monday morning when markets opened and Musk later sold $5bn of shares. One for his board and shareholders to puzzle over.
ISS sets out voting policies
ISS, the proxy voting advisory firm, has issued notice of its proposed voting policies for the 2022 season with strengthened measures on climate, board diversity and the use of dual-class shares.
It proposes voting against the board chair at UK companies if they are judged to fall short on what ISS sees as minimum standards for “detailed disclosure” of climate-related risks according to the TCFD reporting framework. It has also hardened its stance over board diversity by doing away with many “mitigating factors” that could be used to avoid a vote against nominations committee chair.
To have and to hold… stocks
Ever wondered if marriage was a key factor in stock performance? A team of researchers based in Hong Kong, Germany and Northern Ireland looked at whether the marriage status of chief executives affected stock performance. They found that those in a partnership were “associated with lower future stock price crash risk”.
The team concludes: “Our test for underlying channels suggests that CEO marriage can curb managerial bad news hoarding by improving accounting conservatism and can reduce bad news formation by constraining corporate over investment activities.”