Who is at the wheel?
It’s one thing for a company to report on whether it’s meeting climate targets. It’s up to the company whether to disclose its climate-related “lobbying activities”. But a group of investors want Toyota, one of the world’s largest auto manufacturers, to do just that.
According to Minerva Analytics, three asset managers—APG, Storebrand Asset Management and KapitalFereningen MP Invest—want the company to change its articles of incorporation so it has to disclose whether climate campaigning activities “serve to reduce risks for the company from climate change”.
The board is against this proposal, which may not surprise many. It says it is working hard on carbon neutrality by 2050, and its campaigning activities must be flexible and subject to change.
“Thus, the ideal state of disclosure is subject to sudden change as well,” the company says in its response. It adds “articles” are for “basic details of a corporation and its operation”, and “not for stipulating matters related to specific business execution”.
Interesting development. Voting takes place on 14 June, so we’ll keep you posted.
Cracking Shell
Campaign group ClientEarth has said this week it will continue with efforts to sue directors at energy giant Shell over claims it “breached” its legal duties when compiling the company’s climate transition plan.
Earlier this week, the High Court refused permission for the ClientEarth action go ahead. But the campigners say they have been granted a hearing where they will argue that judges reconsider their decision.
Paul Benson, ClientEarth’s senior lawyer, says: “We respectfully disagree with the terms of the court’s decision and, in light of the importance of the issues raised by this case, will ask the court to reconsider.”
Law firm Herbert Smith Freehills says in a commentary that, among other reasons, the refusal shows the court is “extremely reluctant” to interfere in company management decisions and had rejected attempts to “formulate new and absolute duties in respect of climate change”.
“The judgment,” said the firm, “provides comfort to boards that the court will be slow to allow shareholders with small or de minimis shareholdings to use the derivative claim procedure under CA 2006 [Companies Act] as a way to challenge strategic or long-term decisions made in good faith in relation to addressing the risks posed by climate change.”
Coming risks
The top risk “exacerbated” by the current economic uncertainty is “financial, liquidity and insolvency”, according to a survey of chief internal auditors by the Chartered Institute of Internal Auditors.
Of those polled, 62% said this was the top risk, 60% said market change and competition caused by changing consumer behaviour, while in third place, 50% said it was macroeconomic and geopolitical uncertainty.
According to Ann Kiem, chief executive of the institute: “This poll demonstrates that ongoing economic uncertainty means that businesses continue to face strong headwinds with financial, liquidity and insolvency concerns now front and centre.”
Norway or the highway
Beware, US boards: Norges Bank, the world’s largest sovereign wealth fund, is to intensify its ESG proposal game for AGMs stateside this year, according to the Financial Times. The newspaper says the fund made its first ESG proposals this year at Packaging Corporation of America and Marathon Petroleum, which prompted climate commitments. In return, the fund withdrew its proposals.
That is some going, particular in a country where climate action and ESG in corporates has become a polarising political issue. Carine Smith Ihenacho, the fund’s chief corporate governance officer, told the FT: “We would like to do more on climate but also consider other areas across the ESG spectrum. It will most likely be in the US.” Cue anti-Norwegian rabble rousing on the right.
Beating a re-tweet
You’re company chair and you have an outspoken and maverick CEO who has been in trouble with regulators over his tweets about the company and other topics.
Enter Elon Musk, the man who was recently told he still has to run tweets about Tesla past a “twitter sitter”. Appearing on CNBC to answer questions about the company and his tweeting, Musk said: “I’ll say what I want to say and if the consequence is losing money, so be it.”
That one could have the board quick dialling headhunters for another job.
Generally speaking
The debate is as old as the chairman’s jokes: do boards need “generalists” or “specialists”?
The headlong development of issues such as AI, cybersecurity, climate change and ESG more broadly, has prompted claims that boards need more specialists.
As pressing as those topics are, corporate governance professor Lawrence Cunningham, writing for Oxford University Business Law blog, leans towards training generalists and keeping specialists in specialist advisory firms.
The George Washington University prof concludes: “Boards pressed to favor special interest directors, consider this: sponsor a series of board training sessions on the topic, describe the sessions in disclosure documents, and indicate attendance—ideally that every director attended every session. That training would help all directors stay informed, ask good questions, and exercise effective oversight.
“Rather than rely on a special interest director, all directors could do more than check their own box: they could add real value.”