Sweden sour
Swedish industrialist Jacob Wallenberg has caused a ruckus by taking aim at proxy adviser ISS over its criticism of dual-class shares. Wallenberg expressed concern that ISS has indicated it will vote against the reappointment of directors at companies with shares that attach differential voting rights.
“There is a reason why all shareholders have agreed to this set-up. I don’t see why a third party should force through a change because they have a different view.”
The Financial Times points out that almost three-quarters of the market cap on Stockholm’s stock market is at companies with dual-class shares. A minor issue then for Sweden.
Passing the mega bucks
Executive pay is a constant debate, but what about CEOs booted out in the event of a merger deal? Turns out so-called “golden parachute” severance deals in the US are rising in value but so is investor opposition. A study by ISS has found that high-value exits are becoming costly, with the median value rising 62% year on year in 2022 from $7.9m to $12.9m. That’s a lot of dollars for someone being shown the door.
It also turns out that the shareholder votes against parachutes are rising. ISS said the “failure rate” of boards in such votes—they’re advisory, not mandatory—has risen from 11.8% to 15.6%.
Subodh Mishra of ISS writes: “The magnitude of golden parachute payments appears to be a significant factor in many investors’ voting decisions.” No kidding.
Greenwashing is ‘prevalent’
Just in case you thought we had forgotten about climate and business, there is the news from US market research group The Harris Poll and Google Cloud that global executives believe “greenwashing” is prevalent in their industries. According to a Wall Street Journal report, Harris has found that 75% of 1,500 executives in 17 countries believe “most” organisations would be found to be greenwashing if probed.
Meanwhile, Kate Brandt, chief sustainability officer at Google Cloud, appears to have a little more faith in her corporate colleagues, telling WSJ that, although there were companies “overstating” their green credentials, “for the most part companies are sincere—they’ve set their goals, they’re working towards them, but they don’t always have the data to be transparent”.
Harbour rights
Staying with climate, a leading legal eagle argues that US companies should receive a “moratorium” from litigation based on new mandatory climate risk disclosure rules about to be introduced by the US Securities and Exchange Commission.
Virginia Harper Ho, a law prof at City University in Hong Kong, writes for the Oxford governance blog that current “safe harbor” rules are not enough when companies begin to grapple with climate disclosure. “Litigation risk is therefore another potential cost of the new rules and could discourage the kind of more precise risk disclosure the new rules are designed to produce,” she writes.
Breaking up is hard to do
Good news! If your auditor is EY and you were worried what would happen to your reencounters after the firm announced a split last May, fear no longer. The split is off.
After announcing a pause in “split” planning (a process in which the firm’s audit arm would formally divorce from most other services including the big one: consulting), it seems the whole separation is off.
Many news outlets report this week that a permanent end to planning was declared after it proved too difficult to resolve which services would join the separate arms of the newly independent businesses and what compensation some of the partners would receive. The Financial Times says the big bone of contention was how many tax partners would stay with audit versus joining the consultancy.
The Times says EY chair, Carmine Di Sibio, and his team struggled to “garner enough support from partners, especially those in the US, to push through the deal”. Meanwhile, the FT reports the firm will “embark on a $500m cost-saving programme” instead. That should be a useful diversion.