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May 27, 2022

The week in investor relations: SEC targets bogus ESG claims, CEO pay ratio a ‘failed experiment’ and Icahn loses proxy fight with McDonald’s

This week’s other IR-related stories that we didn’t cover on

Reuters (paywall) reported on Wednesday that the SEC proposed a pair of rule changes aimed at stamping out unfounded claims by funds regarding their ESG credentials, and enforcing more standardization of such disclosures. The proposals, subject to public input, outline how ESG funds should be marketed and how investment advisers should disclose their reasoning when labeling a fund. The new ‘Fund Names’ proposal would seek to expand the number of funds that must invest 80 percent of their assets in line with their names and investment policies. The agency estimates the rule would capture about 75 percent of all funds versus 62 percent currently, and would bar funds from using ‘ESG’ labels if those factors are not central to investment decisions.

– The CEO pay ratio rule is a ‘failed experiment’ and the SEC should scrap the disclosure requirement and focus on matters more relevant to investors, according to an opinion piece in Bloomberg (paywall): ‘Back in 2017, a new rule aimed at exposing the excesses of corporate America went into effect: every year, most publicly traded companies would have to disclose a CEO pay ratio, comparing the compensation of the chief executive to that of the median employee. Having spent the subsequent five years trying to make sense of these disclosures, I think it’s time to call the rule a failed experiment and scrap it.’

– Activist investor Carl Icahn lost his proxy fight with McDonald’s on Thursday, signaling that shareholders weren’t swayed by his animal-welfare concerns, reported CNBC. The US financier owns only about 200 McDonald’s shares, a tiny stake that didn’t give him much influence over votes. Preliminary counts of votes during the company’s annual shareholder meeting showed Icahn’s board nominees received votes from only about 1 percent of outstanding shares, McDonald’s said. ‘Moving forward, [the] McDonald’s board and leadership team remain focused on continuing to take actions that uphold and advance our values while committing to serve the interests of all our shareholders,’ the company said.

Reuters reported that Toshiba Corp plans to propose giving two of its major hedge fund shareholders seats on its board, according to people familiar with the matter. Toshiba plans to nominate the executives from Elliott Management and Farallon Capital Management for board seats ahead of its AGM in June, the people said. Three of the people said Toshiba will propose Elliott, and two of them said it would also propose Farallon. A Toshiba spokesperson said the company hasn’t finalized its board director nominees, adding that it will promptly make disclosures as soon as it has decided.

– The UK’s finance minister announced a £15 bn ($18.8 bn) package to help UK households facing a further rise in energy bills this fall, while completing a major U-turn with a £5 bn windfall tax on oil and gas companies to help pay for it, the Financial Times (paywall) reported. Chancellor Rishi Sunak also said he was considering ‘appropriate steps’ to target ‘extraordinary profits’ made by electricity generators. A windfall tax on that sector could bring in a further £3 bn-£4 bn. His package will offset the expected £800 rise in the energy price cap – the average maximum amount paid by a household – in October, when average bills are expected to hit £2,800. Domestic energy prices will by then have risen £1,500 in a year.

TheStreet reported that Wendy’s Co shares powered higher after activist investor Nelson Peltz said he was considering a takeover of the restaurant chain. Peltz, who chairs the Wendy’s board and has been an investor in the group for nearly two decades, said in an SEC filing that his Trian Fund Management group could evaluate the possibility of participating, alone or with partners, a potential transaction ‘to enhance shareholder value’. Two other members of the Trian group – Peter May and Matthew Peltz – are also on the Wendy’s board. Wendy’s said it would review any proposal submitted by Trian, which owns an 11.8 percent stake in the Ohio-based chain.

– The City regulator proposed relaxing London’s stock market rules in an attempt to attract more fast-growing start-ups instead of losing out to other financial centers such as New York, Paris and Frankfurt, reported The Guardian. The proposals by the Financial Conduct Authority would mean scrapping the current two-tier system, where firms decide whether to follow the looser rules of a so-called standard listing, or the more rigorous standards of a premium listing. Instead, all companies would need to meet one set of rules, in order to simplify what some industry bodies have said is the UK’s ‘complex’ and costly listing regime.

– According to The Times (paywall), the $44 bn attempted takeover of Twitter by Elon Musk has been plunged into fresh uncertainty after he was sued by investors accusing him of manipulating the share price. A class action lawsuit filed in a federal district court in San Francisco alleges that tweets by the Tesla chief executive on May 13 claiming that Twitter’s accounts were riddled by spam bots ‘constituted an effort to manipulate the market for Twitter shares’ by driving down the company’s valuation during negotiations in order to claim a discount.

– Amazon CEO Andy Jassy’s first shareholder meeting was a rousing success for Amazon leadership and Jassy’s bank account, The Register reported. But for activist investors intent on making Amazon more open and transparent, it was nothing short of a disaster. While actual voting results haven’t been released yet, Amazon general counsel David Zapolsky told Reuters that stock owners voted down 15 shareholder resolutions addressing topics including workplace safety, labor organizing, sustainability and pay fairness. Amazon’s board recommended voting no on all of the proposals. Jassy and the board scored additional victories in the form of shareholder approval for board appointments, executive compensation and a 20-for-1 stock split.

City AM reported that JD Sports, the UK sports fashion retailer, made attempts to reassure investors on Thursday after red flags were raised by the sudden departure of Peter Cowgill. Shares continued to drop more than 8 percent in early morning trading, with prices down more than 16 percent this week. In a meeting hosted on Thursday, the company said governance and succession was not connected to the delay in publishing its annual results. The London-listed retailer announced Cowgill’s exit on Wednesday, stating it had opted to accelerate a separation of the roles of chair and chief executive.

James Beech

James Beech joined IR Media Group as editor-in-chief of IR Magazine and Corporate Secretary in January 2022. He was a multimedia journalist, editor, client relationship manager, awards host and public speaker at Campden Wealth, for and about the...