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Mar 25, 2022

The week in investor relations: ‘Rooney Rule’ not driving change, Nomura tops Japan corporate access survey and the end of globalization as we know it

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

– US companies have adopted the ‘Rooney Rule’ – a practice of interviewing minority candidates for top jobs – but it hasn’t led to more diverse C-suites, according to Bloomberg. In recent years, the Rooney Rule has gone from barely being mentioned in the corporate world to being adopted by at least 100 public companies for recruiting people at all levels amid the backdrop of a national reckoning on race sparked by the 2020 murder of George Floyd. But as more companies agree to release detailed information about the diversity of their workforces, the figures show little change. While women and people of color are well represented in the lowest rungs of company workforces, there’s little and sometimes no representation in the most powerful roles.

‘It’s kind of really like checking the box to say, We have the Rooney Rule, look how progressive we are,’ said Alina Polonskaia, global leader of the diversity and inclusion practice at executive recruiter Korn Ferry, which has researched the effectiveness of corporate diversity initiatives. The reality, she said, is that ‘there are a lot of companies that are doing it just for show.’

– Nomura was named top for corporate access in Japan in Institutional Investor’s 2022 ranking, which surveyed 157 investors at 113 firms, extending its reign into a second year. The survey group rated the top sell-side firms based on six attributes: conferences, logistics, field trips, team quality, roadshows and virtual events. Nomura captured four of these, with SMBC Nikko Securities and Mizuho Securities rated first for roadshows and virtual events, respectively. SMBC Nikko placed second in the overall leaderboard, which was weighted based on how much respondents spend in commissions, noted the publication. Daiwa Securities Group took third, followed by Mizuho in fourth and Mitsubishi UFJ Morgan Stanley in fifth place.

– According to CNN, BlackRock CEO Larry Fink said Russia’s invasion of Ukraine has ended globalization as we know it. Fink told shareholders in a letter that Russia’s ‘decoupling from the global economy’ following its assault on Ukraine has caused governments and companies to examine their reliance on other nations. He predicted that Russia’s isolation will ‘prompt companies and governments worldwide to re-evaluate their dependencies and reanalyze their manufacturing and assembly footprints.’ But some countries could benefit from focusing on building up their domestic industries as companies onshore or ‘nearshore’ their operations, he said.

– In other Russia news, the Guardian reported that Moscow’s stock market rallied on its first day of trading since being suspended when the Ukraine invasion began nearly a month ago, although the US dismissed Thursday’s limited reopening as a ‘charade’. The market initially rose by more than 11 percent when a limited, shortened trading session got under way on the Moscow Exchange (Moex). But the rally lost some momentum, with the Moex index of blue-chip shares ending the day 4.4 percent higher. It was its first session since February 25 when trading was halted after sanctions sent Russian equities tumbling, said the paper, which noted that only 33 of the 50 securities on the ruble-denominated Moex were trading, with a number of restrictions in place, including a bar on traders short-selling shares they do not own, while foreign investors cannot sell stocks until April 1.

The Wall Street Journal (paywall) noted that under the SEC’s newly proposed rule changes, many companies that have pledged to cut their carbon footprints to help limit climate change would have to disclose their emissions, including hard-to-measure data from their suppliers and customers.

The proposed rule changes would allow companies to choose how they work out their Scope 3 emissions, as long as that methodology is disclosed. That flexibility eases the reporting burden on companies but could allow for some marked differences in approach, according to the WSJ. The SEC proposal gives companies protection against being taken to court for inaccurate Scope 3 disclosures, provided the information is reasonable and given in good faith. The agency has also decided not to require Scope 3 numbers to be audited, unlike the planned requirement for Scope 1 and Scope 2 disclosures by larger companies.

– The WSJ also reported that CFOs said companies will likely face higher compliance costs and new disclosure challenges stemming from the SEC’s proposal. Companies will likely have to hire more people to assist with the work and tap an engineering or audit firm to attest to the accuracy of their estimates, said Julie Mediamolle, a partner at law firm Alston & Bird.

Eden Prairie, Minnesota-based CH Robinson plans to closely watch what the SEC ultimately requires on Scope 3 emissions, which it has found difficult and complex to measure, said CFO Mike Zechmeister. He said it is important that companies not be held liable for their Scope 3 estimates until measurement and reporting on those emissions becomes less challenging. The company expects its compliance costs would grow but not significantly because its reporting aligns with the proposal, Zechmeister said.

– CVC Capital Partners, Europe’s biggest private equity group, is planning to ‘shun London’ and take its multi-billion-euro IPO to Amsterdam’s Euronext exchange, reported the Financial Times (paywall). The buyouts group apparently told potential investors that it is aiming to list on the Netherlands exchange, and to set a €25 bn ($28 bn) target for its next private equity fund, according to four people with knowledge of the matter, who added that no final decision had been made about the listing or its timing, as the war in Ukraine – and its consequences for markets – needed consideration. The paper said ‘the choice of Amsterdam over London by a company that has its roots in the UK capital, where it has had a major presence since it spun out of a private equity division of Citigroup in 1993, would be a blow to the [London Stock Exchange].’

– The FT reported that Toshiba shareholders have voted down management’s plan to split the industrial conglomerate in two, ‘handing a fresh defeat to a company that has been at loggerheads with investors for four years.’ In what it described as a ‘pivotal vote’, the paper said the outcome had ‘revealed a sharp division among shareholders and diminished the prospect of a rapid turnround for one of Japan’s most famous industrial names.’ The vote triggered a heavy sell-off of Toshiba shares, which fell by as much as 5 percent.

– Elsewhere in the FT, it was reported that ETFs run by global asset managers including BlackRock and Invesco have large exposures to the threat that ADR holdings will be delisted if Chinese companies fail to meet US auditing requirements. The SEC has apparently moved closer to delisting certain Chinese companies, identifying the first batch of five that will have to provide proof of audit compliance by the end of March. Failing to do so means they will have to delist from the NYSE by 2024.

– In related news, CNBC reported that Alibaba’s Hong Kong-listed stock closed more than 11 percent up on Tuesday after the Chinese e-commerce giant said it would increase the size of its share buyback program from $15 bn to $25 bn. The share repurchase scheme will be effective for a two-year period through March 2024, the company said. So far, under the previously announced buyback program, the news outlet said Alibaba has bought back about 56.2 mn ADRs, worth about $9.2 bn.

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...