The week in investor relations: Verifying climate data, Ben & Jerry’s sues Unilever and no news is bad news on racial pay equity

Jul 08, 2022
This week’s other IR-related stories that we didn’t cover on

­– According to The Wall Street Journal (paywall), firms that verify companies’ climate data are at odds over who is qualified to perform the work, a key feature of the SEC’s proposed requirements for new disclosures on the topic. The SEC has proposed that companies seek independent certification of certain new disclosures, including estimates of greenhouse gas emissions from their operations and from the energy they consume. The assurance requirement would apply to companies with at least $250 mn in publicly traded shares.

Under US securities laws only certified public accountants can audit public companies’ financial statements. But under the SEC’s proposal, the attestation report could be prepared not only by external auditors but also by other service providers, such as engineering, consulting or certification firms. The Big Four accounting firms are pushing for narrower criteria on who can perform this duty, according to comment letters sent to the SEC. Meanwhile, some non-accounting firms say technical expertise is important and other observers say the market is big enough for both types of firms.

CNN reported that Ben & Jerry’s is suing its parent company in an effort to cancel the sale of its business in Israel to a local partner that would continue to distribute its products in the West Bank. The ice cream maker filed a complaint in the US District Court in New York seeking an injunction against Unilever ‘to protect the brand and social integrity Ben & Jerry’s has spent decades building.’

Ben & Jerry’s in July 2021 announced that it would stop selling in the West Bank. That caused a dispute with its distributor in Israel. Unilever tried to resolve the issue with a recent announcement that it had sold Ben & Jerry’s Israeli business to the distributor. The decision to sell took the Ben & Jerry’s board by surprise, according to its court filing. In its complaint, it noted that its brand values are legally overseen by an independent board of directors under a 2000 agreement with Unilever.

In a statement before the complaint was filed, Unilever acknowledged that ‘Ben & Jerry’s and its independent board were granted rights to take decisions about its social mission.’ But it maintained that the parent company ‘reserved primary responsibility for financial and operational decisions, and therefore has the right to enter this arrangement.’ In a statement after the complaint was filed, a Unilever spokesperson reiterated that it ‘had the right to enter this arrangement’.

‘The deal has already closed,’ the spokesperson said, adding that it would not comment on pending litigation.

CNBC said that, according to new analysis from non-profit JUST Capital, only companies with perfect or near-to-perfect racial pay equity scores are sharing results. In all, fewer than half (43 percent) of the 100 largest US employers disclose conducting pay equity analyses with a specific focus on race and ethnicity, JUST Capital found. Even fewer companies share the results: just 22 percent of the 100 largest US companies disclose non-white-to-white adjusted pay ratios.

‘Companies that aren’t disclosing that information potentially just don’t feel like they’ve reached that point where they can tell a good story, and so see too much risk in releasing this data,’ said Ashley Marchand Orme, director of corporate equity at JUST Capital.  

Among the 22 companies that disclosed their pay ratios in 2022, JUST Capital found high levels of pay parity, with 13 companies reporting a 1:1 ratio where employees of color receive equal pay to their white colleagues. But JUST Capital stresses that for racial pay equity progress to be made, it can’t only be the companies already at parity that choose to share.

– In an interview with the Financial Times (paywall), Europe’s securities regulator has warned it would ‘struggle’ if it were forced to run the live databases of trading information at the heart of a plan to rejuvenate the region’s capital markets. Verena Ross, chair of the European Securities and Markets Authority, told the paper she has warned policymakers against relying on the Paris-based organization because it lacks the money and skills to run the ambitious project. Brussels wants to build a set of real-time databases, known as consolidated tapes, that bundle together basic trading information on stocks and bonds from the bloc’s competing venues. It is part of a broader package of reforms, known as Mifir, which may be agreed by legislators next year.

– The FT also reported that GlaxoSmithKline’s chief executive said a shareholder vote in favor of spinning off its consumer healthcare business vindicated the UK drugmaker’s decision to turn down a £50 bn ($59.7 bn) takeover offer from Unilever for its joint venture with Pfizer. In a ballot at the company’s annual general meeting, 99.8 percent of investors who voted backed two resolutions needed to enable the demerger of Haleon, paving the way for the largest London listing in a decade. The spin-off will take place on July 18, with GSK investors receiving one share in Haleon for each share they own in the parent.

– According to Reuters, GameStop Corp’s board approved a four-for-one stock split that will make it more affordable for investors to own shares of the video-game retailer at the center of last year’s meme stock trading frenzy. Several large US companies have opted for stock splits over the past two years, including Apple, Tesla and Amazon.

– Swiss bank UBS reportedly decided to sublet two floors at its landmark London headquarters after its flexible working-from-home policy left it with too much office space, the FT reported, citing people with knowledge of the bank’s plans. Last summer, UBS rolled out a global flexible working policy that allowed up to two thirds of its 73,000 staff worldwide to permanently mix home and office work. The policy was championed by chief executive Ralph Hamers as a way to gain a recruitment edge over Wall Street rivals, which have taken a more hardline approach on returning to the office.

– The WSJ reported that, according to compliance experts, companies must take a multi-pronged approach to adhere to a strict new US law aimed at curbing forced labor in China, taking steps such as sourcing products from other countries and visiting Chinese suppliers for spot checks. The Uyghur Forced Labor Prevention Act, which went into effect last month, gives US Customs and Border Protection the power to block the importing of goods with ties to Xinjiang, the home region of China’s Uyghur minority group, because those goods are presumed to be made with forced labor. Companies can in theory rebut that presumption but face a heavy burden to do so.

Compliance experts and companies, particularly those that deal with cotton, tomatoes and solar-panel ingredient polysilicon – Xinjiang exports are explicitly flagged as enforcement targets in the statute – are trying to understand how the law will be enforced in practice. ‘A lot of companies are flat-footed right now,’ said Brandon Daniels, CEO of Exiger, a risk and compliance software company. ‘I don’t think they are appropriately and properly prepared.’

– ‘Hong Kong’s equity capital markets are perking up,’ noted the WSJ, after what it describes as ‘a punishing first half’ that saw a 91 percent drop in the IPO market for what has long been one of the world’s largest venues for stock issuance. A recovery in initial public offerings and other share sales would be welcome news for the many companies eager to tap investors in the city for funds, it said. It would also be a boost for global investment banks, after a lean period in which they have brought fewer companies to market, often via much smaller deals than in the good years.

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