The week in IR: Investors to chase directors over audit failures, and shareholders oust CEO of Korean Air from board
Investors are planning to hold directors and audit partners to task for their roles in accounting scandals, according to the Financial Times. Pointing to companies such as Carillion, Interserve and Patisserie Valerie, the newspaper said investment managers have been blamed for failing in their stewardship duties and for not preventing corporate blow-ups. The FT noted that some of the UK’s best-known fund managers now plan to vote against tarnished individuals on the other corporate boards they sit on.
Cho Yang-ho, chief executive of Korean Air Lines, has been removed from the company’s board following a vote, adding fresh momentum to growing shareholder activism in Asia’s fourth-biggest economy, reported Reuters. It noted that Korean Air has been plagued in recent years by a series of scandals involving its founding family members, which ended in the prosecution of the 70-year-old Cho last year over charges of embezzlement and breach of trust. ‘Today’s result [on March 27] is a wake-up call that the Korean Air family’s scandals, starting with ‘nut rage’, have not been forgotten,’ said Park Ju-gun, head of corporate analysis firm CEO Score, according to the publication.
According to The Times, the SEC has opened a new front on the Dieselgate scandal by accusing Volkswagen and its former CEO, Martin Winterkorn, of defrauding bond investors to the tune of $13 bn. The publication reported that they failed to disclose that the car group’s diesel vehicles grossly exceeded federal emissions limits, ultimately causing investors to lose hundreds of millions of dollars. About 11 mn VW vehicles, including half a million in America, were secretly and deliberately equipped with 'defeat devices' that allowed them to cheat diesel emissions tests. VW admitted the existence of the devices in 2015 during an investigation by the US environment watchdog and Winterkorn resigned soon after.
Detailhandel, the €21 bn ($24 bn) Dutch pension fund for the retail sector, is reportedly divesting its stake in 500 of the 1,600 companies in its portfolio in order to refocus its investments in firms performing well on ESG criteria. According to Investment & Pensions Europe, Detailhandel says it has developed a new index in co-operation with FTSE Russell. Detailhandel doesn’t exclude tobacco firms, the publication added.
Investor spending on specialist data has grown to its fastest pace since the financial crisis, driven by the need to have an edge over rivals and to meet compliance demands with changing regulatory standards, reported the FT. A record $30.5 bn was spent by banks, asset managers, hedge funds and insurance companies on critical market information in 2018, said the publication, citing a report from by Burton-Taylor International Consulting: the 7 percent growth rate, or 5.5 percent on a constant currency basis, was the highest since 2008.
Image-search company Pinterest made its IPO paperwork public, putting it on pace to begin trading in mid-April as it looks to tap into a hot market for new issues, reported The Wall Street Journal. The filing shows a company with sharp revenue growth that still loses money, a picture typical of many start-ups. Pinterest’s revenue for 2018 totaled $756 mn, up from $472.9 mn a year earlier; the company’s net loss thinned to $63 mn from $130 mn in 2017.