The week in investor relations: Cyber-crime reporting law, small-cap biotechs at 15-year performance low and GE exec’s compensation cut
– US President Joe Biden signed into law a requirement for key businesses to report to the government when they have been hacked, the Wall Street Journal (paywall) reported. The idea, which has been long delayed due to industry pushback, could correct a fundamental problem the US government faces as it fights cyber-criminals: no one knows how many companies are attacked. But the language of the law leaves unclear what it will require from security teams at businesses and federal civilian agencies, as well as which companies will be affected.
– Small-cap biotechnology companies are on track for the worst 12 months in more than 15 years when compared with their large-cap peers, according to Raymond James analysts and reported by MarketWatch. Small-cap biotechs apparently outperformed large-cap biotechs in only one month – August – of the past 12. ‘The current confluence of factors negatively impacting the biotech sector has been staggering,’ analysts wrote in a note. ‘Biotech sector quant factors are suggesting we are at a cyclical low matched only by the [global financial crisis].’
– Larry Culp, chair and chief executive of General Electric, consented to cut his equity incentive grant for this year by two thirds, reported the Financial Times (paywall). Last year his potential $230 mn pay deal was rejected by investors and the paper said Culp and the compensation committee of GE’s board agreed to the reduction in the annual grant from $15 mn to $5 mn ‘in response to shareholder feedback’, according to a proxy filing ahead of the firm’s annual meeting on May 4.
– In other executive pay news, Moderna CEO Stephane Bancel has sold $408 mn in company stock since the beginning of the coronavirus pandemic – averaging roughly $3.6 mn a week – as the company’s stock soared on the development and rollout of its Covid vaccine, according to CNBC’s analysis of the company’s securities filings. Bancel’s sales were executed under SEC rule 10b5-1, which was adopted to prevent insider trading, though the news outlet said ‘critics argue that the rules governing 10b5-1 plans lack transparency and the rules governing them are too lax’.
– Shareholder activists searching for undervalued or underperforming companies could find an exceptionally target-rich environment among the special purpose acquisition companies (Spacs) that completed M&A deals in the last few years, wrote Bruce Goldfarb of Okapi Partners on Forbes. But while he said there was now evidence ‘of a gathering wave of activism that may engulf de-Spac-ed companies’, Goldfarb also warned that ‘successful Spac-tivism, as it’s now called, won’t be as easy as it looks on the surface. Nothing worth doing is ever that easy’.
– The FT reported that corporate chiefs at some of Japan’s biggest companies have called on the government to reclassify Covid-19 as endemic and lift some of Asia’s strictest pandemic restrictions to help unleash two years of pent-up demand for cross-border mergers and acquisitions. Their push comes as senior M&A bankers and lawyers say they expect an increase in deal proposals after a ‘golden week’ of national holidays in early May as corporate Japan goes on the global acquisition trail.
– According to Reuters, the UK government-backed Parker Review Committee, which was set up to improve the diversity of boards, said most of the UK’s top companies now have at least one ethnic minority board member. ‘Our December 2021 target of every FTSE 100 company having at least one board director from a minority ethnic background has very nearly been met,’ said John Parker, chair of the committee. ‘We have also secured commitments from many of the outstanding companies, which means it is likely that around 97 percent of current FTSE 100 companies will comply with the target by the middle of the year.’
Last year, the number of FTSE 100 companies to meet the voluntary target rose to 89 from 74, and a further five had done so by March 2022. Three have committed to do so and are in the advanced stages of recruiting.
– According to CNBC, Shell’s board is being sued for allegedly failing to prepare the oil and gas company for the transition away from fossil fuels. Environmental law firm ClientEarth, a Shell shareholder, said it had notified Shell of its claim against the company’s 13 executive and non-executive directors. It argues the board’s failure to implement a climate strategy that truly aligns with the landmark Paris Agreement is a breach of its duties under English law. The case is thought to mark the first ever attempt at holding a company’s board of directors personally liable ‘for failing to properly prepare for the net-zero transition’.
‘Shell is seriously exposed to the physical and transitional risks of climate change, yet its climate plan is fundamentally flawed,’ said Paul Benson, a ClientEarth lawyer, in a statement. ‘The longer the board delays, the more likely it is that the company will have to execute an abrupt ‘handbrake turn’ to retain commercial competitiveness and meet the challenges of inevitable regulatory developments.’
In response to the legal action, Shell said it was delivering on its global strategy that supported the Paris climate accord. This includes plans to transform its business ‘to provide more low-carbon energy for customers,’ the company said.
‘Addressing a challenge as big as climate change requires action from all quarters. The energy supply challenges we are seeing underscore the need for effective, government-led policies to address critical needs such as energy security while decarbonizing our energy system,’ a spokesperson for Shell said. ‘These challenges cannot be solved by litigation.’
– Reuters reported that Democratic SEC member Allison Herren Lee plans to leave the agency after her term ends in June, but will remain in office until a successor is named. ‘My term as commissioner expires in June of this year, and I have notified President Biden that I intend to step down from the commission once my successor has been confirmed,’ Lee said.
Her departure will come as the agency tackles an agenda of rule changes that would affect public companies, brokers, Wall Street banks and investment funds. The SEC would still maintain a 2-1 Democratic majority as it continues to await a replacement for the empty Republican seat vacated by former commissioner Elad Roisman in January.
In January 2021 Lee began serving as acting chair of the agency until Gary Gensler was sworn in. ‘Allison Lee definitively raised the bar while serving as acting chair of the SEC,’ said Satyam Khanna, a sustainability consultant and former SEC policy adviser for climate and ESG. ‘She launched path-breaking ESG initiatives across the SEC, including issuing a request for public information on climate risk disclosure, directing the examination unit to enhance its focus on ESG and helping shine a light on how investors’ money is voted in corporate elections.’