Across the Board
$8.6B Acquisition Combines Two Fashion Conglomerates
Tapestry’s acquisition of Capri Holdings brings six luxury brands under one umbrella
“Tapestry, the fashion company that owns Coach and Kate Spade, said on Thursday it had acquired Capri Holdings, the parent of Versace and Michael Kors, for about $8.5 billion, a sign of consolidation in the luxury market…The deal is a partnership of two large American companies with familiar luxury brands coming together as high-end retailers look for growth, amid signs that U.S. consumers are pulling back on discretionary spending…The chief executives of both companies stressed that the combination would bring their handbags, shoes and apparel to a broader consumer base across 75 countries and let them tap into more resources. The companies said the merger also presented an opportunity to increase their direct-to-consumer business and save them $200 million in operating and supply-chain costs within three years.” THE NEW YORK TIMES
The Legal Assault on Corporate Diversity Efforts Has Begun
Companies say their initiatives fall within the law
"Conservative legal activists successfully challenged the use of affirmative action by universities. Now they are going after diversity initiatives widely deployed across American corporations. Some companies are already reconsidering their efforts. In lawsuits, shareholder letters and petitions to the Equal Employment Opportunity Commission, activists are using some of the same tactics that progressive groups have used to advance diversity, equity and inclusion, or DEI, programs. They are arguing that companies are violating rules against race- and sex-discrimination…Comcast settled a case accusing it of illegally favoring minority-owned small-business customers with grants and marketing advice. Amazon has been sued in Texas over a program offering an extra $10,000 to Black- or Latino-owned delivery-service contractors. Starbucks directors and executives are being sued by a shareholder arguing they violated their duty to investors by supporting diversity policies.” THE WALL STREET JOURNAL
ESG Politics vs. Reality
Board sentiments about ESG are mixed but political backlash has little effect
“Environmental, social and governance investing is a way for investors to screen company performance; it’s also become a political football in the US. Depending on your perspective, the concept may seen in need of rebuilding or beyond repair…New studies on ESG in the boardroom, in proxy voting and in shareholder pushback paint a nuanced picture of the strategy in 2023…For European companies, ESG is much more of an opportunity (56% of respondents) than it is a risk (13%). US companies, however, see ESG as more risk (34% of respondents) than opportunity (30%)...Shareholder activist campaigns in every category of environmental, social and governance have had falling success rates since peaking in 2021 (though governance campaigns did have an earlier peak as well)...In addition, anti-ESG proposals have a paltry success rate. According to the Conference Board, the average rate of support is all of 2%, versus 21% support for climate proposals by other proponents.” BLOOMBERG
Podcast: A Simple AI Governance Framework In The Age Of ChatGPT
Board members understand that generative AI will change the way we work, but the devil is in the details
“The key aspect of this AI governance framework is its focus on ‘harm’. The severity of harm that AI may cause in any particular role, inclusive of economic damage, reputational risk, and matters of public security…The AI Governance Framework therefore provides a very useful model to evaluate which tasks are suitable for greater autonomy of AI, and how much human authority should be preserved in decision-making.” FORBES
How Do You Define the Material Impact of a Cyberattack Within Four Days?
The impact often unfolds much later than the SEC’s four-day reporting deadline
“New rules governing when publicly traded companies must report serious cyberattacks to financial regulators center on materiality. Executives disagree on whether the concept is as simple as it seems. The U.S. Securities and Exchange Commission adopted final rules last week that require companies listed on stock exchanges to report cyberattacks no later than four days after they determine a hack will have a material impact. Most companies must start reporting such attacks starting Dec. 18, in an 8-K form...Unlike a factory fire that immediately knocks out production, a cyberattack’s fallout might not be apparent right away, said Michael Oberlaender, an independent consultant and former chief information security officer who serves on the board of the greater Houston chapter of Isaca, a technology governance training organization.” THE WALL STREET JOURNAL
Why Do Investors Vote Against Corporate Directors?
Examining the voting outcomes of uncontested director elections at public firms
“Voting against management-nominated directors is an important mechanism for institutional investors to convey their dissatisfaction with a wide array of corporate policies and performance. Our study shows that the role of directors has evolved into a more complex one over the years. Nowadays, investors hold individual directors accountable for new and emerging issues, such as board diversity and climate change, which have gained significant attention compared to the past…Our findings indicate that while environment and social issues, in general, are not related to voting outcome, governance plays a crucial role. However, within the broader environmental category, we find that the climate change component is significantly associated with voting outcome stemming from issues related to carbon emissions, product carbon footprint, financing environmental impact, and climate change vulnerability.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Even Zoom is Making Workers Return to the Office
Real estate investments driving the move away from remote work
“...joining a swell of other tech firms pushing for in-person work, Zoom is requiring many of its 7,400 employees to start showing up at the office…Hybrid and remote work levels remain far above what they were pre pandemic. As of July, nearly one-third of the country’s full-time workers were in hybrid arrangements, spending some days working from home and some in an office, according to researchers at Stanford. But dozens of companies have joined Zoom in tightening their policies on office attendance this summer, as offices remain at just under half of their pre pandemic occupancy levels…Nick Bloom, a Stanford economist and expert on hybrid work, said the tech industry’s move back to the office was no surprise given the amount these companies spend on office real estate. Mr. Bloom said Zoom, for example, had all the downsides of fully remote work — some employees feeling disconnected — without the company seeing its financial upsides, like saving money on office space, because the company was still paying for Bay Area real estate and Bay Area employees.” THE NEW YORK TIMES
Economic Insight from Apple and Amazon
What the companies’ earnings reports can tell us
“Earnings reports yesterday from Apple and Amazon covered some very different businesses: premium-priced smartphones and tablets versus the world’s “everything store” and a dominant cloud computing platform. But the tech giants provided a snapshot of the state of the global economy: Consumers and companies are cutting back on some costs, but refusing to stop spending on increasingly essential services…(Apple’s) sales slumped for another quarter, even as profit went up slightly compared with a year ago, to $19.88 billion…But revenue from services — including Apple Music, Apple TV+ and App Store sales — grew 8 percent, reaching a record $21 billion…The e-commerce giant handily beat Wall Street’s expectations, as net income of 65 cents per share nearly doubled forecasts…But just as important was how Amazon boosted those results through extensive cost-cutting efforts, including tens of thousands of layoffs and shutting unprofitable divisions.” THE NEW YORK TIMES
The Rise in Board Approved Nine-Figure CEO Pay
Mega grants are criticized when they vest based on a single performance trigger
“Mega grants are large, one-time equity awards with long vesting periods (up to 10 years) granted in lieu of or in addition to annual awards with the intended purpose of providing significant incentive to achieve long-term targets. Mega grants were popular in the late 1990s (having been awarded to the CEOs of Oracle, Walt Disney, IAC/Interactive, and others) but fell out of favor in response to shareholder criticism…This trend has reversed in recent years, with executives receiving nine-figure awards once again appearing on annual lists of the highest paid CEOs.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
