Across the Board
Wells Fargo’s Housing Program Draws Federal Scrutiny
The Trump administration is investigating whether Wells Fargo programs aimed at increasing minority homeownership violated fair-lending laws
“Trump administration housing officials are launching an investigation into Wells Fargo over programs and commitments the bank made over nearly a decade to increase homeownership among Black Americans. The Department of Housing and Urban Development on Wednesday sent Wells Fargo Chief Executive Charlie Scharf a letter saying it would examine whether the bank violated fair-lending laws by favoring Black or other minority homeowners, according to a copy viewed by The Wall Street Journal. Wells Fargo didn’t have an immediate comment Wednesday. The investigation provides another example of corporate America finding itself in the crosshairs for programs that were encouraged during prior administrations, either by the government or socially conscious investors. The Trump administration has opened investigations into companies for so-called diversity, equity and inclusion programs. It has also launched attempts to find evidence of ‘debanking,’ where banks closed the accounts of businesses or individuals operating in politically controversial industries, from fossil fuels to firearms.” WALL STREET JOURNAL
Oura Hits Pause on Ringing the Bell
After completing its roadshow and preparing to price a potential $2.2 billion offering, Oura abruptly postponed its IPO amid market uncertainty
“Hours before Oura, the smart-ring maker behind one of the season's most closely watched IPOs, was expected to price its shares, CEO Tom Hale delivered a stunning announcement: The company was calling off its public debut, at least for now. The explanation Oura gave was simple: ‘uncertainty in the IPO market.’… After all, the buzzy health-tech company had already completed a high-profile roadshow; told investors it was profitable and growing quickly; and was preparing to price an offering that could have raised as much as $2.2 billion. At the top of its proposed $40 to $44 per share range, the deal would have implied a fully diluted valuation of more than $15 billion…. Yes, IPOs can be postponed at any point before shares are sold. But shelving one this late in the game was unusual…. Oura's IPO delay raised big questions on the Street like whether investors would support its valuation; whether the deal's structure had become untenable; and how the company stacks up against a growing field of competitors in the wearables market.” YAHOO FINANCE
Hollywood’s Changing of the Guard
The $110 billion Paramount-Warner merger is officially complete, bringing two historic studios, major streaming platforms and news organizations under David Ellison’s leadership
“On Tuesday, as some employees at Warner Bros. logged onto their laptops, they were met by a logo that signaled a changing of the guard. SKYDANCE, written in all caps, underlined…. The message was clear for all to see: The $110 billion Paramount-Warner merger of two Hollywood giants closed Tuesday, and CEO David Ellison isn’t taking any time to dwell on the past…. The merger blends two historic film studios (Paramount and Warner Bros.), two popular streaming platforms (Paramount+ and HBO Max) and two news organizations (CBS News and CNN) under the leadership of the 43-year-old Ellison, son of Oracle chief Larry Ellison, who is a close ally of President Donald Trump…. Many outspoken actors, writers and producers in Hollywood rallied behind efforts to block the merger…. But what once looked like a formidable legal challenge folded quickly.” NEW YORK TIMES
Mattel Faces Pressure to Play Its Hand
A major shareholder is urging the toymaker to explore a sale or other strategic alternatives as takeover interest builds and shares remain under pressure
“A major Mattel shareholder is calling for the toymaker to explore strategic alternatives, as the company deals with a sliding stock and now a chief-executive transition. Ariel Investments, which has a 5.4% stake in Mattel, said Monday it believes the company’s shares remain significantly undervalued with its current structure as a public company…. Ariel said it believes Mattel should retain an independent financial advisory firm to explore strategic alternatives, which could include a divestiture of significant assets, a merger or an outright sale of the company…. Mattel has already garnered takeover interest. The Journal reported last week that Authentic Brands Group has made an approach and been privately discussing an offer that could value the company at more than $20 a share…. Mattel’s valuation is strikingly low, analysts said, considering the transformation of the business over the past several years and the potential equity of brands such as Barbie and Hot Wheels.” WALL STREET JOURNAL
AI’s Next Big Question: Who Pays When Things Go Wrong?
OpenAI’s mounting legal challenges are putting a spotlight on a broader issue for the AI industry: who bears the liability when AI agents cause real-world damage?
“OpenAI suddenly faces a wave of legal problems. Many of them could spill over into the future of other large AI companies…. The Financial Times describes the risk as ‘A spiraling legal crisis threatens to engulf OpenAI after its AI agents hacked dozens of companies and governments worldwide, with the prospect of a barrage of lawsuits marking the latest test of Sam Altman's leadership.’ The legal challenges run across risks from governments and companies. At the core is a rapidly rising number of hacks and the dollar value of the damages they may represent…. The legal problem is one of the questions at the heart of the AI sector…. The first is whether AI will destroy humanity…. On a more mundane level, customers have expressed anxiety about the cost of AI as a business tool…. And then there is the question of how much hacking costs other companies.” YAHOO FINANCE
The Human Element of AI Risk
Boards are being challenged to treat human oversight of AI as a control effectiveness issue, requiring evidence that reviewers have the expertise, capacity and authority to intervene
“Companies increasingly describe human review as the safeguard that makes artificial intelligence (AI) safe to use in consequential work. But assigning a person to approve an AI output does not prove that the person can detect an error, has enough time to investigate it, or has the authority to stop it…. Companies should have to show that human review of AI-assisted financial work is effective before relying on it as a safeguard. They should retest that oversight when the technology, staffing or workload changes materially. A credible human review control needs four things: competent reviewers, realistic capacity, authority to intervene and independent testing of the complete process…. Before approving an AI project, boards should require the business case to budget for effective review and for replacing learning opportunities automation removes…. Boards should not accept ‘a human will check it’ as evidence that a control works. No company should receive credit for human oversight it cannot demonstrate.” GOVERNANCE INTELLIGENCE
VCs Still Looking for the Exit?
New research suggests venture firms retain post-IPO equity longer than commonly thought
“The IPO is commonly understood as the end of venture capital’s (VC) role in corporate governance. As the conventional story goes, after a relatively short post-IPO lock-up, VCs sell their shares and give way to public-market institutions. Ownership disperses, the balance of control shifts, and the company enters a new phase of its life governed by public-market discipline. In our article, we show that this paradigm is inaccurate: VCs often remain important shareholders and governance participants for years after the IPO. Drawing on a dataset of 844 U.S. venture-backed companies that completed IPOs between 2002 and 2020, we find sustained VC ownership and influence well beyond the lock-up period. A full financial exit by VCs often takes years rather than months. VCs retain an aggregate equity stake above 5% in the median dual-class firm for three years after the IPO and in the median single-class firm for four years. Even by year seven, roughly a quarter of single-class firms and 14% of dual-class firms still have aggregate VC ownership above that threshold.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Zillow’s Home-Flipping Fallout Heads Back to Court
The Supreme Court declined to intervene in an investor lawsuit examining whether Zillow misled shareholders ahead of the collapse of its home-flipping venture
“The US Supreme Court declined on Monday to hear a bid by real estate platform Zillow Group to escape a class action that accused it of misleading investors about its failed home-flipping venture…. At issue in the case is what defenses publicly traded companies can raise in lawsuits alleging they made false statements to the investing public. Zillow's stock plunged in November 2021 because the company announced it was permanently shutting down Zillow Offers, its home-flipping division, after management admitted it could not accurately forecast future home prices. The company disclosed that it wrote down $300 million in losses during the previous quarter and announced a layoff of 25% of its workforce. Investors sued in federal court, saying statements made by Zillow's then-CEO and other company leaders in the preceding months painted an overly positive picture of the business unit. Zillow's lawyers denied that the company had engaged in securities fraud.” REUTERS
Better’s Founder Takes Back the Board
In a rare successful effort to replace a public company board, shareholders backed Vishal Garg’s campaign to oust five directors and reshape the governance and leadership of the company he founded
“Vishal Garg’s months-long fight to regain influence over [digital mortgage platform] Better Home & Finance has reached a decisive turn. Better’s Special Committee said Monday that it has withdrawn its challenge to the preliminary report of the independent inspector reviewing Garg’s shareholder consent campaign, citing the cost and uncertainty of continuing the fight. Minutes later, the Garg Group said it intends to immediately appoint venture capitalists Bing Gordon and Steve Sarracino to Better’s board and begin implementing its plan for the mortgage company. The move follows a preliminary determination by First Coast Results, the independent election inspector hired by Better, that Garg’s group obtained more than 52% of the votes required to remove five incumbent directors…. The plan also calls for an outside interim CEO with mortgage-industry experience while Garg focuses on product, platform, and innovation.” NATIONAL MORTGAGE PROFESSIONAL
Hub Group Reshuffles Board Amid Financial Turmoil
Shareholders removed three directors and three others resigned as the transportation and logistics company grapples with material misstatements, delayed filings and a potential delisting
“Hub Group reshuffled its board of directors, naming four new members and removing three existing directors among other moves, the transportation and logistics company said in a Friday press release and securities filing. The Oak Brook, Illinois-based business noted that the changes, effective Oct. 1, do not ‘affect the Company’s management team, strategy or day-to-day operations,’ according to the Friday release. The board changes — which follow C-suite shifts made by the company last month — come as Hub Group works to refile the last three years of its financial statements after reporting a $77 million accounting error and to avoid the delisting of its stock. Shareholders of Hub Group acted by written consent on Thursday to appoint Gregory D. Bunch, Thomas P. Fitzgerald, Thaddeus J. Malik and Thomas M. White — a former Hub Group CFO — to the board, according to the release. They also voted to remove Michael Flannery, Peter McNitt and Gary Yablon from the board without cause, with the changes effective Oct. 1.” CFO DIVE
Does Your Board Have Appropriate Expectations about Shareholder Voting?
Boards have access to more information than ever, yet key shareholder voting risks remain—here’s how to prepare
“For public companies, the lead up to annual meetings are a key indicator of how well the board and management understand shareholder expectations before votes are cast. Useful insights can be gleaned from a wide variety of sources, including investor voting policies and vote disclosures, proxy advisor research, peer voting outcomes, direct engagement, shareholder proposal trends, and internal governance analysis. Despite having access to more information than ever, these inputs often sit across different teams, systems, advisors, and points in time. … The challenge is not to gather external signals but to synthesize useful insights early enough to inform program changes, guide engagement efforts, and prepare internal reporting to the board and executive management. This article outlines how challenges surrounding shareholder voting risk extend beyond the likelihood of a proposal passing or failing, and how a more structured approach to assessing investor signals can support earlier engagement, clearer board reporting, and more informed governance decisions.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
