Across the Board
Musk Revives Lawsuit Against OpenAI and Sam Altman
Suit alleges Musk was made to believe the artificial-intelligence company would be a nonprofit organization
“Sam Altman, chief executive of OpenAI, allegedly courted and deceived Musk, promising him they would pursue a nonprofit venture, according to the complaint filed in U.S. District Court in Northern California on Monday. Musk invested tens of millions of dollars and recruited top AI scientists for the project, according to the lawsuit. ‘Altman assured Musk that the nonprofit structure guaranteed neutrality and a focus on safety and openness for the benefit of humanity, not shareholder value,’ the complaint said… The complaint alleges that OpenAI co-founders Altman and Greg Brockman engaged in fraud and racketeering. It also accuses OpenAI and Altman of breach of contract for breaking a founding agreement. Musk also asked the court to cancel OpenAI’s licensing agreement with Microsoft because it breaches the deal Musk made with Altman and OpenAI.” THE WALL STREET JOURNAL
Delaware Judge Questions Tesla About Vote on Elon Musk’s Tesla Pay
Tesla lawyers have asked a Delaware judge to reverse her decision to void the multibillion-dollar pay package after shareholders approved it a second time
“A Delaware judge on Friday questioned lawyers for Tesla about why the company asked shareholders to vote on a $55 billion pay package for its chief executive, Elon Musk, after she had struck it down in January. The judge, Chancellor Kathaleen St. J. McCormick of the Delaware Court of Chancery, noted at a hearing in Wilmington that there was no legal precedent for the company’s decision, which led to an overwhelming shareholder vote in favor of the compensation package in June…. The lawyer, David E. Ross, acknowledged there was no exact precedent for having shareholders overturn a judge’s decision in similar cases. But he asserted that the June vote showed that Tesla’s shareholders were willing to award Mr. Musk the package even after being provided a lot more information about how it had been devised.” THE NEW YORK TIMES
Chevron, in Snub to California, Will Move Its Headquarters to Houston
The oil giant has been at odds with California’s elected leaders over the state’s climate and energy policies
“Chevron, the second-largest U.S. oil company, is moving its headquarters to Houston from California, formalizing a long-expected breakup with a state that has pushed aggressively to address climate change. It is the latest example of businesses’ voting with their feet against politicians and regulators who want them to take swifter action to reduce the emissions that are heating the planet. Companies across the oil and gas industry have also been consolidating operations and trimming spending to improve their standing on Wall Street… The State of California sued Chevron and other large oil companies last year, claiming that they misled the public about the risks of fossil fuels, whose extraction and use are leading causes of climate change.” THE NEW YORK TIMES
It’s Getting Harder for Companies to Keep Politics Out of the Workplace
Employers teach de-escalation techniques as divisive political discussions become almost impossible to avoid
“This summer’s dizzying political developments, including the assassination attempt of Trump and President Biden’s decision to end his bid for a second term, have thrust talk of the election back into America’s offices, Slack channels, break rooms and work sites. That is complicating matters for bosses who hope to minimize disagreements among colleagues. For much of this year, executives took pains to say as little as possible on presidential politics and other divisive topics, such as the continuing war in the Middle East. In one widely followed move, Google Chief Executive Officer Sundar Pichai told employees in April that the office isn’t a place to debate politics, noting ‘this is a business,’ following protests at some of Google’s locations. While that sentiment remains in many C-suites, a number of companies are now finding that ignoring political discourse altogether may be unrealistic in an election campaign that is proving to be so unpredictable—and all-consuming.” THE WALL STREET JOURNAL
Senators Demand FDIC Withdraw Proposed Board Governance Rule
Ortberg faces a multitude of issues, including reviving jet production and rebuilding trust with regulators, the industry and the public
“A group of 11 Republican senators demanded that the FDIC withdraw its proposed board governance rule, saying it would harm the safety and soundness of the U.S. financial system. The FDIC last year proposed guidelines for banks with at least $10 billion in consolidated assets that, among other things, state that bank boards should establish risk management programs ‘appropriate for the size, complexity, business model and risk profile of the covered institution.’ The rulemaking was advanced by a notational vote that occurred outside the board’s regular meeting schedule, with two members objecting to the proposal… The letter, led by Sen. Thom Tillis (R-N.C.), states that the proposed rule ‘contains a multitude of issues and flaws,’ such as imposing responsibilities on bank boards that traditionally fell on senior management. It also would implement a ‘one-size-fits-all’ approach to board governance and seeks to impose burdensome corporate governance standards ‘all the way down to some of the smallest U.S. banks,’ the senators said.” AMERICAN BANKERS ASSOCIATION
Adding a Second “G” to ESG?
Geoeconomics is confronting boards with new investor and public relations challenges
“In policy terms, it is useful to consider this the era of ESG + G (for geopolitics or geoeconomics). But in contrast to the bitter political division over ESG, there is widespread bipartisan support in Washington for policies to address the perceived threat to global security and the rules-based international order posed by China. This suggests that corporations will need to adapt to their long-term role on the front lines of geopolitical rivalry… Board and senior executive expertise: U.S. corporations face a “make or buy” decision on geopolitical expertise. My research indicates that while the number and percentage of independent directors with international experience is significant and increasing steadily, the number of independent directors with experience in government or the military – presumably valuable training ground for skills directly relevant to the oversight of geopolitical risk – is modest and declining.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Governance of Transformation Amid an Uncertain Business Climate
In an uncertain business climate, the board’s governance of transformation may help add value for shareholders
“It seems an understatement to characterize the current state of global affairs as “volatile.” If the past few years have shown anything, it’s that boards can be certain of at least one thing: an uncertain governance landscape. Volatility wrought by a pandemic, economic upheavals, and geopolitical conflict—to name just a few challenges of late—have added a suite of new risks for boards to navigate…. Regardless of form, transformation initiatives may involve large-scale changes that aim to bolster efficiency, reduce manual processes, and otherwise modernize business operations. Their scale and scope (from individual business units to organization wide) can be different across industry as can the governance processes. In this article, we highlight three areas of focus for boards when overseeing transformation initiatives.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
The Ties That Bind Howard Schultz to Starbucks
Governance questions have become more pressing as the coffee chain’s challenges have proliferated
“Howard Schultz stood down as chief executive of Starbucks for a third time last year, but his exit only went so far. In 2018, the man who built the Seattle coffee business into a global empire had negotiated an agreement to retain an chair emeritus role — for the rest of his life. The deal lets the 71-year-old attend and observe board meetings, according to Starbucks corporate filings. Other lifetime perks include a badge to access the company’s headquarters and a parking space. The deal — which can only be modified or waived if both parties agree — is one of several ways Schultz’s connections to the Seattle company endure. His continued influence has become a more pressing issue for management and investors as the challenges facing Starbucks have proliferated this year. Among them are an activist shareholder pressing for changes, unionized baristas pushing for better terms, slowing sales in China, and this week, its second consecutive quarterly earnings miss. Its stock is down 20 per cent this year. The former CEO’s ties do not stop at access and a title. They range from Starbucks reimbursing Schultz when it uses his private jet for corporate purposes to him owning a stake in a business making extra virgin olive oil for one of the company’s coffee drinks.” FINANCIAL TIMES
What is the IBA?
Governing body behind Olympic boxing storm has Russian ties, troubled history
“Nearly 17 months ago in New Delhi, Algerian boxer Imane Khelif was disqualified from the International Boxing Association's world championships three days after she won an early-round bout with Azalia Amineva, a previously unbeaten Russian prospect. The disqualification meant Amineva's official record was perfect again. The IBA said Khelif and fellow boxer Lin Yu-ting of Taiwan had failed ‘to meet the required necessary eligibility criteria and were found to have competitive advantages over other female competitors.’ The governing body claimed the fighters had failed unspecified eligibility tests — the same tests that ignited a massive controversy about gender regulations and perceptions in sports this week as Khelif and Lin compete at the Paris Olympics. The IBA's decision last year — and its curious timing, particularly related to Amineva's loss to Khelif — would have raised warning signs around the sports world if more people cared about amateur boxing, or even knew more about the IBA under president Umar Kremlev of Russia.” PBS
Opinion: How to Improve Governance of the Boeing Company
Stronger disclosure requirements would have put pressure on the Boeing board to find robust solutions
“Boeing has received significant worldwide attention since 2018, not because of what the company did right over its century in operation, but because of its corporate governance problems that made its 737 MAX unsafe to fly and led to two accidents in 2018 and 2019 that caused the avoidable loss of 346 lives… Did the Boeing board of directors take appropriate actions after the MAX accidents? The board could have adopted some additional guidelines to improve safety and work quality after the crashes. As revealed by the company’s ongoing problems, the board’s efforts clearly fell short of the needed reforms. Given Boeing’s size and its role in the U.S. economy, its board should face higher standards of accountability through more rigorous disclosure requirements. The board should be required to reveal how safety issues come to light and discuss how the firm will address them.” PRO MARKET
The ESG Debate: A Balanced Perspective for Boards
As the ESG critics see it, a board should focus on shoring up the company’s financial foundations, ensuring liquidity and maintaining operational efficiency
“Everywhere I go, one question crops up over and over again: How will the ESG debate play out? Is the environmental, social and governance party over, or is it just getting started? Champions for each of those views have made loud and compelling cases as their arguments reverberate through boardrooms, investor meetings and executive suites. However, for boards aiming to steer their companies through uncertainty and toward sustainable success, a less one-sided approach is not just prudent but necessary…. Critics are convinced that the ESG movement has reached its peak. They are able to point to several factors that suggest the momentum behind these principles is fading. They cite regulatory fatigue as a primary reason, noting that the rapid proliferation of ESG-related rules and regulations has overwhelmed companies.” LINKEDIN
|
|
