Across the Board
Wells Fargo Agrees to Pay $1B in Class-Action Suit Over Fake Accounts
The payout is the 17th largest class-action settlement brought by shareholders.
"After the 2016 scandal led to a series of regulatory rebukes, the bank moved slower to address the problems than it suggested publicly, the plaintiffs alleged. When the sluggish pace became clear in 2020, the plaintiffs said, stock-price declines cost shareholders, including mutual funds and pension funds…’Wells Fargo betrayed the trust of Rhode Island pensioners and now is rightly facing consequences because of that,’ James A. Diossa, general treasurer of Rhode Island, whose pension fund is a co-lead plaintiff in the case, said in a statement. A spokeswoman for the bank said the agreement resolves a lawsuit ‘involving the company and several former executives and a director, who have not been with the company for several years. While we disagree with the allegations in this case, we are pleased to have resolved this matter.’” THE WALL STREET JOURNAL
Shake Shack Comes Under Activist Investor Attack
Engaged Capital seeks to buoy Shake Shack’s sinking shares by appointing three new board seats.
“Activist investor Engaged Capital is planning to run a proxy fight for three board seats at high-end burger chain Shake Shack, according to people familiar with the matter…Its shares have been cut nearly in half from an early-2021 high—even after rallying more than 50% this year—as inflation pressures have led some customers to pull back on spending and compressed margins. Shake Shack has also struggled to bring back lunchtime diners in bigger cities as fewer people commute to offices daily.” THE WALL STREET JOURNAL
Top Developments and Trends Shaping Shareholder Activism
Check out these nine factors influencing shareholder activism in 2023.
“Following a brief decline during the pandemic, shareholder activism in the US rebounded to pre-pandemic levels in 2022 despite—or perhaps because of—volatile markets, depressed share prices and macroeconomic uncertainty. Specifically, there was an approximately 36 percent increase in activist campaigns in 2022 compared to 2021, and 2022 was the busiest year for activists since 2018…Established activists and a substantial number of new entrants to the market are pursuing an increased number of campaigns focused on ESG and on corporate strategies and operations. Conversely, due in part to the decline in the overall M&A market, there has been a decrease in the number of campaigns focused on M&A, as well as on capital allocation” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
How Boards are Responding to ESG Pressures From Many Sides
As the Biden Administration pushes hard on ESG commitments, boards must navigate increased scrutiny.
“The legislative kerfuffle around ESG has been brewing for years, with actions swinging drastically depending on which party is in charge. Under the Trump administration, the U.S. left the Paris climate agreement. Just a few years later, under Biden, the Inflation Reduction Act was signed into law, billed as the most consequential climate legislation in U.S. history owing to tax credits and incentives meant to help companies address climate change. On the state level, Florida is leading the charge with 18 other states in a movement against ESG investing…In recent years, shareholders, consumers, and employees have pushed companies to address larger societal issues. This movement accelerated in the wake of the 2007–08 financial crisis, when governance changes became a key focus.” FORTUNE
Why the Audit Committee Needs a Strong Read on ESG
What does the Audit Committee have to do with ESG? Plenty.
“Even though oversight for ESG tends to fall primarily with the nominating and governance committee, or in some cases across multiple committees, the role of the audit committee will continue to grow in importance, especially as formal disclosure requirements increase.” CORPORATE SECRETARY
Introducing Google Public Sector’s New Board
Almost a year after announcing its foray into government service, Google has a Public Sector Board.
“Eleven months after Google bet big on its ability to serve government customers with a new division—Google Public Sector—the new, independent subsidiary on Wednesday announced its board of directors…Board members will weigh in on leadership and financial decisions, potential mergers and acquisitions, debt structure and perform other traditional functions, but Goldfein said they’ll also have significant input on matters of policy, such as how the company applies artificial intelligence principles to the market moving forward.” NEXTGOV
