Investor Relations Week: SEC Cyber Rule May Raise Risk, CEO-Worker Pay Gap Grows, Musk-Twitter Saga Continues
– A new rule forcing US asset managers to disclose more information about cyberattacks could actually be a boon for hackers, critics have warned. WatersTechnology said the proposed rule, requiring investment firms to report any “significant cybersecurity incident” to the SEC within 48 hours and to “promptly” notify clients of any breaches, could expose compromised firms to further attacks when they’re most vulnerable, according to cyber security experts.
– CNBC reported that the pay gap between CEOs and workers is widening again as executives who took pandemic pay cuts have more than clawed back lost earnings over the past year. CEOs earned 254 times more than the average worker in 2021, up 7% from the previous year, according to the Equilar 100, which offers a first look at CEO compensation at the biggest companies in terms of income who filed proxy statements for 2021 by March 31.
In 2021, median CEO compensation reached $20 million, a 31% increase over the previous year due to the sharp increase in stock awards and cash bonuses based on market performance and business productivity. According to Lawrence Mishel of the Economic Policy Institute, CEO compensation consists of salary plus bonuses, long-term incentives and stock options, which make up about 85% of CEO compensation.
The median compensation of workers at Equilar 100 companies increased from $68,935 in 2020 to $71,869 in 2021, an increase of about 4%. Equilar says this increase is due in part to companies offering bonuses and other cash payments in the recovery from the pandemic economy which has seen an increase in consumer demand and a tighter supply of employers.
– CNBC reported that Elon Musk said Twitter’s board would not be compensated for his service if he acquired the company. “Board pay will be $0 if my bid is successful, which is about $3 million a year saved there,” Musk said in a tweet. It’s unclear who would be nominated to serve on the board of a Musk-owned Twitter. After accumulating more than 9% of shares, Musk offered to buy Twitter in a deal valued at around $43 billion. In response, Twitter adopted a time-limited shareholder rights plan, often referred to as a poison pill, in an effort to ward off a potential hostile takeover.
The Guardian also reported details of Musk’s funding plan: According to a filing on Thursday, he secured $46.5 billion in funding to fund a possible hostile Twitter bid and is investing $21 billion of his own money in the package frame. In addition to that equity, Musk is raising an additional $12.5 billion for the offering via a margin loan secured by his shares in Tesla. Morgan Stanley leads a group of financial institutions providing $13 billion in debt financing.
– The FinancialTimes (paywall) said Goldman Sachs had reported Wall Street rival Morgan Stanley to Hong Kong’s financial regulator for a series of block trades, citing “people familiar with the matter”. Goldman reportedly alerted the Securities and Futures Commission to the territory three years ago as part of an ‘informal’ discussion of share price declines of a small number of Hong Kong-listed companies that occurred shortly before Morgan Stanley marketed blocks of shares, one of the people said. “It’s interesting to file a complaint against a competitor,” the person said.
– European regulators have warned of emerging risks in the markets, according to The exchange, with the latest assessment report concluding that Russia’s invasion of Ukraine has amplified existing risks and increased vulnerabilities across the financial sector. Three supervisory authorities – the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority – have published a joint risk assessment report for 2022 highlighting heightened vulnerabilities in the financial sector as well as the rise of environmental and cyber risks.
– The Financial Conduct Authority (FCA) has said that women should make up at least 40% of the boards of companies listed in the UK and that one director should be a person of colour, Reuters (paywall) reported. At least one senior position such as company chairman, CEO or chief financial officer should be held by a woman, the FCA added. The regulator said companies will have to make annual statements showing how they are complying with the new rules or explaining any discrepancies.
“As investors pay increasing attention to diversity at the top of the companies they invest in, improving transparency at the board and management level will help hold companies to account and boost further progress,” said Sarah Pritchard, FCA’s executive director of markets. In February, the government-backed FTSE Women Leaders Review said women’s representation on the boards of the UK’s 100 biggest companies stood at 39.1%.
– In related news, pay for FTSE 100 chief executives rebounded to pre-pandemic levels after rising by a third in 2021 as some sectors experienced a post-Covid boom and companies measured performance against conservative targets, reported the FT. An analysis by PwC of the top 50 FTSE 100 companies to publish their 2021 compensation reports – based on financial years ending in September 2021 or later – found that median total compensation for chief executives increased by 34% compared to 2020, to reach £4.1 million ($5.3). min). Growth was mainly driven by a strong increase in annual premiums. That marked a return to levels last seen before Covid-19, the newspaper said.
– The Wall Street Jlog (paid wall) reported that a group of New York City and state pension funds that collectively own more than $5 billion in Amazon.com stock are urging other shareholders to vote against the re-election of two board members of directors for what the institutions see as failures to adequately protect worker safety. The New York City Pension Fund joined with the New York State Pension Fund and the Illinois State Treasurer’s Office to vote against the re-election of Daniel Huttenlocher and Judith McGrath. Both directors sit on a committee of Amazon’s board of directors that oversees leadership development.
New York City Comptroller Brad Lander said Amazon administrators have repeatedly refused requests to meet and discuss the company’s treatment of its employees, which the group says “violates state and federal laws and also conflicts with Amazon’s own human rights policy.” When asked to comment, an Amazon spokesperson provided the company’s security report. “In 2021, we invested $300 million in safety enhancements such as capital improvements, new safety technologies, vehicle safety controls and engineered ergonomic solutions,” the report said.
CNN also broke the news that Amazon would conduct a racial equity audit, following pressure from shareholders.
– In other activism news, Carl Icahn urged top ESG investing-focused index fund managers to back his proxy fight at McDonald’s Corp for better treatment of pregnant pigs, the WSJ reported. The activist investor has named two directors to the fast food company’s board as part of his campaign. McDonald’s shareholders will decide whether to back the Icahn nominees or the company’s slate at its annual general meeting, scheduled for May 26. Icahn said some ESG-focused investors subjectively select the principles they care about and place too little emphasis on animal welfare.
In a letter to McDonald’s shareholders, Icahn criticized McDonald’s for spending $16 million to defend against its proxy fight rather than putting the money in to spare petty cash hogs.
McDonald’s did not immediately respond to a request for comment.
– “Seven years after the collapse of its IPO, Deezer is in talks to go public again,” said The music industry around the world (MBW) – this time via an ad hoc acquisition company (Spac). The merger with I2PO, a Paris-listed blank check company backed by billionaire Francois Pinault, values Spotify’s rival at 1.05 billion euros ($1.1 billion), the newspaper added. FT. He reported that the Spac deal had raised €135m in the form of Pipe funding and a non-buyout agreement – in which investors agree not to withdraw their funds from the deal – from existing Deezer investors, including Universal Music Group, Warner Music and Orange. .