Key Governance Developments - December 2019

Renault and partners seek to draw a line under Ghosn remuneration case 

Renault, Nissan and Mitsubishi are planning changes, including a joint autonomous vehicle R&D organisation and creating the new post of secretary-general, to reboot their auto manufacturing alliance after the damage caused by the arrest of chairman Carlos Ghosn a year ago. Ghosn is accused in Japan of having illegally concealed part of the remuneration he received from Nissan, whose CEO, Hiroto Saikawa, subsequently was also forced out after admitting he and other executives had been overpaid as part of a stock-related remuneration scheme. Ghosn has consistently denied wrongdoing, saying his downfall was precipitated by executives at Nissan opposed to a closer relationship or merger with Renault, the alliance's dominant partner.

Renault, Nissan and Mitsubishi plan governance changes to reboot alliance

Renault, Nissan and Mitsubishi will establish a single research and development business to develop self-driving car technology as part of their plans to rebuild their alliance, following disagreements between the partners in the wake of the arrest of former chairman and the grouping's driving force, Carlos Ghosn, on financial impropriety charges in Japan. The alliance also intends to appoint a secretary-general to strengthen the links between the three companies, although the new CEO of Nissan, Makoto Uchida, has halted talks on restructuring the cross-company ownership structure between Renault and Nissan. Japan’s market regulator, the Securities and Exchange Surveillance Commission, has recommended that Nissan be fined ¥2.4bn ($22m) for the under-reporting of Ghosn’s compensation during the four financial years from April 2014 to March 2018. Ghosn was arrested last year over allegations including understating his salary by around ¥9.1bn over nearly a decade and temporarily transferring personal financial losses to Nissan's books.

Best source: Financial World

See also: Financial Times (subscription required)

See also: Reuters


UK financial regulators expand senior manager accountability regime

The Senior Managers and Certification Regime overseen by UK regulators Financial Conduct Authority and Prudential Regulation Authority has been extended to include independent financial advisers, investment fund managers and hedge fund managers, involving around 47,000 companies. The rules will not be applied retrospectively for past senior management failings. The only person to have been sanctioned under the regime has been Barclays CEO Jes Staley, who was fined £642,000 in 2018 for attempting to uncover the identity of a whistleblower.

Best source: Financial Times (subscription required)


Swedbank rings management changes in response to money laundering allegations

Helo Meigas is to step down as chief risk officer at Swedbank, to be succeeded on an interim basis by Gunilla Domeij Hallros, and Jon Lidefelt will temporarily replace Charlotte Elsnitz as head of Baltic banking in the latest round of executive changes in response to the bank's implication in alleged money laundering. Jens Henriksson was appointed CEO in August after the dismissal of Birgitte Bonnesen over her handling of allegations that Swedbank's Estonian branch processed suspect transactions involving up to €20bn a year. Responsibility for investigations regarding historical shortcomings in anti-money laundering controls moves to a newly-created special task force headed by former head of treasury Tomas Hedberg, who reports directly to the CEO.

Best source: Reuters

See also: Swedbank

See also: ERR News

Founder and independent directors leave M&C Saatchi board over accounting failings

Maurice Saatchi, co-founder of the advertising agency M&C Saatchi with his brother Charles, has resigned from the company's board along with three non-executive directors, Michael Dobbs, Michael Peat and Lorna Tilbian, after the company issued a second profit warning and admitted that accounting irregularities revealed in August could stretch back five years. The group had initially taken a £6.4m accounting charge because of over-aggressive revenue recognition at its UK operation, but has now increased the amount set aside to £11.6m. According to an independent review by PwC, last year M&C Saatchi booked revenues from 12-month contracts into the first half of the year and said that similar practices may have been going on since 2014, as well as understating project costs, misrepresenting assets such as obsolete software on the balance sheet, and overstating the value of assets such as fixtures and fittings. The company's share price has fallen by more than 60% this year.

Best source: The Guardian

See also: Financial Times (subscription required)


Commission report sees conflict of interest for Czech premier over EU grants

A legal opinion provided to the European Commission says that Andrej Babiš, prime minister of the Czech Republic, had conflicts of interest over €82m in EU grants paid to his company Agrofert in 2018 under EU rules stating that public officials and politicians should not benefit from EU funds they control. The Commission is also investigating other structural and investment grants received by the conglomerate since 2013, when Babiš was the country's finance minister. The Czech Republic government could be asked to reimburse some of the €82m paid to Agrofert last year.

Best source: The Guardian


M.M. Warburg chairman and former CEO Olearius forced out over cum-ex deals

M.M. Warburg chairman Christian Olearius and his deputy Max Warburg, who are both also major shareholders in the Hamburg-based private bank, will step down at the end of the year after almost four decades in charge due to a demand for their departure by German financial regulator BaFin over their alleged involvement in cum-ex transactions. Olearius will be succeeded as chairman by fellow board member Bernd Thiemann, a former CEO of Norddeutsche Landesbank and DG Bank.

Best source: Handelsblatt (in German)

See also: Süddeutsche Zeitung (in German)


Hamburg introduces sustainability code for publicly-owned companies

The City of Hamburg and its business holding company Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement will require all publicly-owned businesses to comply with sustainability rules as of January 1. Companies with a balance sheet exceeding €20m, sales of more than €40m, or more than 250 employees will be required to publish sustainability reports every two years. Hamburg public companies include port operations, public transport and ownership of police and fire stations and museum buildings.

Best source: Hamburg News


Institutional investors criticise UK dual-share class proposals

Rupert Krefting, head of corporate finance and stewardship at M&G, Euan Stirling, head of stewardship at Standard Life Aberdeen, and Edward Park, deputy chief investment officer at wealth manager Brooks Macdonald, have criticised proposals by the UK government to alter listing rules to allow dual-class share structures. The government wants to encourage more high-growth companies to list on the London Stock Exchange after Brexit, including tech companies whose founders often favour such share structures in order to retain control after an IPO. However, investment managers believe the structures are not compatible with good corporate governance and the principle of one share, one vote.

Best source: Financial Times (subscription required)


Irish accounting regulator to rate largest audit firms

The Irish Auditing and Accounting Supervisory Authority is to rate the work of the country’s eight largest auditing forms, based on a sample of statutory audits undertaken in 2018. The report will grade the work of EY, Deloitte, KPMG, PwC, Grant Thornton, BDO, Mazars and EisnerAmper. The audit companies will be given one year to rectify issues and deficiencies. If they do not, they face additional investigation and potential fines of €100,000 per partner and mandatory disciplinary panels for firms or individuals.

Best source: Irish Times


ECB demanded remedial measures after Bank of Valletta money-laundering failures

A report adopted by the European Central Bank last summer found that Bank of Valletta had failed to remedy its risk management and anti-money laundering failures, despite warnings by the ECB since 2015. The report called for remedial measures, including a reassessment of the Maltese bank’s senior management’s fitness for their responsibilities and a reduced exposure to foreign client risk. Bank of Valletta says it has improved its risk, governance and anti-money laundering procedures and structures, noting that corporate clients in the gaming sector would be most at risk from remedial measures.

Best source: Reuters