June 26, 2020

Sustainability Disclosure: Pru Reports “Stakeholder Framework” Progress

Late last year, Liz blogged about Prudential’s “multi-stakeholder framework” and the company’s intent to report progress under that framework in future sustainability reports. Yesterday, the company issued its first report since making that commitment.

Our good friend Peggy Foran and her team organized the report by 5 “capitals of sustainability”:

– Corporate Governance: this pillar includes the “multi-stakeholder” framework that codified the board’s accountability to shareholders, employees, customers and society

– Business Model & Innovation: highlighting strategic acquisitions

– Human Capital: noting that Prudential created an “Inclusion Council” last year to ensure C-suite accountability for inclusion & diversity, explaining the director identification process and sharing that 80% of the company’s outside directors are diverse

– Social Capital: discussing the company’s sustainability commitment, support for stakeholders in the midst of Covid-19 and supply chain efforts

– Environment: describing Pru’s “Global Environmental Commitment” that includes operational and investment targets – the company was carbon neutral in its corporate travel and in early 2020, it was the first insurer to issue a green bond

Prudential has issued a sustainability report for several years so they might be further along than others, but for those starting down the path of pulling a similar report together, Prudential’s report is worth a look. The company also has a sustainability micro-site and there, you’ll find the report and a series of short videos with 6 senior leaders.

Covid-19: Investors Want Mandated Disclosures

As reported in a recent Davis Polk blog, Americans for Financial Reform sent a letter signed by over 90 investors, state treasurers, public interest groups and others calling on the SEC to create new Covid-19-related disclosure requirements.  The letter says the disclosure requirements would help investors understand how companies are protecting workers, preventing the spread of the coronavirus and responsibly using any federal aid the companies receive.  Depending on how companies respond to Covid-19, the letter says the potential impact of losses resulting from Covid-19 will be significant.

The requested disclosures are somewhat lengthy and it’s understandable that the information could be helpful to investors, although it would be more work for companies and securities lawyers.  Requested disclosures dealing with cash flow and liquidity concerns and supply chain adjustments may have been addressed, in part, by Corp Fin’s Covid-19 supplemental guidance issued earlier this week.  Some of the other requested disclosures relate to worker protections during Covid-19, compliance with public health recommendations about reopening, rationale supporting executive compensation modifications and all election spending and lobbying activity, including funds spent through trade associations.

With companies preparing Q2 disclosures, the SEC is holding a “Roundtable on Q2 Reporting: A Discussion of Covid-19 Related Disclosure Considerations” this coming Tuesday, June 30.  SEC Chairman Jay Clayton is moderating the roundtable and it will include Gary Cohn, Former Director of the National Economic Council; Glenn Hutchins, Co-Founder of Silver Lake Partners; Tracy Maitland, President of Advent Capital Management; and Barbara Novick, Vice Chairman of BlackRock.  The roundtable is being webcast and can be viewed on the SEC’s website.

Tesla Delays Its Meeting – And D&O Coverage Puts Glass Lewis “Against” Chair

Many have likely seen reports that Tesla postponed its annual shareholder meeting.  The delay is due to social distancing concerns – it had been scheduled for July 7.  Elon Musk tweeted news of the delay and a few days later tweeted that September 15 is the tentative reschedule date – Tesla filed additional soliciting materials with this information and as some would say, a screenshot is worth a thousand words.

With Tesla’s original meeting date just around the corner, proxy advisors issued their voting reports and the NYT reports that Glass Lewis has recommended investors vote “against” Tesla’s Chairwoman, Rhonda Denholm.  Back in May, John blogged about Elon Musk’s cost-saving move by not renewing the D&O liability policy for directors and instead, that Musk intends to personally provide the coverage.  According to the article, that cost saving move is behind Glass Lewis’s recommendation:

The recommendation was based on corporate governance concerns due to an insurance arrangement with Chief Executive Officer Elon Musk after Tesla’s decision to not renew its directors and officers’ liability policy due to high premiums quoted by insurers, Glass Lewis said.  The article quotes Glass Lewis: ‘We are concerned that this D&O arrangement gives the company’s independent directors a direct, personal financial dependency upon the CEO they are tasked with overseeing.’  Since Denholm heads the audit committee that permitted the insurance arrangement, it recommends voting against her.

– Lynn Jokela