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The Morning Risk Report: Companies Under Growing Pressure to Recoup Executive Pay
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Good morning. Before the Securities and Exchange Commission adopted a new rule last week on clawing back executive pay, the agency and federal prosecutors had begun ramping up efforts to recoup compensation from top executives whose companies run afoul of accounting rules or the law.
The new SEC rule will require companies to try to recover incentive pay from executives after significant financial-statement errors, even where no misconduct occurred. But the agency already has been more aggressive about using existing powers to pursue such clawbacks where accounting violations are alleged to stem from misconduct, including from executives who weren’t directly involved.
In the past year, the SEC has sued or settled with 11 executives to recover past pay under provisions of a 2002 law, including nine executives in the past four months, said Andrew Boutros, chair of law firm Dechert LLP’s U.S. white-collar practice for Chicago and Washington, D.C. The provisions had been used infrequently before that, said Mr. Boutros, who with his colleagues recently briefed clients on the increased enforcement.
The dialing-up of enforcement is intended to press corporate leaders to better police conduct at all levels of their companies, according to legal, compensation and governance professionals.
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Content from our Sponsor: DELOITTE
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Government’s Role in Accelerating AI Entrepreneurship
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If the government succeeds in further promoting entrepreneurship focused on AI, the technology could unlock new productivity gains and innovations for workers, private businesses, and government. Read More ›
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WSJ Risk & Compliance Forum
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Speakers at the WSJ Risk & Compliance Forum on Nov. 16 include Brian Nelson from the U.S. Treasury Department and Robert Silvers from the Department of Homeland Security, along with multiple experts on corporate risk and compliance. Sign up here for discussions on economic sanctions, forced labor, climate change regulation, whistleblowers and cybersecurity.
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Ex-SEC Digital Assets Counsel to Advise Web3 Risk-Management Startup
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AnChain.AI, a digital asset risk-management company focused on Web3, has retained a former U.S. Securities and Exchange Commission blockchain-technology counsel as a strategic adviser, the company said on Monday.
Scott Walker will continue as chief compliance officer at venture-capital firm Andreessen Horowitz, also known as a16z, where he oversees its regulatory compliance of investments in cryptocurrency, gaming and biotech, among other areas, according to his LinkedIn profile. Prior to joining a16z in May of this year, he spent six years at the SEC, including as the senior specialized counsel and examiner of digital assets and blockchain technology.
Mr. Walker will advise San Francisco-based AnChain.AI on the use of its risk-monitoring technology in decentralized finance and Web3, the company said. Web3 is considered by some to be the next generation of the internet, a decentralized version of the web based on blockchain. Mr. Walker will also guide the company on issues related to crypto-asset regulation and how its products can address the most present threats in the current system, a spokesman added in an email.
Mr. Walker didn’t immediately respond to a request for comment.
—Mengqi Sun
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Xiaodi Hou was ousted as chief executive of TuSimple, which faces probes into whether it improperly financed and transferred technology to a Chinese startup.
PHOTO: KELLY SULLIVAN/GETTY IMAGES FOR TECHCRUNCH
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TuSimple fires CEO amid federal probes. TuSimple Holdings Inc., a self-driving trucking company, said on Monday it had fired its chief executive and co-founder, Xiaodi Hou.
The San Diego-based company said in a news release and securities filing that its board of directors on Sunday had ousted Mr. Hou, who was also the board chairman and chief technology officer.
Mr. Hou was fired in connection with a continuing investigation by members of the board, the release said.
“Fundamentally, we lost trust and confidence in Dr. Hou’s judgment, decision-making and ability to lead the company as CEO,” TuSimple’s independent board of directors said in a statement.
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Trump Organization trial starts with sparring over Allen Weisselberg’s intent. The Trump Organization’s criminal trial began Monday with arguments over whether longtime finance chief Allen Weisselberg directed a fraud scheme to help reduce the company’s tax bill or instead was motivated by securing personal benefits including a rent-free Manhattan apartment and paid leases for luxury cars.
The Manhattan district attorney’s office has brought tax-fraud charges against two companies—Trump Corp. and Trump Payroll Corp.—that are part of a group of entities collectively referred to as the Trump Organization. The companies were owned by Donald Trump until he became president, and afterward controlled through Mr. Trump’s trust.
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In other compliance-related news...
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Former President Donald Trump asked the Supreme Court to block a House committee from obtaining his past tax returns from the Internal Revenue Service before a Thursday deadline for the material to be turned over.
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The Biden administration will make it easier for students defrauded by for-profit schools to get federal student loan forgiveness under new rules set to go into effect on July 1, setting up a speedier path for debt relief for potentially hundreds of thousands of borrowers.
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A federal judge on Monday blocked Penguin Random House from acquiring rival book publisher Simon & Schuster for about $2.18 billion, agreeing with the Justice Department that the planned merger would unlawfully lessen competition.
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The number of pneumococcal vaccine doses administered in the U.S. rose 12% from a year ago.
PHOTO: SCOTT OLSON/GETTY IMAGES
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Drugmakers fight over lucrative pneumonia vaccines. Rival drugmakers are seeking to upend Pfizer Inc.’s dominance of the $7 billion worldwide market for pneumonia vaccines, launching what is shaping up to be one of the industry’s fiercest battles.
Merck & Co. has already introduced a new competitor to Pfizer’s Prevnar vaccine franchise, while GSK PLC and Vaxcyte Inc. are among companies developing shots that aim to win sales by protecting against even more strains of the pneumonia virus.
The companies are all vying for a piece of a lucrative market that Pfizer has commanded for more than a decade and is forecast to reach more than $10 billion annually by 2028, according to Wall Street analysts.
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Hong Kong considers opening crypto retail trading. Hong Kong is considering lifting a ban on the retail trading of cryptocurrencies, part of an effort to become a hub for digital assets.
That would reverse a yearslong policy that has officially restricted crypto trading on licensed exchanges to professional investors in the city, although retail, or nonprofessional, investors can still trade over-the-counter or use overseas exchanges. The government announced the idea on Monday, the opening day of the Hong Kong FinTech Week conference.
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In other risk-related news...
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One of the first closely watched seasonal outlooks for what the European winter holds sees colder and drier weather than usual across the U.K. and Northern Europe, conditions that could add pressure on governments and companies managing the continent’s supply of natural gas.
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The Treasury Department said that ships loaded with Russian oil before Dec. 5 won’t be subjected to U.S.-led price cap on Russian oil, as Washington attempts to reassure anxious oil markets about its plan for new sanctions.
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Toyota Motor Corp. said it still can’t get its hands on enough semiconductors to meet its production goals, despite signs of excess supply elsewhere in the chip business.
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Andersen Global CEO discusses legacy of defunct audit giant, overseas expansion. Twenty years after the dissolution of Arthur Andersen, the accounting giant felled by the Enron Corp. scandal, the firm that emerged from its remnants has plans to grow its footprint in Asia and expects no more than a minimal hit to the bottom line from a possible recession, according to its chief executive officer.
Mark Vorsatz, chairman and CEO of Andersen Global, the San Francisco-based tax and legal services firm, expects its member firms to generate $1.5 billion in revenue this year, up from nearly $1.1 billion last year. That includes $540 million in revenue from the firm’s U.S. tax-only business, known as Andersen, up from $452 million last year, he said.
Read the full interview with Mr. Vorsatz here.
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Twitter said the nine members of its former board are no longer directors as of the consummation of the merger.
PHOTO: CONSTANZA HEVIA/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Elon Musk ousts Twitter board, names himself sole director. The board that oversaw Twitter Inc. during its tumultuous sale to Elon Musk has been dissolved, with the Tesla Inc. chief now serving as the social-media company’s sole director.
Twitter said in a securities filing Monday that the nine members of its former board are no longer directors as of the consummation of the $44 billion merger, which closed last Thursday after six months of hand-wringing over the deal’s fate.
Mr. Musk always intended to take over as sole director under the terms of the merger agreement, according to the filing.
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China’s latest reading on manufacturing raises the question of what will drive growth.
PHOTO: STR/AGENCE FRANCE-PRESSE/GETTY IMAGES
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China’s factory slowdown worse than expected. China’s factory activity contracted in October after a short-lived improvement, a fresh sign of the toll from the country’s stringent Covid policies and of fading global demand for Chinese-made goods.
The official purchasing managers index for manufacturing fell to 49.2 from 50.1 in September, the National Bureau of Statistics said on Monday. The result fell short of the 49.7 median forecast of economists polled by The Wall Street Journal, underscoring the vulnerability of China’s economy to its pandemic-control policies. A reading below 50 indicates contraction in activities.
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UAW files for permission to set election at Ohio plant. The United Auto Workers are seeking federal permission to hold an election at a new battery plant in Ohio co-owned by General Motors Co., claiming the factory’s owner has resisted workers’ efforts to unionize.
The UAW said on Monday that a majority of the facility’s 900 workers have signed cards requesting that the union represent them at the factory, which is owned by Ultium Cells LLC, a 50-50 joint venture between GM and Korean battery supplier LG Energy Solution. The northeast Ohio facility opened in late August.
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In other operations-related news...
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Saudi Arabia’s national oil company posted a 39% jump in quarterly profit on Tuesday, as high oil prices boosted earnings that help the kingdom pay for an ambitious economic transformation plan at home and expand its diplomatic influence in the region.
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BP PLC reported robust underlying profit for the third quarter and said it would buy back another $2.5 billion of shares, as a strong performance in natural-gas trading offset weaker refining margins.
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