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21st July 2021
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THE HOT STORY
Working-class men lose out to women in the boardroom
A Financial Reporting Council (FRC) report on diversity in FTSE 350 firms, conducted with the London Business School, suggests the increasing number of women in boardrooms is being achieved by appointing women with high socio-economic status in place of men with a lower socio-economic status. The watchdog said it could not yet confirm the supposition, but added that there is an opportunity to “investigate to what extent one type of diversity is being traded for another inside boardrooms.” However, there was enough data to prove that greater representation of women in the boardroom is reshaping culture and dynamics and benefiting businesses from a social justice as well as a performance perspective. Sir John Thompson, chief executive of the FRC, said: “I want to see boards invest time and energy in making diverse appointments not to achieve a target but because it will have a positive impact on their business.” He continued: “The UK Corporate Governance Code makes it clear that board appointments should promote diversity and we want to see nominations committees reporting on progress.”
HYBRID WORK

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REMOTE WORKING
German employers seek clues on the future of remote working
Employers in Germany are coming to the conclusion that new "hybrid" forms of working may become the new normal, reports Deutsche Welle. Dirk Erlhöfer, the managing director of the Ruhr/Westfalen Employers' Association, a lobby group that represents 430 SMEs in the Ruhr Valley industrial heartland of Germany, says remote working has precipitated a better work-life balance that has in turn boosted productivity, and sick days have fallen significantly. Nevertheless, Erlhöfer identifies some novel obstacles presented by new working arrangements.  "It is, for example, more difficult to coordinate processes between administration and production. Technical problems also come into play, and the gradual evolving of a kind of divided, two-class staff could disturb company peace." Deutsche Welle also reports on how German chemical giant BASF is developing a hybrid work model. Valeska Schößler, a BASF spokesperson, said the model does not impose binding rules for everyone. "We are giving our teams a larger degree of flexibility in organising their work," she said, also noting the limitations of such a model: "You cannot oversee a test run in a laboratory from home, nor can our plants be maintained and repaired remotely."
Google staff wait to hear whether their remote work plans will be approved
Bloomberg reports that Google’s ongoing deliberation about which individual employees will get to continue working full time remotely and who will need to come in to the office is causing staff to be frustrated by a lack of clear direction and uneven enforcement of the policy. Despite an unexpected rebound in productivity in the remote working era, the company is sticking with its plan to bring most employees back to offices this fall. Internal research at Google also showed that employees want more “collaboration and social connections” at work, according to Brian Welle, a human resources vice president at the Alphabet unit. Welle did not provide exact data but said “more than 75%” of surveyed employees answered this way, adding that most staff also specifically wished for physical proximity when working on new projects. "There’s something about innovative work — when you need that spark . . . Our employees feel like those moments happen better when they’re together,” he said.
Zoom bets billions on continued remote working
Video conferencing firm Zoom has struck a multibillion dollar deal to buy a cloud-based call centre operator in a bet on the future of hybrid working. The company announced the $14.7bn acquisition of Five9 in a blog post on Sunday. Zoom boss Eric Yuan said the deal would allow the company’s customers to "reimagine the way they do business," adding "This acquisition is . . . positioning us to accelerate Zoom's growth and play an even stronger role in driving the digital future, bringing companies and their customers closer together."  Five9's call centre software is used by more than 2,000 clients such as Under Armour, Lululemon and Olympus, and the deal is expected to be completed in the first half of 2022 having been approved by the boards of both companies. BBC News notes questions over the future of hybrid working, although technology firms including Google and Microsoft have invested in their video-conferencing offer during the pandemic.
LEGAL
Economic crime red tape may cost firms
Businesses could be facing costly new red tape if the government extends the criminal offence of "failure to prevent" economic crimes, a top barrister has warned. Under the Bribery Act, firms can be prosecuted for failing to have adequate safeguards in place to prevent staff from committing crimes. Currently, "failure to prevent" covers bribery or tax evasion, but the government is now looking to extend it to other forms of economic crime such as fraud. The Law Commission has recently started consulting on such an extension. The Serious Fraud Office is among those calling for the reforms which will make it easier to prosecute companies. It has already ratcheted up prosecutions of businesses, rather than individuals, by the use of US-style techniques such as deferred prosecution agreements. Jonathan Fisher QC, of Bright Line Law, has warned that economic crime is such a wide definition that it could open the floodgates to litigation against companies for anything from an environmental spillage to falsification of recycling records to reduce tax liabilities.
Penalties issued to FDs fall as HMRC focuses on furlough fraud
Data obtained by law firm Pinsent Masons show the number of penalties issued to finance directors at large businesses by HMRC has dropped from 148 to just 20 in a year. Partner Jake Landman explained that the fall is due to HMRC having to shift the focus of its investigations away from tax disputes with big businesses to investigating furlough fraud. "As more furlough fraud cases are closed and the lockdown finally ends we would expect compliance work focused on big businesses to increase,” he said. “Some finance directors have felt that being personally fined for a breach of the tax rules they didn't know about is unfair. However, HMRC see it as way of forcing finance directors to take more personal responsibility for tax compliance,” he added. “When this regime was designed it was decided that a fine levied against an individual director can act as more of a deterrent than simply fining the overall business,” Landman concluded.
CORPORATE GOVERNANCE
BlackRock increases opposition to high executive pay in Europe
BlackRock has increased its opposition to executive pay in Europe over the past year, details of the asset manager’s voting records show, indicating an increased willingness to drive up corporate governance standards. BlackRock said it voted against management on 33% of “say-on-pay” proposals in European companies in the year to the end of June – up from 26% last year. This increase in opposition votes was “largely attributed” to BlackRock's opposition to adjustments that companies made during the pandemic. “BlackRock opposed executive pay programmes when companies were not able to explain how these adjustments supported long-term, sustainable value creation for shareholders, ” said Sandy Boss, global head of investment stewardship.
The world of work has changed — time for company law to catch up  
Replacing the word ‘employee’ in Section 172 of the Companies Act would give investors a more complete picture of who contributes to a company’s success, says the FT’s Helen Thomas.
DIVERSITY AND INCLUSION
Investors increase pressure on companies over racial issues
Figures from data provider Proxy Insight show shareholder pressure on companies to address race and other diversity issues has risen to record levels, driven by the BLM movement in particular.
TAX
Treasury announces self-employed tax overhaul
Freelancers and small businesses will benefit from an overhaul of tax reporting rules, the Treasury said as it revealed changes that will see self-employed profits taxed in line with other forms of income, such as property and investment income. Under the current system, tax returns filed by the self-employed, sole traders and partnerships are based on a business’s set of accounts ending in the tax year (April 5th). HM Treasury said the current rules create confusion leading to thousands of mistakes in tax returns. The changes, which will come into force by 2023, will mean businesses will be taxed on profits arising in a tax year, rather than profits of accounts ending in the tax year.
STRATEGY
EY buys business performance specialist
EY has acquired Maidenhead-based Lane4, a leadership and team development specialist. Lane4 Management Group Holdings will bolster EY People Advisory Services’ growth plans by strengthening its transformational leadership and culture change capabilities. Tricia Nelson, EY's managing partner for People Advisory Services in the UK and Ireland, said: "The acquisition of the business of Lane4 represents a significant investment and aims to strengthen the EY position as a leading organisation providing leadership development and large-scale, culture and transformational leadership projects."
INTERNATIONAL
Walmart loses disability lawsuit
A federal jury in Wisconsin has awarded more than $125m to a former Walmart employee with Down syndrome who the Equal Employment Opportunity Commission (EEOC) said was fired because of her disability. Walmart was accused of firing longtime employee Marlo Spaeth after she experienced difficulties with a change in her schedule. The eight-member jury found that the grocery giant failed to provide a reasonable accommodation to Spaeth and dismissed her in violation of the Americans with Disabilities Act, according to the EEOC. The award included $150,000 in compensatory damages and $125m in punitive damages, the EEOC said. That verdict was quickly reduced to a statutory maximum of $300,000 by the judge in the case. “Employers, no matter how large, have an obligation under the law to evaluate the individual circumstances of employees with disabilities when considering requests for reasonable accommodations,” Chicago District Director Julianne Bowman said in a press release announcing the verdict.
OTHER
White men get away with more mistakes, professor says
White men can get away with making a mistake more easily than any other group, says Rosemarie Buikema, Professor of Art, Culture and Diversity at the University of Utrecht. “They can actually make mistakes fairly easily without dragging the entire group to which they belong into the abyss,” Buikema said. Buikema says her studies want to find out “What determines whether you are allowed to participate in the decision-making process about what is important in the world and which values and norms matter?” She notes the error made by Dutch Prime Minister Mark Rutte and Health Minister Hugo de Jonge when they relaxed coronavirus measures too quickly, precipitating a spike in Covid cases. “We have a male prime minister and a male health minister who made a huge mistake by releasing restrictions too quickly. There is no one who says: those white men always make mistakes.”

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