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Companies need to share more wealth with workers

For two generations, workers’ wages have stagnated. During this period, powerful institutional investors have tied executive pay to stock performance and created a corporate-governance system solely focused on delivering for stockholders.

The bulk of the rewards for improved corporate performance shifted to stockholders and top management, at the expense of other company stakeholders.

The result has been soaring inequality, increased economic insecurity and a growing anxiety that the US capitalist system is stacked against working people.

Business leaders have even acknowledged that an economic system that doesn’t work for everyone is unsustainable, most prominently in the Business Roundtable’s statement last August that the purpose of a corporation shouldn’t be just to serve shareholders, but workers as well.

We would go further: Revise the mandate of board compensation committees to make them responsible for overseeing a more equitable pay distribution for the entire company workforce. This is made more urgent by the Covid-19 pandemic which makes clear that the people doing the risky work essential to our economy make much less than the national average. Basic fairness requires us to right these inequities, especially because taxpayers have once again bailed out big business.

Boards must make more sensible decisions about senior executive compensation, situating it within the overall context of the company’s workforce. Likewise, a focus on workers will help directors make more enlightened decisions about balancing shareholder returns with equitable compensation for workers and the maintenance of prudent reserves to help the company better withstand future adversity.

This approach requires directors and senior executives to set baselines for more equitable pay along with metrics to track the workforce’s share of gains in productivity and profitability. That policy should recognise that stockholders deserve a solid, long-term return but also that employees have a deep incentive to sustain corporate profitability and deserve fair wages and encouragement for working hard to achieve that objective.

Although it would be unproductive for a board committee to enmesh itself too deeply in the details of worker pay, a solid grasp of essentials is necessary. For example, the committee could ask company management and advisers to identify – both company wide and along major business lines – data such as the mean and median pay and benefits package of each quartile of employees, with corresponding data about their function, educational level, skill set and business relevance.

The committee should also collect information on whether there is a race and gender-pay disparity. Importantly, it must also consider the company’s use of contract labour and whether those workers are fairly treated.

But the committee shouldn’t stop at issues of pay: it must approve company policies to ensure that employees have safe working conditions, reliable and family-friendly schedules, are treated with respect and dignity, and have a welcoming and inclusive workplace that is free from discrimination and harassment.

By doing this, the well-being of the workers, who are critical to the company’s success, can become a central consideration in corporate decision-making.

Perhaps most of all, if corporate America is serious about capitalism working for the many, the reconceived compensation committee can ensure that workers receive their fair share of the value they create.

BLOOMBERG

• Leo E. Strine Jr is the former chief justice of the Supreme Court of Delaware. He now serves as adjunct professor at Harvard and Penn law schools.

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Trump approves five-week extension for small business pandemic loan applications

WASHINGTON (Reuters) – U.S. President Donald Trump on Saturday signed into law a deadline extension to August 8 for small businesses to apply for relief loans under a federal aid program to help businesses hurt by the COVID-19 pandemic, the White House said.

The extension to the Payroll Protection Program (PPP), which was launched in April to keep Americans on company payrolls and off unemployment assistance, gives business owners an additional five weeks to apply for funding assistance plagued by problems.

An estimated $130 billion of the $659 billion provided by Congress is still up for grabs. Critics worry the U.S. Small Business Administrator’s office, which administers the loan, may continue to experience challenges in fairly distributing the funds.

From the outset, the unprecedented first-come-first-served program struggled with technology and paperwork problems that led some businesses to miss out while some affluent firms got funds.

The SBA’s inspector general found in May that some rural, minority and women-owned businesses may not have received loans due to a lack of prioritization from the agency.

Reuters reported here on Thursday that a technical snafu in a U.S. government system caused many small businesses to receive loans twice or more times, nearly a dozen people with knowledge of the matter said.

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Coronavirus: New European publisher Archant hunts new owners

One of Britain’s oldest regional newspaper groups has put itself up for sale as it races to find new investors willing to plug a funding deficit exacerbated by the COVID-19 pandemic’s disastrous impact on industry-wide advertising revenues.

Sky News has learnt that Archant, which was established in 1845 and publishes titles including the Eastern Daily Press and London’s Ham & High Express, has appointed corporate financiers to find new backers.

City sources said this weekend that the family-owned company wanted to secure new funding within the next few months.

KPMG, the professional services firm, is handling the process.

Archant is one of the most venerable names in Britain’s print media industry, having been jointly founded more than 175 years ago by the Colman family whose name went on to adorn one of the most prominent brands of English mustard.

Along with the Colmans, the Copeman family continue to own the business, which is headquartered in Norwich and employs close to 1,100 people.

It publishes around 60 newspaper brands as well as 75 magazine brands which include Airgun World and Tillergraph, a title aimed at canal boating enthusiasts.

The company boasts 9m unique monthly visitors to its websites, and prints in aggregate more than 6m copies of its publications every month.

Last year, it struck a landmark partnership with Google, the online search giant, to develop a new model for local digital news.

The website PeterboroughMatters.co.uk was the first site to launch from this partnership, which is said to be worth roughly £4m in revenue to Archant.

For Google, the search division of Alphabet, the joint venture was partly intended to counter criticism of the extent to which it and Facebook have eroded ad revenues from traditional sources of local news.

The regional publisher has seen sales decline in recent years, from £96.6m in 2017 to £78.7m last year, with a further fall likely this year as a consequence of the coronavirus outbreak.

One bright spot has been The New European, the anti-Brexit national title which Archant launched just days after the EU referendum as a four-week “pop-up paper”, became a surprising commercial success and continues to be published.

It sells roughly 20,000 copies each week, with 10,000 subscribers, while its website generates 3.5m page views-per-month.

Several private equity groups have been sounded out about their interest in a deal to buy part or all of Archant, according to insiders.

The group’s shareholders are understood to be open-minded about an outright sale of the business.

Any deal could be structured as a pre-pack administration, which would wipe out the interests of existing investors.

David Montgomery, the serial newspaper investor who previously ran the Daily Mirror’s parent company, is likely to be among the contenders to buy the company, according to media analysts.

Mr Montgomery has created a new vehicle, National World, to acquire newspaper and other media assets, and has been rumoured to be interested in bidding for The Daily Telegraph.

One obstacle to a deal is likely to present itself in the form of Archant’s pension deficit, which runs to tens of millions of pounds.

The funding gap is a legacy of the publisher’s long history and the decades-long decline in print circulation and advertising revenues.

In that and other respects, it echoes the demise, and rebirth, of Johnston Press, Archant’s larger rival and owner of The Scotsman and Yorkshire Post.

The pensions watchdog dropped a probe last year into whether the company had used a pre-pack insolvency process to dump £300m of pension liabilities into the Pension Protection Fund.

JPI Media, as the company is now known, has temporarily halted publication of many of its print titles, and has put on hold the search for new owners.

Archant has shaken up its management in an attempt to improve its financial performance.

Last year, it replaced its chief executive – former ITV executive Jeff Henry – and chief financial officer, appointing Simon Bax, a former finance chief from the animation studio Pixar, as executive chairman.

Under Mr Bax, Archant is said to have made good progress, although its print titles have been badly affected by the UK-wide lockdown, hastening the need for new funding.

In a statement issued to Sky News this weekend, an Archant spokesman said: “The board of Archant confirms it is in early-stage discussions with a number of third parties who have expressed an interest in investing in our business.

“For clarity, the company faces no immediate threat to trading, and continues business operations as normal.”

Archant would, he added “be making no further comment for the time being”.

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Oil falls below $43 a barrel on virus fears, still heads for weekly gain

LONDON (Reuters) – Oil fell below $43 a barrel on Friday as a resurgence of coronavirus cases raised concern that fuel demand growth could stall, although crude was still headed for a weekly gain on lower supply and wider signs of economic recovery.

The United States reported more than 55,000 new coronavirus cases on Thursday, a new daily global record for the pandemic. The rise in cases suggested U.S. jobs growth, which jumped in June, could suffer a setback.

“If this trend continues, oil demand in the region is at risk,” said Louise Dickson of Rystad Energy.

Brent crude was down 38 cents, or 0.9%, at $42.76 a barrel by 12:03 p.m. EDT (1603 GMT), and U.S. West Texas Intermediate (WTI) crude fell 44 cents, or 1.1%, to $40.21.

U.S. trade was thinned by the Independence Day holiday.

“The fragile U.S. economic rebound is at risk of being undone by the latest surge in new infections,” said Stephen Brennock of oil broker PVM.

Both benchmarks rose more than 2% on Thursday, buoyed by strong U.S. June jobs figures and a drop in U.S. crude inventories. Brent is still on track for a weekly gain of 4%.

Signs of economic recovery, and a drop in supply after a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, have helped Brent more than double from a 21-year low below $16 reached in April.

Boosting recovery hopes, a private survey showed on Friday that China’s services sector expanded at the fastest pace in over a decade in June.

OPEC oil production fell to its lowest in decades in June and Russian production has dropped to near its OPEC+ target.

The bankruptcy filing of U.S. shale pioneer Chesapeake Energy also supported prices by raising expectations production will decline, JBC Energy said in a report.

Gasoline demand will be closely watched as the United States heads into the July 4 holiday weekend.

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Embraer union seeks planemaker's board ouster after failed Boeing deal

SAO PAULO (Reuters) – A union representing workers at Embraer filed a lawsuit on Friday seeking to dismiss the company’s board, after a $4.2 billion deal with Boeing Co (BA.N) collapsed amid the pandemic, claims the Brazilian planemaker said were an act of “bad faith.”

The failed deal left the Brazilian jetmaker scrambling for a new path forward as the coronavirus pandemic hammered travel demand.

Embraer said the union was “using unfounded allegations and distorting information in order to confuse public opinion and the company’s workers.” It added it had yet to be served.

The lawsuit is the latest headache for Embraer in the aftermath of its breakup with Boeing. Under the deal signed in 2018, Boeing was going to buy the majority of Embraer’s commercial aviation unit in order to take on Airbus in the mid-range jet segment.

But the deal collapsed at the 11th hour in April, leaving Embraer and Boeing pointing fingers at each other.

The lawsuit accuses Embraer’s board of having allowed Boeing to conduct what amounted to “espionage,” by having its U.S. engineers work within Embraer’s research and development unit during the time when the deal seemed like it would in fact materialize.

In the wake of the pandemic, Embraer is now being supported by the government through a $600 million loan and said this week it was negotiating a buyout program. It posted a loss of $210 million last quarter.

Embraer’s board “operates creating billionaire losses and passing on the cost of its incompetence to workers,” the union alleged in court papers.

The planemaker said the union’s claims showed “ignorance about the company and its management.”

The Boeing-Embraer deal was subject to several lawsuits, including by the metalworkers union which sought to stop it. Some judges initially agreed to block the deal, but appeal judges ultimately overturned all allegations.

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Embraer union sues to oust planemaker's board after failed Boeing deal

SAO PAULO (Reuters) – A union representing workers at planemaker Embraer filed a lawsuit on Friday seeking to dismiss the company’s board, after a $4.2 billion deal with Boeing Co (BA.N) collapsed amid the pandemic, leaving the Brazilian jetmaker scrambling for a new path forward.

The lawsuit is the latest headache for Embraer in the aftermath of its breakup with Boeing. Under the deal signed in 2018, Boeing was going to buy the majority of Embraer’s commercial aviation unit in order to take on Airbus in the mid-range jet segment.

But the deal collapsed at the 11th hour in April, having already cleared several regulatory hurdles, and left Embraer and Boeing pointing fingers at each other. Arbitrations filed by both sides are pending.

Now, the metalworkers union in Sao Jose dos Campos is asking a judge to dismiss Embraer’s board. The lawsuit accuses the board of having allowed Boeing to conduct what amounted to “espionage,” by having its U.S. engineers work within Embraer’s research and development unit during the time when the deal seemed like it would in fact materialize.

Embraer did not have immediate comment.

Embraer is now dealing with the coronavirus pandemic that has battered demand for travel, received government support in the form of a $600 million loan and has said it is negotiating a buyout program. It posted a loss of $210 million last quarter.

Embraer’s board “operates creating billionaire losses and passing on the cost of its incompetence to workers,” the union alleged in court papers filed in a Sao Paulo court.

The lawsuit does not seek to oust management. Embraer is currently led by Francisco Gomes Neto, who came to the company only after the deal with Boeing had already been signed.

The Boeing-Embraer deal has been affected by lawsuits in the past, including by the metalworkers union which sought to stop it. Several judges initially agreed to block the deal, but appeal judges ultimately overturned all allegations.

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Oil falls below $43 on virus fears, still heads for weekly gain

SEOUL/LONDON (Reuters) – Oil fell below $43 a barrel on Friday as a resurgence of coronavirus cases raised concern that fuel demand growth could stall, although crude was still headed for a weekly gain on lower supply and wider signs of economic recovery.

The United States reported more than 55,000 new coronavirus cases on Thursday, a new daily global record for the pandemic. The rise in cases suggested U.S. jobs growth, which jumped in June, could suffer a setback.

“If this trend continues, oil demand in the region is at risk,” said Louise Dickson of Rystad Energy.

Brent crude LCOc1 was down 54 cents, or 1.3%, at $42.60 a barrel by 1210 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 fell 53 cents, or 1.3%, to $40.12.

“The fragile U.S. economic rebound is at risk of being undone by the latest surge in new infections,” said Stephen Brennock of oil broker PVM.

Both benchmarks rose more than 2% on Thursday, buoyed by strong U.S. June jobs figures and a drop in U.S. crude inventories. [EIA/S] Brent is still on track for a weekly gain of more than 5%.

Signs of economic recovery, and a drop in supply after a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, have helped Brent more than double from a 21-year low below $16 reached in April.

Boosting recovery hopes, a private survey showed on Friday that China’s services sector expanded at the fastest pace in over a decade in June.

OPEC oil production fell to its lowest in decades in June [OPEC/O] and Russian production has dropped to near its OPEC+ target.

The bankruptcy filing of U.S. shale pioneer Chesapeake Energy also supported prices by raising expectations production will decline, JBC Energy said in a report.

Gasoline demand will be closely watched as the United States heads into the July 4 holiday weekend.

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Fiat sticks by terms of PSA deal after divided cut report

MILAN (Reuters) – Fiat Chrysler (FCA) said the terms of its merger with France’s PSA had not changed after an Italian newspaper report that it was looking to spin off assets to reduce a planned 5.5 billion euro ($6.2 billion) cash pay-out to its shareholders.

FCA (FCHA.MI) said on Friday that it was sticking to the deal agreed with PSA (PEUP.PA) in December before the coronavirus crisis hit demand for cars.

“The structure and terms of the merger are agreed and remain unchanged,” a spokesman for the Italian-American automaker said.

FCA and PSA plan to finalise their merger by the first quarter of next year. PSA declined to comment.

Italian business newspaper Il Sole 24 Ore said that FCA could conserve cash by reducing the special dividend, possibly by handing shareholders assets as compensation.

Il Sole reported that talks were at a very early stage and no decision had been taken, adding the that aim was to keep the 5.5 billion euro value of the special dividend but to turn its “nature” from cash to assets.

FCA, has just agreed a 6.3 billion euro state-backed loan to help its Italian unit and the whole country’s automotive industry to weather the crisis.

Although this does not bar FCA from paying the dividend, as it is not due until 2021 and would be paid by Dutch parent company Fiat Chrysler Automobiles NV, Italian politicians have called into question such a large cash pay-out.

Options being considered include spinning off the Sevel van business, a 50-50 joint venture between the two groups, or FCA’s Alfa Romeo and Maserati brands, Il Sole said.

Sevel, which produces vans in Atessa’s plant in central Italy, Europe’s largest van assembly facility, could be valued between 2.5 and 3 billion euro, Il Sole said.

Its spin-off to FCA shareholders could also help address European Union concerns about the merger’s consequences on competition in the van segment.

This option looks however complicated, Il Sole said, as it would require PSA transferring its 50% stake in Sevel to FCA.

Another option is scrapping a planned spin-off of PSA’s controlling stake in parts maker Faurecia, Il Sole said.

A source close to the matter said that PSA could instead sell its Faurecia (EPED.PA) stake before the merger and keep the cash proceeds of the sale within the new merged company.

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COVID recovery vs COVID reality

LONDON (Reuters) – World shares inched towards a four-month high on Friday and industrial bellwether metal copper was set for its longest weekly winning streak in nearly three years, as recovering global data kept nagging coronavirus nerves at bay.

The market rally fuelled by record U.S. jobs numbers had largely blown itself amid a spike in U.S. COVID cases, though the fastest expansion in China’s services sector in over a decade and more stimulus ensured optimism remained.

Chinese shares had charged to their highest level in five years [.SS], helping the pan-Asian indexes to 4-month peaks, so the sight of European markets stalling early on took some traders by surprise.

Currency and commodity markets also had a subdued feel after an otherwise strong week for confidence-sensitive stalwarts such oil, copper </MCU3=LX>, sterling and the Australian dollar, which all struggled on Friday.

“I think infection rates and fears of localised lockdowns have doused some of the enthusiasm,” said Societe Generale strategist Kit Jukes.

“We have three elements now; vaccine hopes, decent data in most places but also the return of infection rates which can make you nervous.”

Against a basket of currencies, the dollar rose slightly in early London trading. It was up less than 0.1% at 97.306 and still firmly on track for its biggest weekly fall since the first week of June.

The euro was down at $1.1226 and though it gained against the safe Swiss franc it fell versus the sometimes commodity-driven Norwegian crown.

S&P 500 futures were down 0.2% but volumes were lower than usual due to a U.S. markets holiday on Friday for Independence Day.

U.S. nonfarm payrolls surged by 4.8 million jobs in June, above the average forecast of 3 million jobs in June, thanks to rises in the hard-hit hospitality sectors.

But economists noted there were caveats to the upbeat headline figures.

The number of permanent job losers continued to rise, increasing by 588,000 to 2.9 million in June while the unemployment rate remains a chunky 7.6 percentage points above its February level. A Deutsche Bank analysis put the U.S. unemployment rate behind all its developed market peers barring Canada.

The recovery also faces more headwinds as a surge of new coronavirus infections prompts U.S. states to delay and in some cases reverse plans to let stores reopen and activities resume.

More than three dozen U.S. states saw increases in COVID-19 cases, with cases in Florida spiking above 10,000.

Nevertheless markets are largely overlooking the spikes, taking the view that overall the situation was still improving overall.

Ten-year German government bond yields are up 5 basis points this week and set for their biggest weekly rise in a month, though they nudged down on Friday to -0.44%. Riskier Italian yields fell to 1.26% as well though, which is their lowest since late March. [GVD/EUR]

Oil prices also eased after an otherwise solid week. Brent crude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25 this time two months ago.

Copper prices were poised for a seventh consecutive weekly gain, their longest winning streak in nearly three years, despite a slight easing on the day after top supplier Chile had assured traders about supply.

Three-month LME copper was hovering at $6,040 a tonne, more than $1,500 up from lows it ploughed to in March. [/MET/L]

“The one issue that hangs over all the markets is will we see a surge in secondary infections that will trigger a second wave of national rather than regional shutdowns?” Malcolm Freeman, director of Kingdom Futures, wrote in a note.

(GRAPHIC: China recovery – here)

(GRAPHIC: COVID-19 in U.S. – here)

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DBS, Schroders launch multi-asset fund for retirement income planning

SINGAPORE (THE BUSINESS TIMES) – DBS and Schroder Investment Management Singapore (Schroders Singapore) on Friday (July 3) announced the launch of a multi-asset fund for retirement income planning, named Schroder Asia More+.

It will be managed by Schroders Singapore and exclusively distributed by DBS, the companies said in a joint press statement.

The fund offers exposure to a range of investment growth themes across Asia, including technology, consumption, logistics and financial services. It is tilted towards Singapore-based assets, enabling investors to tap the long-term growth potential of Singapore, they said.

Investors can choose from three share classes with different payout features to suit their life stage and income needs.

The distribution class offers intended payouts of 5 per cent per annum, while the accumulation class reinvests all potential coupons, dividends and capital gains back into the fund.

Meanwhile, the decumulation class is targeted at investors who are retired. The focus of these investors shifts from accumulating wealth to drawing down from assets, the companies said.

“With intended payouts of 6.88 per cent per annum, investors can expect higher payouts from their retirement investments, while drawing down from their capital over the long term. This is designed for retirees who may be spending longer in retirement and desire an income solution that will support their needs and wants,” they added.

The companies said investors in a decumulation phase should stay diversified, build multiple income flows and set up their investments in a way that enables them to generate a consistent income stream.

The fund “provides a simple and affordable way to achieve these aims, empowering Singaporeans, who are living longer, to better protect themselves from outliving their savings during retirement”, the companies said.

Lim Soon Chong, regional head of investment products & advisory at DBS consumer banking and wealth management, said the concept of decumulation was “still relatively new” in Singapore, and the lender hopes the fund would “get more Singaporeans to think about managing retirement savings in their twilight years”.

“A typical Singaporean can expect to live around 20 years in retirement. Besides monetary distributions from government and pension schemes post-retirement, a steady source of recurring income from private savings and investments to replace income from work is of critical importance,” he added.

Lily Choh, Schroders Singapore deputy chief executive, said the company’s Global Investor Study last year revealed that Singapore investors had rising income expectations from their investment portfolios, and a vast majority tended to be overly optimistic about how long their retirement savings would last.

“With Schroder Asia More+, we aim to address these gaps and concerns, while also offering a greater peace of mind for investors,” she added.

Investments in the fund start from S$1,000. The dynamically-managed fund has no lock-in period and “low management costs”, the companies said. Customers can choose to invest in Singapore, US, or Australian dollars. It is Supplementary Retirement Scheme (SRS)-approved.

SRS is a voluntary scheme to encourage individuals to save for retirement on top of their Central Provident Fund savings.

The fund is open for subscription with an initial offer period until July 15. Interested customers can consult DBS’s wealth planning managers. From July 16, the fund will be available via DBS’s online channels and TeleAdvisory.

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