Tag Archives: News Wire

E-Cigarette Regulations Survive Industry’s Legal Challenge

U.S. rules for marketing e-cigarettes withstood a legal challenge by a maker of the devices and an industry group.

A federal appeals court in Washington on Tuesday upheld regulations by the Food and Drug Administration, stating that “e-cigarettes are indisputably highly addictive and pose health risks, especially to youth, that are not well understood.”

Nicupure Labs LLC and the Right to be Smoke Free Coalition argued that the FDA’s Tobacco Control Act rules on the marketing of new tobacco products should not be applied to e-cigarettes. The court said the rules were rational and not arbitrary.


Intel Is First to Share Detailed Pay Disparities. It’s Not Flattering.

It’s not really a surprise that white and Asian men dominate the top pay tiers among Intel’s U.S. workforce. That’s been true in the tech industry for years. What’s unusual is the excruciating level of detail about pay disparity the chipmaker is releasing Tuesday to the public—information it could have kept secret.

In addition to its annual update on the outlook for women and people of color at the company, Intel on Tuesday released the results of a new report it sent to the U.S. Equal Employment Opportunity Commission that gives unprecedented pay, race and gender data for about 51,000 U.S. workers. Intel is the first company to release the otherwise private data.

The results are not flattering. Among 52 top executives at Intel, who all earn more than $208,000—the top pay band the EEOC tracks—29 are white men, 11 are Asian men and 8 are white women. The remaining tally is 1 each for Asian women, black women and black men, with no Hispanic men among executives in that top tier.

The ratio was similarly skewed across manager, professional and technician job classifications, with white and Asian men dominating top pay groups and women and people of color clustered in the lower bands. One in four white men at Intel are in the top salary tier, earning at least $208,000, a higher share than any other group. Rates are far lower for women and underrepresented minorities; less than 10% of black employees are top earners.

“It’s difficult to really fix what you aren’t being transparent about,” said Barbara Whye, Intel’s chief diversity and inclusion officer and a vice president in human resources. The chipmaker is making itself “very vulnerable,” she says, to “do the right things,” and she hopes her peers will follow and share pay information, too. “These are industry-wide problems,” Whye said. “They are going to require industry-wide solutions to resolve them.” So far, no other companies have said they’ll do the same. 

Intel joins a small but growing number of companies that have released gender and racial pay data, often under pressure from investors. The transparency may be laudable, but it is often overshadowed by what is revealed. Annual diversity reports from the biggest tech companies from the last half decade have shown scant progress in advancing the numbers of under-represented workers.

Companies that choose to release this kind of information risk backlash. Citigroup this year faced criticism after it voluntarily released median pay data that showed women at the bank earn 29% less than men do.

Intel’s report finds that within job types—not just at the top—white men dominate the highest salary band. Two-thirds of employees fall into a job group called “professionals,” which includes includes non-managerial office workers and programmers. Nearly all earn at least $80,000 per year, but white and Asian men have the highest salaries. Black, Hispanic and other minorities are overrepresented in the bottom half of the pay ranges. 

Even if the numbers look bad, companies will ultimately benefit more from leading on disclosure than they would from dragging their heels, said Natasha Lamb, managing partner at Arjuna Capital, which pressures companies to disclose gender pay data. The point is not to beat up on organizations for telling the truth, she said. “It’s much more important to have an accurate reflection of reality than to glaze over the simple truth,” she said. “These companies are not as diverse and equal as they could be.”

In 2015, Intel set a goal to have women make up at least 26% of its workforce by 2020. The company met that last year and is working to increase the percentage of women among top executives now to 26%, too, Whye said. Intel says representation among its total U.S. workforce and for technical employees has improved—underrepresented workers make up 15.8% of the company up from 14.6% last year. Women as a percentage of the workforce fell slightly to 26.5% from 26.8%.

Overrepresentation of white men in the highest-paying jobs contributes to the nation’s wage gap: American women earn 20% less than men do, and the gap is even wider for women of color. Intel’s disclosure shows that these disparities can’t be fixed simply by raising the salaries of women and minorities. Whye said the company’s task is to help underrepresented groups get promoted into more lucrative roles and keep them there. 

The data provided to the EEOC covered 2017 and 2018 and was collected from nearly all U.S. companies for the first time this fall under an initiative started by President Barack Obama. By law, the forms stay private unless a company makes them public. 

This could be the only time the EEOC collects worker pay broken down by race, sex and ethnicity, making Intel’s disclosure a unique window into company compensation, and how it results in wage gaps. The agency has been soliciting the data since July and could continue to do so until January under a federal judge’s order. But the EEOC has said it won’t pursue future collections in this form. 

In the U.K. where companies are required to publicly report wage gaps between male and female workers, the disclosures have shown the benefits and limits of transparency, said Harini Iyengar, a lawyer who advocates for equal pay in Britain. “A lot of members of the public who don’t pay an interest generally in labor market issues are quite shocked at the scale of the pay disparity,” she said. “So that’s been very positive because people are genuinely shocked.”

But so far the nation-wide initiative has not resulted in measurable change, she said: “What I’m seeing is collective hand-wringing about, ‘Oh no, this is not good enough. But look everyone else in our industry sectors is in the same boat. So that’s all right then.’”


Modi Considers Excluding $7 Billion of Air India Debt to Lure Buyers

 India is considering a plan to exclude more than half of Air India Ltd.’s $11 billion of debt in the government’s latest attempt to lure investors to the struggling carrier, people with knowledge of the matter said.

Prime Minister Narendra Modi’s administration plans to ask proposed investors to take over 300 billion rupees of the airline’s debt, which are backed by the carrier’s aircraft, the people said, asking not to be identified, citing private information. The government may call for the so-called expression of interest as early as Dec. 15, the people said.

Modi’s administration, which failed to attract any bidder for the carrier last year, is keen to sell the company to help bridge a widening fiscal deficit following dismal tax collections and cuts to corporate tax rates worth $20 billion. Last week, the government decided to sell its entire stake in the country’s second-largest state refiner, and its biggest shipping company.

Unprofitable for a decade with taxpayers bailing it out repeatedly, Air India’s appeal to any investor is contingent on the government’s ability to write off the debt not backed by assets. The government has pumped in 560 billion rupees in the last past decade in a bid to keep the carrier afloat, the people said.

A spokesman at India’s finance ministry, which handles assets sales, was not immediately available for a comment.

The government will absorb 500 billion rupees worth of obligations, the people said. Air India Assets Holding Ltd., a special purpose vehicle, holds about 300 billion rupees of the state-owned carrier’s debt and some of its assets, they said.

The SPV expects to raise 100 billion rupees selling the assets, the people said.


Zimbabwe Central Bank Reverses Policy and Halves Key Rate to 35%

Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.

Zimbabwe’s central bank halved its key interest rate to 35%, joining the finance ministry in efforts to revive an economy hobbled by years of mismanagement.

The decision reverses a move by the southern African nation’s newly formed Monetary Policy Committee in September that raised the rate from 50%. It follows the unveiling last week of the 2020 budget which shows a planned surge in spending for next year.

The rate was cut as the MPC “emphasized the need for the bank to put in place measures to fund the productive sectors of the economy by redirecting excess liquidity in the financial system,” Governor John Mangudya said in a statement.

While the moves by the monetary and fiscal authorities seek to boost the economy that’s forecast to contract this year, it could drive up price growth in a nation that a decade ago had to abandon its own currency due to hyperinflation that reached an estimated 500 billion %. The government dropped a one-to-one peg of its quasi currency to the dollar in February and later outlawed the use of foreign exchange. Since then, the currency has lost almost 94% of its value against the greenback.

The worst regional drought in almost 40 years hit food supplies and left about half of Zimbabwe’s 14 million people without reliable access to enough to eat, further driving up costs.

Despite a spike in the monthly inflation rate to 38.8% in October, the central bank says the outlook for price growth is positive. While the country stopped releasing annual figures in August, the rate is 440%, according to John Robertson, an independent economist in Harare.

“The inflation rate itself says the interest rate should be set a lot higher,” Robertson said. “It’s a whole collection of imbalances and the interest rate is one of them.”

The October inflation increase was “due to shocks caused by mainly adjustments of electricity and fuel prices,” Mangudya said. The position on interest rates will be reviewed at future MPC meetings, he said. The panel will convene again on Nov. 29.


Lebanon Bond Sell-Off Eclipses Argentina as Unrest Flares Up

Lebanese bonds have overtaken Argentine debt as the second-worst performer this year, showing the financial toll that the social uprising has taken on one of the world’s most indebted nations.

Investors in Lebanon’s dollar-denominated notes have lost 30% this year, eclipsing the 27% decline for holders of Argentine securities. Lebanese notes maturing in 2034 fell 7% on Friday, the worst for sovereign dollar bonds in emerging markets. Its 2033 is the next worst-performing among developing nations.

S&P Global Ratings downgraded Lebanon’s long-term foreign currency debt rating to CCC from B- after the market closed on Friday, following the rating company’s decision to downgrade three of the nation’s top banks the previous day.

The nation has been without a government since Saad Hariri resigned late last month in the face of mass demonstrations demanding the removal of a ruling elite blamed for corruption and mismanagement. The situation has deteriorated so much that the Lebanese army was deployed heavily across the country this week as protesters began to converge on the presidential palace.

Argentina’s overseas bonds reached new lows this week as investors await clarity on how President-elect Alberto Fernandez plans to save the nation from a looming default and dwindling reserves. Venezuelan debt has lost investors 55% this, the world’s worst performance.


Pentagon Progress in New Audit Undercut by Worsening Shortfalls

The U.S. Defense Department said its second consecutive financial audit documented incremental progress tracking $2.9 trillion in assets and correcting hundreds of serious deficiencies, but the department’s watchdog said there’s still too little information about how taxpayer money is spent.

Like last year, the latest review of the Pentagon’s books cost nearly $1 billion, including $500 million for remediation of existing deficiencies, $250 million for setting up the infrastructure to conduct audits and $195 million in auditor fees.

More than 1,400 auditors were deployed on the project to track spending on everything from F-35 jet parts to Navy real property, commissary operations and Army pay operations.

The audit founds no evidence of fraud or abuse and in many cases documented that serious deficiencies uncovered last year have been remedied, Pentagon officials said.

“We have made good solid progress and this is going to be something we are going to have to measure ourselves incrementally against,” Acting Comptroller Elaine McCusker told reporters on Thursday.

Rising Deficiency Reports

But the Pentagon’s Inspector General, which oversaw the work, cited major shortcomings. For instance, while nearly 550 issues highlighted for correction last year were addressed this year, approximately 1,800 deficiency reports from last year were reissued, and an additional 1,300 were created.

The inspector general also pointed out that there remain “insufficient policies, procedures, and internal controls for the acquisition, disposal, and inventory processes of government property in the possession of contractors.”

“While progress has been made, much more work is necessary for better financial management and a clean audit opinion,” according to a statement from Inspector General Glenn Fine. “It is clear that the road to a clean financial statement opinion for the DoD is a long-term effort.”

For the second consecutive year, the “working capital” and “general funds” of the Army, Navy, Marine Corps as well as the books of the Defense Logistics Agency, U.S. Special Operations Command and Transportation Command and Defense Health Program received “disclaimers of opinion” from auditors.

Disclaimers are issued when auditors can’t form an opinion about the adequacy of the financial records based on a paucity of reliable data. McCusker said that doesn’t imply misuse or poor use of funds.

Documentation Problems

“We know where we are spending our money” but “sometimes our documentation” is “just not where it needs to be,” she said.

Although it gets scant public attention compared with troop deployments, sexual assault statistics or major weapons programs, audits of financial statements can help the Pentagon more effectively manage its resources and operations and can help identify internal weaknesses that mask fraud and abuse.

Just completing a second year of 24 financial audits marks an achievement in its own right since for decades no major agency reviews were completed. It wasn’t until fiscal 2018, at the prodding of Congress and the General Accountability Office, that the Pentagon said it was ready for a full audit.

‘Material Weaknesses’

One clear highlight for the Pentagon: The $9 billion Military Retirement Fund will get its 24th unqualified, or clean, opinion, McCusker said.

Another major improvement from last year’s findings involved fixing deficiencies with Department of Defense information technology security, she said. Ninety-four percent of those reports were closed, she added.

Still, the inspector general said that among the examples of “material weaknesses” that remain from last year are those in information technology, including “inadequate controls over access, system changes, and security management of the IT systems.”

Material weaknesses are deficiencies or a combination of deficiencies in internal controls over financial reporting “that result in a reasonable possibility that management will not prevent, or detect and correct, a material misstatement in its financial statements in a timely manner,” the watchdog said.


China Regulator Approves Plan to Overhaul Share Ownership

China’s stock regulators say they will remove a limit on the public float of mainland companies listed in Hong Kong — a change that would shake up the ownership structures of some of the nation’s biggest firms.

The China Securities Regulatory Commission said in a statement on Friday evening that qualified companies listed or planning an initial public offering in the city can apply for “full circulation” of their shares. The change requires regulatory approval, it added.

Chinese regulators have been preparing to expand a pilot allowing mainland firms listed in the former British colony to convert their non-tradeable shares to H-shares and trade them on the city’s stock exchange. The program has been seen as a key step for state investors to reduce their control or even exit some industries.

“Full-circulation is relatively a good thing for investors as it could improve liquidity for these stocks,” said Steven Leung, executive director at Uob Kay Hian (Hong Kong) Ltd. “However, if there is sharp increase in tradeable shares, it would raise investor concern over the impact on the market.”

The CSRC said in its Friday statement that it successfully conducted a pilot involving three companies in 2018.

Some of China’s biggest and most-high profile firms trade in Hong Kong, including its big four banks, oil giants and insurers.


World’s Biggest Wealth Fund Drops G4S on Qatar Worker Abuses

Norway’s sovereign-wealth fund has dropped U.K. security firm G4S Plc from its portfolio, citing abuses of migrant-worker rights in Qatar and the United Arab Emirates.

The central bank in Oslo, which manages the $1.1 trillion fund, said it took the step “due to unacceptable risk that the company contributes to or is responsible for serious or systematic human rights violations,” according to a statement on Thursday.

Shares in G4S dropped as much as 3.7% in London trading. The fund held a 2.33% stake in G4S at the end of 2018, valued at the time at about $91 million. The investor currently has 156 companies on its exclusion list.

The decision to exclude G4S follows a recommendation from Norway’s Council of Ethics, which said it had assessed the company’s operations in the two Gulf countries. The investigation showed that migrant workers have paid recruitment fees to be able to work for G4S, that a substantial part of their salaries went to pay debt related to those fees, and that many were paid less than agreed. In the Emirates, workers saw their passports confiscated, the Council said.

The probe also revealed that workers were exposed to long days, a lack of compensation for working overtime and instances of harassment, the Council said.

Norway’s wealth fund, the world’s biggest of its kind, is managed according to a set of ethical principles. It’s barred from investing in tobacco and certain kinds of weapons, and in companies responsible for serious environmental damage or human rights abuses.

See list of excluded companies


Japan Post Pledges Caution as CLO Holdings Hit $14 Billion

Japan Post Bank Co. said it would be cautious about future investment in bundled corporate loans after raising holdings last quarter, as financial authorities increase scrutiny of the practice.

The postal savings giant boosted its holdings of collateralized loan obligations by 15% from June to 1.52 trillion yen ($14 billion) as of Sept. 30, an earnings presentation showed Thursday.

“We are acting very carefully and analyzing a range of issues as authorities show interest” in Japanese investments in overseas CLOs, Hiroichi Shishimi, a senior executive, said at a briefing.

With about $1.7 trillion of household savings, Japan Post Bank has been buying CLOs and other foreign assets in search of returns that domestic government bonds no longer provide. The Bank of Japan signaled concern last month that CLO prices “could fall substantially” if economic and market conditions worsen, while adding that the risk of defaults in top-rated tranches is “basically small.”

Shishimi said the bank examines factors including the reputation of CLO managers and the quality of individual loans included in the vehicles. It conducts strict stress tests to make sure that the amount of CLOs owned at any given time is manageable and won’t undermine its financial strength, he said.

The structure of CLOs, particularly top-rated slices, has improved sharply since the global financial crisis, according to Shishimi. Japan Post Bank has been purchasing AAA rated segments partly because they provide higher yields than regular corporate bonds, he said.

Read more about Japan’s unlikely global bond powerhouse

Another way Japan Post has accumulated exposure to U.S. leveraged loans is through investment funds that buy the debt. The company plans to pare its allocation to such funds and increase its CLO investments because the latter offer a cushion against losses in a downturn, a person with knowledge of the matter said last month.

Norinchukin Bank, the Japanese agricultural lender that holds more CLOs than any other local bank, pared its holdings last quarter after becoming more selective about purchasing the credit products, people with knowledge of the matter said this week.


Zimbabwe Distributes New Banknotes but Keeps Curb on Withdrawals

Zimbabwean banks started distributing low-denominated banknotes on Tuesday to help end a crippling cash shortage, more than a decade since the nation had its own hard currency.

However, strict withdrawal limits of Z$300 ($19) a week meant consumers continued to struggle to get enough cash to cover costs.

The central bank sent Z$30 million of the new notes to local banks, the state-controlled Herald newspaper cited Reserve Bank of Zimbabwe Governor John Mangudya as saying. Lenders were issuing newly minted Z$2 and Z$5 notes and coins.

“The only consolation is that today I got my money, but the problem is that it’s not enough to last the whole week since I use public transport,” said Ishe Mukoi, a store supervisor in the capital, Harare.

Zimbabwe this year abolished a multi-currency system and reintroduced the Zimbabwe dollar as sole legal tender, a decade after it went out of circulation because of hyperinflation. It has weakened from a 1:1 parity peg in February to 15.8742 per U.S. dollar on Tuesday.

The central bank plans to “drip feed” Z$1 billion into the economy over the next six months to help end arbitrage and premiums being charged on the parallel market.