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The latest news headlines on issues and developments affecting the internal audit profession.

April 30, 2021

VPN Hack May Have Compromised 5 U.S. Agencies

The U.S. government said it appears that at least five federal agencies were breached in some way by hackers via a popular virtual private network tool, Pulse Secure VPN. CNN reports that the Cybersecurity and Infrastructure Security Agency (CISA) had previously identified 24 federal agencies that used Pulse Secure VPN, but it had not yet confirmed whether any had been compromised. The CISA said the agency has been working with multiple organizations affected by the breach and had issued a rare "emergency directive" to all federal agencies to run tests on the software and report back to the CISA. The hackers who exploited vulnerabilities within the remote connectivity tool are believed to have ties to China and also were able to intrude on defense companies and financial institutions in the U.S. and Europe.

Survey Says Most U.S. Businesses Will Require Proof of Vaccination From Employees

As vaccine distribution escalates in the U.S. and the number COVID-19 cases continues to diminish, the question of how vaccinations will impact return to the workplace plans looms large. According to a new survey of 957 U.S. facilities conducted by Arizona State University and the Rockefeller Foundation, more than 60% of companies in the U.S. will require proof of vaccination from their employees, CNBC reports. Sixty-five percent plan to offer employees incentives to get vaccinated, while 63% will require proof of vaccination. Several companies also are considering consequences for not getting vaccinated. Forty-two percent said the employee will not be allowed to return to the physical work environment, while 35% said disciplinary actions are on the table, including possible termination. "Employers have been relatively quiet in the pandemic; we're now entering the next phase where employers are creating their own policies so that employees can go safely and sustainably back to the workplace," said Maria Aspinall, a professor at Arizona State University's College of Health Solutions and one of the authors of the survey.

More Industries May Be Seen as At-fault in Human Trafficking Cases

Lawsuits against companies implicated in cases of human and sex trafficking are growing, and more types of businesses are at risk, according to a report by Business Insurance. Human trafficking is defined as "force, fraud, or coercion for labor or commercial sex acts," says Kimberly Mehlman-Orozco, a human trafficking expert witness and executive director of the nonprofit organization Freedom Light. Businesses where trafficking occurs — either in-person or virtually — can be considered third parties to crimes if seen as complacent or turning a blind eye to the activity. The hotel industry and technology firms are frequent parties named in lawsuits, but other industries also can be at risk, including agriculture, construction, domestic service, factory work, fisheries/fishing, hospitality, and restaurant and food service, Business Insurance reports. More than 40 states now have laws in place calling for businesses to train workers to identify human trafficking activity.

McDonald's Board Faces Continued Scrutiny Over Former CEO's Severance

McDonald's board is facing heat over its handling of the exit of ousted CEO Steve Easterbrook, Agenda reports (paywall). Investor groups and proxy advisors have filed complaints and lawsuits over the board's decision to terminate Easterbrook in November 2019 "without cause" and grant him a severance valued at as much as $56 million. Easterbrook was let go after he violated company policies by having consensual relationships with employees. "If you're violating company policy, there should be zero reward," says Dieter Waizenegger, executive director at CtW Investment Group, which represents union pension plans that hold McDonald's stock. "The board fell down on the duty to keep top executives in line." The board had been criticized for turning a blind eye to company policy violations by a former head of human resources, as well. Matteo Tonello, a managing director at The Conference Board, told Agenda that investors want assurances that the board can appropriately oversee the company's culture.

April 28, 2021

Biden Administration Moves Forward On Emergency Workplace Safety Rules

The White House is advancing emergency workplace safety rules for U.S. employers to prevent the spread of the coronavirus after weeks of delay and growing pressure from Democrats and safety advocates. Among other things, the rules are expected to require employers to supply their workers with masks and have a written plan to prevent workplace exposure, Politico reports. The U.S. Labor Department sent the safety rules to the Office of Management and Budget (OMB) for review on Monday. The OMB's regulatory affairs office is expected to take about two weeks for its review before it publishes the requirements, which are then likely to take effect immediately.

EU Proposes AI Regulatory Framework

Last week, the European Commission issued a proposal for a first-of-its-kind, comprehensive, harmonized regulatory framework for artificial intelligence (AI). Its objective is ensuring "the proper functioning of the single market by creating the conditions for the development and use of trustworthy artificial intelligence in the Union." The risk-based draft regulation is intended to provide the legal certainty needed to facilitate investment and innovation in AI, while safeguarding fundamental rights and ensuring AI applications are used safely, according to global law firm DLA Piper. The regulation as drafted will impact users, providers, and developers of AI, including those located outside the EU. The proposed text of the AI Regulation is the first step in a long legislative process, the firm notes.

Lack of Tanker Drivers Could Create Gas Shortages in U.S.

The U.S. National Tank Truck Carriers (NTTC) trade group is warning of a possible scarcity of available gasoline this summer because tanker truck drivers are in short supply, CNN Business reports. According to the NTTC, 20% to 25% of available tank trucks are parked because of a lack of qualified drivers. At this point last year, the amount was 10%. The NTTC says there are several reasons for the shortage, including a shutdown of driver schools early in the pandemic, drivers who didn't want to comply with safety protocols during the pandemic, an aging workforce, and a new federal clearinghouse launched in January 2020 to "identify truck drivers with prior drug or alcohol violations or failed drug tests." More Americans traveling by car this summer is likely to exacerbate the problem, with vacation spots at most risk for shortages, said Tom Kloza, chief oil analyst for the Oil Price Information Service. "Imagine the hoarding with toilet paper and topping off of gas tanks that we see after hurricanes and you can see what might happen," Kloza said.

U.S. Administration Offers Businesses Tax Incentivizes to Promote Vaccinations

To incentivize businesses to promote U.S. vaccination efforts, President Biden has called on employers to use a tax credit to provide paid time off to workers to receive the vaccine, The Washington Post reports. This incentive, which covers up to $511 in daily wages per employee, was included in the $2 trillion COVID-19 relief package and applies to all companies with fewer than 500 employees. "I'm calling on every employer — large and small, in every state — to give employees the time off they need, with pay, to get vaccinated," Biden said. Details of the tax-credit plan can be found on the Internal Revenue Service website. According to the administration, more than 200 million vaccines have been administered to date, and 90% of Americans can now find a shot within five miles of where they live.

April 26, 2021

U.K. Parliament Audit Committee Recommends That Retailer Link Bonuses to ESG

Beleaguered U.K. fashion brand Boohoo said it is discussing how to link its executive compensation to environmental, social, and governance (ESG) improvements, based on recommendations from the British Parliament's Environmental Audit Committee (EAC), according to Reuters. The online retailer has been under scrutiny since last summer when newspaper reports surfaced over allegedly illegal actions of manufacturers in Boohoo's supply chain in Leicester, England. Journalists alleged that Boohoo's suppliers had breached lockdown measures and that one manufacturer had offered an undercover reporter less than half of the U.K. minimum wage to work there. Third-party audits of some Leicester factories dating from 2017 cited health and safety issues and no records of holiday pay. In September, Boohoo accepted all the recommendations of an independent review that confirmed major failings in its supply chain. EAC Chairman Philip Dunne welcomed the company's talks and said "bonuses shouldn't just be linked to breakneck growth."

EU Acts to Promote Investment in Sustainable Activities

Last week, the European Commission announced it had adopted a "comprehensive package of measures to help improve the flow of money toward sustainable activities across the European Union." It is part of the European Green Deal, through which Europe seeks to attain climate neutrality by 2050. The package includes the EU Taxonomy Climate Delegated Act, which aims to support sustainable investment by making it clearer which economic activities must contribute to meeting the EU's environmental objectives. Moreover, the package proposes a Corporate Sustainability Reporting Directive that would increase the consistency of sustainability reporting among companies. The package also contains six amending Delegated Acts on fiduciary duties, investment, and insurance advice to ensure that financial firms include sustainability in their procedures and their investment advice to clients.

Countries Pledge Assistance as India Suffers Second COVID-19 Wave

The second wave of COVD-19 in India that began in March continues to rampage with devastating results, CNN reports. Over three days, the country recorded more than one million new cases, leading to overrun hospitals facing dangerously short supplies of oxygen and intensive-care unit beds. In some cases, patients have been forced to wait outside for care. To date, India has recorded 17 million cases. Several countries have promised aid; for example, the U.S. has agreed to deploy supplies such as ventilators, personal protective equipment, rapid diagnostic kits, and therapeutics. The U.S. also announced it will partially lift its ban on exporting raw materials for vaccine production, which could accelerate regional production of India's Covishield vaccine. The U.K. has agreed to send medical equipment to India including oxygen concentrators and ventilators, while Pakistan pledged additional support as a "sign of solidarity."

Survey Finds Support For Vaccination Passports In 5 European Countries

As COVID-19 vaccinations ramp up and countries grapple with how to safely relax restrictions and reopen their borders, a new Morning Consult survey conducted in five European countries found most residents in favor of giving people digital certificates proving their vaccination status. The survey conducted in France, Germany, Italy, Spain, and the U.K. also found residents to be divided over whether such certificates should be mandatory. The certificates have become heavily politicized, with critics calling them divisive and discriminatory. The Biden administration has said it does not support a national certificate in the U.S., Fox News reports.

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