Jamie Dimon Chair and CEO of JP Morgan (NYSE:JPM) is beginning to resemble James Cagney in some of his film roles as an unyielding, unrepentent, tough guy who was not going to take anything from any body. You see? BTW I think Cagney robbed some banks as well.
Just to summarize some of the points which have not influenced Jamie Dimon
- London Whale debacle destroying shareholder wealth
- Publicly arguing with Governors of Central Banks
- Falling out of the running to be Secretary of Treasury under President Obama
- Trying to get cozy with the GOP to get the same possible job back
- Two major proxy solicitation services recommending Chair and CEO position be split.
- Public recommendations that certain independent board members not be re-elected.
- Independent board members meeting with third parties about some or all of the above.
- Federal Regulators saying they do not trust JP Morgan.
- Major institutional shareholders feeling very uneasy about it all. Thats not a vote of confidence.
- Warren Buffett making public statements of support indicate Jamie Dimon does not have the support you would think he should have as the Chairman/CEO
Regardless of where you stand on this issue; because it has become an issue of the tar baby variety it will not go away in a satisfactory fashion. It is a huge distraction.
If there is a final shoot out of the James Cagney fashion shareholder wealth will be destroyed. Who then will be the “Dirty Rat”
George Gutowski writes from a caveat emptor persepctive.
- Jamie Dimon Black Swan Waiting. JP Morgan’s Coming Political Demise $JPM (financialskeptic.wordpress.com)
- JP Morgan Executives Emergency Life Boat Drills $JPM (financialskeptic.wordpress.com)
Office Depot (NYSE:ODP) woke up this morning and found that its largest shareholder wants to re-constitute the board. Starboards Value LP have proposed six of their own and want to do it now before the upcoming merger of equals with OfficeMax.
Activist shareholder Starboard Value LP is saying the existing board cannot handle the new venture. Office Depot and OfficeMax are clearly also rans in the battles with Staples. So the merger is not a brilliant flanking move but a consolidation and lets hope it works stratagem.
The new board of directors is not the championship team that knows the way to the Super Bowl. Lets take a look at a few of the longer serving members on ODP’s board:
W Scott Hedrick 66 is the lead director and has been long serving. Very long serving. Which means he has not provided any differentiating leadership that would have allowed ODP to beat Staples. The corporate blurb says “he brings important institutional knowledge and he has a solid basis for his analysis of our financial strategies” Sounds like he is an excellent analyst.
Brenda J Gaines 62 was formerly President and CEO of Diners Club and previously a rising star in Citigroup. So some more financial experience and insight into plastic money and payments. Not a critical skill for a commodity supplier of office supplies.
Marsha Johnson Evans 64 is a retired Rear Admiral USN and a human resources type. If you look at the sales associates in Office Depot they did not use the high pieces of her advice.
Nigel Travis whose resume lists Dunkin Donuts, Papa John’s, Blockbuster and Burger King is clearly a fast food guy. Not sure how many transferable skills and experiences applied to office supplies.
Justin Bateman 38, sits on the board by virtue of an investors rights agreement with BC partners who has a substantial investment stake in ODP. He should have the best ear for take over value.
Starboard’s CEO Jeffrey Smith wrote in a letter to Office Depot. “Instead, now
is the time to act to immediately improve the current operating performance of
the business on a stand-alone basis and to be in position to maximize the longer
term synergies with OfficeMax if the merger is approved.”
Among the board nominees are Smith and two executives Starboard had already said
it was working with: Robert Nardelli, former CEO of Home Depot and Chrysler, and
Joseph Vassalluzzo, a long-term Staples executive. Also nominates are James
Fogarty, CEO or Orchard Brands, Cynthia Jamison, a board member at Tractor Supply Co.
and David Siegel, CEO of Frontier Airlines.
Quite frankly the new replacement players sound way better than the old team.
Nabors Industries (NYSE:NBR) is paying Chief Executive Anthony Petrello $60 million to give up potentially unlimited annual bonuses and tie his future compensation more closely to company performance.
Bird in hand is worth two in bush for Anthony Petrello. Nabors has been criticized by investors for its outlandish executive compensation packages. This is supposed to be a fix, or improvement or whitewash or…?
Compensation is set by the board. Check out the guys who signed off on the deal and put all the gold into this guy’s pockets
Myron Sheifeld 82 is a lawyer and supposedly a pre-eminent bankruptcy practitioner and scholar. Why does a drilling company need an 82-year-old bankruptcy guy?
James Payne 75, oil man and wheeler-dealer.
James Crane, private equity wheeler-dealer.
John Lombardi 69, career academic
John Yearnwood 51, geologist and Schlumberger alumnus.
Michael Linn, oil man wheeler-dealer.
If you have come to the conclusion that these guys stink you are correct. Governance activists are lining up. The pay cheque shuffle is just some hocus pocus.
Amgen (Nasdaq:AMGN) recently lost a major court case at the Supreme Court Level. On Feb 27 the justices ruled that investors do not have to prove the materiality of a company’s alleged misrepresentations before obtaining class certification in a securities lawsuit.
The ruling went 6-3 against Amgen. The US Chamber of Commerce was backing the Amgen position. Most observers are surprised by the ruling. Looking at the Board of Directors you have a huge wealth of experience in large caps, drugs, pharma, life sciences, big oil, defence contractor, élite universities, (Harvard and MIT) and wealth management. The bio’s do not indicate any particular experience in managing law suits from a risk management perspective.
Frankly these big shooters are used to getting their own way and perhaps that is why the supreme court helped empower shareholder. The majority decision will make it more difficult for many companies to have this type of lawsuit dismissed before the costly pre-trial discovery process.
Looking at some of the directors they may have been blindsided by this one.
Rebecca Henderson 51, is a professor at Harvard and specializes in Tech strategies.
Ronald Sugar 63, is the retired Chair and CEO of Northrop Grumman. He is used to selling weapons systems and wrangling budget money.
Dr. Tylor Jacks 51, has been a MIT professor since 1992, is a bio-technologist and cancer researcher.
Francois de Cardonnell 65 is a french citizen residing in France and has been at GE, Citigroup, Thomson SA, Pages Jeunes and currently is also a director with Quilvest which is a Luxembourg based wealth manager. American jurisprudence is probably a big mystery.
Robert Eckert 58, who was just appointed in Dec 2012 was CEO of Mattell from 2000 to 2011 and before that President and CEO of Kraft 1997 to 2000. No securities law DNA can be identified.
Frank Biondi 67 was Chair and CEO of Universal Studio as well as President and CEO of Viacom. The man was in the mass entertainment business.
J Paul Reasor 71, was a high-ranking admiral with the US Navy. The man was a warrior not a legal beagle.
Vance Coffman 68 was Chairman and CEO of Lockheed Martin. Merchants of Death do not get lawsuits as a rule.
Frank Herringer 69 was Chair of Transamerica and director of Charles Schwabb and Safeway. If financial services is prone to litigation he certainly did not acquire any transferable skills.
Quite frankly none of the directors has the consigliari skills needed to have avoided this loss in the supreme court. Now expensive and time-consuming lawsuits will take up more corporate time.
JC Penney (NYSE:JCP) releases numbers in a few hours. The stock is on discount. Everyone is pointing to Ronald B Johnson because we all need a scapegoat. OK the CEO counts for a lot. Just like quarterbacks in the NFL.
But take a look at the board which is off course heavily influenced by Pershing Capital and Bill Ackman. The current chairman is Thomas J. Engibous. Not a traditional retailer or merchant. He is the former chairman of Texas Instruments, Incorporated and is also an independent director of Taiwan Semiconductor Manufacturing Co., Ltd.
How does a guy like that end up trying to sell shirts, coats, sweaters and engage consumers in the highly fickle game of fashion.
When you look at the rest of the board no else really has a retail perspective. Only Javier G Terul has one other directorship which is good at engaging customers Starbucks.
The earnings report will be as much about assessing the fundamentals and ensuring the conditions for a win are moving into place. If that argument cannot be made Bill Ackman has a problem. Bill Ackman may be the problem and that is why Ronald B Johnson will stay in place.
Ethan Allen (NYSE:ETH) has had an up and down experience. Apparently when the economy is off not everyone wants to buy furniture. Recently they have been able to get a few things on track. But the Chairman, President and Principal Executive Officer seem to be pigging out at the trough.
The market cap is under a $1 Billion so its under the radar. But if an up and coming activist hedge fund manager wanting to build a name and put some scalps up on the wall this might be the place to try. It should be pretty cheap.
Farooq Kathwari 68 has been president since 1985 and owns some 14% of the shares. His compensation is well over $6 miilion a year. Other senior officers cannot even break $500,000. There is no clear cut successor as well. Just plain bad governance all around.
The board of directors is weak and maleable. The company’s 2012 Say on Pay vote received the support of only 57% of shares (down from 96% in 2011).
Three of six directors have served for over a decade. Astoundingly this includes the entire Compensation Committee and the chairs of all three of the board’s standing committees.
You can just see that Black Swan floating onto the scene. Something is going to bite them. Kristin Gamble, also serves as the lead independent director and chairs the Compensation Committee. After ten years it really is time for a change.
So again lets shout out to an activist hedge fund manager who wants to make a name for himself. This one has all the right components for activism.
Google (Nasdaq:GOOG) reports financial results tomorrow after it made the investors painfully aware that analysts are not very good at accounting.
Is Google’s Board of Directors future ready? Larry Page and Sergei Brin along with Eric Schmidt still have their hands firmly on the steering wheel. They come at from a gladiatorial point of view. Live and die by the sword. Get the better product or service. Make or buy new technologies. Does not matter they have the cash to do both.
So what does the Board do for Google? Most of the independent members are from a technology background. Surely they are not vetting independent R&D decisions. The strategic questions are where do we need to be in the next five to ten years needs to be addressed.
Google while certainly in a cut throat tech environment has been blind sided by regulatory and geo-political issues. The existing board does not have a collective resume in those skill sets or contacts.
Yes Eric Schmidt recently went to North Korea but what about China. Google is still shut out and does not seem to be making any headway.
At this point you can argue that the directors with the technology back grounds are the least useful to Google. What you need is a board that is geo-politically savvy. The ideal candidates would be China and probably World Trade savvy. Henry Kissinger is too old but that stature would be helpful.
The competition would initially be confused by the new board appointments. They also see themselves as gladiators in need of better swords. What Google needs is Field Marshalls with a global coup d’oeil. Dealing with the quarterly demands of sell side analysts focused on rather narrow metrics will not create the drivers of future wealth.
What Google needs on the board are geo-political godfathers. Diplomats, Generals. Perhaps Hillary Clinton will be available.
Dr. Shirley M. Tilghman starts to somewhat come close with her association with Carnegie Endowment for International Peace, and King Abdullah University of Science &
Technology. But as President of Princeton University Google is attempting to corner the intellectual market.
The rest while I’m sure are all excellent people are not bringing the skills or contacts that Google needs. Here is a very quick precis:
Diane Greene [Trustee at Massachusetts Institute of Technology and a Member at Massachusetts Institute of Technology Corp.]
Anne Mather [Independent Director with a huge corporate background]
John LeRoy Hennessy [Lead independent director who is President of Stanford University]
Paul S. Otellini [of Intel and San Fran Symphony]
Ram Kavitark Shriram [Angel Investor, Netscape DNA and helped Amazon]
John Doerr [Partner at Kleiner Perkins Caufield & Byers LP]
There once was a powerful Wall Street Mogul. Retired, more than comfortable, Maurice Raymond Hank Greenberg was used to getting his own way. He of course built up the insurance empire we now recognize as AIG (NYSE:AIG).
Shortly after he retired the 2008 financial crisis occurred and AIG did not do so well. Quite frankly it crashed, burned, imploded and fell in upon itself. It was so bad the American people had to bail out AIG as it was “too big to fail”.
Having no negotiating power AIG became a ward of the state. Shareholders lost great amounts of money. Which is what naturally happens in a bankruptcy. Shareholders took the risks. Because of many complicated circumstances which we wont go into here the shareholders actually survived in a manner of speaking after the American people were compensated for their risk.
The American system survived and then thrived somewhat. AIG rebuilt itself and repaid all the very generous support that the American taxpayer kicked in. The American taxpayer made out rather well and made enormous profits. Unfortunately because of huge profligate debts from other actions the huge profits seem like a very small drop in a very large bucket. The American did not notice the profits.
Hank Greenberg did. Much of his wealth and we are sure his ego was tied up in AIG shares. For a few suspenseful months he must have pondered his lack of diversification. Too many eggs in the same basket. Classic diversification and risk mitigation had been ignored. I’m sure he had advice to the contrary but it was ignored.
Hank Greenberg chose to sue the American people claiming that the financial managers hired to save AIG, protect the American and World financial system had extorted too high a price and unfairly confiscated wealth from shareholders.
We can find no record of his viewpoint on what would have happened if AIG had been allowed to collapse with the American people chosing to prop up only selected portions of AIG and letting the rest fend for itself in an ultra-capitalistic manner.
As you would have it there grew a pressure for AIG to join in with Hank Greenberg’s suit. The mothers nipple had been too mean he claimed. He should be wealthier.
AIG’s board at the very least was obligated to consider joining the suit and determining what an expensive long drawn out battle really meant. Given the social and political impact the board resorted to that long drawn public relations technique of press leaks. The media both political and financial were debating the merits of the lawsuit in no time. Public opinion was very much against AIG joining the lawsuit.
The Richter scales shook with disapproval. The board took the prudent course of action as they did not like their chances of perpetuating a politically tone-deaf lawsuit. It seemed like bad business. They quickly wiped the saliva away and went onto the next thing.
They had needed a way to deal with Maurice Raymond Hank Greenberg. They took it to another dimension and invoked the law of unintended consequences. In short they needed a way to not only say no, they wanted a way to get Greenberg off their back. They did not want to be accused of bad stewardship.
The firestorm that arose from the leaks protects AIG’s board from public criticism. It also served up a clever side benefit of skewering Hank Greenberg within the political arena.
Maurice Raymond Hank Greenberg now has nothing.
Hank you’ve been publicly castrated and are being allowed to bleed out.
So I’m wondering. Who on AIG’s board or inner circle was the go between? What were the hook-ups. Someone had lunch or drinks with someone.
It’s important for the rest of the board and inner circle to figure it out. Because if someone brings me a Class A public shit storm…well let’s just say the next time he opens his mouth I would be very very skeptical. Know what I mean.
OK you got to be pretty sure this guy is not headed for political office. Especially if its one where you have to get votes. He may eventually end up on the boards of several very large corporations. But here is my guess on the timelines after the mandatory holiday to get a sun tan.
Academia is safe. He will most likely be quite the catch for a top Ivy League Diploma Factory. Do some research, opine on some scholarly but politically correct pro democratic research and work your way into a position where you ask the questions and do not have to respond to ignorant politicians who are grandstanding.
A few charitable and or non profits would welcome him on their boards as well. Pro-bono work always looks good. The real pay-off will be networking with other wheeler-dealers.
There will be speaking engagements where he should be able to make his former salary in just one day plus lavish expenses.
A book deal. Several book deals as a matter of fact. Being the former Governor of the New York Fed and being at ground zero during the 2008 melt-down makes for some fascinating reading.
Then there’s the board seats. Having a former Secretary of Treasury with international contacts would be quite a catch. Given Obama’s constant anti Wall Street tongue lashings may be a little awkward but we’ll get over it.
I predict he will first sit on the boards of foreign non-American global goliaths. They’ll pay well, very well. They will not care about American opinion. They will be able to shield Timothy Geithner from American Press. And he can work on some very interesting problems.
So Timothy Geithner welcome to the private sector. I’m pretty sure that I’ll buy your books. Maybe even buy some tickets to some of your speeches.
Sears Holding (Nasdaq:SHLD) just gave to long-term guidance that investors needed to hear. Eddie Lampert who has no experience as a Merchant or retailer will take over as CEO. The existing CEO has quit because of poor sales and inadequate profitability.
Eddie Lampert is stuck. No one will buy him out. He tried to duct tape K-Mart and Sears together on the basis of what a spread sheet told him. Unfortunately the spread sheet had poor predictive powers and now Eddie Lampert has been twisting in the wind in full display.
About the only thing that has stayed constant is Eddie Lampert. No one has a good idea to turn the joint around; including Eddie Lampert.
Retailing is a very very tough business. Wal-Mart (NYSE:WMT) is and will be a powerhouse. Target (NYSE:TGT) continues. JC Penney (NYSE:JCP) some feel will be resurgent. Someone has to take a dive.
Sears has been kissed by Judas.
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