$JCP enney. Does the board have what it takes? #Ackman #Pershingsquare

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.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

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Message to CEO. Capitalism Pays Better Than Socialism. Ford’s Mulally makes 4X GM Akerson $F $GM

Capitalism pays better than Socialism. General Motors Co (NYSE:GM) CEO Dan Akerson has requested a no increase to his compensation despite some pretty good returns in the past two years. This of course is as long as Uncle Sam retains an ownership interest which is still around 19%.

The House Oversight and Government Reform Committee will hold a hearing on
executive pay at the companies that received bailouts. GM will be a topic of
discussion along with automotive lender Ally Financial Inc.

In the meantime Ford (NYSE:F) which did not take a penny despite tangible problems at the time was able to pay Alan Mulally some $29.5 million in 2011. The company also gave him $58.3 million in stock as a reward for the auto maker’s turnaround.

End of Lesson

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

 

Discover Financial Up 60% but CEO Comp Down. Whats the Plan with David Nelms? $DFS

Discover Financial Services (NYSE:DFS) stock has appreciated some 60% in the past year. So what happens to the Chairman and Chief Executive David Nelms? He has held the job for nearly ten years now and the compensation committee cuts his pay cheque back.

According to SEC documents David Nelms received $9.96 million in compensation in fiscal 2012, down 28% from the previous year due to lower stock awards. No one is holding a tag day but the strategy is interesting.

Discover cited Mr. Nelms for helping it “deliver record profits”. Then the company said its board’s compensation and leadership development committee approved changes to its executive-compensation program for 2013 to “align with shareholder interests” and strengthen its “risk-balancing features.”

Among other issues changes include the ability to alter proposed stock unit awards if the company’s corporate risk officer determines an executive behaved recklessly.

So in this confusing context Mr Nelms is recognized for good work and then sees his pay cheque cut back.

Something is not aligning between the real mechanics of the program and the way it is communicated to the shareholders and investing public.

The chairman of the compensation committee is Gregory Case 50 who is now President and CEO of AON as well as a director. He spent some seventeen years at McKinsey and headed up their financial services practice. The two other members are Jeffrey Aronin 45 who has been President and CEO of numerous pharmaceutical companies and Richard Lenny 61 who has a DNA from Hershey’s and has been on the boards of Kraft and McDonald’s.

David Nelms 52 is relatively young. So is this a short-term bob and weave to appease current political winds? How much longer will David Nelms stay on board?

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

Bank of America Rewards Brian Moynihan. They had too. $BAC

Bank of America (NYSE:BAC) rewarded Brian Moynihan with a very large piece of sugar claiming that it was well deserved after all the hard turn around work. What the board  is really saying is that they did a lot of good work by picking and backing this guy. At this stage to come out and not publicly reward him big time would have signalled board dissatisfaction.

Given the story arc of Bank of America’s revival the board has no option but to signal satisfaction. Two marque members in particular would find it difficult to advocate their financial leadership is questionable.

Susan Bies 65 was a Governor of the Federal Reserve and is also a member of the SEC advisory committee improving financial reporting.

Donald Powell 71 was the former head of the FDIC.

Five independent directors are less than twelve months on the board and were not parties to previous decisions. The new guys usually go with the flow until they find their own footing.

David Yost 65, Sharon Allen 60, Arnold Donald 58, Lionell Newell 58 and Linda Hudson 62 probably all nodded and said well done.

So the newbies and gotta be are half the board so you know which way this is going to roll.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

Ethan Allen’s Piggy Piggy Piggy Chair. Black Swan Coming Soon $ETH

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.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

 

Twitter has Bigger Problem with Burger King $BKW $TWIT $FB

Burger King (NYSE:BKW) twitter account was hacked. Why. Because they could. Today Burger King is embarrassed and scrambling. No one blames them as a corporation.

The question becomes who is ultimately responsible for security. Was Burger King incompetent or where they following the rules as laid out by Twitter.

I use twitter a lot and am constantly annoyed by accounts which have been hacked and suddenly dysfunctional twits are streaming all over the world. Happens daily.

Twitter needs to get its security in line. Twitter is still a compelling social media platform. but questions are starting to appear. Twitter needs to fix this immediately if not sooner.

In the meantime Burger King lawyers must be reviewing a lawsuit. You cannot rely on an unstable partner and keep being hit by this nonsense.

Twitter maybe  about to experience a Black Swan consequence.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski

Kraft Lays an Egg. Is it the Board’s Fault or Will Management be Brilliant $KRFT

Kraft Foods Group (Nasdaq:KRFT) laid a smelly egg and missed street expectations. If you`re gonna miss might as well be by a lot and get it all over.

Chief Executive Tony Vernon made some maudlin comments about not being happy but they are making progress on restructuring. He did not comment on the hedge loss of $46 million or how you can lose in a hedge when you were not supposed to be gambling. but somehow they did it.

Kraft is undergoing some major transformational moves. Most of the loss was restructuring and post-employment benefits. Read buy-outs for termination. Hopefully the ugly part is past and an upswing is around the corner.

Taking a look at the board you have two hard-core numbers guys in the shape of John C Pope and E Follin Smith. Given their resumes they probably counselled financial restructuring and are now waiting for the fruits of their advice to arrive. You can only cut so much. Then you expect dividends. The pressure will be on these two to validate the cost  cutting expense.

You have several career retailers and merchants. Terry Lundgren, Jeanne Jackson, Myra Maloney Hart. The bio`s do not talk to product brilliance. There does not seem to be a food industry expertise. They put it on the shelf and hope to move it. While Kraft needs to tap into this expertise the board may be over weighted in this skill set.

Two Pepsi alumni in the form of Abelardo Bru of Pepsi and Frito-Lay as well as L Kevin Cox of Pepsi Bottling and Virgin Mobile as well as being the EVP HR of American Express may bring some product experience to the table. But it`s too highly concentrated.

So while the cost cutting exercise continues somewhere in the Kraft empire a phoenix of new product and compelling offerings should be arising. This board does not have the expertise to navigate this landscape.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski