WellPoint Behavorial Bias at Board Creates Street Confusion with new President $WLP

WellPoint (NYSE:WLP) appointed a new CEO Joseph R. Swedish, age 61,  effective March 25, 2013. Mr. Swedish will serve as Chief Executive Officer of the Company and will be appointed to the Board, effective upon Mr. Swedish commencing employment with the Company.

The stock sold off because the street did not know this guy. Under the guise of hating uncertainty pundits were saying he is not well know on the street so lets sell the stock and destroy shareholder wealth. So much for deep analysis from the street.

The board signed off on a hospital administrator instead of a financial insurance guy. Lets take a look at some of the board’s behavioural biases. Officially WellPoint wanted someone who well understands the operating behaviours of the entities that rack up the huge bills they are so concerned over. Out of the box thinking and the board should get kudos’ for it.

Quick scan of the board and why the guy got the job.

Lenox D Baker MD 70 is a doctor and hospital executive. He would have understood the new CEO’s experiences and how transferable they are.

Sheila Burke 61 Lawyer, Academic and public policy background. On Boards of associations such as Cancer Society and Association of Medical Colleges. she too would be relating to an operating hospital guy.

George Schaeffer 66 is a member of medical school advisory board of University of Cincinnati and Board member of University of Cincinnati Healthcare System. Positive bonding with hospital administrators is more than probable.

Warren Jobe 71 sits on board of Georgia Council on Substance Abuse. Again generating contact with hospitals and administrators.

Susan Bayh 52 has a pharma background. Her DNA is to sell and influence hospitals on various drugs.

Julie Hall 65 is a real estate developer. She is on University of California Irvine School of Medicine Deans Advisory Board. so the hospital connection is come by honestly.

Ramino Peru 56 is from Phelps Dodge a mining concern. Jackie Ward 73 has a technology background and Robert Dixon Jr. 56 is from PepsiCo and Proctor & Gamble. Their biases would have been neutral.

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

GE Fakes Out Comcast Best Financial Head Fake $GE $CMCSA $TRI

Comcast (Nasdaq:CMCSA) decided to buy out GE’s (NYSE:GE) 49% and make it final. NBC and associated parts including CNBC are going to Comcast for $16.7 Billion. Everyone thought it would eventually break this way but Comcast put the hurry up on. Clearly it was a chess game and lets look at some of the strategists who influenced the outcome.

Comcast of course is off the opinion that owning content and delivery is the right way to go. GE is of the opinion that $16.7 Billion takes it all away.

On the Comcast side you have

Brian Roberts 52 who controls some 33% of voting control and has his fingerprints and family jewels on the deal. Wonder who got impatient with the corporate culture clash?

Drilling down to independent directors you have

Kenneth J Bacon 57 retired from Fannie Mae. Not exactly a case history of financial success.

Joseph J Collins 67 who was Chair and CEO of Time Warner followed by a short stint as Chair and CEO of AOL Time Warner Interactive Video. This basically is the worst merger of all times. He cannot be screaming in board meetings “don’t do it”

Jonathan Rodgers 66 President and CEO of TV One, former president for six years of Discovery Network. Prior to that a career CBS man who became president of CBS television stations division. This man’s DNA screams network and control.

So you can see why Comcast wants it. These guys are network oriented.

On the GE side

I’m sure it’s unanimous that selling something for a cash amount equal to about 7% of market cap sounds pretty good. Here are a few personality issues for GE independent directors.

W Geoffrey Beattie 51 President of Woodbridge. He is a quiet Canadian power player for a quiet Canadian billionaire who controls Thomson Reuters (NYSE:TRI). So he signed off and waved good-bye to CNBC and other media assets. He would have some uniquely accurate perspective on valuations in this business.

Andrea Jung 53 Chair and CEO of Avon is also co-lead independent director for Apple. She must have a few insights into the future of media and technology (like maybe Apple TV and other stuff). The Apple DNA with smart phones, tablets and iTunes is to disrupt existing networks not acquire them.

The GE board is very heavy with high-powered Chairman and CEO’s who look closely at the numbers. NBC Universal was a discard from way back when. No one was trying to reverse the process.

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

Toyota Motor Sucker Punch One Day Maybe Soon $TM

Toyota Motors (NYSE:TM) has a Black Swan paddling in some time soon. If you believe in independent directors this company is not for you. They simply do not have one. All the directors are senior level Japanese Toyota executives who have been politically savvy enough to climb the corporate rungs and sit at the upper levels.

The probability of group think is astounding. Corporate radicals need not apply. You can talk all you want about Japanese culture and Toyota’s track record but as we all know nothing goes in a straight line forever. This Achilles heel will cause serious damage to shareholder wealth one day.

By the way not to sound xenophobic but if you are not Japanese this board will not care about you.

It’s that simple.

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

BlackBerry Bulk’s Up Board Is It Long Term or Just Window Dressing? $BBRY

Research in Motion err BlackBerry (Nasdaq:BBRY) announced the appointment of two heavyweight tel con guys.

Richard Lynch, retired executive vice president of Verizon Communications Inc., and Bert Nordberg, former chief executive of Sony Ericsson Mobile Communications.

Richard Lynch was the Chief Technology Officer for Verizon and seems to have a résumé in networks.

Bert Nordberg previous to Sony Ericsson Mobile was head of Ericsson’s Silicon Valley group.

On the surface the two seem to round out the board rather nicely. However nowhere is there a hint of customer user experience leadership. There are a lot of technology guys around. But how many are the generals in winning battles.

Time will tell of course. The newbies need to get up to speed. But it looks like BlackBerry is running out of excuses on the strategic leadership front.

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

Microsoft’s Uber Strategic Dell Move Blocks Google. Chrome is Dead $GOOG $MSFT $DELL

Microsoft (Nasdaq:MSFT) just kicked in $2 Billion into the Dell privatization deal and does not even get a board seat. Whats up with that. Firstly the $2 billion is one months excess cash flow. So it’s not big coin. Secondly it is a very small fraction of Microsoft’s overall cash position. Again so it’s not big coin. The investment is a subordinated debenture so they have mitigated some risk.

Here is the big win for Microsoft. Dell stays Windows. Google with Chrome could have done the deal but was blocked out if they knew about it at all in the early stages.

What about Microsoft’s relationship with Lenovo and Acer. For all we know Lenovo and Acer may be holding a piece of the deal. In any event Google relationship with the Chinese market is so bad Microsoft has safely concluded they will not go for Chrome. Dell will not go for Chrome. The remaining market for Chrome is not big enough.

Chrome is dead. It only cost $2 Billion and who knows it might yield a return.

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

S&P Goes to Woodshed McGraw-Hill Board Very Quiet About All of This $MHP

McGraw-Hill (NYSE:MHP) has finally heard the other shoe drop. The people of the United States are suing Standard and Poor’s for alleged fraud in credit ratings for mortgage backed securities all pre 2008 melt down.

About time the litigation commenced, if only to get it over. Much has been written about credit rating agency failures during this time. Precious little has been written about any positives.

So lets take a look at the McGraw-Hill board and see if the governance culture emanating was influenced.

Since 2008 only three new directors have been appointed to the board. So the old vets have their finger prints on the governance issues if as and when this finally blows up. A quick look at the two newbies shows

Charles E. Haldeman 63 was until very recently CEO of Freddie Mac. Seems very high in the awkward category but everyone had to know litigation would eventually come to be. The board may have some hard questions for Mr. Haldeman themselves.

William D. Green 59 and Richard E. Thornburgh also 59 seem to have no direct ties to the mortgage business so pre-2008 activities should not matter.

Sir Michael Rake 64, joined the board 2007 just before the party got going. He was the Chairman of KPMG International. He also has been knighted by the Queen of England. While certainly most of the allegations occurred before his watch his counsel since then has been very valuable. A top-notch accountant certainly should be able to see through much of the smoke and mirrors involved.

Pedro Asape 61, is well-connected in Mexican circles having held a number of positions with the Mexican Government. Currently involved within the investment business he seems to have no profile in risk management or ratings.

Linda Koch Lorimer 60,  has been a career administrator at major universities including Yale.
Sidney Taurel 63, has made a career at Eli Lilly which of course is all about pharmaceuticals.
Sir Winfried Bischoff 70, has been in very senior levels at Citi, Lloyd’s Bank, Schroeders and Prudential. His bio does not elaborate on what departments he worked in. But at these senior levels he would understand the trust required to rely on ratings.
Edward B. Rust, Jr. 61, is from the State Farm system and sits on the Board of Caterpillar which is also going through its own problems.
Hilda Ochoa-Brillembourg 67, runs her own investment concern and was formerly chief investment officer for World Bank Pension Fund. Again a heavy reliance on the trust of ratings.
Kurt L. Schmoke 62, is a lawyer and former politician. No particular business background so he had not antennae to pick up ratings problems.
William D. Green, 59, is the Executive Chairman of Accenture, a global management consulting, technology services and outsourcing company. But no ability in ratings or governance.
So about half of the directors have an investment/financial background and would intuitively understand the need for ratings. The other half were not even in the game. It appears no one has a stong risk management or governance background. Also no sign that any of the financial backgrounds had insights into real estate, credit ratings or mortgages.
So no one thought to ask the correct questions of where is this leading to? And why is the US government not going to sue us? AIG may have been ground zero for the melt-down. S&P provided the fuses.

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

Caterpillar Chinese Folly. Follow Trail back to Board of Directors $CAT

Caterpillar (NYSE:CAT) was robbed, cheated, swindled, hog tied, defrauded and screwed over. Not exactly what you want to hear about the management of a large and otherwise supposedly seasoned global company.

They overpaid because the financials were mis-represented not because they were hyper-competitive. For a deal of this size the board would have been consulted, lobbied, presented to and otherwise engaged to ensure their blessing.

So lets look at the board and see if we can conjure up some reasonable explanations for this colossal destruction of shareholder wealth.

Jon M. Huntsman 51 is the former US Ambassador to China, before that to Singapore and before that the Trade Ambassador.He also sits on the board of Ford. Quite the catch for a director. You could just see everyone soaking up his wise counsel on globalization and the enormously compelling opportunities that China has to offer. Given his background if he had expressed any concerns the deal would have died.

But here is the problem with Jon Huntsman. He flies at 30,000 feet and is very macro. He does not operate on the ground with all the other soldiers and button men. He is not a wheeler-dealer type that you would find at the investment bank’s merger and acquisition teams. Basically he has never been kicked in the balls and therefore did not understand the concept of jock strap athletic protection device. Just wondering if the Chinese did not profile him in some fashion and gamed the negotiations.

Dennis A Muilenburg 48 is from Boeing and has a background in the defense side. So while he must have picked up global experience he never bought anything from a foreigner. Sure he must have sold combat aircraft to how shall I put this err “foreigners”; but that is completely different.
Miles D. White 57 points to McDonald’s, Abbott Labs and Motorola as experience. Still no experience in purchasing operational assets in China.
Susan C. Schwab 57 also sits on Boeing’s Board as well as FedEx. She too was an US trade representative which is a Cabinet level position. So along with Jon Huntsman she chimed in at 30,000 feet of altitude. The dirty deeds were done at trench level somewhere she has not been. at least not in the sense that Caterpillar needed.
Daniel M. Dickinson 50 is a private investor. While his bio does not show an Asian or china expertise you would think a private investor should be good a due diligence. Whatever it was that he did not save the day.
David L. Calhoun 55 is also on board of Medtronic and Boeing. Perhaps there was a herd instinct subtly at play. He was vice chairman of General Electric and CEO of GE Infrastructure. Strange that this background did not make a light go off and get suspicious. How closely was he involved.
Jesse J. Greene 67 is the former chief risk officer for IBM. This is exactly what this guy is supposed to be good at.
Charles D Powell 70 comes from the investment business. Nothing to show he was good at due diligence in China.
Joshua I. Smith 71 is also in board of FedEx (another hook up which may have caused herding) and Allstate which provides no transferable insights.
Edward B. Rust 61 also has a background with the State Farm system. Not helpful in China.
William A. Osborn 64 ran Northern Trust and was on board of Abbott Labs and General Dynamics. so here is another Abbott labs hook up. The General Dynamics experience while global is that of sales not purchaser of operating assets. Very different game.
Juan Gallardo 64 has a food and beverages background which is not helpful.
Peter A. Magowan 70 is the former President  of the San Francisco Giants and he also headed up Safeway. Nice gigs but no China experience.
So the bottom line is some high level expertise in China and trade. But at the brass knuckle level Caterpillar had no game at any level.

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