Remaining Useful Life of Directors $SPY

How long do directors last on Boards of publicly traded companies. Some stay on for  twenty years and become very entrenched if not irrelevant. I am researching a predictive formula that calculates the remaining useful life of an independent director.

I calculate the average age of the board and the average tenure as a director. Some 59 years olds have been on the board for seven years or more. Some 72 year olds have been recently elected. Add the two averages together. Compare the number to the sum of a directors age and his/her tenure on the board. If they are above or well above the average the clock is ticking and they will be replaced shortly.

With the march of time the oldsters will drop out. With high tenures boards will be looking for a refresh as they need new skills and perspectives.

Not 100% perfect but worth noting.

George Gutowski writes from a caveat emptor perspective.

Infosys Secret Sauce at Board Level. Why did they kick so much ass? $INFY

Infosys (NYSE:INFY) has moved a lot of jobs from high wage to low wage environments. How did a bunch or foreigners do this? Everyone knows the company with the cheapest cost structure has the ultimate financial advantage.

How did they build a company of almost $30 Billion in market cap by destroying good paying blue-collar and pink collar jobs.

The board has thirteen members. Five of whom are active duty senior officers of the company. Eight are independent directors. The average age of the independent director is 59 and average tenure is 8 years. One women who clearly is a westerner. Two other men bring the western count to three. Most global companies are not that well diversified in global perspective.

Therefore you have to conclude that the rest of the board was exceptionally savvy about western economies and how to exploit the cost differential. The independents are:

Deepak Satwalekar 63 is a bank and money man. Managing Director and CEO of HDFC. Formerly with Standard Life Insurance. He has been a consultant to World Bank, Asian Development Bank and has developed an understanding of what have not economies can offer.

R Seshasayee 64 is the Executive Vice Chairman of Ashok Leyland from 1988 to 2011. He joined Ashok Lelyland in 1976 and therefore can be considered a car guy. Cars are global brands which have long been dominated by American Brands until they lost control of labour wages and quality.

Omkar Goswami 55 is a career economist and Chairman of the Investors Grievance Committee. As an economist in the Indian economy the question has been how do we achieve western standards.

Sridau Iyengau 64 was with KPMG from 1978 to 2002. He was a senior partner in both the US and the UK. He was also Chairman and CEO of KPMG India from 1997 to 2000. while at KPMG this man has had the inside seat at numerous western based companies and knew cost structures very well.

Ravi Venkatsen 49 was formerly the chairman of Microsoft India from 2004-2011. Prior he spent 17 years at Cummins Inc the engine people. MBA and Baker Scholar from Harvard B School started his very good appreciation of the western business world.

So while many would look at Infosys and see them as an opportunistic player, their board has an excellent savvy of western business constructs. The average western executive trying to operate in India spends more time stumbling about.

Now through in three western directors and the team becomes very strong.

Ann Fudge 61 the chairman and CEO of Young and Rubican Brands. She had earlier experience at Kraft Foods, General Foods, General Mills and was on the board of Federal Reserve Bank of New York. Harvard MBA to boot. Her consumer products experience rounds the financial operations expertise of her peers.

Jeffrey Sean Lehman 55 is a tax lawyer by profession. Professor of Law and Dean. His understanding of taxes would be key as you transfer cost inputs across political boundaries.

David Boyes 63 is a career IT guy. Formerly Chief Operating Officer of ANZ bank and previously was SVP e-commerce at American Express. Don’t believe he’s a Yank but western oriented does apply with a good understanding of Asia.

So yes it was all about the cheaper labour. But it took a western mind-set to put the game plan into play. This board has no difficulty understanding the West.

George Gutowski writes from a caveat emptor perspective.

$JCP enney shoots the $AAPL guy. Target hires a $YHOO guy. Just what is the fashion in retail?

JCPenney (NYSE:JCP) whacked their Apple executive who was supposed to save them. Ackman cannot pick them. Now everyone is saying Apple executives are not very good outside of the Apple eco-structure.

Take a look at Target (NYSE:TGT) They just added to the board Henrique de Castro 47 who since Nov 2012 has been the chief operating officer of Yahoo (Nasdaq:YHOO) and has been at Google (Nasdaq:GOOG), Dell and McKinsey. Now clearly he is a board member and not the quarterback. But I find the hook up of a very newly minted COO at Yahoo coming on the board of Target.

Lets take a look at the rest of Targets board. Eleven independent directors. Average age of 55 and 7.5 years of tenure.

Gregg Steinhafel 58 is the President, CEO and Chairman. He has been with Target since 1979 when he joined as a merchandising trainee. Way more solid as a quarterback than the JCPenney guy who used to be an Apple guy.

Solomon D Trujillo 60. CEO of Telstra Australian Telecom. Why an Australian?

Mary Minnick 52 Partner with Lion Capital a consumer focused Private Investment Firm. 23 year career with Coca Cola culminating in senior executive positions. Consumer and retail. Got it.

Derica W Rice 47 EVP Global Services and CFO Eli Lilly & Company. Global perspective in a highly regulated drug industry.

Mary N Dillon 50 President and CEO of US Cellular Corp Wireless Telecom. Previously EVP and Chief Marketing Officer of McDonald’s. Burgers, cell phones they’re all consumable right.

Anne Mulcahy 59 Former Chairman and CEO of Xerox. Director of Washington Post and J&J. One of the longest-serving directors. Some logic to replace just to prevent staleness on the board.

Calvin Darden 62. Real Estate Development now. but was SVP of US operations for United Parcel Services. Gets the facilities and logistics for on-line fulfillment.

Roxanne Austin 51 is currently the President of Austin Investment advisors since 2004. Professional investor who can empathize with investor concerns.

James Johnson 68 Vice Chairman of Perseus a Merchant Banking Private equity firm. Also a director of Goldman Sachs Group. At the age of 68 with 13 years of tenure on the board he is probably a candidate for replacement in the near future.

John G Stumpf 58 Chair, President and CEO of Wells Fargo. Full time CEO. Does he really have the time to pay attention to Target.

Douglas Baker 54 24 year veteran of Ecolab where he is now President and CEO.

The board has clear strengths on retail/consumer with a smattering of financial engineering. Three active duty CEO or COO probably find themselves short for time but the CEO is a seasoned merchant.

This group has figured out a way to include the very new Chief Operating Officer of Yahoo onto the board. Very different from the JCPenney experience.

George Gutowski writes from a caveat emptor perspective.

 

 

IBM Board of Directors CEO Driven One Employer Focus

IBM (NYSE:IBM) has a very unique board of directors. Not only are most of them either serving or retired CEO’s but they did not job hop as they climbed the rungs of corporate power. Most of the job changes were from one CEO position to another.

Several are still serving and much has been made if a serving CEO has the time to be a good director somewhere else. Be that as it may lets take a look at the current team:

Sidney Taurel 64 a career Eli Lilly executive culminating as CEO and Chair before retiring.

Ken Chenault 61 a career American Express executive culminating in CEO and Chair before retiring.

David Farr 58 a career Emerson Electric executive culminating in CEO and Chair before retiring.

James Owens 67 career Caterpillar executive culminating in CEO and chair before retiring.

Joan Spero 68 Former Ambassador to the United Nations for Economic and Social Affairs. Started off as a career American Express executive and was the US Under-Secretary of State for Economic, Business and Agricultural Affairs. clearly brings a geo-political slant which IBM finds valuable.

Andrew Liveris 58 career Dow Chemical and now Chair, President and CEO of Dow. does he have the quality time.

W James McNerney 63  career General Electric executive heading up GE Aircraft Engines. Was Chair and CEO of 3M before he snagged the big job at Boeing where he is now Chair, President and CEO.

Shirley Ann Jackson 66 Theoretical Physicist. Formerly at AT&T Bell Labs and former Chair of US Nuclear Regulatory Commission.  Provides a perspective on technology and how it can be regulated.

Alain JP Belda 69 career Alcoa executive until 2010 retirement as chairman. currently a managing director of Warburg Pincus.

William Brody 69 scientist, radiologist, professor of bio-medical engineering. President of Salk Institute. Second prominent scientist on board.

Michael Eskew 63 career executive with United Parcel Services retiring as Chair and CEO.

Lorenzo H Zambrano 68 a career executive with CEMEX and currently the Chair and CEO.

So have we made it clear. Big Blue board of directors is all about the guys who clawed their way to the top as CEO’s. They may understand what it takes to win at the CEO game but do they understand the process of shareholder wealth creation. The perspective while very powerful is very narrow.

George Gutowski writes from a caveat emptor perspective.

Alcoa’s Board is it Still Up To Challenge? $AA

Alcoa (NYSE:AA) is coming out with earnings soon. Does their board of directors still have what it takes. The average age of the independent director is 66. Average tenure is 8.3 years. Three women out of ten independent directors.

The lead director is Dr Judith Gueron age 71 who has been on the board since 1988 and is a highly respected economist. We could not identify any other board memberships either past or present.

The most interesting or should I say Machiavellian member is Ratan Naval Tata of the Tata Group from India. A global company if there ever was one. Mr. Tata is also on the international advisory boards of Mitsubishi Corporation, JP Morgan Chase, Rolls-Royce, Temasek Holdings and the Monetary Authority of Singapore.

Will the interests of Alcoa shareholders align with those of Tata? Will a lead director with about 25 years at the table be the right person for the job?

George Gutowski writes from a caveat emptor perspective.

Ding Dong Avon Leaving Ireland. Is that It? $AVP

Avon Products (NYSE:AVP) announced further head count reductions to achieve their cost cutting which had also been previously announced. The plan is to whack another 400 and leave Ireland. The plan is to exit small markets and concentrate on big ones.

Yeah OK big markets, big bucks and hopefully big rewards. So why even announce anything for Ireland was it really that big? Sure some employees are out of a job. But Ireland had only a population of just under 5 million. (Ex Northern Ireland) so how big of a savings are we going to see.

Ireland has had a recent history of some very interesting tax laws. The Irish allowed you to shelter much income from the revenuers from many a far-a-way land. As they beat the drums of retreat the Irish advantages are not as attractive. the losses need to be taken where they can be maximized in high tax jurisdictions such as the United States.

So in a little while bye and bye do not be surprised if the IRS suddenly decides to challenge some of the consolidations and tax losses. Fair is fair.

In the mean time lets take a quick look at the board. 9 independent directors, 4 women, average age 65. Average tenure 9.7 years although new blood has been coming on recently.

Ann Moore 62 formerly Chair and CEO of Time. a career time-life executive.

Maria Elena Lagomasino 64 A career private wealth banker from Sun Trust, JP Morgan Private Bank, Chase Manhattan Bank.Would have understood the advantages of Ireland’s tax code very well.

Paula Stern 68. Former Commissioner of US International Trade Commission. Expert understanding of international structures and how to leverage them.

Laurence Weinbach 73 was chairman of Unisys until 2006. Previously managing director – chief executive officer Andersen World Wide. Retiring in a few weeks but with that level of accounting expertise he would have a very good handle on taxes and structuring.

Gary Rodkin 60. CEO of Conagra Foods. Prior was Chair and CEO of Pepsico Beverages and Food. Significant experience at Tropicana, General Mills and Yoplait Yogurt. Food is an international commodity which is usually structured to be tax effective.

Don Cornwell 65 Chairman of Granite Broadcasting 1988-2009. COO Corporate Finance Dep’t Goldman Sachs 1980-88. Vice President at Investment Banking Goldman Sachs from 1976. This guy is all about financial engineering.

Charles Noski 60 former vice chair of Bank of America. Former CFO of Northrop Grumman, ATT, Hughes Electronics and formerly partner of Deloitte & Touche. Financial engineer extraordinaire.

So the board with a very strong financial engineering background decides to get out of Ireland because its a small market and they can fire a few guy’s. They even press release it.

Hmmm.

Double Hmmm.

George Gutowski writes from a caveat emptor perspective.

Douglas Connant

Home Depot Becomes Debt Junkie. Board of Directors Propensity for Debt $HD

Home Depot (NYSE:HD) recently announced $2 Billion dollar indebtedness. They told the shareholders and market in general that they could raise more and still be comfortable financially. The finds are predominantly earmarked for share redemption. This creates the very temporary illusion or delusion of increasing earnings per share because you buy  and cancel stock. You have not done anything clever its just financial engineering.

One tranche for ten years and the second billion dollars for thirty years. If you believe interest rates are low lock in as long as you can get. If you believe your business plan is not respected borrow tons of money and buy out stupid shareholders who are looking for a way out.

$2 Billion is a lot of debt. What board of directors would approve of the leverage? Do they have a propensity to borrow? Are they debt junkies? Some directors cannot stand borrowing a nickel but not these guys.

Lets take a look at the profiles and see what characteristics can be spotted.

The average age of the directors is approximately 58. Average tenure is 6.5 years. Only nine directors so independents are a little small. Two women at this point.

Gregory Brenneman 50 currently a private capital guy. Was the President of Continental Airlines. Turned around Quiznos and Burger King. Became President of PwC Consulting prior to its sale to IBM. Always a series of very short assignments. Quick fixes in turnarounds and airlines borrow lots of money.

Armando Codina 65. Strong roots as a real estate developer. These guys may be very astute but they operate in a leverage driven environment.

Karen Katen 62 Career Pfizer Executive since 1974. Learning the ropes as a director of a publicly traded company. While she probably has done well in positions of increasing importance she is green when it comes to directing public companies and huge debt loads.

Mark Vadon 42. Founder and chief of everything at Blue Nile an online diamond and jewelry retailer. Prior to that was a consultant at Bain. While I’m sure Blue Nile is a bone fide success story its growth was driven by organic reasons. New technology taping into the age-old penchant for jewelry. So why do you want to borrow a lot of money? You have no experience base in leveraged grind em out and fight like hell companies.

Bonnie Guiton Hill 70 and lead director. Consultant. Was the SVP Communication and Public Affairs for LA Times, a Tribune asset.

F Duane Ackerman 69 Retired President and CEO of Bell South. All experiences are with a telco utility that had huge monopoly power and could borrow against future revenue streams. When a retail operating company borrows it’s very different. not sure he has the perspective to get that.

S Frank Brown 55 Audit committee financial expert as per SEC guidelines. Just finished his term as dean of Insead. 26 years at PricewaterhouseCooper. Bio says he is an author but does not say what he wrote. Very cruel. Authors hate that.

Albert Cary 60 Career Frito-Lay and Pepsi Executive. Started off with seven years at Proctor and Gamble. Packaged consumer goods and foods. Not exactly building materials. Do marketing guys ever understand numbers like the finance guys? No.

No one on this board understand a two by four. No one on this board understand the economic and  housing cycle. So they all bought into a story to borrow two billion and maybe more because the power point looked very good.

Given a 6.5 year average tenure most of these guys will not be around when the first tranche for $1 Billion has to be repaid or rolled forward. Good luck with that.

George Gutowski writes from a caveat emptor perspective.