Cross Border blogs

What now for retail investors?

The jury is out on the next course of action for the world's retail investors. Some suggest that they will sell up and move their hard earned cash out of equities, others argue they will channel their substantial anger into challenging boards, making for an extremely eventful 2009 proxy season.

In the UK, the UK Shareholders Association is taking on the government for what it sees as unduly painful conditions of the banking bailout. The abolition of dividends to conventional shareholders at the request of the government has sent small shareholders hopping mad. In China, emotions have been similarly fraught due to the huge number of ordinary Chinese people who chucked their money into local companies in the mistaken belief that there was only one way the valuations could go: up. It will probably be a long while before small investors so readily entrust their money in the whim of the markets.

COMMENT: Microsoft, meet Angelina

Microsoft is upping the ante on good corporate conduct, recently introducing bonuses for outside legal counsel who commit to diversifying their firms. Get the full story in the November issue of Corporate Secretary.

Just this month the computer company made another Good Samaritan move, garnering the interest of the world’s most coveted socially conscious actress, Angelina Jolie. Together, they formed Kids in Need of Defense (KIND), a national children’s advocacy initiative to provide free legal counsel to immigrant children in the US caught without caregivers.

Not that anyone cares, but 25 law firms and corporate law departments also helped create KIND.

By Janine Armin
Corporate Secretary magazine

Holton's heroes

Investor suffragist Glyn Holton, who is spearheading a global proxy exchange, has found his first field agents. Badge number 00001 is shareholder activist John Chevedden, who helped get majority votes on 40 shareholder proposals last year alone. Another recruit is Vincent Cirulli, head of derivatives for MetLife.

Holton is sending his agents on the road to educate shareholders about transferring their proxy rights to like-minded investors who have more time than they do to push governance issues. They will also attend shareholder meetings. ‘We wanted smart professionals and activists who understand that real investing is about engagement,’ writes Holton on his website, ‘That is exactly the sort of people who are stepping forward to be field agents.’

See the entire list of field agents here.

 

The debut of the anti-Broadridge coalition

It’s a very tall order, but NIRI, the Society of Corporate Secretaries & Governance Professionals and three other trade associations have launched a campaign attempting to enlist the average shareholder in a reform of the 'cumbersome, circuitous and overly expensive' proxy system. 

A new website for the Shareholder Communications Coalition outlines the afflictions in crystal-clear language. Check out the definitions of NOBO/OBO in layman’s terms and the explanation of how shareholders can keep short sellers from borrowing their shares held in margin accounts. There’s a shot or two at Broadridge Financial Solutions, locked in (as it is) at the center of most proxy material processing, and plenty of testimonials from figures in the proxy community supporting the coalition position.

We think they’ll need some luck driving traffic considering many shareholders can’t even be bothered to open their proxy statements.

COMMENT: The right moves

Congressman Vito Fossella’s reputation for advocating good corporate governance was tarnished when it was revealed, through a drunken driving arrest, that he had had an extra-marital affair, which led to having an extra child.

Besides the possibility of serving a little jail time for the DUI, things are looking up for Fossella. The National Association of Manufacturers gave him the Award for Manufacturing Legislative Excellence, which honors voters who have supported manufacturing in America.

Perhaps the renewed respect will help him regain his authority in the world of business ethics, even if he falls a little short of that sentiment when it comes to romance and driving.

By Janine Armin

Shift to cash by hedge funds could be adding to volatility

Hedge funds, hit hard by the ongoing crunch, are choosing to sit out of equity trading, a move that could be adding to volatility.   

According to the FT this week, analysts say the shift to cash by funds such as SAC Capital, Paulson & Co and Millennium Partners has caused a ‘decoupling of volume and volatility’, with big sell-offs and gains ‘exacerbated by relatively low trading volumes’.

It seems, even when they sit on their hands, hedge funds can’t help but cause trouble.

Wachovia’s canned conference call

We’d only just stopped praising Wachovia for ditching Citigroup’s merger offer in favor of a better deal from Wells Fargo, and now this? The bank, so famous for its open and complete IR program, didn’t let analysts ask questions on its earnings call today. When investors dialed in, they got a canned message about the results, which included a gigantic $23.7 bn net loss.

It’s a strange move for a company in the midst of a closely watched merger, set to take a $25 bn cash infusion from the US government’s bailout fund. And it didn't escape the notice of the Wall Street Journal's 'Heard on the Street' squad.

IR consultant John Palizza says it is ‘a startling and abrupt change in style’ for Wachovia. ‘My guess is that it was dictated by Wells Fargo, given that they will inherit any securities law problems that might arise out of the call and the miss was so large,’ he says. ‘It does look awfully convenient that the switch took place at a time when they announced such massive losses.’

A Wachovia IRO did not return a message.

‘Lunch is for wimps’: the sequel

Admit it. You love the 1987 movie ‘Wall Street’ as much as we do. What could be more fun than the drinking game it spawned which requires you to drink: anytime the time is shown, anytime Gordon Gekko calls Bud Fox ‘sport’ or whenever anyone calls an investment a ‘dog’?

The current market turmoil has inspired 20th Century Fox to get moving with its sequel. In 2007, a draft script focused on Gekko ‘working on a global scale in the hedge fund era’ on his release from prison for that sentence that sounds so dated now (insider trading). Now the studio has called in rewrite for a new version that apparently aims to reflect ‘a much more tumultuous world,’ according to Variety.

An intriguing detail is that the scriptwriter is Allan Loeb, a licensed stockbroker who once worked at the Chicago Board of Trade. Pending script approval, Michael Douglas will reprise the lead role. Could there please also be a part in there for Benicio del Toro?

Shares boosted by earnings

Stock market commentators have had an unenviable task these last few weeks, with world indices lurching to and fro in apparent blind panic. One prediction this week looks to be on the money, however, which offers hope that investors might be regaining a little composure.

At a press briefing on Wednesday, Gary Baker of Merrill Lynch said two things need to happen before we see a decent equity rally: accurate forecasts and lower interest rates.

Just two days later, Reuters reports that encouraging earnings signals from technology firms helped markets rise in Asia, Europe and on Wall Street. IROs desperate for stability might want to cross those fingers for further rate cuts…

COMMENT: Participaction!

If any company could find the corporate governance mainstays America has come to know and love a bit challenging – like internal monitoring programs – it’s Siemens. The German engineering company has had one severe round with its shadow since German authorities uncovered a massive bribery scandal two years ago. The scale of the problem was in part attributed to its far-ranging operations.

To right the ship, last year Siemens hired Peter Solmssen as general counsel, putting him in the unenviable position of instilling ethical values among the company’s 400,000 employees. Tackling the global problem head-on, Solmssen headed to its facilities in Mexico, and did exactly what anybody charged with such a gargantuan task should: he told employees about ethics.

His new job could not be more different from his past role at GE, a company renowned for its compliance and deft leadership.

But it could help Solmssen reinforce Siemens’ conviction to end corruption, important as the Justice Department nears the end of its investigation. And, according to the New York Times, Siemens’ compliance department is indeed on the up and up, heralding the virtues of the three Ps of corporate governance: procedures, processes and people.

By Janine Armin
Corporate Secretary magazine