Cross Border blogs

All is not doom and gloom

Well not for the International Accounting Standards Committee Foundation (IASCF), which discovered by chance yesterday it would be receiving a whopping €15 mn ($19 mn) from the European Commission. Senior officials were astonished to find out, via a press release, that the IASCF was to receive €5 mn a year for three years in 2011, 2012 and 2013.

COMMENT: No rhyme nor reason in the markets these days

With stories unraveling this quickly, today's basket of gold is tomorrow's basket case.

Take our 2008 IR Magazine UK Awards. Shortly before our ceremony last year, investors and analysts heaped praise on Barclays, the British bank that could seemingly do no wrong.

'Barclays is good at communicating shareholder value. The profit targets and the calculation framework are clear,' said one investor in last year's investor perception study.

'Barclays' disclosure is the best. It gives the clearest detail on all its diverse businesses,' said another.

Fast-forward six months and the bank can barely do anything right. Last week, a fund manager told me that the management and IR team at Barclays were 'in denial'. The British bank issued a statement after close of trading on Friday, January 16 reassuring investors it was still profitable after its share price fell by 25 percent in one day. But despite its best efforts, Barclays' previous attempt at reassurance clearly failed to abate investor agitation and more share price falls followed last week.

It is slightly odd then that suddenly investors decided to believe Barclays yesterday after it released a joint letter from its chief executive and chairman. Agius' and Varley's statement was revealing nothing particularly new, so why did fund managers suddenly decide to reach into their pockets?

There are three possible reasons: the letter is long (over three pages), detailed (it goes into the bank's capital ratios) and more credible. Because the letter originates from the chief exec and chairman, it carries more weight than a generic market release from the firm's IR department. And with the markets in this kind of state, more firms need this kind of commitment from their senior management to get their desired message across to their investor audience.

The move seemed to pay off yesterday with the stock rising over 70 percent, but has Barclays done enough to secure itself an award this year?

Clare Harrison
Deputy international editor

COMMENT: No bye, no aloha

John Thain, Bank of America’s former president of global banking and global wealth investment management and the ex-CEO of Merrill Lynch, resigned last week. Though there were many reasons, one of the key ones was Bank of America CEO Kenneth Lewis' purported unhappiness with the fact that, during the merger with Bank of America, it was a transition team that reported Merrill’s fourth-quarter losses, not Thain.

Oh, and Thain asking for a $10 mn bonus in the face of financial tremors didn’t help much. Then there was that untimely December vacation in Vail, Colorado, where he worked amid the ski slopes while the bank struggled under major financial losses. Should the former NYSE CEO still be interested, he’ll have some time freed up to take another trip the bank warned him against, to Davos, Switzerland, which hosts the World Economic Forum now through February 1.

If he does show up, it will certainly be a whirlwind of ‘this could’ve worked in hindsight’ moments for Thain, where he’ll receive all sorts of ill-timed bonuses that could even include tips on how to save beleaguered banks.

By Janine Armin
Associate editor
Corporate Secretary magazine

COMMENT: Bring back the UK shorting ban pretty damn shortly

After a disastrous few days for UK banking stocks, the head of the Fianancial Services Authority, Lord Turner, today alluded to a possible reintroduction of the shorting ban on financials. Quite frankly, a reinstatement of the ban is something I'd like to see happen sooner rather than later.

Letting the ban expire last Friday seems rather irresponsible given the news of the bailout that broke on Monday – news of which the government must have had an inkling. And after the Royal Bank of Scotland (RBS) trading statement, which dropped the bombshell that full-year losses at the bank could reach as much as £28 bn ($40 bn), we knew there'd be a fair bit of volatility. Add in the very real threat of nationalization and you've got a riot.

Letting the shorting ban expire ahead of a bailout - and as RBS teeters precariously on the brink of nationalization - seems somewhat counterintuitive, to say the least.

Clare Harrison
Deputy international editor

Steve Jobs to Bloomberg: ‘leave me alone’

The hysteria over Apple CEO Steve Jobs’ health issues hasn’t let up. And now the company has the SEC on its case. According to a Bloomberg report, regulators have launched an inquiry to ensure investors haven’t been misled about Jobs’ true condition.

Apple shares rose after Jobs, once a cancer patient, made a rare public statement on January 5 explaining that his noticeable weight loss was down to a hormonal imbalance. But the stock went into decline nine days later when Jobs said he was taking a five-month leave because his medical problems were ‘more complex’.

Jobs said he had had the last word, and has since given Bloomberg reporters an earful for staying on the story. ‘Why don’t you guys leave me alone - why is this important?’ he told one.

Companies generally probably do have a lot of room to maneuver when it comes to disclosing CEO health, but Apple’s own selling of Jobs may give it less space. ‘The company has used him and made him a public figure to increase the value of Apple,’ explains John Dienhart, a professor of ethics at Seattle University, in the piece. ‘If you take the good from that, then you have to take the bad.’

 

COMMENT: IFRS in XBRL

It sounds a bit like alphabet soup to the uninitiated, but its impact on the financial world promises to be sizeable; yesterday, the IASC (International Accounting Standards Committee) announced its XBRL taxonomy, or set of codes, for companies electronically issuing financial information via IFRS (international financial reporting standards).

Aside from all the acronyms, the main obstacle for the IFRS XBRL taxonomy is its reliance on global companies favoring it over a local taxonomy, assuming, that is, their domestic financial regulator has made the move to XBRL in the first place.

Luckily for the IASC, the SEC has agreed that non-US companies filing in XBRL will need to do so using the IFRS taxonomy.

Had the US not chosen to accept data filed via the IFRS taxonomy, the IASC may have found itself up a creek with no paddle, with a brand new code it had spent months slaving over and no one to use it.

Chatting to two SEC officials yesterday, I couldn’t help but get the feeling they had resigned themselves to the inevitable. Besides, IFRS taxonomy can only help in the conversion process when the SEC eventually goes down the path of adopting IFRS for all its issuers.

The officials, who were on a one-day jaunt from Washington to visit the IASC, appeared more enthusiastic about the notion that the US use of the IFRS taxonomy might prompt other issuers to jump on the bandwagon. They recognized a common electronic reporting language was the best way of fending off competitors. ‘If you can’t beat us…,’ smiled the head of the SEC’s interactive disclosure office.

The IASC might be waiting some time before UK companies join the party. The Financial Services Authority (FSA) the UK's financial regulator, posted a statement on its website declaring it had considered XBRL and ‘determined that it is not the most appropriate technology for the FSA or UK financial services regulation at the current time.’ Later it adds: ‘Unlike other regulators, the FSA is not required to provide or facilitate access to such corporate disclosures. Therefore, one of the main benefits of XBRL as a 'firm-oriented' technology would not be realized by the FSA.’

Fay Sanders
International editor
IR magazine

COMMENT: Madoff and the Trojan Horse

Even though the holidays are a time for giving, Bernard Madoff’s sons did not appreciate the approximately $1 million worth of jewelry he sent to their Florida homes. Instead, the rebellious offspring notified their lawyers. And Madoff, architect of the elaborate ‘Ponzi scheme’ defrauding investors out of a possible $50 billion, was promptly accused of trying to make off with assets the SEC had only just frozen.

You’re probably thinking, where’s the drama in that? But the nepotism goes deep in this one. David Kotz, the SEC's inspector general, is investigating a possible lack of regulatory oversight at Madoff Securities in connection with the fact that Madoff's niece, a compliance officer at the firm, married a former SEC examinations official.

Later this week the Securities Investor Protection Corp and the SEC will discuss the process for reimbursing Madoff’s customers. So regardless of Madoff family feuds, investors will at least be a little closer to getting their money back.

By Janine Armin
Associate editor
Corporate Secretary magazine

COMMENT: Apple boss attempts to quell speculation

'An apple a day keeps the doctor away', so the adage goes.

So you'd think being CEO of multi-billion-dollar consumer electronics powerhouse Apple would provide more than enough of the good stuff to ward off unwanted illness.

Yet investors were unconvinced after speculation grew on the causes of Steve Jobs' dramatic weight loss after a product launch last year.

Yesterday, Jobs finally (and reluctantly) penned a letter acknowledging speculation about his health and dispelling rumors he was on his 'deathbed' or even that there were any immediate plans to step down as Apple chief.

Investors welcomed Jobs' frank submission, rewarding its share price with a 4.2 percent rise in New York. The share price spike was a clear testimony to investors' high regard for Jobs, the man many credit with turning around the electronics manufacturer.

The focus for any firm in Apple's position should be succession planning. While having a demigod in charge is all very well, it leaves open the question of what will happen in the long term. Is he or she the lone genius in an otherwise distinctly average management team? Will a sudden and unexpected departure destroy the intricate balance of chemistry on the board?

The fortunate consequence of Jobs' recent absence has been the chance for other members of the management team to share a piece of the limelight. It is just a shame that Apple and Jobs, in particular, were so cagey about acknowledging the questions surrounding his health. A CEO may be entitled to a private life but where health is concerned, investors have a right to know where they stand. The absence of any communication only served to exacerbate the whisperings and amplify the dissenting voices.

Clare Harrison
Deputy international editor