From Institutional Shareholder Services:
Submitted by: L. Reed Walton, Staff Writer
After the passage of the "Shareholder Vote on Executive Compensation Act" by the U.S. House of Representatives, Senate Democrats are making it known that they, too, want shareholders to have a vote on executive pay.
A bill seeking to amend the Securities and Exchange Act of 1934 to give shareholders at public companies an advisory vote on executive compensation--or "say on pay"--was introduced April 20 in the U.S. Senate as a companion to the House bill approved the same day. The House legislation passed by a vote of 269-134, indicating that it got some Republican support.
Senate Bill 1811, which was introduced by Sen. Barack Obama of Illinois, proposes an annual vote on the executive compensation disclosed in proxy statements under the new Securities and Exchange Commission's standards. Companies would be required to allow a non-binding vote on the compensation disclosure and analysis (CD&A), summary compensation tables, and related material, starting in 2009.
Like the House measure, the Senate bill would give shareholders the opportunity to vote on any severance agreements that are reached while a company is considering a takeover offer or merger.
S. 1811 has been referred to the Senate Committee on Banking, Housing, and Urban Affairs, and has attracted co-sponsorships from at least four of Obama's fellow Democrats, including Sen. Sherrod Brown of Ohio, Sen. Tom Harkin of Iowa, Sen. John Kerry of Massachusetts, and Sen. Richard Durbin, also of Illinois.
In his invitation to co-sponsors on April 24, Obama wrote, "It's time that we not only make executive compensation packages more transparent, but that we also allow shareholders to express and debate their views on those packages."
The Bush administration has expressed opposition to the House legislation, saying it "does not believe that Congress should mandate the process by which executive compensation is approved."
Monday, April 30, 2007
Enron, the Supreme Court and Shareholders on the Brink
By BEN STEIN, New York Times, Sunday, April 29, 2007:
LONG ago and far away, when I was a little tyke studying economics under the tutelage of C. Lowell Harriss at Columbia, and finance under Jan Ginter Deutsch and Henry Wallich at Yale, we were taught that the stockholder was the ultimate owner of a public company, the ultimate boss, the ultimate trustor to whom the highest standards of fiduciary duty were owed.
These included the duty to put the interests of the stockholder ahead of the interests of the managers and their agents in each and every situation, to avoid even the appearance of a conflict of interest, to disclose each and every material fact and to avoid any subterfuge that would operate to conceal a material fact.
These duties were common-law obligations, but some of them had also been codified in federal and state law. Federal law, in particular, enacted after the disclosure of huge securities fraud surrounding the 1929 stock market crash that started the Great Depression, prohibited the use of any artifice or device to conceal material facts or to keep them from being disclosed to the investing public.
Section 10(b) of the Securities Exchange Act of 1934 specifically barred the use of any manipulative device or contrivance that would defraud or mislead. A rule adopted by the Securities and Exchange Commission under that act, the famous Rule 10b-5 said that it would be unlawful for any person “directly or indirectly” to “engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”
That, you would think, would have special relevance to the huge scandal at Enron. In that sad story, managers of the company used various devices to conceal from the markets and the investing public that the company was essentially a huge fraud.
In that effort, the managers were helped considerably by a number of very large investment banks. These banks and brokerages used complex transactions that made it look as if Enron were making money when in fact it was insolvent. Andrew S. Fastow, the former finance boss at Enron, testified during legal proceedings about Enron that he saw the large banks as “problem solvers” who would come up with these schemes and thus help the company conceal the reality of its dire situation.
Now, you would think that if this were true, Merrill Lynch, Credit Suisse and Barclays — named in an investor lawsuit — might possibly be liable to the defrauded stockholders, whose losses were in the tens of billions of dollars, and might owe some little pittance to them. (Banks including Citigroup, JPMorgan Chase and CIBC have already paid more than $7.3 billion to settle with Enron shareholders.) You would think that there would at least be a trial about it.
Ah, but then you would be missing the point that the law is a wily, cunning beast of utter unpredictability. Some years ago, in 1994, after a series of disastrous missteps by accounting firms in connection with an earlier series of securities frauds, the Supreme Court brought out an opinion in the case called Central Bank of Denver v. First Interstate Bank of Denver.
In this long and incomprehensible case, the high court basically said that there would be no 10(b) liability for players who “merely” aided and betted securities fraud.
Just as an opinion, by little me, this was done to save the accounting firms from completely immolating themselves by their misconduct. However, the facts of that case were somewhat limited. The defendant, Central Bank, had been the trustee for $26 million in defaulted bonds issued by a local public building authority. But Central was not its investment bank and did not issue investment analysis and, moreover, the securities in question were not publicly traded.
The Enron fraud involved a public company and had a much wider scope. In a huge class-action case where millions of documents had been collected in a federal district court, and in which many witnesses had been deposed, a jury trial was headed to daylight. But suddenly last month, something happened. A three-judge panel of the Fifth Circuit United States Court of Appeals in New Orleans ruled that the class-action suit against investment banks over Enron could not proceed. (Individuals’ ability to pursue claims was not affected.)
The panel held that although its ruling might prevent justice from being done and satisfaction from being had, the acts of the investment bankers were at most aiding and abetting, not direct acts, and therefore not actionable under 10(b) as construed in the Central Bank case.
Ouch. Yes, the defendant banks are accused of concealing the true facts about Enron and likely led investors to buy when they should have sold. Yes (and this is a beauty), at the same time the investment banks were helping Enron with its questionable financials, their “analysts” were praising Enron. (As the petitioners’ brief notes in an appeal to the Supreme Court to overturn the Fifth Circuit decision, these were “full service” banks.)
But, according to the Fifth Circuit panel, this was not enough. This was not a scheme or contrivance to defraud, they said. Yes, the facts were completely different from those of the Central Bank case, but the banks were to be let off the hook. This was in the name of offering predictability in these cases (apparently the predictability that the stockholders would be mistreated).
But not all hope is lost. A tasty appeal has been filed, which is a little masterpiece of legal argumentation.
Now, the Supreme Court can have another look at this case. It can return some dignity and rights to Enron stockholders and send up a warning flare to investment banks to avoid helping out with financial fraud. It can let this case go forward to trial.
This is a potential golden moment for the stockholders — or another step down the dreary alley toward extinction of the rights of those poor whipped dogs: the actual owners of America’s public companies. It is up to the Supreme Court to right the ship.
Ben Stein is a lawyer, writer, actor and economist. E-mail: ebiz@nytimes.com.
LONG ago and far away, when I was a little tyke studying economics under the tutelage of C. Lowell Harriss at Columbia, and finance under Jan Ginter Deutsch and Henry Wallich at Yale, we were taught that the stockholder was the ultimate owner of a public company, the ultimate boss, the ultimate trustor to whom the highest standards of fiduciary duty were owed.
These included the duty to put the interests of the stockholder ahead of the interests of the managers and their agents in each and every situation, to avoid even the appearance of a conflict of interest, to disclose each and every material fact and to avoid any subterfuge that would operate to conceal a material fact.
These duties were common-law obligations, but some of them had also been codified in federal and state law. Federal law, in particular, enacted after the disclosure of huge securities fraud surrounding the 1929 stock market crash that started the Great Depression, prohibited the use of any artifice or device to conceal material facts or to keep them from being disclosed to the investing public.
Section 10(b) of the Securities Exchange Act of 1934 specifically barred the use of any manipulative device or contrivance that would defraud or mislead. A rule adopted by the Securities and Exchange Commission under that act, the famous Rule 10b-5 said that it would be unlawful for any person “directly or indirectly” to “engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.”
That, you would think, would have special relevance to the huge scandal at Enron. In that sad story, managers of the company used various devices to conceal from the markets and the investing public that the company was essentially a huge fraud.
In that effort, the managers were helped considerably by a number of very large investment banks. These banks and brokerages used complex transactions that made it look as if Enron were making money when in fact it was insolvent. Andrew S. Fastow, the former finance boss at Enron, testified during legal proceedings about Enron that he saw the large banks as “problem solvers” who would come up with these schemes and thus help the company conceal the reality of its dire situation.
Now, you would think that if this were true, Merrill Lynch, Credit Suisse and Barclays — named in an investor lawsuit — might possibly be liable to the defrauded stockholders, whose losses were in the tens of billions of dollars, and might owe some little pittance to them. (Banks including Citigroup, JPMorgan Chase and CIBC have already paid more than $7.3 billion to settle with Enron shareholders.) You would think that there would at least be a trial about it.
Ah, but then you would be missing the point that the law is a wily, cunning beast of utter unpredictability. Some years ago, in 1994, after a series of disastrous missteps by accounting firms in connection with an earlier series of securities frauds, the Supreme Court brought out an opinion in the case called Central Bank of Denver v. First Interstate Bank of Denver.
In this long and incomprehensible case, the high court basically said that there would be no 10(b) liability for players who “merely” aided and betted securities fraud.
Just as an opinion, by little me, this was done to save the accounting firms from completely immolating themselves by their misconduct. However, the facts of that case were somewhat limited. The defendant, Central Bank, had been the trustee for $26 million in defaulted bonds issued by a local public building authority. But Central was not its investment bank and did not issue investment analysis and, moreover, the securities in question were not publicly traded.
The Enron fraud involved a public company and had a much wider scope. In a huge class-action case where millions of documents had been collected in a federal district court, and in which many witnesses had been deposed, a jury trial was headed to daylight. But suddenly last month, something happened. A three-judge panel of the Fifth Circuit United States Court of Appeals in New Orleans ruled that the class-action suit against investment banks over Enron could not proceed. (Individuals’ ability to pursue claims was not affected.)
The panel held that although its ruling might prevent justice from being done and satisfaction from being had, the acts of the investment bankers were at most aiding and abetting, not direct acts, and therefore not actionable under 10(b) as construed in the Central Bank case.
Ouch. Yes, the defendant banks are accused of concealing the true facts about Enron and likely led investors to buy when they should have sold. Yes (and this is a beauty), at the same time the investment banks were helping Enron with its questionable financials, their “analysts” were praising Enron. (As the petitioners’ brief notes in an appeal to the Supreme Court to overturn the Fifth Circuit decision, these were “full service” banks.)
But, according to the Fifth Circuit panel, this was not enough. This was not a scheme or contrivance to defraud, they said. Yes, the facts were completely different from those of the Central Bank case, but the banks were to be let off the hook. This was in the name of offering predictability in these cases (apparently the predictability that the stockholders would be mistreated).
But not all hope is lost. A tasty appeal has been filed, which is a little masterpiece of legal argumentation.
Now, the Supreme Court can have another look at this case. It can return some dignity and rights to Enron stockholders and send up a warning flare to investment banks to avoid helping out with financial fraud. It can let this case go forward to trial.
This is a potential golden moment for the stockholders — or another step down the dreary alley toward extinction of the rights of those poor whipped dogs: the actual owners of America’s public companies. It is up to the Supreme Court to right the ship.
Ben Stein is a lawyer, writer, actor and economist. E-mail: ebiz@nytimes.com.
Friday, April 27, 2007
The Other Shoe Drops on Wendy's
From Business Law Prof Blog:
Wendy's is looking for a buyer. The final act is about to open on the two year interest in Wendy's by several prominent hedge funds. In the opening acts the hedge funds bought Wendy's stagnant shares, demanded that the board spin off two profitable subsidiaries (which it did), eased out the CEO, and negotiated for three seats on the board of directors. In response, Wendy's management took advantage of a rising stock price to cash in some options and received a standstill agreement from the most prominent of the hedge fund operators (Peltz). The standstill is expiring. Peltz is still interested and the board is rumored to be considering putting the company up for sale. The entire drama unfolded in a company with a staggered board and the multiple anti-takeover protections in Ohio legislation. The lesson? The old anti-takeover protections no longer work against determined hedge funds. The threat to mount a proxy fight against for even one-third of the seats works if those seats include insider heavyweights up for re-election (the CEO or the CFO).
Wendy's is looking for a buyer. The final act is about to open on the two year interest in Wendy's by several prominent hedge funds. In the opening acts the hedge funds bought Wendy's stagnant shares, demanded that the board spin off two profitable subsidiaries (which it did), eased out the CEO, and negotiated for three seats on the board of directors. In response, Wendy's management took advantage of a rising stock price to cash in some options and received a standstill agreement from the most prominent of the hedge fund operators (Peltz). The standstill is expiring. Peltz is still interested and the board is rumored to be considering putting the company up for sale. The entire drama unfolded in a company with a staggered board and the multiple anti-takeover protections in Ohio legislation. The lesson? The old anti-takeover protections no longer work against determined hedge funds. The threat to mount a proxy fight against for even one-third of the seats works if those seats include insider heavyweights up for re-election (the CEO or the CFO).
Breeden Gets Seats at Applebee’s Table
Richard Breeden, the former chairman of the Securities and Exchange Commission, recently called Applebee’s International a “study in stagnation.” But life at the restaurant chain is bound to get livelier now that Mr. Breeden, who is head of activist investment firm Breeden Capital Management, and one of his allies have been named to the Applebee’s board. The appointments, announced Thursday, settle a proxy fight that was brewing ahead of the company’s annual shareholder meeting on May 25.
The settlement marked a victory for Mr. Breeden, who calls himself a “active shareholder” or a “relational investor,” albeit not a complete one: He had previously been gunning for four seats on the board.
In sharp contrast to the combative tone Mr. Breeden has sometimes taken with Applebee’s — among other things, he has caustically criticized the company’s use of its corporate jet — Mr. Breeden said in a statement Thursday that he is “convinced that as a group we can provide the leadership to help make Applebee’s better, stronger and more valuable for the benefit of all.”
Applebee’s also said Thursday that it had gotten several “nonbinding, preliminary proposals” to buy the company and was proceeding to a second round of due-diligence discussions. Shares of Applebee’s rose 4 percent following Thursday’s announcements.
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The settlement marked a victory for Mr. Breeden, who calls himself a “active shareholder” or a “relational investor,” albeit not a complete one: He had previously been gunning for four seats on the board.
In sharp contrast to the combative tone Mr. Breeden has sometimes taken with Applebee’s — among other things, he has caustically criticized the company’s use of its corporate jet — Mr. Breeden said in a statement Thursday that he is “convinced that as a group we can provide the leadership to help make Applebee’s better, stronger and more valuable for the benefit of all.”
Applebee’s also said Thursday that it had gotten several “nonbinding, preliminary proposals” to buy the company and was proceeding to a second round of due-diligence discussions. Shares of Applebee’s rose 4 percent following Thursday’s announcements.
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Thursday, April 26, 2007
Who Wants to Take Out Wendy’s?
Wendy's International, the No. 3 hamburger chain in the United States, said it formed a special committee of directors to review options that could include a possible sale of the company. Under pressure from activist investor Nelson Peltz, Wendy's recently spun off its Tim Hortons chain of coffee shops and agreed to sell its Baja Fresh restaurant business. Some industry analysts said Wendy's could be an ideal turnaround candidate for private equity firms, but others suggested that its relatively high stock price could deter potential buyers. The news pushed Wendy's stock up 12.6 percent to $36.80, above its 52-week high, in after-hours trading on Wednesday.
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Wednesday, April 25, 2007
ISS Publishes New Study - What International Market Say on Pay: An Investor Perspective
ISS Publishes New Study - What International Market Say on Pay: An Investor Perspective
Submitted by: Stephen Deane, Vice President, ISS' Center for Corporate Governance
A Say on Pay shareholder proposal reportedly scored the highest level of support yet yesterday: 49.2 percent of the votes cast at Merck's annual meeting. That's still just shy of a majority vote - or is it? It isn't clear whether "votes cast" includes abstentions. If so, then support could actually have reached a majority of yes-and-no votes excluding abstentions. The company has declined to comment. Either way, with scores of shareholder proposals appearing on ballots - plus a Congressional bill that the House of Representatives passed last week - Say on Pay has become one of the hottest topics of this proxy season.
Several overseas markets - including the U.K., the Netherlands and Australia -already have legislation requiring companies to put their compensation reports or policies to shareholder votes. What lessons can we learn from their experience?
Institutional investors in those markets report positive impacts. The shareholder votes have strengthened dialogue with companies, tightened pay-for-performance links and reduced the likelihood of severance rewards for failure. It's true that there are market differences with the U.S., and votes on pay are not a panacea. But the experience abroad suggests that the practice can and should be transplanted to American soil.
Today we publish our research findings in a new study titled "What International Markets Say on Pay: An Investor Perspective."
Submitted by: Stephen Deane, Vice President, ISS' Center for Corporate Governance
A Say on Pay shareholder proposal reportedly scored the highest level of support yet yesterday: 49.2 percent of the votes cast at Merck's annual meeting. That's still just shy of a majority vote - or is it? It isn't clear whether "votes cast" includes abstentions. If so, then support could actually have reached a majority of yes-and-no votes excluding abstentions. The company has declined to comment. Either way, with scores of shareholder proposals appearing on ballots - plus a Congressional bill that the House of Representatives passed last week - Say on Pay has become one of the hottest topics of this proxy season.
Several overseas markets - including the U.K., the Netherlands and Australia -already have legislation requiring companies to put their compensation reports or policies to shareholder votes. What lessons can we learn from their experience?
Institutional investors in those markets report positive impacts. The shareholder votes have strengthened dialogue with companies, tightened pay-for-performance links and reduced the likelihood of severance rewards for failure. It's true that there are market differences with the U.S., and votes on pay are not a panacea. But the experience abroad suggests that the practice can and should be transplanted to American soil.
Today we publish our research findings in a new study titled "What International Markets Say on Pay: An Investor Perspective."
Big Union Takes Skeptical Look at Private Equity
The Service Employees International Union, which represents nearly two million workers including health care employees and janitors, on Tuesday released a report that takes a skeptical look at the private equity industry. While the report stops short of being openly hostile to buyout firms, it sets forth a series of “public policy concerns” related to the recent run of large buyout deals.
The union held a conference call Tuesday, in which officials said the main goal of their report was to start a conversation about private equity funds, which have gathered billions of dollars from investors (including, in some cases, corporate pension funds for workers in the S.E.I.U.). In the past year or so, private equity funds have used that cash to sweep dozens of large public companies, such as hospital chain HCA and office landlord Equity Office Properties, into private hands.
The union’s report took pains to quantify the riches that private equity firms have reaped by acquiring companies and then selling them again — sometimes after making drastic cuts in jobs or worker benefits.
The union also put a spotlight on certain tax breaks that accrue to private equity firms. One of these — the ability to pay a lower tax rate on certain kinds of private equity fees — seems to be of particular interest to the union — as well as some lawmakers in Washington.
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The union held a conference call Tuesday, in which officials said the main goal of their report was to start a conversation about private equity funds, which have gathered billions of dollars from investors (including, in some cases, corporate pension funds for workers in the S.E.I.U.). In the past year or so, private equity funds have used that cash to sweep dozens of large public companies, such as hospital chain HCA and office landlord Equity Office Properties, into private hands.
The union’s report took pains to quantify the riches that private equity firms have reaped by acquiring companies and then selling them again — sometimes after making drastic cuts in jobs or worker benefits.
The union also put a spotlight on certain tax breaks that accrue to private equity firms. One of these — the ability to pay a lower tax rate on certain kinds of private equity fees — seems to be of particular interest to the union — as well as some lawmakers in Washington.
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Tuesday, April 24, 2007
Vonage Can Sell Services During Appeal
By Alan Sipress, Washington Post, April 24, 2007; 3:40 PM
A federal appeals court ruled today that Vonage Holdings, the leading Internet telephone provider, can continue doing business as usual while it seeks to overturn a lower court ruling that it violated three patents belonging to Verizon.
Roger Warin, a lawyer for Vonage, told the appeals court during morning arguments that the company faced a "real risk of insolvency" if barred from selling its service to new customers as the trial court ordered earlier this month. He asked the three-judge panel to extend an emergency reprieve allowing the company to continue adding new customers.
Less than two hours later, the appeals court ruled in favor of Vonage and scheduled a June 25 hearing on the appeal itself.
The decision by the Court of Appeals for the Federal Circuit, a special court established to hear all patent case appeals in the country, marks the latest chapter in Vonage's struggle to survive after a U.S. district court in Alexandria ruled last month that the company could no longer use a crucial technology connecting its online network to the public telephone system. The district court judge had granted Vonage a partial reprieve, saying it could temporarily continue serving existing customers but could not sign up new ones.
While Warin told the appeals court that Vonage's viability was on the line, he added that Verizon could actually benefit if his company were allowed to continue signing up new customers. This because Vonage could have to pay Verizon royalties on the new business under the district court ruling.
In a filing to the Securities and Exchange Commission last week, Vonage said it could face bankruptcy and liquidation if its appeal fails.
A federal appeals court ruled today that Vonage Holdings, the leading Internet telephone provider, can continue doing business as usual while it seeks to overturn a lower court ruling that it violated three patents belonging to Verizon.
Roger Warin, a lawyer for Vonage, told the appeals court during morning arguments that the company faced a "real risk of insolvency" if barred from selling its service to new customers as the trial court ordered earlier this month. He asked the three-judge panel to extend an emergency reprieve allowing the company to continue adding new customers.
Less than two hours later, the appeals court ruled in favor of Vonage and scheduled a June 25 hearing on the appeal itself.
The decision by the Court of Appeals for the Federal Circuit, a special court established to hear all patent case appeals in the country, marks the latest chapter in Vonage's struggle to survive after a U.S. district court in Alexandria ruled last month that the company could no longer use a crucial technology connecting its online network to the public telephone system. The district court judge had granted Vonage a partial reprieve, saying it could temporarily continue serving existing customers but could not sign up new ones.
While Warin told the appeals court that Vonage's viability was on the line, he added that Verizon could actually benefit if his company were allowed to continue signing up new customers. This because Vonage could have to pay Verizon royalties on the new business under the district court ruling.
In a filing to the Securities and Exchange Commission last week, Vonage said it could face bankruptcy and liquidation if its appeal fails.
SEC Won't Sue Apple Over Backdating of Stock Options
April 24 (Bloomberg) -- Apple Inc. won't be sanctioned by the U.S. Securities and Exchange Commission for backdating stock options, including some to Chief Executive Officer Steve Jobs, because it cooperated with regulatory probes.
The SEC credited Apple today for ``swift, extensive, and extraordinary cooperation,'' while announcing lawsuits against two former top executives. Sheila O'Callaghan, an SEC enforcement official overseeing the case, declined to comment on whether the regulator may later sue Jobs.
Apple, maker of the iPod music player, is the largest company to have current or former executives targeted in an SEC lawsuit alleging the manipulation of stock options to boost their value. The company said in December 6,428 option grants between 1997 and 2002 were backdated, including one to Jobs marked as approved at a board meeting that never occurred.
Former Apple General Counsel Nancy Heinen will fight the SEC's civil lawsuit filed against her today in San Francisco, her lawyers said. The SEC settled with former Chief Financial Officer Fred Anderson. He agreed to forfeit $3.5 million and pay a $150,000 fine to resolve claims he filed false financial reports and had inadequate accounting controls at the Cupertino, California-based company.
The SEC credited Apple today for ``swift, extensive, and extraordinary cooperation,'' while announcing lawsuits against two former top executives. Sheila O'Callaghan, an SEC enforcement official overseeing the case, declined to comment on whether the regulator may later sue Jobs.
Apple, maker of the iPod music player, is the largest company to have current or former executives targeted in an SEC lawsuit alleging the manipulation of stock options to boost their value. The company said in December 6,428 option grants between 1997 and 2002 were backdated, including one to Jobs marked as approved at a board meeting that never occurred.
Former Apple General Counsel Nancy Heinen will fight the SEC's civil lawsuit filed against her today in San Francisco, her lawyers said. The SEC settled with former Chief Financial Officer Fred Anderson. He agreed to forfeit $3.5 million and pay a $150,000 fine to resolve claims he filed false financial reports and had inadequate accounting controls at the Cupertino, California-based company.
Big Numbers for VCs
From today's PE Week Wire:
Q1 venture capital data is out this morning, and it includes three significant developments. First, venture capital investing reached its highest level in six years, with over $7.05 billion disbursed. Second, biotech (including pharma) was the top sector for the second time in the past three quarters (even though IT still tops healthcare by a 52-37% split). Finally, Southern California-based companies raised more VC funding in Q1 than did New England-based companies, although the latter still had more companies funded.
All of this comes courtesy of the MoneyTree number-crunchers at PricewaterhouseCoopers, National Venture Capital Association and Thomson Financial. Click here for an abundance of downloadable data.
Q1 venture capital data is out this morning, and it includes three significant developments. First, venture capital investing reached its highest level in six years, with over $7.05 billion disbursed. Second, biotech (including pharma) was the top sector for the second time in the past three quarters (even though IT still tops healthcare by a 52-37% split). Finally, Southern California-based companies raised more VC funding in Q1 than did New England-based companies, although the latter still had more companies funded.
All of this comes courtesy of the MoneyTree number-crunchers at PricewaterhouseCoopers, National Venture Capital Association and Thomson Financial. Click here for an abundance of downloadable data.
Monday, April 23, 2007
When Conflicts Arise, Lawyers May Be a Source
Lawyers face potential conflicts of interest when they advise public companies and also have buyout firms and investment banks as major clients, Andrew Ross Sorkin wrote in his DealBook column in The New York Times.
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Friday, April 20, 2007
House OKs Bill to Give Investors Say on Executive Pay
April 20 (Bloomberg) -- The U.S. House of Representatives approved a measure to give shareholders more say on how companies pay top executives, rejecting amendments by Republicans who said corporate boards already have enough power to set compensation.
The measure, approved 269-134, aims to rein in pay levels House Financial Services Committee Chairman Barney Frank and other top Democrats called excessive by giving public-company shareholders annual non-binding votes on executive salaries.
``There are unfortunately a lot of examples of excessive compensation for CEOs,'' Frank said today, speaking to reporters after the vote. ``It bites into other things that you would use the money for.''
Frank, a Massachusetts Democrat, has made tackling exorbitant executive compensation a top priority since taking over as chairman in January. He criticized the severance package awarded to former Home Depot Inc. Chief Executive Officer Robert Nardelli in January as a ``$210 million good-bye kiss.''
The measure, approved 269-134, aims to rein in pay levels House Financial Services Committee Chairman Barney Frank and other top Democrats called excessive by giving public-company shareholders annual non-binding votes on executive salaries.
``There are unfortunately a lot of examples of excessive compensation for CEOs,'' Frank said today, speaking to reporters after the vote. ``It bites into other things that you would use the money for.''
Frank, a Massachusetts Democrat, has made tackling exorbitant executive compensation a top priority since taking over as chairman in January. He criticized the severance package awarded to former Home Depot Inc. Chief Executive Officer Robert Nardelli in January as a ``$210 million good-bye kiss.''
Thursday, April 19, 2007
Vonage faces key legal hearing
The final resting place of Vonage Holdings Inc. could be determined in a courtroom next week.
The United States Court of Appeals in Washington on April 24 is expected to rule on whether the embattled Internet telephony provider may sign up new customers. Vonage in a regulatory filing on Tuesday, April 17, said it risks bankruptcy related to patent litigation with Verizon Communications Inc., and a legal ruling against the so-called voice-over-Internet-protocol company could do irreparable harm to its business.
At issue is whether Holmdel, N.J.-based Vonage infringed three patents held by Verizon, a New York telecommunications giant. In so ruling, Judge Claude Hilton of the U.S. District Court for the Eastern District of Virginia earlier this month barred Vonage from adding new customers. The court of appeals subsequently stayed that injunction. The federal appeals court will determine whether to stay the injunction permanently.
The United States Court of Appeals in Washington on April 24 is expected to rule on whether the embattled Internet telephony provider may sign up new customers. Vonage in a regulatory filing on Tuesday, April 17, said it risks bankruptcy related to patent litigation with Verizon Communications Inc., and a legal ruling against the so-called voice-over-Internet-protocol company could do irreparable harm to its business.
At issue is whether Holmdel, N.J.-based Vonage infringed three patents held by Verizon, a New York telecommunications giant. In so ruling, Judge Claude Hilton of the U.S. District Court for the Eastern District of Virginia earlier this month barred Vonage from adding new customers. The court of appeals subsequently stayed that injunction. The federal appeals court will determine whether to stay the injunction permanently.
Monday, April 16, 2007
SEC Enforcement Shift May Lead to Lower Penalties
On Friday, this Washington Post article noted: "The SEC is changing how it negotiates settlements with companies in a way that could reduce the number and size of financial penalties that businesses pay, current and former officials said yesterday.
Under the change, which has not been made public, SEC enforcement lawyers must seek approval from the agency's five commissioners before they begin settlement talks that involve fining corporations, including seeking ranges for possible fines. Currently, staff members have the authority to negotiate with businesses and draft settlements in principle before they take the deals to the agency leaders for final approval.
The shift marks the latest development in a heated debate over whether companies or individual wrongdoers should bear the brunt of blame for legal violations. Penalties reached record proportions after destructive scandals at Enron, WorldCom and Adelphia Communications, creating concern among some commissioners that enforcement staff members are overreaching.
The initiative comes at the behest of SEC Chairman Christopher Cox, a former Republican lawmaker from California who is striving to avoid split votes at the agency. The pilot program will affect a relatively small percentage of cases and will result in more productive and fast-tracked negotiations between business and enforcers, according to spokesman John Nester. The plan, Nester said, "will increase investor protection because it will give our enforcement division a stronger hand in settlement negotiations."
The enforcement division was criticized by trade groups last month as "adversarial" and "overly punitive." Republican Commissioner Paul S. Atkins has argued that imposing fines against businesses in many circumstances unduly penalizes their stockholders. Rather, he and allies say, corporate executives who broke the law should pay the price.
Disagreement over the issue has slowed resolution of several cases, including some involving more than 160 companies that engaged in backdating of stock options for officials and employees. For example, staff members are continuing to deliberate whether Brocade Communications Systems, whose former chief executive was charged last year with criminal fraud, must shell out money for backdating offenses.
After months of behind-the scenes negotiations, Cox unveiled a policy statement in January 2006 laying out analytical steps the SEC would follow in deciding whether to levy penalties against businesses. Since then, the commission at times has sent the enforcement unit back to the drawing board in cases against Veritas Software and MBIA, among others, frustrating businesses and defense lawyers who seek quicker resolution of investigations.
The new policy on settlements is designed to prevent disconnects between SEC staff members and the commissioners. But the change is also contributing to lowered morale within the enforcement unit, which swelled in financial resources and prestige after widespread accounting frauds came to light five years ago.
Since that time, the enforcement budget has flattened and the U.S. Chamber of Commerce, the nation's largest business lobby, has called on SEC leaders to appoint an advisory panel to scrutinize the enforcement division's fairness.
Some staff members are balking at the change as a show of distrust in their judgment and another layer of red tape that could reduce the frequency and the size of financial penalties. But officials asserted yesterday that Cox and enforcement unit leaders are on the same page. Details of the plan continue to be worked out, agency officials said."
Under the change, which has not been made public, SEC enforcement lawyers must seek approval from the agency's five commissioners before they begin settlement talks that involve fining corporations, including seeking ranges for possible fines. Currently, staff members have the authority to negotiate with businesses and draft settlements in principle before they take the deals to the agency leaders for final approval.
The shift marks the latest development in a heated debate over whether companies or individual wrongdoers should bear the brunt of blame for legal violations. Penalties reached record proportions after destructive scandals at Enron, WorldCom and Adelphia Communications, creating concern among some commissioners that enforcement staff members are overreaching.
The initiative comes at the behest of SEC Chairman Christopher Cox, a former Republican lawmaker from California who is striving to avoid split votes at the agency. The pilot program will affect a relatively small percentage of cases and will result in more productive and fast-tracked negotiations between business and enforcers, according to spokesman John Nester. The plan, Nester said, "will increase investor protection because it will give our enforcement division a stronger hand in settlement negotiations."
The enforcement division was criticized by trade groups last month as "adversarial" and "overly punitive." Republican Commissioner Paul S. Atkins has argued that imposing fines against businesses in many circumstances unduly penalizes their stockholders. Rather, he and allies say, corporate executives who broke the law should pay the price.
Disagreement over the issue has slowed resolution of several cases, including some involving more than 160 companies that engaged in backdating of stock options for officials and employees. For example, staff members are continuing to deliberate whether Brocade Communications Systems, whose former chief executive was charged last year with criminal fraud, must shell out money for backdating offenses.
After months of behind-the scenes negotiations, Cox unveiled a policy statement in January 2006 laying out analytical steps the SEC would follow in deciding whether to levy penalties against businesses. Since then, the commission at times has sent the enforcement unit back to the drawing board in cases against Veritas Software and MBIA, among others, frustrating businesses and defense lawyers who seek quicker resolution of investigations.
The new policy on settlements is designed to prevent disconnects between SEC staff members and the commissioners. But the change is also contributing to lowered morale within the enforcement unit, which swelled in financial resources and prestige after widespread accounting frauds came to light five years ago.
Since that time, the enforcement budget has flattened and the U.S. Chamber of Commerce, the nation's largest business lobby, has called on SEC leaders to appoint an advisory panel to scrutinize the enforcement division's fairness.
Some staff members are balking at the change as a show of distrust in their judgment and another layer of red tape that could reduce the frequency and the size of financial penalties. But officials asserted yesterday that Cox and enforcement unit leaders are on the same page. Details of the plan continue to be worked out, agency officials said."
Friday, April 13, 2007
Will Buyout Brouhaha Put Dow Chemical In Play?
The irony of Thursday’s spectacle at Dow Chemical, which fired two senior executives for allegedly engaging in rogue negotiations to sell the company, is that it may have whetted investors’ and suitors’ appetite for a Dow takeover. “I find it interesting how private equity had penetrated the highest levels of the company,” HSBC Securities analyst Hassan Ahmed told Bloomberg News. The announcement “is telling us that there are parties interested in making that bid.” Shares of Dow rose 2 percent Thursday as some suggested that, while these talks appear to have been bungled, Dow could still make an attractive takeover target for Middle East investors or private equity firms. Breakingviews said this may be an example of “the wrong people doing the right thing.”
The Financial Times’s Lex column said the imbroglio highlights the “ever-present conflicts involved in management buyouts.”
There is a dispute, however, over whether the unauthorized talks really happened. One of the fired executives has already denied Dow’s accusations, telling TheStreet.com on Thursday that there may be “some kind of scapegoat going on.”
Dow Chemical, meanwhile, continues to reject the notion that it may be sold, a rumor that has been reported several times in British newspapers this year. A Dow spokesman told the Detroit Free Press that it is considering about 60 deals, ranging from joint-venture acquisitions to divestitures, but none involves the entire company.
Dow has a lot of cash, and many consider its shares to be undervalued — two factors that make for an appealing buyout candidate. But analysts also see plenty of reasons why a buyout is unlikely, including Dow’s size (its market capitalization is about $44 billion), its highly cyclical earnings and the difficulty of breaking the company up.
Details of the executives’ undercover negotiations began to emerge yesterday after Dow Chemical fired the two executives — J. Pedro Reinhard, a director and senior adviser to management, and Romeo Kreinberg, an executive vice president — saying they were “engaged in business activity that was highly inappropriate” involving “unauthorized discussions with third parties about the potential acquisition of the company.”
The New York Times reports that that both men engaged in talks with J.P. Morgan Chase about the prospect of a buyout and encouraged the bank to seek possible bidders, although the report notes that it is unclear whether the two executives had hoped simply to put Dow Chemical in play or had sought to be part of the management of an acquired company.
In any case, J.P. Morgan worked on the project for at least a month, running numbers on the business based on public filings and eventually reaching out to several private equity firms including Kohlberg Kravis Roberts & Company and the Blackstone Group, according to the Times. The firms apparently held meetings and briefly crunched some numbers, but their interest soon cooled.
J.P. Morgan was never formally retained by Dow Chemical to pursue a sale, and it is unclear whether Mr. Reinhard and Mr. Kreinberg represented themselves to the bank as authorized to engage in such preliminary discussions.
Yet the private talks soon became public on Feb 25, when The Sunday Express reported that three private equity firms — Kohlberg Kravis Roberts, Blackstone Group and the Carlyle Group — were ready to bid $54 billion for Dow.
The original report set off a firestorm at Dow Chemical’s headquarters in Midland, Mich.
Dow Chemical’s chief executive, Andrew Liveris called J.P. Morgan’s chief executive, James Dimon, to find out what was happening, according to The Times. When Mr. Dimon learned that Mr. Liveris was not interested in a buyout, it apparently stopped work on the project.
Furthermore, an executive from Blackstone reportedly called Mr. Liveris to tell him that the firm was not involved with a buyout proposal.
On Sunday, however, The Sunday Express ran another report of a possible buyout, this one specifying that Dow Chemical was about to be bought for $50 billion, with much of the money coming from the Middle East, in particular Oman.
“The fact that conversations had been held with potentially realistic buyers of the company suggests that those buyers aren’t going to go away,” William Batcheller, who helps oversee $85 million, including Dow shares, as director of investment management at Butler Wick, told Bloomberg.
On Monday, Dow, which usually does not comment publicly on deal speculation, issued a statement denying that it was in play. And on Tuesday, the chief executive, Mr. Liveris, appeared on CNBC to reiterate the denial.
Dow also decided that it was time it found out exactly why the talk persisted.
Christopher R. Huntley, a Dow spokesman, told The Times that high-level executives and directors started calling their contacts in the financial world, trying to trace the rumor to its source. One of them struck gold: “Someone in a position to know pointed at Romeo and Pedro,” Mr. Huntley said.
But now that the company has managed to rout the alleged secret deal makers, will it find itself — albeit unwittingly — in play?
Go to Article from Bloomberg News »
Go to Article from The New York Times »
Go to Article from TheStreet.com »
Go to Article from The Financial Times via Yahoo News »
Go to Article from Breakingviews »
Go to Article from The Detroit Free Press »
The Financial Times’s Lex column said the imbroglio highlights the “ever-present conflicts involved in management buyouts.”
There is a dispute, however, over whether the unauthorized talks really happened. One of the fired executives has already denied Dow’s accusations, telling TheStreet.com on Thursday that there may be “some kind of scapegoat going on.”
Dow Chemical, meanwhile, continues to reject the notion that it may be sold, a rumor that has been reported several times in British newspapers this year. A Dow spokesman told the Detroit Free Press that it is considering about 60 deals, ranging from joint-venture acquisitions to divestitures, but none involves the entire company.
Dow has a lot of cash, and many consider its shares to be undervalued — two factors that make for an appealing buyout candidate. But analysts also see plenty of reasons why a buyout is unlikely, including Dow’s size (its market capitalization is about $44 billion), its highly cyclical earnings and the difficulty of breaking the company up.
Details of the executives’ undercover negotiations began to emerge yesterday after Dow Chemical fired the two executives — J. Pedro Reinhard, a director and senior adviser to management, and Romeo Kreinberg, an executive vice president — saying they were “engaged in business activity that was highly inappropriate” involving “unauthorized discussions with third parties about the potential acquisition of the company.”
The New York Times reports that that both men engaged in talks with J.P. Morgan Chase about the prospect of a buyout and encouraged the bank to seek possible bidders, although the report notes that it is unclear whether the two executives had hoped simply to put Dow Chemical in play or had sought to be part of the management of an acquired company.
In any case, J.P. Morgan worked on the project for at least a month, running numbers on the business based on public filings and eventually reaching out to several private equity firms including Kohlberg Kravis Roberts & Company and the Blackstone Group, according to the Times. The firms apparently held meetings and briefly crunched some numbers, but their interest soon cooled.
J.P. Morgan was never formally retained by Dow Chemical to pursue a sale, and it is unclear whether Mr. Reinhard and Mr. Kreinberg represented themselves to the bank as authorized to engage in such preliminary discussions.
Yet the private talks soon became public on Feb 25, when The Sunday Express reported that three private equity firms — Kohlberg Kravis Roberts, Blackstone Group and the Carlyle Group — were ready to bid $54 billion for Dow.
The original report set off a firestorm at Dow Chemical’s headquarters in Midland, Mich.
Dow Chemical’s chief executive, Andrew Liveris called J.P. Morgan’s chief executive, James Dimon, to find out what was happening, according to The Times. When Mr. Dimon learned that Mr. Liveris was not interested in a buyout, it apparently stopped work on the project.
Furthermore, an executive from Blackstone reportedly called Mr. Liveris to tell him that the firm was not involved with a buyout proposal.
On Sunday, however, The Sunday Express ran another report of a possible buyout, this one specifying that Dow Chemical was about to be bought for $50 billion, with much of the money coming from the Middle East, in particular Oman.
“The fact that conversations had been held with potentially realistic buyers of the company suggests that those buyers aren’t going to go away,” William Batcheller, who helps oversee $85 million, including Dow shares, as director of investment management at Butler Wick, told Bloomberg.
On Monday, Dow, which usually does not comment publicly on deal speculation, issued a statement denying that it was in play. And on Tuesday, the chief executive, Mr. Liveris, appeared on CNBC to reiterate the denial.
Dow also decided that it was time it found out exactly why the talk persisted.
Christopher R. Huntley, a Dow spokesman, told The Times that high-level executives and directors started calling their contacts in the financial world, trying to trace the rumor to its source. One of them struck gold: “Someone in a position to know pointed at Romeo and Pedro,” Mr. Huntley said.
But now that the company has managed to rout the alleged secret deal makers, will it find itself — albeit unwittingly — in play?
Go to Article from Bloomberg News »
Go to Article from The New York Times »
Go to Article from TheStreet.com »
Go to Article from The Financial Times via Yahoo News »
Go to Article from Breakingviews »
Go to Article from The Detroit Free Press »
Wednesday, April 11, 2007
Berkshire Agrees to Hold First U.S. Shareholder Vote on Sudan
From Institutional Shareholder Services Corporate Governance Blog, April 11, 2007:
Shareholders at Berkshire Hathaway will vote on a Sudan divestment proposal in May--the first time a socially responsible investing (SRI) proposal regarding the violence-beleaguered African country will be on the proxy at a U.S. company.
The proposal, submitted by stockholder Judith Porter, asks the company to consider divesting its shares in PetroChina, a Chinese oil subsidiary whose parent company has mining, refinery, and pipeline operations in Sudan.
Porter, who owns 10 class-B Berkshire shares, wants the company to stop investing in "any foreign corporation or subsidiary thereof that engages in activities that would be prohibited for U.S. companies by Executive Order of the President of the United States."
Since 1997, U.S. firms have been forbidden to operate in Sudan, but the law says nothing about investment in foreign companies that conduct business there.
Berkshire originally obtained permission from the Securities and Exchange Commission to exclude the proposal on the grounds that the wording was "vague and indefinite." However, Berkshire Chief Executive Warren E. Buffett, who has said that he opposes the proposal, decided to put it on the proxy at the company's May 5 annual meeting to assess investors' views on this issue.
Berkshire management said in a Feb. 21 statement that PetroChina does not do business in Sudan. However, Berkshire acknowledges that PetroChina's parent company, the China National Petroleum Company (CNPC), does.
Shareholders at Berkshire Hathaway will vote on a Sudan divestment proposal in May--the first time a socially responsible investing (SRI) proposal regarding the violence-beleaguered African country will be on the proxy at a U.S. company.
The proposal, submitted by stockholder Judith Porter, asks the company to consider divesting its shares in PetroChina, a Chinese oil subsidiary whose parent company has mining, refinery, and pipeline operations in Sudan.
Porter, who owns 10 class-B Berkshire shares, wants the company to stop investing in "any foreign corporation or subsidiary thereof that engages in activities that would be prohibited for U.S. companies by Executive Order of the President of the United States."
Since 1997, U.S. firms have been forbidden to operate in Sudan, but the law says nothing about investment in foreign companies that conduct business there.
Berkshire originally obtained permission from the Securities and Exchange Commission to exclude the proposal on the grounds that the wording was "vague and indefinite." However, Berkshire Chief Executive Warren E. Buffett, who has said that he opposes the proposal, decided to put it on the proxy at the company's May 5 annual meeting to assess investors' views on this issue.
Berkshire management said in a Feb. 21 statement that PetroChina does not do business in Sudan. However, Berkshire acknowledges that PetroChina's parent company, the China National Petroleum Company (CNPC), does.
Tuesday, April 10, 2007
Foreign IPOs Rise
Despite fears that burdensome regulations are scaring companies away from listing on U.S. exchanges, U.S. markets are getting more and more foreign listings, TheStreet.com reported. Go to Article from TheStreet.com>>
Private equity fund-raising momentum continues in first quarter
Private equity's record fund-raising in 2006 continued unabated in the first quarter, according to Dow Jones Private Equity Analyst.
U.S. private equity firms have raised $44.3 billion among 68 funds in the first quarter of 2007, according to the newsletter. That's up 67 percent from the 46 funds that raised $26.6 billion in the first quarter of last year.
Go to Article from the Silicon Valley/San Jose Business Journal>>
U.S. private equity firms have raised $44.3 billion among 68 funds in the first quarter of 2007, according to the newsletter. That's up 67 percent from the 46 funds that raised $26.6 billion in the first quarter of last year.
Go to Article from the Silicon Valley/San Jose Business Journal>>
Richest hedge fund managers get richer
The wealthiest U.S. hedge fund managers and traders became a lot richer last year when five of them took home $1 billion or more each, according to a study compiled by magazine Trader Monthly and released Monday.
Go to Article from Reuters via CNN Money>>
Go to Article from The New York Post>>
Go to Article from Reuters via CNN Money>>
Go to Article from The New York Post>>
Friday, April 06, 2007
Second Circuit Won’t Rehear IPO Securities Litigation
The Second Circuit ruled today that it won’t rehear the plaintiffs appeal in the IPO securities litigation, but said they can try again for class certification at the lower court. In December, Wall Street won a big victory when the appeals court said a lawsuit alleging fraud in the pricing of IPOs couldn’t move forward as a class action. The case alleged that more than 50 Wall Street firms committed fraud by artificially inflating stock prices in IPOs that the firms underwrote during the tech bubble.
Vonage Barred in Verizon Lawsuit From Signing Up New Customers
April 6 (Bloomberg) -- A federal judge barred Vonage Holdings Corp. from signing up new customers while it appeals a ruling that it infringed three Verizon Communications Inc. patents.
U.S. District Judge Claude Hilton in Virginia federal court today agreed to stay an order banning Vonage's use of Verizon technology that lets customers make Internet calls to standard phone lines. He put his order on hold while the Internet telephone service provider appeals the ban, known as an injunction.
The case is Verizon Services Corp. v. Vonage Holdings, 06- cv-682, U.S. District Court, Eastern District of Virginia.
U.S. District Judge Claude Hilton in Virginia federal court today agreed to stay an order banning Vonage's use of Verizon technology that lets customers make Internet calls to standard phone lines. He put his order on hold while the Internet telephone service provider appeals the ban, known as an injunction.
The case is Verizon Services Corp. v. Vonage Holdings, 06- cv-682, U.S. District Court, Eastern District of Virginia.
Thursday, April 05, 2007
Ohio Lawmakers Introduce Board Election Bill
From ISS Governance Weeky, April 6, 2007:
Ohio lawmakers have introduced legislation that would make it possible for Ohio-incorporated firms to adopt majority voting in director elections.
Ohio law now mandates that companies use plurality voting. The legislation (H.B. 134), introduced on March 27, would allow issuers to adopt alternative election standards in their articles of incorporation after Jan. 1, 2008.
The legislation was prompted by requests by trade union pension funds and several prominent Ohio companies to change the law to allow firms to change their board election standards. The United Brotherhood of Carpenters and Joiners and the Sheet Metal Workers have sought to build support for the legislation by filing proposals at 13 Ohio-incorporated firms this season that urge the companies to reincorporate in Delaware, which permits majority voting. The two union funds have withdrawn most of those proposals after the companies agreed to support legislation to change Ohio law.
A Carpenters proposal will appear on the ballot at Convergys, an Ohio-based consulting firm, on April 17. Convergys asked the Securities and Exchange Commission for permission to exclude this proposal, but the SEC staff rejected that request in late December. A similar reincorporation proposal is slated for a vote at DPL on April 27.
Convergys opposes the proposal, arguing in its proxy that the benefits of remaining in Ohio would outweigh any benefits from incorporating in Delaware. The company notes that reincorporation would have to be approved by investors and dissenting shareholders would be entitled to “appraisal rights,” which could require the company to repurchase their shares. The company also said it would have to obtain the consent of some lenders. Reincorporation may also subject the firm to Delaware's franchise tax and additional shareholder lawsuits, Convergys warned.
A growing number of large companies have adopted majority vote bylaws after significant shareholder support for the issue during the 2006 and 2005 proxy seasons. Overall, at least 28 percent of the S&P 500 firms have adopted such bylaws, according to the Chicago law firm of Neal, Gerber & Eisenberg. At least 60 majority-voting proposals are slated to appear on corporate ballots this season, according to ISS data.
Ohio lawmakers have introduced legislation that would make it possible for Ohio-incorporated firms to adopt majority voting in director elections.
Ohio law now mandates that companies use plurality voting. The legislation (H.B. 134), introduced on March 27, would allow issuers to adopt alternative election standards in their articles of incorporation after Jan. 1, 2008.
The legislation was prompted by requests by trade union pension funds and several prominent Ohio companies to change the law to allow firms to change their board election standards. The United Brotherhood of Carpenters and Joiners and the Sheet Metal Workers have sought to build support for the legislation by filing proposals at 13 Ohio-incorporated firms this season that urge the companies to reincorporate in Delaware, which permits majority voting. The two union funds have withdrawn most of those proposals after the companies agreed to support legislation to change Ohio law.
A Carpenters proposal will appear on the ballot at Convergys, an Ohio-based consulting firm, on April 17. Convergys asked the Securities and Exchange Commission for permission to exclude this proposal, but the SEC staff rejected that request in late December. A similar reincorporation proposal is slated for a vote at DPL on April 27.
Convergys opposes the proposal, arguing in its proxy that the benefits of remaining in Ohio would outweigh any benefits from incorporating in Delaware. The company notes that reincorporation would have to be approved by investors and dissenting shareholders would be entitled to “appraisal rights,” which could require the company to repurchase their shares. The company also said it would have to obtain the consent of some lenders. Reincorporation may also subject the firm to Delaware's franchise tax and additional shareholder lawsuits, Convergys warned.
A growing number of large companies have adopted majority vote bylaws after significant shareholder support for the issue during the 2006 and 2005 proxy seasons. Overall, at least 28 percent of the S&P 500 firms have adopted such bylaws, according to the Chicago law firm of Neal, Gerber & Eisenberg. At least 60 majority-voting proposals are slated to appear on corporate ballots this season, according to ISS data.
SEC Votes to Ease Sarbanes-Oxley Rules
By Marcy Gordon, Associated Press, Thursday, April 5, 2007;
The Securities and Exchange Commission yesterday approved a framework for changes to rules under the Sarbanes-Oxley anti-fraud law that would ease requirements for companies and the auditors who pore over their books.
The vote by the five SEC commissioners was unanimous in support of building more leeway into the rules, especially those being written by the independent board that oversees the accounting industry. The commissioners debated the changes, proposed by the SEC staff, at a public meeting at which differences were aired over a crucial part of the Sarbanes-Oxley Act. The law, enacted in 2002 in response to a number of corporate and accounting scandals, requires companies to assess the strength of their internal checks and balances to guard against fraud. The proposed changes are intended "to eliminate waste and duplication," the SEC said. "These needed improvements in the Sarbanes-Oxley process are especially urgent for smaller companies," SEC Chairman Christopher Cox said.
The framework calls for greater use of an approach based on principles rather than ironclad rules, which is in line with a recommendation of a private-sector group that has been pushing for eased business regulations.
The SEC and the Public Company Accounting Oversight Board have worked for several months to resolve differences over the rules. Some experts and investor advocates complain that the SEC is strong-arming the board to weaken regulatory standards.
Officials of the SEC and the accounting board say they are striking a balance between protecting investors and reducing the financial record-keeping required of companies. The SEC and the oversight board want final rules in place by June so they would apply to audits of all 2007 statements.
The Securities and Exchange Commission yesterday approved a framework for changes to rules under the Sarbanes-Oxley anti-fraud law that would ease requirements for companies and the auditors who pore over their books.
The vote by the five SEC commissioners was unanimous in support of building more leeway into the rules, especially those being written by the independent board that oversees the accounting industry. The commissioners debated the changes, proposed by the SEC staff, at a public meeting at which differences were aired over a crucial part of the Sarbanes-Oxley Act. The law, enacted in 2002 in response to a number of corporate and accounting scandals, requires companies to assess the strength of their internal checks and balances to guard against fraud. The proposed changes are intended "to eliminate waste and duplication," the SEC said. "These needed improvements in the Sarbanes-Oxley process are especially urgent for smaller companies," SEC Chairman Christopher Cox said.
The framework calls for greater use of an approach based on principles rather than ironclad rules, which is in line with a recommendation of a private-sector group that has been pushing for eased business regulations.
The SEC and the Public Company Accounting Oversight Board have worked for several months to resolve differences over the rules. Some experts and investor advocates complain that the SEC is strong-arming the board to weaken regulatory standards.
Officials of the SEC and the accounting board say they are striking a balance between protecting investors and reducing the financial record-keeping required of companies. The SEC and the oversight board want final rules in place by June so they would apply to audits of all 2007 statements.
Cemex Bid for Rinker Advances
Cemex, the third-largest cement producer in the world, received clearance from United States antitrust regulators for its $11.7 billion hostile offer for the Rinker Group of Australia. The Justice Department said Cemex, based in Monterrey, Mexico, had agreed to sell 39 operations in Florida and Arizona to preserve price competition for large transportation projects in the two states. Rinker, based in Sydney, a building materials maker, gets about 80 percent of its sales in the United States.
Wednesday, April 04, 2007
SEC Meets To Debate Accounting Provision
The Securities and Exchange Commission will meet today to consider easing the most contentious part of the Sarbanes-Oxley Act, which imposed new duties on corporate executives and accountants after a series of fraud-ridden business collapses in 2002.
For five years, industry groups have complained that the law is too complex and burdensome, homing in on a provision that requires companies to assess the strength of their financial controls designed to prevent fraud and mistakes. In recent months, President Bush, Treasury Secretary Henry M. Paulson Jr. and members of Congress have called for an overhaul that would make that provision, known as Section 404, less expensive for small and mid-size businesses.
But striking an appropriate balance between reducing the costs of regulation and preserving the safeguards for investors remains tricky. The SEC's five commissioners are wrestling with how far to scale back the financial-control rule at the same time consumer advocates and a few vocal former agency officials are complaining that regulators are favoring business at the expense of average investors.
For five years, industry groups have complained that the law is too complex and burdensome, homing in on a provision that requires companies to assess the strength of their financial controls designed to prevent fraud and mistakes. In recent months, President Bush, Treasury Secretary Henry M. Paulson Jr. and members of Congress have called for an overhaul that would make that provision, known as Section 404, less expensive for small and mid-size businesses.
But striking an appropriate balance between reducing the costs of regulation and preserving the safeguards for investors remains tricky. The SEC's five commissioners are wrestling with how far to scale back the financial-control rule at the same time consumer advocates and a few vocal former agency officials are complaining that regulators are favoring business at the expense of average investors.
Ohio Bureau of Workers’ Compensation leaving the private equity market
From today's PE Week Wire:
Ohio could certainly use some good news, after the locals got tossed again by Florida in a national championship game. So here it is:The Ohio Bureau of Workers’ Compensation is just weeks away from leaving the private equity market.
Ok, I know what some of you are thinking: “Isn’t this a bad thing, given how private equity typically outperforms public equity and bond indices?”Well,that would betrue in most cases — but OBWC is exceptionally inept. It favors short-term political expediency over long-term investment strategy (take a bow Coingate). It also seems unable to properly file away partnership subscription agreements. And then there was its willingness – no, make that its eagerness – to sell GPs down the river by disclosing portfolio company valuations. In short, OBWC is like that annoying guy at the poker table. He’s got enough money to keep anteing, but is unable to differentiate between a low pair and a straight flush. At least OBWC knows when to fold them…
Which brings us to the present. Both buy-side and sell-side sources tell me that final bids for the OBWC private equity portfolio were due last Thursday. An email goof by placement agent UBS revealed that at least 29 firms had expressed serious interest, although it’s unclear how many actual offers were made. What I do know is that UBS put the entire portfolio’s net asset valuation at $685 million, including around $271 million in unfunded commitments. In case you’re now scouring your FedEx pile for the offering book, look for something codenamed “Project Ottawa.”
The final sale will come at a premium, but it’s highly unlikely that any one secondary firm will walk away with the whole enchilada. In fact, such a bid probably does not exist. Instead, prospective buyers view the portfolio as three pieces: (1) The good stuff, which includes funds from firms like The Carlyle Group, Castle Harlan and Charter Life Sciences; (2) The bad stuff, which is a portfolio of Ohio-based firms that has an average net annualized IRR of -17.3% through the end of Q1 2005; and (3) The funds-of-funds, which include HarbourVest Partners, Lexington Partners and Fort Washington Capital Partners.
Top-end secondary firms will be interested in 1, but probably will be contractually precluded from owning stakes in 3. They won’t want 2, but might bid anyway just to ease the process. There will be some secondary salvage shops (read: masochists) that only will bid on 2, and then some secondary firms without fund-of-funds arms that will bid on part 3.
Winners and losers will be selected within the next two to three weeks, with UBS already having scheduled presentations to current OBWC staff (who are far more competent than their former bureaucratic overlords).
Ohio could certainly use some good news, after the locals got tossed again by Florida in a national championship game. So here it is:The Ohio Bureau of Workers’ Compensation is just weeks away from leaving the private equity market.
Ok, I know what some of you are thinking: “Isn’t this a bad thing, given how private equity typically outperforms public equity and bond indices?”Well,that would betrue in most cases — but OBWC is exceptionally inept. It favors short-term political expediency over long-term investment strategy (take a bow Coingate). It also seems unable to properly file away partnership subscription agreements. And then there was its willingness – no, make that its eagerness – to sell GPs down the river by disclosing portfolio company valuations. In short, OBWC is like that annoying guy at the poker table. He’s got enough money to keep anteing, but is unable to differentiate between a low pair and a straight flush. At least OBWC knows when to fold them…
Which brings us to the present. Both buy-side and sell-side sources tell me that final bids for the OBWC private equity portfolio were due last Thursday. An email goof by placement agent UBS revealed that at least 29 firms had expressed serious interest, although it’s unclear how many actual offers were made. What I do know is that UBS put the entire portfolio’s net asset valuation at $685 million, including around $271 million in unfunded commitments. In case you’re now scouring your FedEx pile for the offering book, look for something codenamed “Project Ottawa.”
The final sale will come at a premium, but it’s highly unlikely that any one secondary firm will walk away with the whole enchilada. In fact, such a bid probably does not exist. Instead, prospective buyers view the portfolio as three pieces: (1) The good stuff, which includes funds from firms like The Carlyle Group, Castle Harlan and Charter Life Sciences; (2) The bad stuff, which is a portfolio of Ohio-based firms that has an average net annualized IRR of -17.3% through the end of Q1 2005; and (3) The funds-of-funds, which include HarbourVest Partners, Lexington Partners and Fort Washington Capital Partners.
Top-end secondary firms will be interested in 1, but probably will be contractually precluded from owning stakes in 3. They won’t want 2, but might bid anyway just to ease the process. There will be some secondary salvage shops (read: masochists) that only will bid on 2, and then some secondary firms without fund-of-funds arms that will bid on part 3.
Winners and losers will be selected within the next two to three weeks, with UBS already having scheduled presentations to current OBWC staff (who are far more competent than their former bureaucratic overlords).
Tuesday, April 03, 2007
Panel urges repeal of '30s era antitrust law
WASHINGTON (Reuters) - A 1930s-era antitrust law designed to protect small retailers should be repealed, a government-appointed panel of U.S. antitrust experts recommended on Tuesday.
The commission, which has been meeting and deliberating for three years, said lawmakers should put an end to the Robinson-Patman Act, which bars suppliers from engaging in anticompetitive price discrimination.
"The act has really outlived its usefulness and is better put to rest," said Jonathan Jacobson, an antitrust lawyer with the firm Wilson Sonsini Goodrich & Rosati and a member of the commission.
Repeal of the Robinson-Patman Act was the biggest change recommended by the commission, which was tasked with a review of the Sherman Act and other U.S. antitrust laws to see if they were in line with the modern economy.
Overall, the commission concluded that the antitrust laws are fundamentally sound and flexible enough to deal with relatively new industries such as computer software.
The commission also recommended that the two agencies that share responsibility for reviewing mergers -- the Justice Department and Federal Trade Commission -- act more quickly to decide which agency will review each particular deal.
Further, the commission suggested that the two agencies study and report to Congress on the possibility of developing a centralized international pre-merger notification system.
The commission, which has been meeting and deliberating for three years, said lawmakers should put an end to the Robinson-Patman Act, which bars suppliers from engaging in anticompetitive price discrimination.
"The act has really outlived its usefulness and is better put to rest," said Jonathan Jacobson, an antitrust lawyer with the firm Wilson Sonsini Goodrich & Rosati and a member of the commission.
Repeal of the Robinson-Patman Act was the biggest change recommended by the commission, which was tasked with a review of the Sherman Act and other U.S. antitrust laws to see if they were in line with the modern economy.
Overall, the commission concluded that the antitrust laws are fundamentally sound and flexible enough to deal with relatively new industries such as computer software.
The commission also recommended that the two agencies that share responsibility for reviewing mergers -- the Justice Department and Federal Trade Commission -- act more quickly to decide which agency will review each particular deal.
Further, the commission suggested that the two agencies study and report to Congress on the possibility of developing a centralized international pre-merger notification system.
FTC moves to block Giant-Western
Although Giant Industries Inc.'s shareholders approved their company's proposed purchase by Western Refining Inc. more than a month ago, members of the Federal Trade Commission are expected next week to vote for blocking the $1.13 billion deal.
According to a government lawyer, the oil refinery deal is scheduled for a Tuesday, April 10, vote by the five-member commission, and it's expected to be the second time this year the commission has formally initiated a legal fight to stop a deal under its review. In March, the FTC voted 4-1 to stop a merger between rival nonresidential natural gas suppliers in Pittsburgh. That deal, Equitable Resources Inc.'s purchase of Peoples Natural Gas Co., a subsidiary of Dominion Resources Inc., is still pending.
It's unclear what specific remedy would satisfy the commissioners and head off their rejection of the merger, although sources following the deal believe any divestiture would affect the merged companies' capacity in the Albuquerque, N.M., market.
all the positive noises the companies have been making about the merger's prospects, there have been procedural disputes with regulators.
The companies' initial Hart-Scott-Rodino premerger notifications were apparently incomplete and delayed progress on the antitrust review. Then the FTC issued a second request for more information on the deal Oct. 10, and the agency was initially at loggerheads with the companies over whether the information they provided was sufficient for that request, too. Giant said in late December that it had substantially complied with the FTC's second request. But in a Feb. 28 earnings call, they announced they were still trying to satisfy the agency.
According to a government lawyer, the oil refinery deal is scheduled for a Tuesday, April 10, vote by the five-member commission, and it's expected to be the second time this year the commission has formally initiated a legal fight to stop a deal under its review. In March, the FTC voted 4-1 to stop a merger between rival nonresidential natural gas suppliers in Pittsburgh. That deal, Equitable Resources Inc.'s purchase of Peoples Natural Gas Co., a subsidiary of Dominion Resources Inc., is still pending.
It's unclear what specific remedy would satisfy the commissioners and head off their rejection of the merger, although sources following the deal believe any divestiture would affect the merged companies' capacity in the Albuquerque, N.M., market.
all the positive noises the companies have been making about the merger's prospects, there have been procedural disputes with regulators.
The companies' initial Hart-Scott-Rodino premerger notifications were apparently incomplete and delayed progress on the antitrust review. Then the FTC issued a second request for more information on the deal Oct. 10, and the agency was initially at loggerheads with the companies over whether the information they provided was sufficient for that request, too. Giant said in late December that it had substantially complied with the FTC's second request. But in a Feb. 28 earnings call, they announced they were still trying to satisfy the agency.
Monday, April 02, 2007
Auto industry reacts to court decision
Automakers called for an economy-wide approach to global warming in reaction to a Supreme Court decision Monday that could give the government the authority to regulate the emissions of carbon dioxide and greenhouse gases from cars.
The Alliance of Automobile Manufacturers, an industry trade group representing General Motors Corp., Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp. and five others, said in a statement that "there needs to be a national, federal, economy-wide approach to addressing greenhouse gases."
The Supreme Court ordered the federal government on Monday to take a fresh look at regulating carbon dioxide emissions from cars, a rebuke to Bush administration policy on global warming. In a 5-4 decision, the court said the Clean Air Act gives the Environmental Protection Agency the authority to regulate the emissions of carbon dioxide and other greenhouse gases from cars.
The Alliance of Automobile Manufacturers, an industry trade group representing General Motors Corp., Ford Motor Co., DaimlerChrysler AG, Toyota Motor Corp. and five others, said in a statement that "there needs to be a national, federal, economy-wide approach to addressing greenhouse gases."
The Supreme Court ordered the federal government on Monday to take a fresh look at regulating carbon dioxide emissions from cars, a rebuke to Bush administration policy on global warming. In a 5-4 decision, the court said the Clean Air Act gives the Environmental Protection Agency the authority to regulate the emissions of carbon dioxide and other greenhouse gases from cars.
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