Market Overhaul Proposal Draws Criticism

From NYT's Deal Book:


Depending on whom you ask, a panel’s sweeping proposal to revamp securities rules goes too far, or not far enough. The panel, formed with the endorsement of Treasury Secretary Henry Paulson, issued a report Thursday that recommended making it harder for companies to be indicted or sued and seeking to limit rules that impose high costs on business, among other changes. The Council of Institutional Investors, a corporate governance group, responded Thursday by saying that the recommendations “would undermine the effectiveness of market watchdogs and weaken critical investor protections.” The National Venture Capital Association had a very different take.
The venture association, which represents firms that invest in start-up companies, suggested the committee’s proposal did not give enough relief to small businesses. It called the report a “step backwards based on work and recommendations that have already been put forth.”
The opposing views reflect the growing debate over whether the Sarbanes-Oxley Act of 2002, passed after the collapses of Enron and WorldCom, has made the U.S. a less-hospitable place for business, a safer place for investors, or some combination of the two.
The panel, called the called the Committee on Capital Markets Regulation, is co-chaired by R. Glenn Hubbard, the dean of the Columbia University Graduate School of Business, and John L. Thornton, the chairman of the Brookings Institution. It has no official standing, but its recommendations are likely to help set the agenda at the Bush administration.
The report spends a lot of time describing what it considers to be the flight of initial public offerings to markets outside the U.S., a trend it suggests is driven by the additional red tape and costs of a U.S. listing. The Council of Institutional Investors, a nonprofit group of pension funds, called this analysis “off-base.” In a statement released Thursday, the council argued that the nation’s declining I.P.O. share reflects increased globalization, higher investment banking fees in the U.S. and the privatizations of many state-owned companies overseas.
The National Venture Capital Association issued its own statement, in which it criticized the report for failing to recommend more measures to shield small businesses from Sarbanes-Oxley. It argued that the scope of small businesses that would be granted relief is “much narrower” than a proposal recently put forth by a committee of the Securities and Exchange Commission.
Go to Press Release from the Council of Institutional Investors »
Go to Press Release from the National Venture Capital Association »

Are Securities Rules Hurting U.S. Markets?

An independent committee formed with the endorsement of Treasury Secretary Henry M. Paulson Jr. called for a sweeping overhaul of securities regulations, citing concerns that American markets are losing their competitiveness. In a report released Thursday, the committee recommends making it harder for companies to be indicted by the government or sued by private lawyers, and urges policies to keep the Securities and Exchange Commission from adopting rules that impose high costs on business. The committee has no official standing, but it includes many influential members. Harvey J. Goldschmid, a professor at Columbia Law School who had served as general counsel and as a member of the S.E.C., said the report "raised legitimate questions but over all their recommendations are unbalanced and unwise." A briefing on the report was scheduled for 10:30 a.m. Thursday in New York.
• Go to Article from The New York Times
• Go to Article from Bloomberg News
• Go to Report from the Committee on Capital Markets Regulation
• Go to Webcast of Committee Briefing

PE Week Wire - Monday, November 27

From Monday's "Random Ramblings":

In 2001, the Boston Red Sox hiked ticket prices just 24 hours after the New England Patriots had won their first Super Bowl. It was an egregious increase, but no one noticed.
People also don’t notice much on the day after Thanksgiving, because they either are suffering tryptophan hangovers or are in pre-stampede mode at the local Best Buy. Even the public markets take half the day off.
So it isn’t terribly surprising that hospital chain HCA picked Friday to disclose additional terms of its $21 billion sale to Bain Capital, KKR and Merrill Lynch. After all, $175 million in transaction fees and $15 million annual management fees aren't something to promote (or list in the small print on an ER visit bill). In addition, the management fee can increase annually beginning in 2008, while new owners will be entitled to: “a fee equal to 1% of the gross transaction value in connection with certain subsequent financing, acquisition, disposition, and change of control transactions as well as a termination fee based on the net present value of future payment obligations under the management agreement in the event of an initial public offering or under certain other circumstances.”
Once again, we are watching new private equity owners raid the corporate coffers for their own benefit (as opposed to for the company’s benefit). Let me repeat that word: “Owners.” Shouldn’t it be implicit that owners will participate in company management? Do they deserve extra financial credit for paying active attention to their own control investment? And, even worse, why do they get paid to terminate said agreement? It’s a pre-baked golden parachute that presumes KKR is just as valuable to HCA while “not managing” as it is “managing.” I wonder if Daddy Thomson would agree that I'm as valuable when "not writing" as when "writing?" Methinks not.
The counterargument here is: “Hey, the private equity firms now own HCA, so they’re the only ones who get hurt if the company’s valuation is reduced.” Yes and no. First, value also is being reduced for any HCA employee holding company options (for the inevitable flip). More importantly, not all private equity firms share either the transaction or management fees with limited partners. You remember limited partners, don’t you? They’re the ones who actually funded the buyout’s equity tranche.
Bain, for example, almost never shares any of those fees with LPs. Well, it officially does, but then takes out all of the unaccounted for consulting fees generated by affiliate Bain & Co. Even firms with more generous sharing – which usually means 50/50 or 60/40 in the LP’s favor – still apply carried interest, which means that even firms that give 100% to LPs may only end up giving 80 percent. It’s worth pointing out that buyout firms all used to take 100% of such fees for themselves, but progress in this area has still moved like stubborn molasses.
The solution: End management fee agreements, and probably transaction fees as well. Private equity is supposed to be about building portfolio company value over time – not about getting rich on Day 1.

Richard Epstein Blasts Thompson Memorandum

Today in a searing WSJ op-ed, Chicago law professor Richard Epstein takes aim at deferred prosecution agreements. He blasts the Thompson Memorandum, the 2003 Justice Department policy statement that laid out guidelines for prosecuting corporations. “The Thompson memorandum insisted that corporations receive a temporary reprieve only if they purge themselves of individual wrongdoers and agree to extensive government oversight to make them walk the straight and narrow path.”
He mocks the deferred-prosecution agreement the feds struck with Bristol-Myers Squibb, which was accused of inflating its revenues. New Jersey U.S. Attorney Chris Christie went too far, says Epstein. “The most striking evidence of the abuse of power is paragraph 20 of the agreement, which requires BMS to ‘endow a chair at Seton Hall University School of Law,’ Mr. Christie’s alma mater, for teaching business ethics, a course that he himself could stand to take.”

NASD, NYSE Agree to Merge Regulatory Arms

The NASD and the NYSE Group said Tuesday they intend on combining their regulatory operations, creating a single private overseer for all stock market activity in the United States. The new organization, which has not yet been named, is expected to begin operation next year, the NYSE Group said in a press release.
The new regulator will retain all of NASD’s 2,400-person regulatory team, as well as 470 of the NYSE Group’s operation. NYSE’s regulation chairman, Richard G. Ketchum, will serve as interim chairman of the combined operation for three years, while NASD’s chairman and chief executive, Mary L. Schapiro, will serve as C.E.O.
Earlier this year, the Securities and Industry Association, Wall Street’s trade and lobbying group, said it favored eliminating duplication by creating one regulator with one set of rules and interpretations to govern the industry. The association also sought a seat for itself on the board of whatever regulator emerged.
Go to NYSE Group Press Release »

S.E.C. Sets Date to Consider New Hedge Fund Regulations

It’s a date. After indicating that it would seek tougher regulations for hedge funds, the Securities and Exchange Commission has scheduled a public meeting for Monday, Dec. 4, to consider two measures that would tighten rules governing these lightly regulated pools of capital.
One proposal to be considered would deal with the minimum net worth that an investor must possess to be allowed to invest in hedge funds. Earlier this month, S.E.C. chairman Christopher Cox said that it was necessary to further isolate hedge funds from small investors.
Another measure to be batted about next Monday would tighten up the anti-fraud statute dealing with hedge funds.

For M&A, a Much-Deserved Holiday

Investment bankers and corporate lawyers seemed to take a break on Wednesday — and they certainly earned it. About $3.1 trillion worth of transactions have been announced this year, including about $50 billion on Monday alone. That was when Blackstone offered $20 billion (excluding debt) for Equity Office Properties and Freeport-McMoRan agreed to pay $25 billion for Phelps-Dodge.
On Wednesday, both BusinessWeek and Fortune magazine took a look at why there is such a deal-making frenzy.
They covered some familiar territory (bulging private equity funds in search of takeover targets, easy access to the debt markets), but BusinessWeek hinted at a tantalizing, if a bit far-fetched, political angle. It cited the incoming Democratic congress as one big reason for the year-end spate of deals. In the new year, “deals may see a greater degree of scrutiny in Washington,” it concludes.
Meanwhile, the tone of the media’s merger-related coverage seems to grow more portentous every day. “If the good times keep rolling,” Fortune writes, the buyers will “do fine.” But “if the normal cycle reasserts itself, if the world hasn’t really changed, the buyers will end up with a wicked hangover.”
Because private equity buyers tend to offer cash, as opposed to the stock that strategic buyers tend to offer, sellers are more willing to deal. But that shows that the sellers “apparently would rather cash out than bank their future on the success of an expensive merger,” the article continued.
On Tuesday, The New York Times noted how the deal-financing scene has gone topsy-turvy, thanks to free and easy debt markets. It is so cheap to borrow that buyers essentially cannot help themselves, and debt financing is often seen as safer than using stock. While “normally cautious bond investors are living like Las Vegas high rollers,” the article noted, “stock speculators are behaving like worry-warts.”
Go to Article from BusinessWeek »
Go to Article from Fortune »
Go to Earlier Article from The New York Times »

The Importance of Being Private

Leveraged buyouts are not the get-rich-quick schemes they are often made out to be. Or at least, not always. That is the assessment of Geoffrey Colvin and Ram Charan, whose article in Fortune offers a different view of the private-equity phenomenon than many recent articles in the business media.
Rather than focus on buyout funds’ record-setting size or quick exits, Fortune looks at how private equity investment changes business.
Go to Article from Fortune »

The Sorkin RoadMap for Fairness

From today's PE Week Wire:

Andrew Ross Sorkin of NY Times Dealbook has developed some middle ground between Ben Stein’s call for banning management buyouts and the private equity market’s calls for continued regulatory indifference. Specifically, he has a four-part plan for fixing certain problems inherent in management buyouts. It goes something like this:
Require that a majority of minority shareholders approve the transaction. If senior management holds a control position, don’t let its vote be the only one that matters.
Use independent advisors. Real ones without either existing company relationships or a financial stake in the deal (i.e., stapled financing agreements).
Set aside up to 10% of the newly-private company for public shareholders. In other words, pre-empt the whining.
Provide some detail of the business plan for the company, once it becomes private. Let shareholders decide if management can best add value as a public or private entity.
Points one and two seem like no-brainers. Both help prevent self-dealing without much downside. If it’s really a good deal, then the minority shareholders will vote for it. Sure certain Wall Street firms will lose some fees, but not in the aggregate. It might even promote the creation of new boutique I-banks.
Points three and four are a bit trickier (as Sorkin admits).
My concern on point three isn’t so much the mechanics of it, difficult though they may be to design. Instead, it’s an issue of consistency. Assuming the point one becomes a generally-accepted principle, would a majority of this new 10% class have the right to veto a subsequent sale? If not, why not? Maybe the answer is that public and private shareholders are granted different levels of privilege, but then the same could be argued of controlling and non-controlling shareholders. It seems that you must either accept point one and deny three, or accept them both with a giant addendum to number three.
I have been arguing for a while that there is an inherent unfairness that public shareholders vote on acquisitions without knowing what the future possibilities are. I also think that the only viable solution is to demand more of the banks charged with writing fairness opinions (I’d also ask more of corporate boards, but it’s futile to request objectivity of cronies). If a company gives away its future gameplan – particularly when adoption of said plan is not yet approved – it almost certainly puts the company at a competitive disadvantage. Again, put some bite in the currently-toothless fairness opinions.
Finally, let’s add a fifth point (as first suggested by DealBook reader Andy Johnston): Make public all auctions of public companies. Once a corporate board is actively willing to consider buyout bids, retain a banker and issue what would amount to a buyout RFP (request for proposal). Give everyone one month to submit bids – which is a tight enough timeframe to still reward those private equity firms that helped initiate the deal.To be clear, I mean something even more transparent than afterthought “go shop” provisions.
Some M&A bankers may object to this proposal, saying that their selective bluebook mailing lists are designed to discourage frivolous bids. I say that I’d rather suffer through a handful of frivolous bids, rather than arbitrarily restrict the process in a may that may depress/prevent legitimate bids.
It also is worth noting, of course, that all of the above likely would require federal regulatory action. So be it. Even free markets require some ground rules.

The temptations of private equity

With financing free and easy, many companies are coming out of leveraged buyouts with just enough cash flow to cover their interest expense and capital spending, according to an analysis by The Deal. But some buyouts have more liquidity and flexibility than might appear on the surface, The Deal writes. Breakingviews suggests that easy access to funds has driven many private equity firms to chase "larger, more expensive and overly indebted companies," which it calls a "classic sign of a bubble."
• Go to Article from The Deal
• Go to Article from Breakingviews

Treasury Chief Urges ‘Balance’ in Regulation of U.S. Companies

Amid growing fears that London may replace New York as king of the I.P.O. castle, Treasury Secretary Henry M. Paulson Jr. said yesterday that excessive regulation and burdensome litigation were prompting companies to choose to list their stock on foreign exchanges over American ones.
• Go to Article from The New York Times

Merger Monday

Merger and acquisition activity worldwide surged on Monday with a focus on real estate, mining, media and exchanges sectors as demand by private equity funds and the push for industry consolidation gathered pace.
• Go to Article from Reuters
• Go to Item on DealBook

Rewriting the Rules for Buyouts

How can shareholders trust management to represent their interests when it is trying to make off with the company? DealBook's Sunday column in The New York Times offers a four-step cure for the conflicts of interest that are inherent in management-led buyouts.

$70 Billion Merger Monday

Investment bankers have plenty to be thankful for in this holiday-shortened week, which began with several megadeal announcements with a combined value of more than $70 billion. There was the Blackstone Group’s record-breaking agreement to buy Equity Office Properties Trust, the nation’s largest office-building owner and manager, for about $36 billion in cash and debt. That deal, announced Sunday night, ranks as the largest leveraged buyout in history, surpassing the $33 billion buyout earlier this year of hospital chain H.C.A.
In a research note published Monday, Sri Nagarajan of RBC Capital Markets called Blackstone’s offer “attractive” for Equity Office’s shareholders and said he thought competing bids were unlikely. By targeting Equity Office, Blackstone is probably betting that it can further reduce corporate overhead at the company and profit from a rise in office rents in late 2007 or early 2008, Mr. Nagarajan wrote.
Also on Sunday, mining giant Phelps Dodgesaid it would be acquired by smaller competitor Freeport-McMoRan Copper and Gold in a cash and stock deal worth $25.9 billion. Earlier this year, Phelps Dodge unsuccessfully tried to arrange a three-way transaction with two Canadian miners.
John Tumazos of Prudential Equity Group suggested Monday that Freeport-McMoRan is getting a bargain in the proposed transaction, which calls for each Phelps Dodge’s share to be swapped for $88 in cash plus 0.67 of a Freeport-McMoRan share. Mr. Tumazos wrote in a research note Monday that the offer is “not the full or maximum value that [Phelps Dodge] could obtain,” even though it represents a 33 premium over Phelps Dodge’s closing price on Friday.
Early Monday, Nasdaq unveiled a $5.1 billion offer for the London Stock Exchange, marking its second attempt to buy Europe’s largest stock market. And Charles Schwab said Monday morning it would sell its U.S. Trust wealth-management unit to Bank of America for $3.3 billion in cash.

M&A party is rocking, for now

On today's Business Week Online "Deal Flow" blog:

Researcher Dealogic reported today--and I know, this is a shock--that global M&A volume has hit an all time record....

Before too long, we're likely to see another record broken, as investment bankers share the largest bonus pool in history.

I know, everyone hates a buzz kill. But I won't be surprised a few years from now if the M&A party is followed by a huge hangover, as more and more of the principal on the junk bonds used to finance these deals has to be paid back. It's a borrowers market. Lenders are competing to win deals. I hear a number of them have been offering easy terms, in which a few years of interest-only payments are allowed. But if financial sponsors can't make an exit, they will be stuck with huge bills when the payments on principal kick in three, four, five or more years down the road. Weaker acquisitions are going to be under extreme pressure at that point, as limited cash flow is stretched to pay back expensive junk debt. It's like the corporate version of an exotic mortgage.

Hedge funds face a shortage of talent

Of all the problems hedge funds face today — increased government scrutiny, declining returns for some — this is perhaps the strangest problem to have: running short of talent.
Chalk it up to their success. According to Financial News Online, so much capital has flown in that managers cannot find enough savvy employees to maintain that momentum. Hedge funds collected $111 billion in the first nine months of 2006, swelling hedge fund assets under management to $1.3 trillion and helping pump up salaries and bonuses more than 20 percent to an average of $1.5 million before profit sharing. While one would think that enviable, that rise in investors’ money has created a “structural problem” for the industry.
Individual managers, attracted to the billions being poured into hedge funds, are striking out on their own, leaving the established firms that are favored by most institutional investors without enough help.

Civil Suit Accuses 13 Buyout Firms of Antitrust Violations

Three investors filed a class-action lawsuit Wednesday against some of the biggest buyout funds in the United States, accusing the firms of colluding to take companies private at below-value prices. The suit, which was filed in federal court in Manhattan, follows a similar Justice Department investigation into the practice in question, known as the club deal.
The suit is the first civil action taken against the buyout funds, several of which already have received letters from the Justice Department regarding potentially anticompetitive behavior. At the heart of both suits seem to be club deals, when private-equity firms form consortiums to collectively bid on a target.

The Ben Stein Interview

PE Week Wire interviewed Ben Stein on his controversial NYT OpEd piece of last month:

Last month, Ben Stein wrote in The New York Times that management buyouts of public companies should be outlawed. Pretty surprising for a free-market Republican who made his bones in the Nixon White House, before becoming an economic pundit, actor, gameshow host and economic pundit (again). So surprising, in fact, that some financial bloggers wondered if it was a fit of pique that has since abated.
It hasn’t. I spoke with Stein yesterday about the article, and have posted the entire audio interview at peHUB.com. My goal was to let Stein expound on the points he made in print, but also to play a bit of Devil’s Advocate. For example, if management buyouts are such good deals for company management, how come they don’t get outbid? Aren’t there certain operational efficiencies a company can recognize as a private entity that it can’t as a public entity? Isn’t there a possibility that company management will overvalue its corporate assets (the “falling in love with your own players” problem)? Don’t shareholders have the ultimate responsibility here, since they have the final vote?

Hedge Funds and Wall St. Are Warned to Be Vigilant on Misdeeds

The Securities and Exchange Commission expects to file more lawsuits aimed at hedge funds accused of illegal trading and violating their clients’ trust, the agency’s chief enforcer said yesterday.
At the same time, a senior official at the New York Stock Exchange said that Wall Street’s prime brokerages, which lend to hedge funds and process their trades, might be held accountable if they failed to catch illegal conduct.
The S.E.C.’s enforcement director, Linda C. Thomsen, said that federal regulators were concerned about illegal trading and the potential for harm to hedge fund investors.
“I expect to see activity in connection with both,” she said yesterday at a securities conference in Manhattan.

Venture firms bank on Pelosi to relax Sarbanes-Oxley rules

SAN FRANCISCO: For Silicon Valley venture capitalists eager to weaken the corporate governance law known as Sarbanes-Oxley, Representative Nancy Pelosi may prove to be a useful ally.
Pelosi, a Democrat, already has identified revising the law as a priority when she becomes the speaker of the U.S. House of Representatives in January.
Venture capital firms have been lobbying the White House, legislators and regulators for months to water down the law, arguing that higher auditing and legal fees were driving companies to take initial public offerings overseas. This year, Pelosi has received more campaign money from partners at Kleiner Perkins Caulfield & Byers, which helped get Google and Amazon.com started, than she got from the labor federation AFL-CIO.

Middle Market Back En Vogue

In today's Merger Mogul (Association for Corporate Growth):

Middle Market Back En Vogue
The middle market is back in the “in crowd.” For the past three years the mid-sized buyout firms have been an easy target for critics that wallow in the platitude of too much money chasing too few deals. There are even investment strategies, such as the barbell theory, based on avoiding the “ugliness” seen in the middle market. And by now every weathered soul that targets companies around $500 million in size knows that JAMBOG derisively stands for “just another mid market buyout group.”

But rather than wonder when mid-market investors became PE’s version of Willy Loman, a more timely question to ponder is when exactly Willy Loman became so damn cool? The answer to that, apparently, is last week.

That’s when news broke that both Texas Pacific Group and Silver Lake Partners each had designs on launching new mid-market vehicles, bringing long-overdue attention to what might be the largest overlooked segment in finance.
It’s easy for the mainstream press and others to neglect what’s been going on in the middle market. Most mid-sized firms aren’t buying gigantic brands like Dunkin’ Donuts or Hertz. They’re not necessarily attracting the Lou Gerstners or Jack Welches of the world to sit on their boards. But what shouldn’t be missed is the very reason that TPG and Silver Lake are moving in – there’s money to be made.

Proof can be found by perusing the return data of the reporting public pensions. A quick look at some of the investments that fell between 2001 and 2003, for example, reveals Thomas H. Lee’s fifth fund is being currently being topped by a Thoma Cressey vehicle launched the same year; KKR’s famed Millennium Fund, while generating a robust 40% IRR, is still running short of Advent’s less heralded 2002-vintage fourth fund; and the 38.7% IRR being generated by Apollo’s 2001 vehicle stands shy of TowerBrook Investors I! , raised that same year.

It’s time to call Maury Povich for a booking. The red-headed stepchild has turned out to be legitimate, and her hair has developed into a lovely auburn with age.

Ken MacFadyen

High Court asked to hear IPO case

Lawyers for the government last week asked the Supreme Court to take a case that has the potential to wreak havoc on initial public offerings in the U.S. by calling into question much of the cooperation investment banks engage in when they form underwriting syndicates.
The class action, Glen Billing v. Credit Suisse First Boston Ltd., charges that common practices such as setting prices and allocating shares among themselves is essentially illegal collaboration among competitors.
Aside from the threat to current IPO practices, the case already has sparked a turf battle between the Securities and Exchange Commission, the primary regulator for Wall Street, and the Department of Justice, which has jurisdiction over antitrust enforcement.

Hedge Funds Could Face New Limits

The Securities and Exchange Commission will propose rules next month raising asset requirements for investing in hedge funds after one fund, Amaranth Advisers, lost $6.5 billion on bad natural gas trades.
The changes will be proposed to the S.E.C.’s five commissioners at a December meeting in Washington, the agency chairman, Christopher Cox, said yesterday. He did not specify how the agency might limit the pool of hedge-fund investors.

Eddie Bauer to Be Taken Private

A year and a half after emerging from bankruptcy protection, Eddie Bauer Holdings, which runs a chain of outdoorsy clothing stores, has agreed to be acquired by two private equity firms. An affiliate of Sun Capital Partners and Golden Gate Capital will buy the company for $286 million in cash and $328 million in assumed debt, for a total transaction value of $614 million, Eddie Bauer said in a press release.

KB Home Chief Resigns Amid Options Probe

The longtime chief executive of KB Home, one of the nation’s largest home builders, resigned under pressure on Sunday night and agreed to return $13 million in profit from backdated stock options, the company said.
Two other KB Home executives were also ousted, including the head of human resources, whom the company said worked with Bruce E. Karatz, the company’s chairman and chief executive, to set the dates for stock option grants.

Wave of corporate bankruptcies seen on horizon

Corporate bankruptcy filings, subdued by the high availability of credit in recent years, should hit courts in a wave within the next six to 18 months, according to a report released this week.The survey said 70.7 percent of 90 respondents expect "the next big wave of restructurings" is on its way, according to an analysis by the American Bankruptcy Institute and Dow Jones' Daily Bankruptcy Review.

Cox: Hedge Funds, Regulators under the Microscope

What’s next for the Securities and Exchange Commission, especially as it prepares to operate under a Democratic Congress? According to Chairman Christopher Cox, hedge funds and securities regulators could see significant changes to their operations.

The Dark Side of the M&A Boom

Private equity may be setting record levels for fundraising, but it is also charting new highs in high-yield debt, a trend that worries BusinessWeek.

Private equity Under the microscope

Critics are calling for stricter oversight regulations involving private equity firms, especially following a failed $51 billion bid by Kohlberg Kravis Roberts for Vivendi.

Texas Pacific founder hits at private equity critics

David Bonderman, the founder of giant private equity firm Texas Pacific Group, has mounted a spirited defense of the industry a few days after British regulators expressed concern that a default of a major private-equity-backed company was "inevitable."

This Fund Is Making a Bundle

As Fortress Investment Group filed to sell $750 million shares to the public, valuing the hedge fund at $7.5 billion, its filing makes two things clear: money management, under good conditions, is extraordinarily profitable, and its principals will make a killing in the offering.

Fortress Opens the Gates to Landmark Hedge-Fund I.P.O.

Throwing aside hedge funds’ traditional taste for secrecy, the Fortress Investment Group has filed with regulators to sell shares in an initial public offering. The I.P.O. would be the first listing of its kind in the United States, allowing ordinary investors to own a piece of a firm that manages billions of dollars in hedge-fund and private-equity investments, which are usually restricted to institutional investors and the wealthy.
The preliminary filing said the I.P.O. could raise as much as $750 million by selling a 10 percent stake in the company, giving Fortress an implied value of $7.5 billion.

A more active Capitol Hill

Sweeping gains by Democrats in the congressional midterm elections guarantee that Wall Street and corporate America will deal with a more hostile Capitol Hill next year.
Those in the M&A world got a taste of what Tuesday, Nov. 7's elections mean for them in the comments of Rep. John Dingell, the Michigan Democrat in line to chair the Commerce Committee, following his party's dramatic takeover of the House of Representatives. Dingell, whose panel will oversee competition in nearly every sector of the economy, made media consolidation one of his first shots.
Similar antagonism is expected from John Conyers, also of Michigan, who is slated to take over the House Judiciary Committee, the chamber's primary overseer of antitrust policy.
Although which party will control the Senate remained unclear Wednesday, a change in leadership of the Antitrust Subcommittee is nevertheless guaranteed. Sen. Mike DeWine, who chaired the panel, was defeated in his bid for a third term. Uncertainty over a Virginia Senate seat Wednesday offered Republicans a long-shot chance of retaining the Senate, but DeWine's most likely successor will be Democrat Herb Kohl of Wisconsin.
Regarding the financial services industry, the shift in power means that Massachusetts Rep. Barney Frank is expected to succeed Ohio Republican Michael Oxley as head of the House Financial Services Committee.
The House panel oversees the U.S. Securities and Exchange Commission and the Federal Reserve, and it helps in setting policy for the banking, securities and mortgage industries. Frank, a social liberal, is expected to take a much more activist approach than his predecessor, but one not always unsympathetic to business.

Financial Power Shift in Washington

The upset on Capitol Hill has many in the financial-services industry asking one question: What will Barney Frank do? With the Democrats winning back control of the House in Tuesday’s elections, Mr. Frank, who has long represented a district in suburban Boston, is widely expected to succeed Michael Oxley, a Republican who is retiring, as head of the House Financial Services Committee.
While Mr. Frank’s priorities as the committee chairman are likely to be issues such as affordable housing and consumer protection, some items on his agenda are apt to affect Wall Street more directly. High on that list is the issue of executive pay, one of the most hotly disputed corporate-governance issues of recent years.

Smithfield deal gets DOJ scrutiny

A merger between two of the nation's largest pork processing companies is officially under review by the antitrust lawyers at the Department of Justice, according to Smithfield Foods Inc. and Premium Standard Farms Inc.
Smithfield, based in the Virginia town of the same name, agreed to pay more than $810 million in cash and stock, including debt assumption, for Premium Standard Farms, the nation's second-largest pork producer and the sixth-largest pork processor. After a 30-day initial review at the DOJ, the agency has formally issued a second request for information, a move that could mean another six months or so before the agency makes a decision on the deal.

Treasury Dealers Get an Earful From the Fed

Trading in Treasury bonds may not be the most glamorous corner of Wall Street. But it has gotten the attention of the New York Federal Reserve, which assembled a collection of Treasury dealers on Monday and advised them to do more to prevent market manipulation. Executives from the 22 primary dealers, which buy the securities directly from the Fed, were called to a meeting with officials from the Fed and the Treasury Department.
The meeting shows Treasury officials’ mounting concerns about suspicious market activity in the trading of U.S. bonds. Investment bank UBS recently said it was cooperating with U.S. authorities who are reportedly investigating possibly manipulative trading practices.
Officials are concerned that primary dealers are using their positions unfairly, making it difficult for investors to buy the securities at market prices. Forbes.com quoted one market researcher who said the inquiry would likely extend to hedge funds that work with primary dealers on bond trading.

Regulators in U.S., U.K. eye private equity

Apparent U.S. focus on Hertz deal as company plans rich IPO

NEW YORK (MarketWatch) -- American and U.K. regulators are looking into their oversight roles in the exploding private-equity market, and the U.S. Department of Justice is reported to be looking particularly closely at the purchase of former Ford unit Hertz.
The moves by regulators come just a week before Hertz is set to take itself public in one of the year's richest deals.
The U.S. Department of Justice has added Merrill Lynch & Co's private-equity arm to its informal inquiry into the private-equity world, in a move that suggests the Hertz Global Holdings Corp. auction is being looked at, according to a report in The Wall Street Journal. The report cited people familiar with the matter.
And, in a separate announcement Monday morning, Britain's Financial Services Authority (FSA) said it's studying whether it needs to more closely regulate the private-equity market. It will add private-equity supervisory responsibilities to a unit that already monitors hedge funds.

VC Firms Look To M&A For Exits

From the November 6 edition of Merger Mogul newsletter, published by the Association for Corporate Growth:

The M&A market is proving to be a handy escape hatch for venture capitalists trying to cash out of portfolio companies. Outright sales of venture-backed companies account for just a sliver of M&A deals each year and are rarely eye-catching, but M&A remains an intriguing option to liquify a VC portfolio at a time when the more publicized exit mechanism—the IPO—has gone into deep freeze for venture investors.
In fact, recent M&A trends involving VC-backed targets are nothing to shout about. Total disclosed deals, according to the National Venture Capital Association (NVCA) and Thomson Corp., continued to slide in the third quarter to 74 from 91 in the second quarter and 104 in the opening leg of 2006. But compared to IPOs, the deals outlet shines. A mere eight venture-backed firms went public in the third quarter against 19 in the second and 10 in the first. NVCA President Mark Heesen says the M&A slowdown may be a “quarterly aberration” that reflects a “slower summer business climate.” Deal flow may be up 15% to 20% in the final quarter, he suggests. Heesen makes no bones about the difficulty in floating new issues, saying IPO activity is at “alarmingly low levels” and that public markets may not be “the destination they once were for emerging growth companies.”
For the first nine months of 2006, the NVCA-Thomson Exit Poll found, 269 venture-backed targets were acquired compared with about 6,300 deals overall. Disclosed values—for 119 deals—came in just shy of $1.2 billion versus around $856 billion overall. Average deal price for a VC-backed sell-off was $99.9 million for the first nine months against $95.8 million.
Venture capitalists seem to have historically preferred IPOs because the new-issues market has bought growth stories and because public markets have allowed follow-on cash-outs—the proverbial extra bites of the apple. But M&A is no slouch in rewarding them either. Investors sold for less than their total investment in 13 of the 34 third-quarter deals with disclosed prices. But they made money in the others—including 10 times the investment in seven deals and four to 10 times in one other deal, while doing as well as four times their investment in 13 others.

By Marty Sikora

Where Were The Auditors?

It's pretty clear by now that the stock option backdating scandal is much more widespread than initially believed. More than 150 companies are either embroiled in internal probes or are now being investigated by the Securities and Exchange Commission for potential stock option backdating abuses. The deluge is growing daily, with a fresh batch of companies announcing stock option accounting problems with each passing day.
Says Elizabeth MacDonald of Forbes.com:

So where are all those expensive auditors who are paid a lot of shareholder money to catch such problems? Right now, just as in past accounting scandals, they're reverting to type: They're trying to run away, or at the very least, blame the accounting rules.

BlackBerry Redux? Patent Holder Sues Palm

The same company that wrested a $612.5 million settlement from the maker of the BlackBerry has set its sights on another purveyor of handheld gadgets: Palm Inc. NTP, a patent holding firm, said Monday that it filed a patent infringement lawsuit again Palm, the maker of the Treo smart phone. Shares of Palm slumped 8.5 percent on Monday afternoon after the lawsuit was announced.

Treasury Police Act for First Time Since Salomon

Nov. 6 (Bloomberg) -- Regulators who police the U.S. Treasury market are preparing to warn Wall Street's top bond traders against manipulation for the first time in 15 years.
The heads of Treasury bond trading and compliance officers from the 22 primary dealers -- the banks and securities firms that trade government securities directly with the Fed -- were summoned to a meeting at 4 p.m. today by Dino Kos, executive vice president of the Federal Reserve Bank of New York.
The executives will be addressing concerns raised by the Interagency Working Group on Market Surveillance, a group set up after Salomon Inc. admitted to rigging five Treasury auctions in 1991. The group, made up of officials from the Treasury Department, Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission, is probing firms including UBS AG for allegedly hoarding securities to profit by boosting prices. Regulators are concerned because an average $528 billion of Treasuries trade each day and provide the benchmarks for borrowing costs around the world.

Creeping Hedges: Study Shows Funds’ Growing Reach

Public companies are increasingly likely to have hedge funds as large shareholders, a new study suggests. Conducted for Financial News by Gartmore, a British fund manager, the study found that hedge funds now have significant stakes — more than 5 percent — in 38 percent of public companies worldwide, up from 24 percent two years ago. Given many hedge funds’ tendency to shake things up at companies in which they invest, chief executives might want to brace for some turbulence.
Hedge funds are more often taking large stakes as well. The study found that in one-fifth of all public companies, hedge funds hold stakes of 10 percent or more, twice the proportion as in 2004.

SEC Chief, No `Cox in Henhouse,' Defies Skeptics

Reporter Bob Drummond has an excellent, if lengthy, article at Bloomberg.com regarding SEC Chairman Christopher Cox's thus far tenure in office. The article describes in some detail the manner in which Cox's performance has frustrated some expectations.

Resumes, it turns out, can be deceiving. Cox, a securities lawyer who holds MBA and law degrees from Harvard University, says he never contemplated overturning existing regulations or going easy on corporate crooks. ``It was maddening,'' says Cox, who was under instructions to make no public statements before his Senate confirmation hearing. ``I might have set a lot of the speculation to rest if only I could have said something.''
More than a year after taking office, Cox has taken no action to unravel the 2002 Sarbanes-Oxley corporate reform law, which set up strict new accounting rules, or any of the new regulations adopted under Donaldson after bitter battles and 3-2 votes.
He has won passage of a rule requiring more and clearer disclosures of pay and benefits for top executives.

British Regulators Warn of Buyout Blow-ups

Calling a default of a large private-equity-backed company or a cluster of smaller ones “inevitable,” the United Kingdom’s market regulator on Monday published a report on what it considers to be the major risks from the buyout boom, including excessive leverage, market abuse and conflicts of interest. With classic British restraint, it said that the amount of debt in buyout transactions has surged, and that “this lending may not, in some circumstances, be entirely prudent.”
The F.S.A. said it hopes to get feedback from private equity executives and public policy makers on a number of initiatives related to leveraged buyout activity, which has been setting records in both the United Kindgdom and in the United States. For example, the agency said it plans to create an alternative investment team to bolster its oversight of private equity deals. It may also conduct regular surveys on leveraged loans, which are used to fund private-equity takeovers.
Despite the concerns outlined in the 102-page report, it did not call for tighter oversight of the industry in general, which is likely to come as a relief to many private equity professionals. On the subject of private equity, the F.S.A. said it believes “our current regulatory architecture is effective, proportionate and adequately resourced.”

General Electric CEO Jeff Immelt on Internal Pay Equity and More

From today's CorporateCounsel.net Blog:

Here is a "must read" article and free video from Friday's Financial Times: "Jeffrey Immelt, chairman and chief executive of General Electric, has urged company leaders in the US to ensure their pay does not dramatically outstrip that of their senior managers and to limit the influence of compensation consultants.
Mr. Immelt's intervention in the debate over executive pay - featured in a video interview with the Financial Times - underlines the growing importance of the issue for shareholders and executives of America's largest companies. "These are public jobs, there were so many abuses in the late 90s and in the early part of this century and that created concerns," he said.
Mr. Immelt argued that chief executives should not have multi-year contracts, which could lead to large pay-offs if they were dismissed, and the bulk of their compensation should be linked to performance. Yesterday, the FT revealed that a group of leading public pension funds had urged the top 25 companies in the US, including GE, to ban pay consultants from advising the board and working on other company matters.
Mr. Immelt, who took over the leadership of the industrial conglomerate five years ago from Jack Welch, did not mention the letter but said the board should be the final judge of executive pay. "I think it should be based on the good judgment of the compensation committees, the board and the CEO," he said. "I don't think consultants should be involved."
In a separate conversation with the FT, he said that, to motivate staff and avoid excesses, chief executives' pay should remain within a small multiple of the pay of their 25 most senior managers. "The key relationship is the one between the CEO and the top 25 managers in the company because that is the key team. Should the CEO make five times, three times or twice what this group make? That is debatable, but 20 times is lunacy," he said. Mr. Immelt, who last year received $3.2m in salary and no cash bonus, added that his pay was within the 2-3 times range."

Democrats in Control of the House??

On this morning's Business Law Prof Blog:

With the polls suggesting that Democrats will control the House and the Republicans will control the Senate, what will be the effect on new business regulation?? Rep. Barney Frank (Mass.) will get the chair of the House Financial Service Committee (Oxley has it now and is retiring; his Republicans successor would be either Baker of (La.) or Leach (Iowa). It will be a disaster for the business community. A Democratic House and a Republican Senate (Republican President) guarantees deadlock. This would be wonderful if our regulatory rules were in good shape. We would get no new silly rules. Unfortunately we are not in good shape now. As the result of Sarbanes-Oxley Act of 2002 and a quixotic SEC, our regulatory rules are too heavy-handed (hurting the competitive position of the United States in the world financial markets) and now will look to stay that way. If Frank does get legislation through it will be big on more, not less mandatory rules (look at his executive compensation bill introduced last year). We need more options for business structure not less; business needs to compete based on their structure. He is also big on increasing "average" worker pay and disabling Wal-Mart from offering a credit card. Again, this is a disaster for business--no way to sugar coat it.

Commentary: At Four Seasons, a Deal or Self-Dealing?

On this morning's DealBook weblog (New York Times):

Management-led buyouts have always raised questions about conflicts of interest, because in such deals, the management that is supposed to represent shareholders is suddenly representing itself as well. That potential for conflict was especially evident this morning when Isadore Sharp, the chief executive and controlling shareholder of Four Seasons Hotels, made a $3.7 billion takeover bid for the company with the backing of Kingdom Hotels International, a company owned by a trust created by Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud; and Bill Gates’s Cascade Investment.
At first glance, the offer of $82 a share seems pretty decent; it represents a 28 percent premium to Four Season’s closing stock price on Friday. In early 2005, however, shareholders could have sold their stock for about that price on the open market.
And then there is the money Mr. Sharp will pocket in what essentially amounts to a sale to himself. According to a press release announcing the proposed buyout, Mr. Sharp stands to make $288 million as part of a 1989 incentive arrangement as a result of any deal. Now that’s an incentive!
Mr. Sharp also seems intent on preventing any rival offers, which raises questions about whether he is fulfilling his fiduciary duties to shareholders. In a statement, he said, “this transaction, with these investors, is the only one I am prepared to pursue.”
Management-led buyouts like this one play into the hands of critics who say they are rigged from the outset.

Morgan Stanley Criticizes Stock Structure of Times Co.

The New York Times Company may be headed for a proxy battle with one of its largest shareholders. Morgan Stanley Investment Management has stepped up a campaign to spur the company to change its dual-class share structure by sending a report to the board that is sharply critical of its governance practices.

Investment Banks Await Record M&A Fees

The Dow Jones Industrial average is not the only financial metric that has been hitting new highs. The backlog of banking fees for mergers and acquisitions also continues to mount, hitting its third consecutive monthly record, according to Merrill Lynch analyst Guy Moszkowski. The backlog, which represents fees that investments banks are due to collect from announced but not-yet-completed M&A deals, hit the $9 billion mark for the first time ever in October, the analyst wrote.
A graph in Mr. Moszkowski’s report suggests that of that $9 billion, about $1 billion is set to flow to one firm: Goldman Sachs. (Provided, of course, that none of its deals fall through.) The overall fee backlog has risen 50 percent since October 2005, he calculated.
Announced M&A volume in October rose 55 percent from the previous month, and was 34 percent higher than October of last year. The ratio of announced to completed deals was also up, at 1.6 announced deals for every completed one.
J.P. Morgan was the top investment bank as measured by announced global M&A in October; Merrill Lynch led in U.S. equity underwriting, according to the report.

With Fewer Workers, S.E.C. Brings Fewer Cases

The Securities and Exchange Commission, already facing an examination of its efforts to police the nation’s securities markets, said Thursday that it brought 9 percent fewer enforcement cases last year. The commission’s chairman, Christopher Cox, said the decline stemmed from a temporary dip in its employee numbers, The Washington Post reported. Experts differed on whether this should be a source of concern for investors.
The S.E.C. conducted 574 enforcement actions in the fiscal year that ended Sept. 30, according to figures the agency released Thursday. In a statement accompanying the data, Mr. Cox pointed to recent S.E.C. actions that he considered to be successful, including settlements with Fannie Mae and the American Insurance Group.
The agency lost 155 employees last year, The Post said, including 43 in its enforcement unit. Its budget remained level at $888 million.

CVS-Caremark to draw FTC glare

The proposed merger of CVS Corp. and Caremark Rx Inc. is the first attempt to pair up a major retail pharmacy chain and a large pharmacy benefit manager, a potentially industry-shaping milestone large enough to ensure a long look by the Federal Trade Commission.
But ultimately, if the companies can convince the FTC they will have more leverage to negotiate lower pharmaceutical prices and they will pass those cost-savings on to consumers, the deal stands a good chance of winning approval from the agency, according to antitrust lawyers in Washington.
The merger would pair CVS' chain of retail pharmacies with Caremark's expertise of managing pharmaceutical benefits of healthcare plans, usually using mail-order pharmacies. Caremark is one of the nation's largest pharmacy benefit managers.

Former Software Executive Receives 12-Year Sentence

NEW YORK (AP) -- The former chief executive of Computer Associates International Inc. was sentenced to 12 years in prison and fined $8 million on Thursday in a massive accounting fraud scandal at one of the world's largest software companies.
Sanjay Kumar, 44, had pleaded guilty in April to obstruction of justice and securities fraud charges at the company, which since has become known as CA Inc.
Under federal sentencing guidelines, Kumar could have faced life in prison but the judge called that punishment unreasonable.

NACD's 2006 Public Company Governance Survey

The National Association of Corporate Director's has released its 2006 Public Company Governance Survey, done in partnership with Mercer Delta Consulting. Like the previous surveys, this report is based on data both from 798 online governance survey respondents and gleaned proxy statements of 5000 public companies—providing current indicators of both action and attitude.
Highlights from the 2006 Public Company Governance Survey:
The leading issue for directors this year remains the same as in 2005: strategic planning. CEO succession, corporate performance, and CEO performance management are also in the top four.
While CEO succession was one of the top issues, directors ranked their boards relatively ineffective at handling it (15.6% at “below acceptable levels”).
There was an increase in time spent on board and committee-related activities: about 26, 8-hour days per year for the average public company director.
Board size averaged nine members, and more than three-quarters of survey respondents felt their board size was ideal.
If you would like more information about the NACD's 2006 Public Company Governance Survey, please visit their website at http://www.nacdonline.org/ or call the publications department at 202-572-2091. All 2006 survey respondents will be mailed a complimentary copy of this report.

Japan's Nomura to acquire Instinet brokerage from Silver Lake Partners

TOKYO: Nomura Holdings Inc. will acquire major electronic stock broker Instinet from Silver Lake Partners, both Nomura and Instinet said Thursday.
Nomura, which wholly owns Japan's top brokerage Nomura Securities, will acquire a 100 percent stake in Instinet from its majority owner Silver Lake Partners, Nomura said in a statement.
The purchase will be conducted in an all cash transaction which is expected to be completed in the first quarter of 2007, Instinet said in a statement. It did not disclose the purchase price.
Silver Lake, a private-equity firm in Menlo Park, California, bought a majority interest in Instinet from the Nasdaq Stock Market last December for US$208 million (€162 million). The two companies have said that they were planning to sell Instinet or take it public since.

RiskMetrics to buy ISS for $553M

Buyout house Warburg Pincus and co-investors in Institutional Shareholder Services Inc. are poised to make 13 times their original money selling the corporate governance and proxy advisory firm to RiskMetrics Group Inc., according to a well-placed source.
RiskMetrics Group announced Wednesday, Nov. 1, that it would buy ISS. No terms were announced, but a source said the price was $553 million.
ISS had capitalized in recent years on increased concerns about corporate governance and the demands of institutional investors for research on key corporate votes.

CVS to Buy Caremark in $21 Billion Deal

CVS and Caremark Rx said Wednesday afternoon that they agreed to combine in what they described as a “merger of equals,” creating a company with about $75 billion in annual revenue. As is typical in such deals, though, one company emerged as the de facto buyer: CVS’s shareholders would end up owning a slight majority — 54.5 percent — of the enlarged company, and Caremark shareholders would turn in their stock in exchange for CVS shares, the companies said.
The announcement came a few hours after CVS, a drug-store chain, and Caremark, a pharmacy benefits manager, confirmed a report in The New York Times that they were in talks about a possible transaction.

CalPERS Serves Up New Buyout Fund Data

PE Week Wire on Wednesday noted that giant pension fund CalPERS has released new quarterly data on its private equity returns, offering a peek into how often-secretive buyout firms are doing. The latest data on CalPERS’s private-equity investments shows that as of June 30, a 2001 fund called T3 Partners II, which is affiliated with the Texas Pacific Group, was its top-returning fund in terms of its internal rate of return. A new fund from Blackstone Group had the lowest return.

RiskMetrics Group Acquires ISS

RiskMetrics Group, the leading financial risk management firm announced it will acquire Institutional Shareholder Services, Inc. ISS is the world's leading provider of proxy voting and corporate governance solutions to the institutional marketplace. The merger reflects the broader vision of both companies to expand beyond their core businesses of financial risk management and corporate governance to offer a broad range of data, analytics and advice to investors.
Combined, RiskMetrics Group and ISS will generate over $200 million in revenue per year with approximately 900 employees across 23 offices serving over 2400 clients worldwide. Spun-out of JP Morgan in September of 1998, RiskMetrics Group is the leading provider of financial risk analytics to banks, central banks, hedge funds, asset managers, pension funds and corporations.

Chief Guilty at Cendant in 3rd Trial

Walter A. Forbes, the former chairman of Cendant, was convicted Tuesday -- after eight years and three trials -- on charges that he masterminded an accounting fraud that was considered at the time it was discovered in 1998 to be the largest on record. Investors lost $19 billion when Cendant's stock fell after the disclosure. The Cendant fraud was later eclipsed by the scandals at Enron and WorldCom.

What’s Next for Boards? Ten Landscape-Altering Trends

What’s Next for Boards? Ten Landscape-Altering TrendsUp ahead: shifting governance spotlights and CEO role models.
By John C. Wilcox

Here is an optimist’s view of 10 trends that will shape boardrooms and the governance landscape in the years ahead:
1. Majority voting and the right of shareholders to vote against directors will become the norm, replacing the plurality vote standard in U.S. director elections.
2. Executive compensation will be brought into line by a combination of factors: enhanced SEC disclosure requirements, an advisory shareholder vote on compensation committee reports, and recognition of the need for internal pay equity.
3. Separating the roles of chairman and CEO will become more common at U.S. companies, encouraging boards to worry less about preserving power and more about developing and incentivizing the best executive talent.
4. The model of the imperial, celebrity CEO will be replaced by the stewardship model, with Reginald Jones unseating Jack Welch as the role model.
5. Sustainability and corporate social responsibility, formerly relegated to gadflies and special interest groups, will be recognized as key corporate governance responsibilities for which directors should be held accountable.
6. Shareholder communications and proxy voting systems will be revamped by the SEC to make better use of technology, reduce costs, increase efficiency, and improve a board’s ability to identify and communicate with shareholders.
7. Shareholder resolutions will be overtaken by other forms of constructive engagement, and shareholder activism will become less confrontational, more responsible--and more effective.
8. The definition of beneficial ownership will become more complicated and problematic as stock lending and derivative investment strategies enable investors to separate voting rights from any economic interest in the underlying stock.
9. The spotlight will shift from the governance of companies to the governance of institutional investors, with a focus on how institutions should best fulfill their conflicting duties to maximize returns while acting as responsible owners.
10. Companies will come to recognize that corporate governance is not just a matter of regulatory compliance and accountability but a strategic means to lower the cost of capital, reduce risk, create value, and strengthen the long-term performance of the corporate enterprise.

John C. Wilcox is senior vice president, head of corporate governance, at TIAA-CREF, one of America’s largest institutional investors and a leading advocate for sound principles of corporate governance (http://www.tiaa-cref.org). He formerly spent 31 years with Georgeson Shareholder Communications Inc., where he specialized in corporate governance, takeovers and control contests, and investor communications. He can be contacted at jwilcox@tiaa-cref.org.