Why your Fund Manager/Financial Adviser ignores You

No surprise, there is no proper structure - or even willingness - to incorporate the views of the real end investor/saver into the corporate policies of Fund Managers, Private Banks or other Financial Institutions. All talk about corporate governance is basically only so much (empty?) talk.
(26-August-2019)
Why isnt your mutual fund sticking up for you?

The Real Problem with Buy-backs

Most debates about pros and cons misses the point: buy-backs are an ineffective way to 'return' capital to shareholders. Managements have as much insight about future share prices as the average investor, be it Joe Blogs or a 'Professional'. If shares are bought at too high a level it is obvious value destruction. One might as well have given shareholders cash and let them make a decision about whether to buy more of the company's shares at a certain level or deploy the returned capital elsewhere. The same applies to situations where management considers the shares to be undervalued.
So basically all the buy-back activity is nothing but guesswork and punting on the share price that should not be the task of management. It should just do the job of running the business.
Of course, there is an element of price manipulation - and that seems to be the major factor behind all the buy-back activity. But the sad example of General Electric demonstrates that management should not be able to roll the dice in the stock market casino.
Returning money to shareholders should not mean that some sellers get a (manipulated) exit price while those shareholders that don't sell get no cash - and may or may not benefit from a short-term boost to the stock price. For when buy-backs stop the share price may rapidly drop to the undisturbed neutral price it would trade were there not buy-back activity.

Selling your company to China?

The dispute in Hong Kong is far from being settled. But it does not look good for the (semi)independence of the former British Colony. So why the rush to sell to a company from Hong Kong? And if shareholders should no longer be the primary focus of corporations and rank only next to workers, suppliers, customers and the wider community (however defined) - how much longer and under what rules can these sell-outs be allowed to continue? And what good is served if all this transaction does is making Hong Kong's richest man richer still? And how much tax does he pay and where? No good for anyone if he just piles his riches higher and higher - in Hong Kong (where taxes are low to non-existent) or in another tax "friendly" geography.
(20-August-2019)
Hong Kong's richest man snaps up British Brewer 

I do like to be working for an Association

Nearly as good as to be beside the seaside: to work for one of the Associations that(claim) to work for the good of investors. AFME (also known as the Association for Financial Markets in Europe) pays its top executive £1.7 Mio in 2018 and he is 'understood' to be in line for  £2 Mio in 2019. This is a huge number that is totally out of proportion given that staffing and pay in the sectors the AFME is representing is under pressure. The chief of the Investment Association - a lobby group that is looking after the interests of savers in a more direct fashion than the lobby for market professionals - pockets a relatively paltry£666,000 in 2018. How any of the member firms of these two lobbies can claim to protect the interests of investors/savers is difficult to imagine as they seem to be incapable (unwilling?) to keep their own houses in order.
(19-August-2019)

Climate Change, Diversity, Human Rights, Income Equality

Climate Change, Diversity, Human Rights, Income Equality - all very worthy causes but the solution is not to push business to provide all the answers. That just means that politicians are left off the hook as they should be providing a framework that can take care of these issues.

• Use too much coal, oil? - There is a simple solution and it is not so prone to be aubused fraudulently than the carbon tax: higher taxes on production/sale.
• Diversity - simple legislation can mandate ratios for different ages, sexes, even 'races', but get a democratic majority for any law (and please, not just 50.1%)
• Human Rights - Don't ask managements to judge in which countries a business should operate, again, politics needs to make a (democratic) decision.
• Income Inequality - no point moaning, too many pieces of legislation further growing inequality and achieve the opposite of what politicians claim they try to.
  (19-August-2019)
  

Another Public Company disappears in the Maw of 'Private' Equity

In this age of growing concern about Inequality it is a slap in the face of ordinary investors - let alone citizens - if more and more public companies get gobbled up by financial engineers and their conspirators among dominant shareholders and management. Apart from the problem that benefits of the Private Equity industry are disputed - there was hardly ANY private equity to speak of before the mid-1980s and the world was doing quite well without it - the distributional effects are clear for all to see: Who else but promoters of the industry can spend millions on a birthday party? why should public companies show restraint in relation to executive compensation when promoters and their hired guns in management don't disclose their pay packets? They probably get paid amounts that would sometimes be multitudes of what senior executives in public companies can earn. It is clear that mechanisms to protect public shareholders from having their companies taken away on less than attractive terms are not up to the task. Who cares about Wider Shareownership or the Shareholder Democracy? Rome's decline started when wealth got concentrated in the hands of the few.
(5-August-2019)
Springer Buy-out on track

Anyone still thinks that investment fiduciaries should run Corporate Governance?

Who are the 90% that waved through Lloyds Bank CEO Horta-Osorio's pension? The missing link in the whole debate about corporate governance, and inequality in particular, is the lack of any control that real end investors - the man/woman on the street whose savings are at stake - have over the actions that fiduciaries (and fund managers do NOT own any shares!). And make one guess how fund managers associated with Lloyds Bank voted.
(18-May-2019)
Lloyds wins backing for CEO’s pension — but 10% of shareholders dissent

Amundi investors urged to vote against chief’s pay deal

Major problem for the whole governance debate: The 'Shareholders' as the Investment Management Firms and/or Banks are often mistakenly called are in reality nothing but fiduciaries for the real end investors. But they have disproportionate power over corporate policies - and therefore our whole economic (market? capitalist?) system. This is a relatively recent development - just remember that Fidelity was a comparative midget in terms of AuM just 45 years ago, and Blackrock was only founded in 1986. No one seems to have thought of introducing a mechanism that allows end investors - the real shareholders - to influence - let alone control - the governance policies that are exercised on their behalf by these fiduciaries. To add insult to injury directly or indirectly they pay their fiduciaries twice, once with any management fees and again for farming out governance to third parties, known as Proxy 'Advisers'. Not many savers are informed about the fees that are charged by these advisers and how their performance is measured. At best they provide a fig leaf for the fiduciaries and at worst the fees they receive are an outright waste of money as fund managers should be able to assess companies they invest in in a 360 degree fashion, not just if the price will go up or down in the next five minutes. So to conclude: would the great unwashed public agree to pay CEO's the sums they get paid these days? I think the answer should be obvious.
(11-May-2019)
Amundi investors urged to vote against chief’s pay deal

Should Shareholders have stricter control of Corporate Acquisitions?

News that IBM just concluded a $20 billion bond issue to pay for the acquisition of Red Hat was a reminder for the absurd terms of this Folie de Grandeur (or maybe desperate attempt to halt the decline of Big Blue). Ten times Sales? If that works out I will eat my hat. But on a more serious note, should there be stricter oversight when CEO's gamble with shareholder money? Not only on acquisitions but also on disposals (which often are on terms favourable to insiders in the case of MBO's)?
(9-May-2019)
IBM Sells $20 Billion of Bonds as Market Defies Trade Drag

NO! The GE 'Shareholders' DID NOT approve Executive Pay!

How often do I have to repeat this: it is the financial intermediaries, aka investor fiduciaries, who approved the Pay for the senior GE executives - and most other C-suite staffers. The REAL investors have no say in this matter and the whole corporate governance movement is at best a fig-leaf, at worst a circus to entertain the ordinary citizen watching helplessly.
(9-May-2019)
GE Investors Approve Executive Pay, Reject Independent Chairman

Investor Forum - a secret Society?

Reading the the Investor Forum intervened in the Barclays - Branson battle I tried to find a copy of its letter on the website - but no luck. So one has to ask with what authority the IF takes sides, and why is it not willing to share its opinions or insights with the wider public.
(30-April-2019)
City Forum intervenes in Barclays Battle

Overpaid CEO's are lacking Modesty and Decency

Given the astronomical pay that CEO's and their carefully selected board members (and they all belong to the same Club) award themselves one can only presume that the old fashioned habits of Modesty and Decency have given way to unbridled greed. These pay rises are not simply the result of misconceived economic and business theories but also the reflection of a general decline in moral standards.
(24-April-2019)

What do real end investors want from Proxy Advisors?

A recent survey found that real end investors do not want more political and social activism! The survey also highlights the lack of influence retail investors have in the corporate governance debate. And it should also be mentioned that while 30% of listed shares in the USA are directly owned by the Great Unwashed Public, the remaining 70% are also owned by individuals - albeit via financial intermediaries in all forms and shapes.
(24-April-2019)
Proxy Advisors: What Do (Real) Retail Investors Think?

CEO Pay - how much is too much?

$65 million for Disney's Bob Iger is insane says Disney heiress. And many - if not most people - would tend to agree. But in the heated discussion about CEO pay one question has not been answered: what is the correct level of CEO pay, and how should it be set?
(23-April-2019)
Disney heiress calls Bob Iger's $65 mio pay insane 

The Real Problem with the Carried Interest Tax

Another broadside from a supporter of the status quo. But one aspect is forgotten (on purpose?) in this ongoing saga. For arguments sake let us agree that it is beneficial and fair to give entrepreneurs and investors a lower tax rate on capital gains. But the promoters behind Private Equity are not always putting sufficient funds of their own into the businesses they finance. Taxable income could easily be converted into capital gains if they award themselves a sort of founder's shares at artificially low prices - and voila, when the company/asset is sold they can book a capital gain that is taxed at a much reduced rate. Given the opaque nature of Private Equity one has to assume that this practice is quite prevalent in the industry. In addition, basing buy-out vehicles in offshore tax havens allows even more manipulation of tax levels. So while most of the money managed by 'Private' Equity ultimately comes (via financial intermediaries) from the Public the tax affairs of the promoters are the one aspect that is really private. Maybe a small part of all the noise and energy spent on reforming pay in the listed company sector would be much better addressed to shed more light on the pay practices in the Private Equity business.
(19-April-2019)
Hiking the tax on carried interest capital gains is a lose, lose, lose

What purpose do Proxy Advisers serve?

One of the large Proxy Advisers seems to be more than happy to sign off on the compensation of Credit Suisse CEO Thiam. And many institutional investors are similarly content with his pay. But where does that leave the ordinary investor - the great majority is not holding CS shares directly but invests their savings via intermediaries who are really fiduciaries. But how do they insure that their investor's best interests are represented? This is the great deficiency in all the discussions about corporate governance - the real participants have no voice!
(10-April-2019)

Shrinking Universe of Listed Companies - that's why!

No wonder that the universe of listed companies is shrinking. It is much too easy to gain control of companies and take them off the public markets. A tiny number of votes above the 50% threshold should not be allowed to force the remaining shareholders out of their holdings. No wonder that stakeholders are disregarded and sacrificed on the mantra of simplistic corporate constitutions.
(3-April-2019)
Roche fails to get control of Spark

Dual-class voting shares - are our Fiduciaries standing firm?

Canny insiders - with the help of advisers among investment banks - are steadily eroding shareholder rights. There is opposition but it is piecemeal and split. Reality is, if the major fiduciaries in the asset management business would get together and put their feet down this unhealthy development would be stopped very quickly. I would not go so far as to call these structures the biggest threat to financial markets but they are just one more factor behind the continuous increase in Inequality.
(27-Mar-2019)
Dual-class structures biggest threat to financial markets

Who runs our Companies? Proxy Firms? ETF Providers?

A lot of noise had been created about the (supposed) undue influence that 'passive' investors (and ETF providers in particular) may or may not exert on investee companies. But the elephant in the room really are the few proxy firms that dominate voting advice to most investment managers. Apart from the fact that it is unclear how much of an extra burden their fees heap on the charges that the real end investor has to bear (without ever being asked), their 'advice' (basically nothing but another opinion for which they will never be called to account) in many cases ends up in the proverbial waster paper basket as their clients often ignore this expensive advice. Apart from that the self-imposed voting principles that proxy firms publish on a regular basis are devoid of any input from end investors and the wider public (are we not in a new age where wider stakeholder interests should be included in good corporate practice?) (9-March-2019)
Elliott's key proposals for hyundai dealt a blow by Glass Lewis

The 100 Most Overpaid CEOs 2019

This 2019 study is the fifth report by As You Sow. During these five years, what has changed? Quite a bit, and not enough. Significantly, more large shareholders are voting against more CEO pay packages. Those who are not are more isolated and defensive (25-Feb).
As You Sow

UK bank CEOs paid 120 times as much as average employee

The banks made the disclosures alongside full-year results over the past fortnight, ahead of new reporting requirements coming into force next year that oblige firms to set out the ratio of CEO pay to a median UK employee and those in the lowest and upper pay quartiles. (25-Feb)
Reuters

Proxy Advisers - cosy and intransparent cartel

Who gives the handful of proxy advisers to right to set their own 'policies'?
Do they ever ask the real end investor, - and not only the intermediaries that pay hefty fees with other peoples' money?
Why does it seem impossible for real end investors - and the public at large - to find out the fees that are paid to proxy firms so that they can do the work that the financial intermediaries should be doing, i.e. supervising the companies they invest in on behalf of the great unwashed public?
(10-Feb-2019)
ISS Policies on Compensation 

Board Evaluation -but who evaluates the evaluators?

Well intended maybe, but who evaluates the evaluators, and so on...
(10-Feb-2019)

Board Evaluation Disclosures - Council of Institutional Investors

Does UBS Chairman really deserve $ 6 Mio?

Or is he just an extremely well-paid PR operator? If American firms can get by without a separate Chairman is keeping such expensive staffers a necessary expense? Any decent IR professional could front such an announcement. Does anyone in the Corporate Governance crowd really care?
(22-Jan-2019)
UBS sees outflows of $13 Million

Blackrock's Larry Fink - confused or mischievous?

Interesting comment about Larry Fink's sudden commitment to better governance. Problem is, with his compensation he is sitting in the proverbial glasshouse. And in addition, as Alex Brummer correctly pointed out, Blackrock's governance policies are nebulous. No good hiring more and more governance 'experts' when they are left without clear guidelines. And the poor end investor (in most cases shielded from having any input into said guidelines by being only indirectly invested - via fiduciaries in pension funds, private banks or assorted platforms) is left standing in front of a closed 'governance universe' where self-appointed guardians of his interest are mostly talking to themselves.
The other interpretation of the half-hearted approach to governance would be that it is just another tool in the marketing arsenal of investment managers - grown out of necessity in order to follow the 'Zeitgeist' dominated by unaccountable pressure groups or lobbies.
(19-Jan-2019)
Larry Fink at Blackrock: Talk the walk, but need to walk the talk 

Yesterday I cam across another comment on Fink's letter - what do you think?
Naked Capitalism 

Chairman - a cushy sinecure for the Establisment

Looking at Philip Hampton's numerous board memberships one can notice one thing: not one of the companies he passed through can be seen as a thorough success - look at the list and point out one if you can find it! British obsession with the role of Chairmen is somewhat similar with the obsession of pack the House of Lords with superfluous worthies!
(21-Jan-2019)
About Philip Hampton
GSK Chairman to retire

Disclosure of Corporate Political Spending - just another box-ticking exercise?

So what is the benefit if end-investors know how the companies they hold shares in spend money on political causes? No point disclosing, it might just raise the blood pressure of those who disagree with specific donations. And what about spending by the vast - and growing - universe of quasi 'Private' companies in the PE sector? They are as much owned by Joe Six pack and do not give the slightest look in about their political or other lobby spending.
(20-Jan-2019)
Mutual Fund Voting on Corporate Disclosure 

Give Real End-Investor control of proxy voting

The current system of allowing fiduciaries such as Pension Funds, Mutual Funds or Private Banks discretion over proxy voting is broken. In an age of Internet and seamless information flows it should be easy to change the system. While most investors would be hopelessly challenged a system of delegated voting via proxy firms would be appropriate. They would declare their policies and investors could choose the proxy firm that most closely matches their preferences. Even a sort of 'mix and match' of policies on individual issues could be envisaged.
(20-Jan-2019)
How to fix the unhealthy concentration of corporate voting power 

Private Equity Boards not much better than those in Listed Companies

Not clear why boards in listed companies could not make speedy decisions - if the will and skillset are there. At least boards in listed companies are more transparent as fiduciaries and often real investors can see the impact of their actions more directly.
(16-Jan-2019)
60 seconds with Bill Priestley

What do Non-Executive Board Members bring to the Party?

News that hospitality veteran James Horler resigned from Patisserie Valerie's board raises the question: what purpose to outside board members play? If they are excused from supervising the nitty-gritty of a company's accounts are they then left with being a sounding board and in-house giver of strategic advice? And who are they accountable to?
(16-Jan-2019)
James Horler resigns fro Patisserie Valerie Board

AntiTrust massively eroded - Should Fiduciaries care?

Should Investors - and their hired hands in the Fund Management/Private Banking Industry - really care if Oligopolies and Monopolies are not held in check? Higher profits at the cost of higher inequality may be attractive in a Darwinian world but how does this fit in with the current focus on ESG, SRI and Impact Investing?
(9-Jan-2019)
Why the Regulators went soft on Monopolies

Seed Oligopoly - next battleground for ESG/SRI Investment?

Just a question of time before the investors in the Seed providers will come under heavy fire from those concerned about good ESG/SRI practices. How much does it cost to invent? discover? a new seed variety? Have those breeding new varieties of flowers, pigs etc left tons of money on the table? Given that the seed companies are so keen on protecting their 'intellectual' property one can only be suspicious of their motives. How much does it cost to develop a new seed variety, and how much in annual rent are they exacting?
(8-Jan-2019)
India's Top Court backs Genertically modified Seed Oligopoly