 |
||||||
| Tuesday, February 9, 2010 |
Contact Us
|
 RSS
|
|||||
|
|
| |
|||
|
||||||
|
||||||
|
|
ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
|
|
|
|
November 16, 2008 12:01 AM ET
Several directors have connections with Wall Street firms, so they are effectively straddling the two industries slammed hardest by the economic downturn and seeking the most government aid. GM’s 14-member board includes three directors who also advise or sit on the boards of financial services firms that have received bailout funds: Erskine Bowles serves at Morgan Stanley, Armando Codina at Merrill Lynch, John Bryan at Goldman Sachs. In addition, GM director E. Neville Isdell served on the board of SunTrust until April. And director Eckhard Pfeiffer is a member of an advisory board at Deutsche Bank, which has so far refused bailout funds. Meanwhile, at Ford, Gerald Shaheen also sits on the board of National City, which is likely to be acquired by PNC later this year. John Thornton was the chief operating officer at Goldman Sachs until 2003. And John R.H. Bond, who last month resigned from Ford’s board, served as CEO of HSBC in the 1990s and is now a senior adviser to private equity firm Kohlberg Kravis Roberts. Privately held Chrysler does not disclose who sits on its board. While automakers tried to increase their ties to Wall Street as they moved more into financing operations, the connections could be a liability for those double-dipping directors, as shareholder anger swells over poor performance in both industries. It’s unclear whether their dual roles will help automakers carve out a slice of the bailout pie. According to Warren Batts, a board member at Methode Electronics, which makes components for automotive manufacturers, the Detroit-Wall Street connection gives automakers no extra leverage with the federal government in seeking bailout funding, and could in fact weaken the automakers’ case. “They are out there with a tin cup looking for money from Uncle Sam twice,” he said. That said, GM may have an advantage in obtaining federal funds, however slight. Board member Mr. Bryan, formerly CEO of Sara Lee, is reportedly good friends with Treasury Secretary Henry Paulson; he served on Goldman’s board while Mr. Paulson was CEO there a few years ago. Mr. Bowles also likely has political contacts with the incoming administration, having served as White House chief of staff for President Clinton. Ford has some influential members as well. Mr. Bond—who retired last month from the board, but who will remain in touch as an unpaid consultant to Ford’s executive chairman—has been tapped by the British government to advise the European Union on the current economic crisis. A Ford spokesman didn’t return calls seeking comment. Calls to directors at both companies were not returned. According to GM spokeswoman Renee Rashid-Merem, the company has not specifically sought out directors with financial experience or connections. She also noted that under GM bylaws, no director can sit on more than four boards. She declined to comment on the role of the automaker’s directors in lobbying for bailout protection. Denny Beresford, a director at Fannie Mae, whose board has ceased meeting since the federal government took control in September, said corporate boards often look for “portfolio directors,” or those with multifaceted experience, rather than only former CEOs or single-industry executives. Those who sit on the boards at Wall Street firms could help with finance-related business decisions, he said. Both GM and Ford now have roughly average governance ratings overall but have been flagged for poor internal controls and accounting problems, according to John Jarrett, research director at Governance Metrics International. He noted that the boards at both companies are made up of mostly independent directors—a good thing, according to governance experts. However, some of the directors at the automakers have been targeted for poor stewardship. Proxy Governance in April of this year recommended a vote against Mr. Codina for his role on Merrill Lynch’s compensation committee; 13% of shareholders voted against him. Mr. Codina also sits on GM’s compensation committee, as do Messrs. Bryan (the committee chair) and Bowles. All three sit on the compensation committees at their respective Wall Street firms as well. Executive compensation in both industries has been criticized by some shareholders for being too high. “In some ways, [the interconnectivity] is part of a larger problem of the U.S. economy relying on some of the same faces to run boards,” said Stephen Davis, director of the Millstein Center on Corporate Governance at Yale University. He said the big issue now will be whether—if automakers receive assistance—the government changes the makeup of the current boards. He noted that the Obama administration would likely insist on taking a more active ownership role, as in the case of Fannie Mae and Freddie Mac. “The people who are on the finance-type, Wall Street-type company boards are the most interconnected of any kind of director because everybody wants somebody like that on their board,” said Nell Minow of the Corporate Library, which has been critical of interlocking boards. However, she said that having Wall Street connections is not necessarily a bad thing. It may not be if it gains automakers the same bailout provisions that Wall Street has received. Despite the Treasury’s reluctance to bail out Detroit—Mr. Paulson said last week that the $700 billion relief fund would not be used on automakers—the chances for a deal seem to be growing, though it may not come until after the new administration is in. Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, has said he is considering legislation to provide $25 billion in loans to the Big Three. FW
|
|
|
|
Latest News
• Reversal? Stanford advisers sue the SEC
March 5, 10:52 AM EST
• Third of companies not complying with new tax reporting rule
March 4, 4:25 PM EST
• Regulators aware of problems at First National for six years: audit
March 4, 3:31 PM EST
• Influential advisory group to look at fair-value, off-balance sheet accounting
March 4, 4:16 PM EST
• In a first, NY State hopes to sell bankrupt insurer
March 4, 3:59 PM EST
CRAIN'S BENEFITS OUTLOOK 2009
SPECIAL REPORT
MOST POPULAR
|
MORE ANALYSIS
Crain Financial Group:
InvestmentNews |
Pensions & Investments |
Workforce Management
Copyright ©2010 Crain Communications Inc
All rights reserved.
Privacy Policy |
Terms & Conditions