Know The Laws, Know Your Rights: Change

In Gretchen Morgenson’s “Five Years Later, the Plumbing Is Still Broken” (Fair Game, Sept. 15), Ms. Morgenson does not note the significant reforms that the financial services industry has carried out or that are under way, and the fact that many large financial institutions have already reduced their reliance on the overnight repo market. As one of the clearing banks supporting the infrastructure of the tri-party repo market, Bank of New York Mellon has been at the center of significant changes.

For example, new service and delivery technologies, combined with significantly enhanced collateral standards, will practically eliminate the need for intraday credit in the tri-party repo market by the end of next year. By the end of this year, 70 percent of intraday credit will have been removed from the market. In addition, further reform initiatives will address the precise risks associated with unwinding repo transactions that the article mentions.

The Basel III Accord introduced, for the first time, quantitative liquidity requirements that stress-test large-bank funding practices and force firms to move from primarily overnight funding to longer-term financing arrangements. We are seeing financial institutions rely on more stable term sources of capital, such as debt and equity, rather than repo financing. In fact, the vast majority of remaining risk in the repo market is against United States Treasuries, the most liquid instruments in the market today.

Additionally, the Federal Reserve and other global regulators are focusing on banks’ reliance on short-term funding and on reform measures to more closely link capital and liquidity regulation. These efforts will materially alter the way banks fund themselves and change the repo market for the better.

As the industry and regulators work to advance reforms, your readers should know that many of the risks mentioned in the article are being addressed.

BRIAN RUANE

New York, Sept. 16

The writer is executive vice president for tri-party services at Bank of New York Mellon.

Thursday, September 5, 2013

Advertising: With Change Coming, Aetna Targets Employers

But because a majority of Americans are insured through their employers, the insurance companies have to reach several audiences. Speaking to human resources professionals, health care providers and policy makers is still an important part of many insurance companies’ marketing plans.

Aetna, one of the largest of the companies, will introduce a new campaign on Tuesday aimed at those groups. It will highlight the company’s goal of cutting billions of dollars of expenditures through so-called Big Data, electronic health records and other technologies as well as encouraging better coordination among health care providers. The campaign, called “Our Healthy,” will run online, in print and on mobile devices through the end of 2013.

“We believe that the health care system is desperately in need of improvement,” said Robert Mead, the senior vice president of marketing, product and communications at Aetna. Mr. Mead cited a report by the Institute of Medicine that tallied more than $760 billion in health care “waste” created annually as a result of consumer fraud, unnecessary procedures and excessive administrative costs.

The campaign was created by OgilvyOne in New York and is an extension of a consumer campaign called “What’s Your Healthy?” that Aetna began earlier this year. Both “What’s Your Healthy?” and “Our Healthy” are part of a $50 million advertising and marketing strategy for the company.

“If you’re a consumer, you don’t know what things cost,” Mr. Mead said. “You don’t know what things are worth. You don’t always know how to get the most value out of the health system. We have to bring everybody to the table.”

Mr. Mead said the campaign also stressed the need for health care providers to shift to a model known as “accountable care,” which shifts their reimbursement models for health care professionals from being paid for the volume of services they perform to being paid based on the outcomes of patient care. Accountable care systems are usually linked to technologies that help health care providers measure performance and manage patient data. Aetna has 27 accountable health care agreements with hospitals and other health care providers around the country.

A video for the “Our Healthy” campaign features Mark T. Bertolini, the chief executive of Aetna, explaining the company’s goals. “Unless you fix that health care system, you cannot fix the economy,” Mr. Bertolini said in the video. “If we fix just 20 percent of it, we could pay for the Affordable Care Act. We could insure everyone without increasing taxes.”

Like other insurance companies, Aetna has over the last few years been ramping up its technical products and services. It created Healthagen, a division of the company that sells health technology services to consumers and providers, like a mobile application that helps patients assess their symptoms and find doctors.

“The fee-for-service model is broken,” Mr. Mead said. “The Affordable Care Act encourages the system to move to accountable care,” he added. “The challenge with that is that doctors and hospitals need technology and support to make that work.”

But more technology and more data may not solve the problem of waste in health care, said Robert S. Huckman, a professor of business administration at Harvard Business School and the faculty co-chairman of the Harvard Business School Healthcare Initiative. “When you’re talking about having to manage waste in the system, most would agree that a lack of coordination rests at the heart of a lot of it,” he said. “Data without an educated way of querying that data is not helpful. It is a start.”

While insurance companies like Aetna have access to vast amounts of patient data that could be used to manage costs, according to Mr. Huckman, the economic impact of even widely adopted technologies like electronic health records is still unclear. “Within providers and within a hospital, the electronic records have made greater inroads. But the question of moving toward greater coordination and greater interoperability is an issue we are still grappling with.”

The cost of health care, however, is something everyone can agree is too high, Mr. Huckman said: “I think the cost issue is most salient right now for most Americans. It hits you front and center when you look at some of the prices.” He noted how costs could vary widely depending on where a person lived and who their insurer was. “It shouldn’t vary that much,” Mr. Huckman said. “The cost of a product on Amazon is the same no matter where I buy it from. It does defy a little bit of explanation.”

Friday, July 19, 2013

Monte dei Paschi, Venerable Italian Bank, Yields to Change

While the move was considered essential to the survival of the bank, Italy’s third-largest, it was seen as tragic by local residents, who lined up at the shareholder meeting to hurl invective at bank management.

“You did nothing to relaunch the bank,” Gabriele Corradi, a former Monte dei Paschi employee and candidate for the mayoral race in 2011, said to the three top managers of the bank sitting in front of him. The new management team arrived last year, brought in to salvage the operation.

“The bank is still doing badly,” Mr. Corradi said. “It’s still losing money.”

Nonetheless, shareholders on Thursday passed changes in bank bylaws to weaken dominance by the Monte dei Paschi Foundation, a charitable organization. The foundation owns one-third of the shares and for decades lavished bank profits on the community of Siena — until there were no more profits.

Financially devastated and with little choice, the foundation supported Thursday’s change. Previously, no shareholders other than the foundation could exercise votes equal to more than 4 percent of the total. Other changes approved at the meeting will allow more frequent turnover on the board, which had been dominated by the foundation and Sienese political interests.

The problems of Monte dei Paschi, which led to a 4.1 billion euro ($5.4 billion) government bailout late last year, have contributed to a nationwide debate about the powerful and secretive foundations that play a large role in the Italian banking system.

In the 1990s, many Italian banks were privatized and converted to stock corporations, but with local foundations receiving large, sometimes controlling stakes. For Monte dei Paschi, the change was mostly formal because it had always belonged to the city in one way or another.

In recent times, no major decision was taken without the approval of the foundation, which supported the ill-advised acquisition of a rival that stretched bank finances and led to its downfall.

Despite the bank’s overwhelming problems, many citizens of Siena refuse to accept that the bank can no longer serve as all-purpose community benefactor and patron, one that has subsidized the local university and a hospital.

“The abolition of the 4 percent limit simply cancels the Sienese identity of the bank,” Paolo Emilio Falaschi, a lawyer in Siena who in the past has also represented the bank, said at the shareholder meeting, which was held in a local auditorium owned by the bank. “It’s incredible.”

Monte dei Paschi plans to sell 1 billion euros of new shares next year to replenish its capital after a loss of 3.2 billion euros last year. That move will inevitably water down the foundation’s stake in the bank, and perhaps allow another institution or a private equity fund to become the largest shareholder.

Alessandro Profumo, who became chairman of Monte dei Paschi last year in the effort to salvage the bank, said at a news conference that he hoped the change in bank governance would make it easier to sell the new shares. The bank also needs cash to repay the 4.1 billion euro bailout loan, known as a Monti bond for former Prime Minister Mario Monti, who was still in office when the bailout was granted.

“The fact that M.P.S. has a chance to restore itself totally and reimburse the Monti bonds is good news for the country,” Mr. Profumo told reporters after the five-hour shareholder meeting.

There had been little doubt about the outcome of the shareholder vote. Still, dozens of Sienese citizens, wearing linen shirts or short sleeves in the heat, used the event to vent their anger at previous managers, who accumulated huge debts; at the Monte dei Paschi Foundation, for giving up all its power; and at current managers, whom they said they doubted would be able to reverse the bank’s fortunes.

Gaia Pianigiani reported from Siena, Italy, and Jack Ewing from Frankfurt.

Thursday, July 4, 2013

Penguin and Random House Merge, Saying Change Will Come Slowly

Receptionists cheerfully answered the phones with a new greeting: “Good morning, Penguin Random House.”

E-mails were sent to nervous employees assuring them that their health plans would not change.

And a new temporary logo — with a penguin in profile next to a tidy house — was released until a permanent one could be designed.

On Monday, the newly formed company of Penguin Random House began to take shape, only hours after a middle-of-the-night announcement that the long-planned merger had been completed.

Together, Penguin and Random House will make up the biggest and most dominant publisher in the business, one that has unmatched leverage against Amazon.com and the potential to inspire other mergers in the industry.

Markus Dohle, the chairman and chief executive of Random House, who will take on the role of chief executive of the new company, announced the completion of the merger in an e-mail to employees on Monday.

“Today, we are Penguin Random House,” he wrote. “You should be proud of what you’ve accomplished and what we are all now a part of: the first truly global trade book publishing company. Together, we are even better positioned to fulfill our core purpose: to bridge authors and readers by publishing the very best books.”

Bertelsmann, the owner of Random House, and Pearson, the owner of Penguin, disclosed the merger in October, saying that Bertelsmann would control 53 percent of the company and Pearson 47 percent. Since then, the merger has sailed through regulatory approvals in the United States and Europe, as well as China, Canada and other countries.

The combined companies will control more than 25 percent of the book business, with more than 10,000 employees, 250 independent publishing imprints and about $3.9 billion in annual revenues.

Mr. Dohle, in a telephone interview from London, where he was about to embark on a three-week tour around the globe to meet with employees, said that part of his message is simple: there will not be much change at first.

There are no immediate plans for laying off employees or closing imprints. Both Penguin and Random House have long leases on their buildings in Manhattan, so they will not work from the same building anytime soon — maybe not for at least a decade, Mr. Dohle said.

“The continuity will far outweigh the change,” said Mr. Dohle, who has a reputation for deliberate moves. “We have the luxury to take the time before we make any strategic decisions. There is no need to rush.”

One goal of the merger, he said, is to “crack the code of discoverability” — of how to put books in front of potential buyers — “in a world with fewer bookstores.”

Several important leadership changes for the new company were announced Monday. David Shanks, the chief executive of the Penguin Group USA, has stepped down and will be a senior adviser to Mr. Dohle and the executive team. John Makinson, the head of Penguin Group since 2002, will be the chairman of Penguin Random House.

Executives sought to reassure anxious employees, authors and agents that there was nothing to worry about. In a letter to authors, Mr. Dohle said that the new company would invest in distribution and marketing, maximizing potential readers. The authors’ relationship with their editors and publishing teams, he said, “will remain untouched.”

Executives at Penguin and Random House said the initial focus would be on unifying the infrastructure of the companies, including establishing pay scales, health benefits and new e-mail addresses.

But there will also be an effort to sort out redundancies, a process that typically involves a reduction in employee count. As physical book sales decrease, so does the need for gigantic warehouses to store and ship books; the newly combined company is likely to find ways to trim printing, distribution and storage costs.

“There’s positives and negatives,” said Elyse Cheney, a literary agent. “The positive is that I hope they will be able to have greater leverage with companies like Amazon. But more importantly, that they figure out new and innovative ways to reach consumers, now that the marketplace is changing so rapidly.”

Analysts said it was too early to predict the consumer impact of the merger. Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers, speculated that Penguin Random House would eventually use its large list of books to create a digital subscription offer, much like a book-of-the-month club for e-books, or build minibookstores within retailers like clothing stores.

For authors, the suddenly larger presence of Penguin Random House will make it a more attractive prospect, Mr. Shatzkin said.

“If you’re a Penguin author or a Random House author, you should be pretty happy today,” he said. “If you’re another publisher or an author with another publisher, you should be watching this with a wary eye.”

But authors and agents also quietly voiced concern that there would be fewer major publishing houses competing for their work.

Harlan Coben, the best-selling novelist who is published by Dutton, an imprint of Penguin, said that “the one thing that worries every writer is that there is going to be fewer houses and less competition.”

But, he added, “this business so constantly changes that whatever we’re talking about now will be nonsense a few years from now.”

Monday, March 25, 2013

PPR Will Change Name to Kering to Show Breton Roots

Kering is pronounced “caring,” according to François-Henri Pinault, the chairman and chief executive of the family-controlled company. “Ker” is a Breton word meaning “home,” making the new name also “a proud reminder of our origins in the Brittany region of France,” Mr. Pinault said in a statement.

The rebranding comes as the house is completing its transformation into a “pure” apparel and accessories group, shedding some of the broader collection of businesses on which it once depended. Mr. Pinault said in February that PPR planned a public stock offering this year of its Fnac entertainment retailing chain, which, like Virgin Megastores and HMV, has struggled as much of its core business has moved online.

The company also plans to divest itself of the Redcats online clothing and furniture business. That will allow it to focus exclusively on its luxury and sports-lifestyle brands, which also include Saint Laurent and Bottega Veneta.

The new name “expresses the group’s new identity and our corporate culture,” said Mr. Pinault, 50, the son of PPR’s founder, François Pinault, 76. A marketing campaign, to be carried out largely though print advertisements and social media, is planned to help get the word out before the name change takes effect in June.

PPR reported revenue of 9.7 billion euros, or $12.5 billion, for last year.

Manfredi Ricca, the managing director at Interbrand in Milan, said the name change reflected an awareness that companies needed “a strong angle on what they stand for,” both for consumers and for employees, to demonstrate their “overarching vision” and values.

“I think it’s a case where the name needs to tell the story of the business,” Mr. Ricca said of PPR. “The former name contained things that are no longer relevant to the group.”

Kering will actually be the company’s fifth name.

It began in 1963 as a timber-trading business run by François Pinault, who called it simply Pinault. After expanding into distribution, the company took control of the venerable Printemps department store in 1992 and changed its name to Pinault-Printemps. With the acquisition of La Redoute, a mail-order shopping business, it changed its name to Pinault-Printemps-Redoute, before eventually opting for the simpler PPR.

The company achieved global prominence in 2001, when the elder Mr. Pinault won a highly public and drawn-out battle with Bernard Arnault, the chief executive of LVMH Moët Hennessy Louis Vuitton, for control of the Gucci Group.

Friday, December 7, 2012

EADS Confirms Change in Ownership Structure

PARIS — European Aeronautic Defense & Space, the parent company of Airbus, confirmed a major overhaul of its ownership structure late Wednesday that would dissolve a decade-old arrangement that grants the governments of France and Germany an effective veto over strategic management decisions.

The balancing of national interests in EADS was enshrined in a shareholder pact that dates to the group’s creation in 2000. That agreement stipulated that the French and German stakes in EADS must be equal, and until now the two countries have each exercised control of 22.5 percent of the company through a mix of state holding companies and private-sector owners that have acted as proxies for Paris and Berlin.

Under the terms of the new agreement, KfW, a German state-owned bank, will acquire a 12 percent stake in EADS — giving Berlin its first direct stake — while France will reduce its voting rights to 12 percent from 15 percent. A Spanish government holding company will have its stake shrink to 4 percent from around 5.5 percent.

The two large private-sector shareholders that have served as proxies for Berlin and Paris are expected to substantially reduce their stakes “either immediately or in the near future,” EADS said, in part through a general buyback of up to 15 percent of its shares planned in the first quarter of next year.

The German carmaker Daimler, which holds 15 percent of EADS shares and 22.5 percent of its voting rights, said in a separate statement that it planned to reduce its holdings before the end of 2012. Daimler did not say how much of a stake it would sell, but EADS said the initial disposal would amount to a 7.44 percent stake, including a 2.76 percent stake to be sold to KfW.

Lagardère, the French magazines-to-missiles conglomerate that owns 7.5 percent of EADS, said it would sell most of its holding — 5.5 percent — back to EADS under the buyback program.

Under the new governance structure, France, Germany, Daimler and Lagardère have also agreed to relinquish special rights, granted them under the previous accord, to a veto over certain management decisions, including major acquisitions.

“The agreement aims at normalizing and simplifying the governance of EADS while securing a shareholding structure that allows France, Germany and Spain to protect their legitimate strategic interests,” EADS said.

The changes will eventually increase the “free float” of publicly traded EADS shares to more than 70 percent from 49 percent currently, EADS said.

It said it would convene an extraordinary meeting of all shareholders in the first half of 2013 to approve changes to the ownership structure and to elect a new slate of directors.

EADS proposed that the new board be comprised of 12 members, rather than 11 currently, and include “at least” 8 independent members. The majority of board directors, as well as two-thirds of the members of the group’s executive committee, would be European Union nationals, EADS added.

EADS has long sought a new shareholder arrangement that would preserve the politically sensitive balance of influence between France and Germany without subjecting key management decisions to the approval of politicians in Paris and Berlin.

The impact of such political interference was on prominent display in October, when the German government led by Chancellor Angela Merkel failed to give its blessing to the merger of EADS with BAE Systems of Britain, a deal that would have created the world’s largest aerospace group.

Monday, November 5, 2012

Name Change to 'ChristIsKing' Gets Rejected by Judge

Finding a lot to ponder in a name, a Staten Island judge has issued a seven-page, single-spaced opinion denying judicial sanction to the wish of a father, mother and their two children to become the "ChristIsKing" family.

Monday, October 15, 2012

Wealth Matters: When Advisers Change Jobs, Ask Questions

Whatever the reason, the transition often seems opaque to clients — the people whose money gives these advisers’ businesses value. But most probably don’t care too much as long as they get the same service and their statements arrive on time.

But a transaction this week got me thinking about the obligations advisers have to their clients when they move and how their handling of that process can offer insight into their character.

Seth Glickenhaus, who has worked on Wall Street since 1934 and started his first firm in 1938, has decided to sell his advisory firm, Glickenhaus & Company, to Marvin Schwartz, the team leader of six advisers called the Straus Group at Neuberger Berman.

Mr. Glickenhaus, who got his first job in finance from Herbert Salomon, one of the original Salomon brothers, is 98. With his eyesight failing and his step slowing, he said it was finally time to retire.

“I love being a money manager,” he said. “If I didn’t have certain obvious handicaps, I’d still be working at it. But I don’t think it’s fair to manage other people’s money when you think your handicaps could impair your ability.”

He had been concerned about finding a good home for his clients, who have entrusted him with over $900 million to manage. He has spent this past week contacting clients to tell them about his departure and why he picked Mr. Schwartz.

“I’ve admired him and used many of his ideas,” Mr. Glickenhaus said. “It was very hard to find someone with a similar investment policy. Most people in money management are interested in the fees they get and the commissions and don’t do an outstanding job.”

Mr. Schwartz, 72, whose group manages $11 billion, said he did not take the transition for granted. Mr. Glickenhaus’s clients are free to go elsewhere. But he said he and his team would be working hard over the next 90 days to meet with them and explain why they should move their accounts to Neuberger Berman.

“One of the challenges is to understand the mentality of an investor who entrusts a majority, if not all, of their invested assets with one person to manage over a long period of time,” Mr. Schwartz said. “I think it’s important to recognize that the new manager doesn’t have an attitude of coming in with a strong broom and instituting major change. Change should be instituted slowly, to the extent that there is change.”

That this transition of client accounts between firms is amicable is not the norm. Just ask people whose adviser has left one firm to go another and found themselves on the receiving end of a flurry of sweet-talking calls from the old and new firms.

“It’s a question of growing importance because there is a lot of moving of the deck chairs, partly in the brokerage industry,” said Stephen Horan, head of the private wealth practice at the CFA Institute, an association of investment professionals. “The situation creates a really interesting opportunity to gauge one of the things clients say is most important to them about their adviser, and that’s ‘What is the commitment to ethics?’ ”

Mr. Horan said that the increased movement of advisers over the last several years had been largely driven by the decline in the public’s opinion of many big Wall Street firms. Some advisers have decided they could be more successful at a boutique firm, on their own or, at the very least, at another big firm with a better reputation.

I decided to call three firms whose model is based on inducing advisers to leave established brokerage firms to join them and ask them how they look to smooth out transitions. All three were started, or began to grow, after the financial crash of 2008, and their goals are to become large enough that clients can get the advantages of a big brokerage house but with a wider variety of investment choices.

I wanted to know what clients could glean from how their advisers changed firms.

Moving has become so common that the industry has a set of guidelines called the broker protocol that is meant to govern the process and cut down on the number of lawsuits between firms.