Wednesday, July 24, 2013
Glaxo Says Executives May Have Broken Chinese Law
Glaxo Says Executives May Have Broken Chinese Law
Thursday, May 2, 2013
DealBook: JPMorgan Executives Come and Go as Vote Nears
Clockwise from top left: James Staley, William Winters, Heidi Miller, Steven Black, Charles Scharf, Barry Zubrow, William Daley, Jay Mandelbaum, Frank Bisignano and Ina Drew.10:35 a.m. | Updated
In the depths of the financial crisis, Jamie Dimon, the chief executive of JPMorgan, and his top lieutenants were hailed as “The Survivors” on a Fortune magazine cover. Today, of the 15 executives featured in that article, only three remain — and one of them has been demoted.
The most recent high-level exit at the bank — that of the co-chief operating officer, Frank J. Bisignano, regarded within JPMorgan as something of an operational wizard — has heightened worries about the persistent executive turnover at the bank and raised fresh questions about who is ready to succeed Mr. Dimon one day.
For Mr. Dimon, who is 57, the latest departure comes at a precarious time, just weeks before the results are tallied on a shareholder vote on whether to split the roles of chairman and chief executive. Mr. Dimon currently holds both jobs. With voting now under way, the bank had hoped to keep a low profile, according to people briefed on the matter but not authorized to speak on the record.
In the last four years, Mr. Dimon’s inner circle has been winnowed by the departures of William Winters, Heidi Miller, Steven Black, Charles Scharf, William Daley and Jay Mandelbaum.
And while people close to the chief executive say he is not worried about the executive turnover, others wonder if the many reshufflings at the top point to a larger problem within the bank.
More changes in the executive suites could distract shareholders from the bank’s successes. Earlier this month, JPMorgan reported its 12th consecutive quarterly profit, bolstered by strong revenue from investment banking and mortgage-related businesses. JPMorgan executives are emphasizing the positives of the bank’s businesses in making their case to shareholders.
Of the 15 leaders at JPMorgan profiled in a September 2008 article for Fortune magazine, only three remain with the bank.Still, the turnover at the top is a reminder of unfinished business at JPMorgan as the bank wrestles with the fallout from a multibillion-dollar trading loss in 2012. A number of agencies, including the Federal Bureau of Investigation, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are investigating the trading losses. The inquiries and the need to improve relations with regulators promise to be a burden for those executives staying on.
The losses, which stemmed from a soured bet on credit derivatives, prompted a number of the recent departures.
Shortly after the losses were announced in May 2012, Ina R. Drew, who headed the unit at the center of the trades, resigned. In January, JPMorgan produced a 129-page internal report that dissected the bad bet and offered a rare window into the factors that led to the risk breakdowns. Losses on the trades have swelled to more than $6 billion.
The trading missteps also ensnared Barry L. Zubrow, who was a chief risk officer at the bank during the time that the chief investment office was making riskier bets. He announced his departure from the bank in October.
The trading debacle, however, explains only part of the executive exodus. In January, James E. Staley, who was the former head of JPMorgan’s investment bank, announced he would leave to join a hedge fund.
Another executive, S. Todd Maclin, ceded his spot on JPMorgan’s management committee and moved to Texas, where he is chairman of the consumer and commercial bank. Within the bank, some executives disagree that Mr. Maclin was demoted, noting that the move to Texas was prompted by the executive. Before the transition, they say, Mr. Maclin groomed a successor and has since agreed to help the bank bolster its Texas business.
Mr. Dimon has struck a positive tone about the turnover, writing in his annual letter to shareholders that the changes are “not as pronounced” as they may appear. He added that the exits did not leave a leadership vacuum, in part because the vacancies were being filled by people who already had experience in the roles they were stepping into.
For example, Matthew E. Zames, who now becomes the bank’s sole chief operating officer, already shared the job with Mr. Bisignano.
Mr. Bisignano, whose departure was announced on Sunday, is leaving JPMorgan to become chief executive of First Data, a payment-processing firm. His is a particularly difficult loss for the bank, according to people briefed on the matter, because he was widely considered to be skilled at tackling thorny problems at a time when the bank has been faulted over weak oversight in places.
The most recent departures put a spotlight on a handful of possible successors to Mr. Dimon, including Mr. Zames. Mr. Dimon lauded Mr. Zames in a statement on Sunday, calling him a “proven business executive” who will “continue to have an important impact on our company.” Mr. Zames joined JPMorgan in 2004 from Credit Suisse.
Another potential executive to succeed Mr. Dimon is Michael J. Cavanagh, who held the chief financial officer post from 2004 to 2010. As part of the management overhaul in the wake of the trading losses, Mr. Cavanagh, like Mr. Zames, gained more power within the bank. He became the co-chief executive of the corporate and investment bank.
Mr. Cavanagh has a long history with JPMorgan’s chief executive. He was head of strategy and planning at Bank One, where he worked closely with Mr. Dimon.
Mr. Dimon appears unfazed by the steady stream of departures. At meetings inside the bank he has lauded the executive team that remains, and although the bank’s succession plans are not known, he has told people close to him that he is confident the bank will be in good hands when he does decide to leave.
JPMorgan shareholders are scheduled to meet on May 21. At that time the company will announce the results of a shareholder proposal calling for the separation of the roles of chairman and chief executive officer.
In recent years, pension funds and other shareholders have pushed companies to split these roles. Wall Street executives have largely scoffed at the idea, saying a powerful lead director is just as effective as a nonexecutive chairman. Goldman Sachs recently reached an agreement with a shareholder group to withdraw a resolution to split its chairman and chief executive jobs.
Such a vote is still advancing at JPMorgan, however, and last year a similar proposal was supported by 40 percent of the shares voted. Last year’s vote happened not long after JPMorgan first disclosed the trading losses to its investors, and in recent interviews, many shareholders said the news was so fresh at the time that it did not play a factor in how they voted.
The trading losses — and Congressional hearings and a Senate investigation that looked into them — are expected to play a much bigger role this time around.
As a result, JPMorgan has been working behind the scenes to avert losing the vote, calling a wide swath of shareholders to encourage them to cast a ballot. Some big shareholders are scheduled to meet with some directors on the bank’s board so they can air any concerns they might have.
Voting to split the roles would send a powerful message to the bank, but could have serious side effects, something shareholders must weigh. If the vote goes against the company and the board decides to split the role, Mr. Dimon might resign rather than see his powers reduced.
JPMorgan is owned by a wide array of shareholders, from big institutions like the Vanguard Group to mom-and-pop investors. Despite the concerns over the trading loss, the firm’s biggest shareholders, including the asset managers BlackRock and Vanguard, have a history of voting with management, suggesting that it is unlikely the proposal to split the top roles will carry the day.
Nonetheless, firms that advise shareholders on how to vote are expected to recommend again that JPMorgan separate the two top posts. While voting has already begun, most shareholders typically vote in the two weeks leading up to the annual meeting. One big JPMorgan shareholder who has yet to vote and is not authorized to speak on the record said he believed the vote would be close.
“There is so much attention on JPM’s situation that shareholders who might previously have voted to keep the roles together will this year think twice about it because there is bound to be increased scrutiny on how everyone votes,” the shareholder said.
Monday, December 24, 2012
Italian Appeals Court Acquits 3 Google Executives in Privacy Case
Wednesday, October 17, 2012
DealBook: High-Speed Trading Executives Shut Firm
A high-frequency trading firm founded less than two years ago by former Citigroup executives is ending operations as the industry confronts a slowdown.
The firm, Eladian Partners, was started in early 2011 by two pioneers in high-speed trading, Steve Swanson and Peter Kent. It grew to more than 50 employees and had offices in New York, London and South Carolina that were focused on buying and selling stocks and exchange-traded funds.
A spokeswoman for the company confirmed the firm had shut down “due to market conditions.”
High-speed trading firms have come to dominate trading in American stocks over the last decade with sophisticated computer programs that allow them to hop in and out of positions, taking advantage of small changes in prices. They have recently faced scrutiny from regulators and politicians, who have worried that the traders have an advantage over traditional investors.
There are growing signs that the business of high-speed trading, or electronic market-making as it is sometimes called, is shrinking because of the steadily declining volume on the world’s stock exchanges over the last four years. At the same time, the demands of keeping up with the quickly evolving technology have eaten away at the bottom line.
The brokerage firm Rosenblatt Securities estimated that the profits these firms were expected to earn this year from trading American stocks would be down 35 percent from last year and 74 percent from 2009, at the industry’s peak.
Doug Cifu, the president of another high-speed firm, Virtu Financial, said Tuesday that “Eladian’s failure demonstrates how difficult it is for market-making firms to prosper in current market conditions.”
Neither of Eladian’s founders were available to comment on the decision to close the firm.
Mr. Swanson and Mr. Kent both helped build one of the first major players in the high-speed industry, Automated Trading Desk. It was sold to Citi in 2007 for $680 million and became a central part of that bank’s trading operations.
Mr. Swanson and Mr. Kent initially stayed on at Citi, but left in 2010, not long before founding Eladian.
On its Web site, the company had stated that: “Trading in today’s market requires exceptional talent and experience coupling superior technology with a unique and innovative approach to trading. Eladian Partners is a global multi-asset class trading firm built on cutting edge technology combined with sophisticated quantitative trading strategies.”
By the end of Tuesday, the company Web site had been taken down.
Friday, October 5, 2012
DealBook: In Stock Market Rebound, a Windfall for Wall St. Executives
Harry CampbellSome four years after the financial crisis, many are still feeling the ill effects. But big bank executives are not among this unfortunate group, compensation data shows.
The executives who headed financial institutions in those uncertain times of early 2009, when markets and banks were being supported by the federal government, are now in line to receive windfall compensation in the hundreds of millions of dollars.
What did they do to deserve such a reward? It’s hard to justify and it goes a long way toward explaining the persistent anger toward Wall Street. And we have the government partly to blame for it.
A large part of the reason is simply lucky timing.
In the depths of the financial crisis in 2008 and 20009, when the Standard & Poor’s 500-stock index was touching below 700, bank executives were granted millions in options and stock incentives valued at incredibly low stock prices. The banks were encouraged to offer this compensation because of the restrictions in the Troubled Asset Relief Program, which in many circumstances prohibited the payment of bonuses other than in long-term restricted stock. As a result, companies awarded more equity than they otherwise would have at the time.
Since then, the stock market has returned to near the level it was before the financial crisis, making those options and stock very valuable.
To determine how large the windfall is, I asked Equilar, an executive compensation data firm, to compile the value of stock and options granted to the top five executives at each of the 18 largest American financial institutions — those that underwent stress tests in those years. (Ally Bank also received a stress test but was excluded because it was not public at the time). I also asked Equilar to determine what the packages were worth now, assuming the executives had held on to the stock and options.
It’s a stupendous amount.
The top executives at those 18 financial institutions received an aggregate of $142 million in stock and options from July 1, 2008, to June 30, 2009. It was a lot then, but these stock and options are now worth $457 million, an increase of $330 million, or 221 percent. On average, that is roughly $4 million per executive who received such compensation.
Individually, some of the gains are even more breathtaking. Take American Express and its chief executive, Kenneth I. Chenault. In 2007, before the financial crisis, American Express was trading for years at $50 to $60. Then the crisis hit, and in six months the stock fell below $10 a share.
In January 2009, American Express granted its top five executives stock options with a strike price of $16.71, which Equilar values at $7.63 million. According to American Express’s public disclosure, Mr. Chenault received the largest grant of 1,196,888 options.
American Express stock is now back to about $57 a share. And that equity package is up 1,097 percent and valued at $91.36 million. Mr. Chenault’s option package alone is now valued at almost $50 million.
That’s a nice payday. Can anyone argue that it is owed to the executive’s performance rather than to a recovery in the stock market?
American Express did not respond to requests for comment.
The biggest dollar winners are the executives of Capital One. According to Equilar, the credit card company’s top five executives received an incentive pay package granted in 2009 valued at $19.9 million. The package is now worth $114 million. The reason for the huge compensation package: Capital One’s options were granted at a price of $18.28 during the financial crisis. . Yet, Capital One’s stock price is trading at almost $60 a share, below its precrisis price of around $80.
A Capital One spokesman said that the compensation was justified because Capital One “delivered solid results in 2009.” The spokesman added that Equilar’s figures did not account for the fact that some Capital One executives had already exercised their options. According to Capital One, if these exercises were taken into account, the package’s value would be $87 million instead, still a fantastic amount.
All told, eight of these 18 firms, including Wells Fargo and SunTrust banks, gave executive pay packages during the financial crisis that are now more than 200 percent higher in value. Four of these financial institutions — BB&T, U.S. Bancorp, Capital One and American Express — awarded pay packages that are up more than 400 percent. Almost all of this value is attributable simply to the stock market’s recovery.
And some of these packages reward what frankly appears to be poor performance. The top five executives of Fifth Third Bancorp received a pay package that is now 253 percent higher in value despite Fifth Third’s stock being about a third its precrisis value.
How could this happen, you may ask?
The bank executives who stood to make the most were those who were paid more in options than in stock. Options provide greater gains when the stock goes up and so are increasingly in disfavor. For example, Equilar calculates that the options granted to the Capital One executives are up 838 percent, or almost $70 million, while the stock component is up only 212 percent, or about $25 million. You won’t be surprised to hear that American Express’s total 2009 incentive compensation was paid all in options.
Another explanation is that many of the financial institutions did not adjust the dollar amount of their financial compensation paid that year to take into account the stock market drop. In other words, the banks paid the same dollar amounts but had to grant more options and stock to meet this number because of the low price.
If you are shaking your head, you should know that these numbers are only for the top five executives at these companies. Lower-ranked employees who received equity compensation, which is largely undisclosed, may have also received such a windfall.
Indeed, The New York Times reported in 2010 that the partners and employees of Goldman Sachs had received a substantial equity grant of 36 million stock options during the financial crisis. And of course, this excess compensation was awarded at many other, smaller banks.
Taken together, this is a sobering view of executive compensation. It shows how compensation can have little to do with performance and more with stock market movements and the luck of having options granted instead of less valuable stock. More tellingly, it also shows how the government most likely enriched financial executives by pushing banks to award more equity compensation through TARP than they otherwise would have.
The sad thing is that these executives were compensated not because of the work they did at their firms, but because of a lucky rise in the stock market. It is anything but pay for performance. And yes, if the financial crisis had not occurred, they were likely to have been much poorer otherwise. It’s no wonder Main Street is still seething.
Equilar Analysis of 18 TARP Bank Equity Grants JPMorgan Chase plans to disclose part of the total losses on a bungled trade.