Talk Back

By Neal Lipschutz

A DOW JONES NEWSWIRES COLUMN

At least for the day, the most powerful man in the U.S. financial industry and for equities markets is 82 years old, a man who ended his leadership of the Federal Reserve more than 20 years ago.

But Paul Volcker is back. Big time. Reportedly on the margins of the Obama administration even in his current role as an adviser, “the tall guy behind me,” in the words today of President Barack Obama, is back on stage figuratively and literally.

As the president announced two major initiatives that would radically change the world of America’s big banks, he was flanked by Treasury Secretary Timothy Geithner and adviser Larry Summers. He also had with him two key Congressional leaders, Rep. Barney Frank (D., Mass.) and Sen. Christopher Dodd (D., Conn.).

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NEW YORK — Summarizing the extremes of the Senate Banking Committee hearing today on the renomination of Ben Bernanke to lead the Federal Reserve will take two quotes.

We’ll start with Sen. Jim Bunning (R., Ky.), the only member of the upper chamber to vote against Bernanke the first time around and a time-tested antagonist of the U.S. central bank.

“In short, you are the definition of moral hazard,” he said.

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By Neal Lipschutz 
   A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–Federal pay czar Kenneth Feinberg isn’t just halving the pay for 25 top earners at the seven fallen angels under his control. He’s apparently also forcing some changes in governance.

Feinberg, who technically is called the special master of compensation at the U.S. Treasury Department, delved into some of the issues that have been talked about for years in U.S. boardrooms and among activist investors.

He will insist on a split between chairman and chief executive jobs, a model already followed in other countries. Staggered board terms will be eliminated. And boards of directors will have to create risk committees. This according to reporting by Deborah Solomon of The Wall Street Journal. Continue reading…

By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–The recommendations on U.S. executive pay from the Conference Board, a nonprofit business research group, could just as easily have been proposed by a government agency.

That shows we seem to know what needs to be done to put a lid on over-the-top compensation at publicly traded companies.

What we can’t agree on is who we want to enforce such principles. Do we want it to be a function of government, even in the sensitive and important banking industry? Or do we want to leave it to boards of directors and company shareholders?

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By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)–Bond guru William Gross’s economic outlook for America, while logically defensible, is downright depressing.

It’s a place where growth is slow, old people break down (ironically helping GDP via spending on health care) and the government involves itself heavily in the economy.

The view seems to imply all the animal spirits and innovation will have been drained from the U.S. and other advanced economies for a generation. Did we really use all of that up in the economic and market frenzy of the past 20 years?

“It’s time to recognize that things have changed and that they will continue to change for the next – yes, the next 10 years and maybe even the next 20 years,” Gross, managing director of the big bond investment firm Pimco, writes Tuesday in his latest monthly commentary.

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 POINT OF VIEW: Comments In: ‘Proxy Access’ A Step Too Far
 
By Neal Lipschutz 
A DOW JONES NEWSWIRES COLUMN
 
Monday was the final day for public comment about the Securities and Exchange
Commission’s governance-changing proposal to give large shareholders the ability
to nominate directors whose candidacy would be listed on the same proxy cards as
serving board candidates.

In the multi-step effort to shore up board of director independence and
shareholder rights in the aftermath of a decade’s worth of accounting scandals
followed by the credit crunch, this is a step too far. It invites the creation
of special interest directors beholden to a subset of powerful pension funds and
other large institutions.

Among the flurry of comments on the final day, came this from the nation’s
largest public pension fund, the California Public Employees’ Retirement System
(CalPERS). CalPERS “offers its full support for the proposed rule.” Continue reading…

By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN 

The fine imposed on Bank of America Corp. for allegedly misleading investors about big bonuses it agreed could be paid to Merrill Lynch & Co. executives just before the struggling Merrill was subsumed into BofA illustrates the Securities and Exchange Commission’s punishment conundrum.

There’s no doubt the BofA action, or lack of disclosure, is a serious matter. Yes, it was a frantic time in the annals of American capitalism. The system was rocked. Still, basic tenets of shareholder rights, such as disclosure of material information, must always be respected.

Imagine the position of a theoretical, long-time shareholder of Bank of America. He was an owner when the merger was coming together. He is  frustrated and angry by the SEC’s allegations against Bank of America.

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By Neal Lipschutz
   A DOW JONES NEWSWIRES COLUMN 

The resignation of Eric Schmidt, the chief executive officer of Google Inc. (GOOG), from the board of directors of Apple Inc. (AAPL) is just a glaring example of a poor industry practice. Currently serving CEOs should not be board members of other public companies.

In the Schmidt/Apple affair it took head-on competition in some areas between the two companies before the announced mutual decision that Schmidt should take his leave. Dow Jones Newswires also noted there has been a Federal Trade Commission look at the boards of Apple and Google, as they not only shared Schmidt as a member on both but also Genentech Inc. (DNA) Chairman Arthur Levinson.

Apple CEO Steve Jobs thanked Schmidt for being “an excellent board member,” but added, “as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest.”

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