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Nikkei Sinks Again Amid Mixed Signals From Central Bank

May 27, 2013 by Leave a Comment

HONG KONG — The Japanese central bank on Monday released minutes of a recent meeting that showed some board members skeptical of the bank’s own strategy of lifting Japan from deflation, while another big fall in the country’s stock market stoked fears of further volatility in the weeks and months ahead.

But European stocks shrugged off the slide on the Japanese stock market Monday and traded higher as a member of the European Central Bank repeated the bank’s commitment to low interest rates. Stock markets in Britain and the United States were closed for public holidays.

In Tokyo, the minutes of the Bank of Japan’s policy meeting on April 26 revealed a degree of doubt about the bank’s ability to inject a healthy dose of inflation into an economy that has suffered from crippling deflation for years.

‘‘A few members’’ pointed out that the target of 2 percent inflation appeared ‘‘difficult to achieve’’ in the planned time frame of about two years from now, ‘‘since it was highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to the minutes.

Some board members also noted that the bank’s aggressive easing policies appeared to have been perceived by the markets as ‘’contradictory’’ — comments that highlighted the challenges that the bank and policy makers are wrestling with.

The bank, on one hand, has committed to ending deflationary expectations and sparking an economic recovery by flooding the economy with money, a logical result of which would be rising long-term interest rates. But the bank has also committed to keeping those interest rates in check, partly by buying large amounts of government bonds. That has sowed confusion among market players over whether they should welcome or panic at the recent rise in long-term rates.

On Monday, the Nikkei 225 share average in Tokyo fell 3.2 percent. The decline followed a 7.3 percent slump last Thursday, when a rally of about 80 percent since mid-November came to an abrupt end.

“While it’s still difficult to clearly pinpoint a reason, the big market falls themselves have started to stoke fear among investors,” Koichi Fujishiro, an economist at the Dai-ichi Life Research Institute, said in a report. He said that high-frequency trading by investors looking for short-term gains helped magnify those market swings.

“Japan’s fundamentals have not changed,” Mr. Fujishiro said. But, he added, “turmoil in financial markets won’t settle down overnight, and we are likely to see nervousness remain for some time.”

An article carried by the Nikkei business daily on Monday urged calm.

‘’Investors need a bird’s-eye perspective of market movements, not a bug’s-eye perspective,’’ wrote Ryo Suzuki, a columnist who is a member of Nikkei’s editorial board. “Things look different from a larger perspective,” he said. “For people who sat out on the market surge, this might be a good time to get in on the action.”

Japanese stocks have been on a tear since last November, swept by a wave of optimism that bold plans outlined by Shinzo Abe, who took over as prime minister in December, would succeed in breathing life back into the Japanese economy.

Volatility in the Japanese bond markets, a renewed strengthening of the yen and concerns about the dynamism of China’s economy all have combined in recent days to underline the challenges facing Mr. Abe and the Japanese central bank as they seek to reignite growth.

Analysts have struggled to explain the exact cause of the recent reversal, saying that a range of factors were probably at play and continue to fan nervousness in the market.

“There have been times when the market jumped over 1,000 points in a week. We were bound to see a correction,” Yoshihide Suga, the chief cabinet secretary, told reporters in Tokyo. “But Japan’s economy is recovering steadily. So it is extremely important that we react in a calm manner.”

Investors are also concerned that the U.S. Federal Reserve might reduce its own stimulus measures before too long.

The realization that Mr. Abe’s stimulus efforts — in particular, the structural overhauls that are needed to bolster Japan’s long-term competitiveness — face an uphill struggle also have played a part, analysts said, as did profit-taking after the long rally this year.

“Investors have realized that the Japanese market does not just rise and rise,” said Jun Yunoki, an analyst at Nomura in Tokyo.

Article source: http://www.nytimes.com/2013/05/28/business/global/nikkei-sinks-again-as-investors-doubts-linger.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

H.P. Chairman Steps Down as 2 Resign From Board

April 5, 2013 by Leave a Comment

The move may give Meg Whitman, H.P.’s chief executive, a little more breathing room in her long and painful effort to turn the technology giant around. H.P. is one of the biggest technology companies in terms of sales, but for years it has been marked with financial losses, bungled acquisitions, and turbulence in the executive ranks and boardroom.

Ms. Whitman, who took over in September 2011, has said H.P. will return to modest profitability in 2014 and have robust growth in the years after.

“The pressure is on Meg,” said Toni Sacconaghi, an analyst with Bernstein Research. But, he said, a housecleaning of the board “bought her a year.”

Mr. Lane, who will continue to serve on the board, will be temporarily succeeded by Ralph Whitworth, an activist shareholder who joined the H.P. board in November 2011. He has been a champion of Ms. Whitman.

No successors for the departing board members — John H. Hammergren and G. Kennedy Thompson — were immediately named. The two, who barely survived re-election to the board at a meeting in late March, are expected to serve until May.

During the shareholders meeting, Mr. Whitworth took the unusual step of indicating, while voting for directors was under way, that some board members would soon step down.

“All boards should evolve, certainly when they’ve had the recent past this one does,” he said. “You can expect some evolution of the board over the coming years — months, maybe.”

It is not clear whether this comment swayed some votes toward Mr. Hammergren and Mr. Thompson, two of the longest-serving board members. Mr. Hammergren received 54 percent of the vote and Mr. Thompson 55 percent. Mr. Lane was re-elected with 59 percent of all votes cast. Other board members had majorities of over 90 percent.

“Having under 60 percent is not a vote of confidence,” Mr. Sacconaghi said. “They worked hard to secure support, and in the end they barely got a majority for these three people. It reflected the sins of the past.”

Mr. Lane said the vote was a major reason he was stepping down.

“After reflecting on the stockholder vote last month, I’ve decided to step down as executive chairman to reduce any distraction from H.P.’s ongoing turnaround,” he said in a statement issued on Thursday by H.P.

In the same statement, Mr. Whitworth said Ms. Whitman “is leading a herculean turnaround, so most of all, we must build and maintain the best possible leadership structure for Meg and H.P.’s entire team to succeed.”

Mr. Lane and the other two board members were publicly criticized for their oversight of H.P., including a spectacularly expensive acquisition that later failed, both before and after the shareholder vote. On Thursday, their critics were quick to praise their resignations.

“Directors must be willing to ask tough questions, challenge assumptions and have the capacity to walk away from a deal that is unlikely to add value for shareholders,” said ISS, a proxy advisory firm that opposed Mr. Lane. “That clearly didn’t happen at H.P., and shareholders hold Mr. Lane accountable for that failure.”

The New York City comptroller, John C. Liu, another critic of the company, said in a statement, “H.P.’s board got the message.” He added, “This a good day for H.P., its board and its share owners.” The New York City pension fund has over $100 million in H.P. stock.

Mr. Hammergren, who as chief executive of the McKesson Corporation is one of the highest-paid chief executives in the United States, has served on H.P.’s board since 2005. He was on the board while it was at the center of a scandal involving spying on journalists, board members and employees, and during the 2010 resignation of Mark Hurd as chief executive after he admitted to improper relations with a contract employee.

Mr. Hurd’s successor, Léo Apotheker, lasted less than a year. He was hired without meeting or speaking with most members of the board. As chief, he agreed to pay $11.1 billion for Autonomy, a British software company and mused publicly about whether to sell H.P.’s personal computer business. He was succeeded by Ms. Whitman a month after those actions.

Late last year, H.P. took a more than $8 billion accounting charge in conjunction with the Autonomy purchase. It contended that it had been misled about the health of the company.

Mr. Thompson, a principal of Aquiline Capital Partners and a former chairman of Wachovia, joined the H.P. board in 2006, after the spying scandal. Mr. Lane, a former president of Oracle and a venture capitalist at Kleiner Perkins, joined the H.P. board in 2010. He was a vocal supporter of Mr. Apotheker.

Article source: http://www.nytimes.com/2013/04/05/technology/hewlett-packard-chairman-steps-down.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Searching for Capital: Do Your Board Members Represent Your Interests?

February 6, 2013 by Leave a Comment
Searching for Capital

A broker assesses the small-business lending market.

Whenever small-business owners and entrepreneurs come to me looking for capital, I encourage them to think about the trade-offs involved in choosing debt or equity. Sometimes there is no choice, and they have to pick one or the other. But often there is a choice, and that’s when it’s especially important to think things through.

The decision gets trickier when a company already has investors, particularly if they are venture capitalists. In these cases, there is often a board, and the directors get to vote on whether there will be additional rounds of financing. That vote can prompt some interesting questions.

When the board members are venture capitalists, the vote can create potential conflicts. Are they voting based on what’s best for their own investment in the company or what’s best for the company? If the company is doing well, the investors generally would prefer there to be another round of equity investing — at a higher valuation than when they first invested. This way, the investors can show a return, even though the entrepreneur faces further dilution of his or her ownership stake.

This is what I call the venture capital treadmill. Once you’re on it, the investors always want the next round completed and the round after that. There are times when debt financing may be better for the entrepreneur, but that won’t help the venture capitalists prove that their investment is growing. The board members have a fiduciary responsibility to represent the best interests of the company. But how can they do this if their jobs are ultimately measured by the success of their own investments? Should board members with financial stakes in the company be prohibited from making these votes?

Above all, this is another reason that, if you choose to take on equity investors, you should interview them carefully. It’s not just about the money. As much as possible, you want to try to make sure that your interests and the investors’ interests are as closely aligned as possible. It’s a lot like getting married — both parties need to understand each other very well.

What do you think?

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/02/05/whose-interests-do-your-board-members-represent/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Common Sense: Voting to Hire a Chief Without Meeting Him

September 22, 2011 by Leave a Comment

The answer, say many involved in the process, lies squarely with the troubled Hewlett board. “It has got to be the worst board in the history of business,” Tom Perkins, a former H.P. director and a Silicon Valley legend, told me.

Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of Mr. Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.

Among their revelations: when the search committee of four directors narrowed the candidates to three finalists, no one else on the board was willing to interview them. And when the committee finally chose Mr. Apotheker and again suggested that other directors meet him, no one did. Remarkably, when the 12-member board voted to name Mr. Apotheker as the successor to the recently ousted chief executive, Mark Hurd, most board members had never met Mr. Apotheker.

“I admit it was highly unusual,” one board member who hadn’t met Mr. Apotheker told me. “But we were just too exhausted from all the infighting.” During Mr. Apotheker’s brief tenure, once-proud H.P. has become a laughingstock in Silicon Valley. Its results have weakened, its stock has plummeted and his strategy shifts have puzzled people inside and outside the company. Hewlett had no immediate comment.

The immediate cause of dissension was the board’s decision in August 2010 to demand the resignation of Mr. Hurd, who had himself assumed the top position in the midst of board leaks and a phone pretexting scandal surrounding efforts to determine the source of the leaks that had laid bare irreconcilable differences among directors. He had replaced Carly Fiorina, who was also summarily ousted by the board.

Though not without detractors, Mr. Hurd pulled off one of the great rescue missions in American corporate history, refocusing the strife-ridden company and leading it to five years of revenue gains and a stock that soared 130 percent. Then came an incendiary letter from the activist lawyer Gloria Allred, charging that Mr. Hurd had sexually harassed a former soft-core pornography actress named Jodie Fisher, whom he had hired as a consultant for H.P. The accusations set off another fierce board battle.

The board named a committee headed by Robert L. Ryan, a former Medtronic executive and H.P.’s lead director, and Lucille Salhany, another director who was a former chairwoman of Fox Broadcasting, to investigate the accusations. An outside law firm concluded that Mr. Hurd was innocent of the harassment charges but had submitted false expense reports in what seemed an effort to conceal the relationship. Mr. Hurd denied having an affair with Ms. Fisher (as he has since done publicly) and said his assistant had first contacted her after seeing her on a reality television program.

As one director told me, “We said, ‘Mark, just tell us the truth.’ He stuck to this story. He interviewed the woman twice, there was no search firm, no job posting, no discussion with anyone else. He met with her alone on more than one occasion. To be the hostess at a party? Give me a break.” Complicating matters was evidence H.P. obtained from Mr. Hurd’s office computer showing that he had viewed videos of Ms. Fisher.

Once some board members became convinced that Mr. Hurd had not been totally truthful, they insisted he had to be fired. Mr. Ryan convened a meeting to decide Mr. Hurd’s fate by saying that he wanted to give every director an opportunity to speak, but that he would begin.

“I don’t believe him,” he said bluntly, and noted that under H.P.’s employee guidelines, any other employee who lied to the board would be fired. He was strongly backed by Ms. Salhany.

Two other members, Joel Z. Hyatt, a media executive and founder of Hyatt Legal Plans, and John Joyce, a former private equity partner, were adamant that Mr. Hurd should stay, at least long enough to groom a successor and arrange for an orderly transition.

Article source: http://feeds.nytimes.com/click.phdo?i=a59964766875a3cff7b54a499f628e2d

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At I.M.F., a Strict Ethics Code Doesn’t Apply to Top Officials

May 30, 2011 by Leave a Comment

Over the last four years, the fund has tightened internal systems for catching ethical misconduct among its 2,400 staff members, establishing a telephone hot line for complaints like harassment; publishing details of complaints in an annual report; and empowering an ethics adviser to pursue allegations, which last year led to at least one dismissal.

But the fund’s board members remain largely above these controls. The ethics adviser, for example, is not able to investigate any of them.

The board is responsible for policing its own directors as well as the managing director. It has a five-person ethics committee, whose work is confidential. And the only way the board can discipline its members is to write a warning letter to them or to their home countries, or the group of countries that appointed them.

“There are a lot of controls in place when it comes to the staff, but not for the leadership,” said Katrina Campbell, a compliance and ethics expert at Global Compliance.

The I.M.F.’s ethics policy has come under intense scrutiny in recent weeks since the arrest of its managing director, Dominique Strauss-Kahn, on charges of sexually assaulting a hotel housekeeper in New York. Mr. Strauss-Kahn, who denies the charges, has resigned his position at the fund.

In 2007, Ms. Campbell carried out a study of the fund’s ethics policies for the fund’s Independent Evaluation Office. It found that the board lacked satisfactory procedures for disciplining its own members or the managing director for ethical lapses. The report criticized the board’s code of conduct as vague, saying that it “reads, for the most part, as a set of recommendations, rather than rules” and that the board lacked effective enforcement procedures.

In contrast, it praised the staff code of conduct as detailed and offering “a plethora of policies and procedures.”

Until several years ago, the managing director’s position was ambiguous in terms of ethics policy. The person holding that post is both chairman of the executive board and head of the staff, and it was not clear which code of conduct applied, Ms. Campbell said.

But when Mr. Strauss-Kahn was selected for the top spot in November of 2007, the staff code of conduct was written into his contract, she said, although ultimately he remains answerable only to the board.

In 2008, not long after Mr. Strauss-Kahn assumed the top post, the fund was compelled to investigate him for having an affair with a staff subordinate. In that case, the fund hired an outside law firm to handle the inquiry because the ethics officer was not authorized to investigate at that high level. Although Mr. Strauss-Kahn was found not to have abused his position, he was publicly reprimanded by the board for showing poor judgment, and he apologized.

Since then, the law firm, Morgan, Lewis Bockius, has been brought in to investigate several other matters at the fund, according to a person familiar with the situation who requested anonymity because he was not authorized to speak publicly. None of the matters concerned Mr. Strauss-Kahn, this person said, and the cases were not related to allegations of sexual misconduct or affairs.

A spokesman for the fund, William Murray, declined to comment except to say ethics investigations might potentially cover complaints of abuse like intimidation or aggressive behavior.

In January 2009, the executive board formally adopted procedures for ethics investigations: they would be conducted by an outside consultant who reported to the ethics committee.

The fund’s ethics adviser, currently Virginia R. Canter, a former White House associate counsel, publishes an annual report detailing staff complaints. Last year, for example, the ethics adviser pursued 30 allegations of misconduct, resulting in 10 disciplinary actions, including at least one firing.

In 2009, a complaint made to the fund’s ethics hot line involved the conduct of a member of the executive board, according to the ethics adviser’s 2009 published report.

That complaint was referred to the board’s ethics committee. It would have been up to the committee to decide whether to bring in an outside investigator to look into the allegation; it is unclear whether it did so in this case.

As an international organization, the fund’s legal status is complicated. Though it is based in Washington, not all the laws of the United States apply to it. Unlike the staff, the directors are appointed by their home governments rather than the fund and so do not have an exclusive duty of loyalty to the fund. This places great importance on its internal codes of ethical conduct.

The fund insists its codes are strong and that in matters of workplace conduct the executive directors are held to the same high standards as the staff. The code for the board for instance says that directors are expected “to maintain the highest standards of integrity.” They should also “treat their colleagues and the staff with courtesy and respect, without harassment, physical or verbal abuse.”

This month, the ethics rules for lower-level staff members were tightened, making a close personal relationship with a subordinate a potential conflict of interest that had to be reported. Other updates included protections for staff members against retaliation when they allege misconduct.

But the executive board’s code has not been modified since 2003. It does not state specifically whether a close personal relationship with a staff member poses a potential conflict of interest that must be reported.

The board’s ethics committee was established in 1998. But the internal report found that by 2007 the committee had “never met to consider any issues other than its own procedures.” The fund said it could not disclose whether the committee had met since then, because its work is confidential.

Article source: http://www.nytimes.com/2011/05/30/business/global/30fund.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

You’re the Boss: How We Decided to Go Global

April 14, 2011 by Leave a Comment

Sustainable Profits

When I first suggested taking TerraCycle’s operations global, there was nearly a mutiny among my board members and executive team. No exaggeration, they thought I’d lost my mind. As quickly as I’d brought up the idea, it was tabled — that is, until I got a phone call in 2008 that set everything in motion.

The phone call came from PepsiCo-Frito in Brazil. The company’s executives liked what we had done with Frito chip bags in the United States, and they wanted to do the same thing in Brazil. As we’ve done with many brands, we had developed national collection programs for Frito’s nonrecyclable waste, its chip bags. People all across America can collect used bags and send them to TerraCycle. We cover the cost of shipping and pay 2 cents per chip bag to the charity or school of the collector’s choice. We then take the bags and convert them into materials including branded fabrics and plastic pellets. Our team then works with major manufacturing companies to use the new stuff in their products, effectively replacing the need for virgin materials. As an example, Olivet, a major supplier to Wal-Mart, now uses “chip-bag plastic” from TerraCycle as the plastic in the coolers it makes. This renders the chip bag nationally recyclable and produces a major win for the brands and their sustainability goals.

The executives with PepsiCo Brazil indicated that, if we weren’t prepared to open operations there, they would pay us to teach a local company how to replicate our business. It immediately became clear to me that if we didn’t seize the opportunity in other countries, someone else would get there first, and we’d never get another chance.

So I went back to my board, this time with a major corporate partner ready to go. The board members still had a concern, and it was a legitimate one — that the strain of global expansion would burden our operations in the United States and threaten the fiscal viability of the company. I made the following promise (not knowing for sure whether I could keep it): Money will not flow from the United States to our operations in other countries, I told the board. If those operations cannot subsist on their own, they will fail. With this, I got approval to start TerraCycle do Brasil.

This started a journey that has taken TerraCycle into 14 countries beyond the United States: Canada, Mexico, Brazil, Argentina, United Kingdom, Ireland, Sweden, France, Germany, Turkey, Israel, Spain, Holland and Belgium. And there are five more coming in the next nine months: Italy, Switzerland, Philippines, Chile and Uruguay. In most cases, the impetus to open in these countries came from domestic partners that have operations overseas. The companies we work with have global waste problems, and if something works in one market, they like to try it in others. For us, the process has been a learning experience like no other. I wish I could say we got it all right, but of course we didn’t. Here are a few lessons we’ve learned, mostly through trial and error:

1. Setting up a new entity in a new country can be expensive, and there are a lot of hurdles. Some countries require you to have a board that includes citizens of that country. Most require that all of your legal and financial work be done by firms based in the country. One of the methods I’ve found effective is to stretch free advice as far as it will go. Lawyers and accountants are often willing to offer free advice and services, all over the world, as long as they think there will be business later on.

2. Employment taxes can make hiring the right person difficult. I love Brazil and its progressive attitude toward sustainability, but it is frustrating to have to pay close to 100 percent taxes on every employee there. I also learned that it is critical to have local people doing local work. Public relations and customer service are great examples. To work effectively with media and customers, we need someone who not only knows the language but the local customs and norms. When we tried to manage our British public relations and customer service from the United States, we had no success. The moment we hired local representatives, our media interest and customer engagement took off.

3. Managing a global company can be complex. Our Trenton, N.J., operation employs more than 65 people, but none of our foreign entities has more than 10. When we begin operations in a new country, we hire a local general manager who works from his or her home, has no staff and wears the P.R., customer-service, operations, business-development and client-management hats all at once — just like a proper start-up. To maintain global oversight, our team leads in the United States are responsible for managing their counterparts in the rest of the world. Each country’s local general manager reports to me and to each of the United States team leads in their areas of responsibility. In other words, structure your team so that you can manage whatever you take on.

4. Adapt and continue to adapt. While every country in the world has a garbage problem, business and garbage are different everywhere, as are consumer attitudes, customs, retail demands, regulation and everything else. After six months in Mexico, we had fantastic P.R., but very few people had signed up for our program collecting Tang pouches. We realized that in some countries not as many consumers use the Internet for daily communications, so we had to rethink our outreach strategy. We began to focus on phone communications and leveraging local nonprofits to function as our ambassadors.

So far, we’ve been able to stick to my pledge – none of our domestic dollars are supporting the global expansion. And in 2010, our non-United States operations accounted for 10 percent of our revenue. In 2011, I expect our international divisions to generate more than 25 percent of our revenue.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton, N.J.

Article source: http://feeds.nytimes.com/click.phdo?i=4720a938f9d808b7b5215c2ff3ff6d84

Filed Under: Small Business Tagged With: , ,