September 16, 2019

Knell, NPR’s Chief, to Leave for National Geographic Society

His announcement came as an unwelcome surprise to NPR staff members, given that Mr. Knell brought some stability to the organization’s executive ranks when he was appointed in late 2011. Conflicts between past chief executives and the NPR board had resulted in repeated shake-ups in the years leading up to his arrival. But Mr. Knell’s departure is because of something else: a better job offer.

In an e-mail to the NPR staff, Mr. Knell said he was approached by the National Geographic Society and “offered an opportunity that, after discussions with my family, I could not turn down.”

In a subsequent telephone interview, Mr. Knell said he had been prepared to renew his NPR contract, which expires in November. But then National Geographic called, and it was enticing for a number of reasons, he said. One was immediately suggested by observers on Monday was money: he will earn a significantly higher salary at the society. But he said his decision “wasn’t really driven by a financial equation”; what was most appealing about National Geographic, he said, was its size, its educational efforts and international scope.

At National Geographic, he will succeed John M. Fahey Jr., who has been the society’s chief executive since 1998. Mr. Knell is already one of the 22 trustees of the society, which publishes National Geographic and other magazines, supports scientific research and expeditions, and jointly owns the National Geographic Channel.

The society had about $600 million in income in 2011, according to tax filings, making it far bigger than NPR, which has a budget of about $180 million this year and is running a small deficit. The society also has twice as many employees.

“After a comprehensive and global search, we are delighted to announce that the perfect person for this crucial role was right in our own backyard,” said Jean Case, the co-chairwoman of the committee that searched for a new chief executive for the society. She said Mr. Fahey would remain the chairman of the board.

While Mr. Knell’s departure from NPR appears amicable, it is disappointing to that organization’s board, which must once again search for a leader.

Ken Stern, who was named chief executive in 2006, stepped down less than two years later; an interim head took over until NPR hired Vivian Schiller away from The New York Times to run the organization in 2009. She resigned two years after that, after back-to-back controversies involving the political views of an NPR analyst, Juan Williams, and a pair of NPR fund-raising executives. Another interim head was appointed until Mr. Knell’s arrival in 2011 from the nonprofit Sesame Workshop.

In his message to the staff on Monday, Mr. Knell said the NPR board “has been incredibly supportive of my leadership and is more than up to the task of finding a great successor.” The board could turn to one of Mr. Knell’s top lieutenants, like Kinsey Wilson, NPR’s executive vice president and chief content officer, or Margaret Low Smith, the senior vice president for news. Or it could look outside the organization, as it did when it brought in Mr. Knell.

Kit Jensen, the chairwoman of the NPR board, said she expected a “fairly quick” succession process.

Calling Mr. Knell a “stellar C.E.O.,” Ms. Jensen said in a telephone interview, “Certainly, we wish his decision had been otherwise, but we respect what that decision is.”

Before he steps down, Mr. Knell will help NPR break even by proposing a number of as-yet-undisclosed steps. The organization has a $6 million deficit in the fiscal year that ends on Sept. 30. It is forecast to run a deficit again next year, and the premise of the plan that Mr. Knell is preparing will result in a balanced budget in 2015. “We hope to present a strategic plan to the board soon, before my departure,” he said Monday.

Mr. Knell said that among his proudest achievements at NPR were “bringing institutional donors back” and “helping calm some of the waters on Capitol Hill.” (Calls for cuts to government subsidies for NPR have largely quieted.) By other measures — like NPR’s relations with member stations and its reputation for innovation — the organization has made steady improvement under Mr. Knell.

“We’ve made a lot of progress in a short amount of time,” he said, suggesting that he felt as if he had fit four years of work into his two years.

Article source: http://www.nytimes.com/2013/08/20/business/media/knell-nprs-chief-to-leave-for-national-geographic-society.html?partner=rss&emc=rss

All-You-Can-Fly Airline Plies the California Coast

After arriving in Washington, jobless, he landed a position in Vice President Dick Cheney’s press office, followed by stints in Iraq as a government operative and in Washington as a National Security Agency consultant.

This all helps to explain why Mr. Eyerly, while projecting a Ferris Bueller-like certainty that everything will always work out in the end, eschewed graduate school at Stanford to start an airline.

With Surf Air, Mr. Eyerly is bringing what he calls the all-you-can-eat-style pricing plan of the local gym or Netflix to air travel — pay a membership ($500), a monthly fee ($1,650) and fly as often as you like on six-seat, single-engine turboprops.

Surf Air started flying in June, with service between smaller airports in Burbank, Calif., and San Carlos near Palo Alto, tapping into those who do business between Hollywood and Silicon Valley and would prefer to do so without the headaches of major airports. It added service last month to Santa Barbara, Calif., and is considering additional destinations by the end of the year.

If it looks as if he is flying blind — a novice businessman diving into an industry that is plagued by contractions, mergers and failed enterprises — Mr. Eyerly views his fledgling Surf Air as an opportunity to fundamentally change the way business travelers fly.

It is a pitch to certain kinds of decision makers — the small-business chief executives, the bottom half of the one-percenters, those who have not yet made their fortune but are intent on making their mark. For his customers, Mr. Eyerly hopes Surf Air can be an incubator of ideas, where flights can be dinner parties in the air, where the membership can be a Facebook for entrepreneurs.

If the business model works in California, with expansion to places like Palm Springs and Lake Tahoe in mind, it will work in more than 50 markets around the country, he said.

“Forgive the Kansas City reference, but it’s Bo Jackson at the plate,” Mr. Eyerly, a 34-year-old Kansas City native, said, referring to the former Royals slugger. “It’s a home run or a strikeout. It works or it doesn’t. If this doesn’t work in a year, 18 months, we’ll know. It won’t drag out.”

Surf Air has raised about $11 million in capital, Mr. Eyerly said, from investors that include Velos Partners, Base Ventures and Anthem Ventures, as well as the actor Jared Leto and the developer Rick Caruso. The company has 60 employees, 25 of whom are pilots, and a fleet of three Pilatus PC-12 planes. Its membership is nearing 300, each of whom has made a three-month commitment.

It was not hard to see the lure recently when members arrived and departed from Burbank. It was possible to pull into the small parking lot outside the Atlantic Terminal, which is separate from the main terminal, walk a few dozen steps to the lobby, grab a snack from the concierge cart and walk out on the tarmac to board the plane. There were no tickets, no lines and no body scans. A valet parked the customers’ cars.

“It’s truly transformative for me on several levels,” said Heather Rafter, who runs her own small Bay Area law firm but travels frequently to Burbank to do business, visit children in college or attend concerts. She is an elite-level flier with United Airlines and Southwest, but because of early-booking requirements or change fees, her frequent flights are costly, she said.

“My whole brain is thinking differently,” Ms. Rafter said. “I do business development when I want, I do client meetings when I need to and if I forgot to come home for my daughter’s swim meet, I just come home without stressing about what it’s going to cost. I feel free in my personal and work life.”

Article source: http://www.nytimes.com/2013/08/06/business/airline-banks-on-a-buffet-style-business-model.html?partner=rss&emc=rss

DealBook Column: On Wall Street, a Culture of Greed Won’t Let Go

Jordan A. Thomas, a Labaton Sucharow partner, sought the report on Wall Street ethics.Jordan A. Thomas, a Labaton Sucharow partner, sought the report on Wall Street ethics.

Ethics. Values. Integrity.

Wall Street firms spend a lot of time using those catchwords when talking about developing the right culture. Bank chief executives often discuss how much effort they devote to instilling a sense of integrity at their institutions. The firms all have painstakingly written codes of conduct, boasting, “Our integrity and reputation depend on our ability to do the right thing, even when it’s not the easy thing,” as JPMorgan Chase’s says, or, “No financial incentive or opportunity — regardless of the bottom line — justifies a departure from our values,” as Goldman Sachs says.

And yet a new report on industry insiders about ethical conduct, to be released on Tuesday, disturbingly suggests that Wall Street’s high-minded words may largely still be lip service.

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Of 250 industry insiders from dozens of financial companies who responded to questions — traders, portfolio managers, investment bankers, hedge fund professionals, financial analysts, investment advisers, among others — 23 percent said that “they had observed or had firsthand knowledge of wrongdoing in the workplace.”

If that’s not attention-grabbing enough, consider this: 24 percent said they would “engage in insider trading to make $10 million if they could get away with it.”

As we approach the fifth anniversary of the onset of the financial crisis this September, it appears memories are shorter than ever. If the report is accurate, the insidious culture of greed is back — or maybe it never left.

The questions were posed last month by the law firm Labaton Sucharow at the behest of one of its partners, Jordan A. Thomas, a former assistant director and assistant chief litigation counsel in the enforcement division of the Securities and Exchange Commission. The results are a telling reminder of the continued challenges the industry faces, challenges that appear endemic.

While the results may not be scientific, they are stark. For example, 26 percent of respondents said they “believed the compensation plans or bonus structures in place at their companies incentivize employees to compromise ethical standards or violate the law.”

There is a view that the ethical problems come from the very top: 17 percent said they expected “their leaders were likely to look the other way if they suspected a top performer engaged in insider trading.” It gets even more troubling: “15 percent doubted that their leadership, upon learning of a top performer’s crime, would report it to the authorities.”

There is nothing acceptable about these responses.

Wall Street has a very real problem, whether the leaders of the industry want to believe it or not.

It is often said that it is unfair to paint an entire industry with a broad brush, and it is. There are clearly good people out there doing good work. A large majority falls in that category. But the numbers presented in the report reflect an unsettling reality that there may be more than just a few bad apples in the industry, too. It should be considered a red flag when insiders say this: “28 percent of respondents felt that the financial services industry does not put the interests of clients first.”

Perhaps oddly, the problem is most pronounced among the youngest employees in finance, the next generation of leadership on Wall Street.

Remember the question about whether an executive would commit insider trading for $10 million if there were no repercussions? Well, if you parse the numbers by seniority in the industry, respondents with under 10 years of experience were even more likely to break the law: 38 percent said they would commit insider trading for $10 million if they wouldn’t be caught.

That result is particularly striking since I would have expected the next generation of financiers to be the most interested in helping to build a new, anti-Gordon Gekko culture on Wall Street.

Virtually every top M.B.A. program in the country now teaches ethics classes, many of them required. In 2008, a coalition of students started the MBA Oath, a voluntary pledge among students to “create value responsibly and ethically.” So far, more than 6,000 students have signed the pledge.

And yet, the report and other anecdotal evidence suggest that whatever is being done both in the classroom and on the job is not enough. According to a controversial study called “Economics Education and Greed” that was published in 2011 by professors at Harvard and Northwestern, an education in economics surprisingly may be making the problem worse.

“The results show that economics education is consistently associated with positive attitudes towards greed,” the authors wrote. “The uncontested dominance of self-interest maximization as the primary (if not sole) logic of exchange, in business schools and corporate settings alike, may lead people to be more tolerant of what other people see as morally reprehensible.”

The problem is compounded by a trait shared by everyone, no matter their industry. “People predict that they will behave more ethically than they actually do,” according to a 2007 study led by Ann E. Tenbrunsel, a professor at Notre Dame. “They then believe they behaved ethically when they didn’t. It is no surprise, then, that most individuals erroneously believe they are more ethical than the majority of their peers.”

That may help explain why, in the Labaton Sucharow report, 52 percent said they “believed it was likely that their competitors have engaged in illegal or unethical activity in order to be successful.”

It may also explain why 89 percent of respondents “indicated a willingness to report wrongdoing” yet so few do.

As part of the Dodd-Frank financial overhaul law, the S.E.C. developed a $500 million whistle-blower program that pays 10 to 30 percent of penalties collected to the whistle-blower. The fund still has some $450 million in it, despite recent remarks by Stephen L. Cohen, associate director of the S.E.C.’s enforcement division, that we should expect bigger payouts soon. Mr. Thomas of Labaton Sucharow helped develop the whistle-blower program when he was at the S.E.C., and he now represents whistle-blowers.

“We are seeing a culture of silence,” he said. “There’s an unwillingness to come forward.”

Greed, for far too many, is still good, apparently. There’s still much work to be done before the catchwords become the culture.


Andrew Ross Sorkin is the editor-at-large of DealBook. Twitter: @andrewrsorkin


This post has been revised to reflect the following correction:

Correction: July 17, 2013

The DealBook column on Tuesday, about Wall Street ethics, misstated the university affiliation of Ann E. Tenbrunsel, who conducted a study on the perception of ethics. She is a professor at Notre Dame, not Harvard. The column also misstated the date of the study. It came out in 2007, not 2000.

A version of this article appeared in print on 07/16/2013, on page B1 of the NewYork edition with the headline: On Wall St., A Culture Of Greed Won’t Let Go.

Article source: http://dealbook.nytimes.com/2013/07/15/on-wall-st-a-culture-of-greed-wont-let-go/?partner=rss&emc=rss

Today’s Economist: Uwe E. Reinhardt: The Culprit Behind High U.S. Health Care Prices

DESCRIPTION

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

Elizabeth Rosenthal’s eye-opening article about health care costs in The New York Times on Sunday was a reminder of how much more Americans pay for given procedures than citizens in health systems abroad. What was probably more surprising to most readers was the huge price differentials for identical procedures — not only across the United States, but even within American cities, where prices for a given procedure can vary tenfold.

Today’s Economist

Perspectives from expert contributors.

These price differentials, it should be noted, have never been shown to be related either to the cost of producing health care procedures or to their quality.

The question, not addressed in the article, is who bears the blame for this chaotic, private-sector price system. The only fair answer is: American employers. Who else could it be?

I have been critical of employment-based health insurance in this country for more than two decades. In the early 1990s, for example, at the annual gathering of the Business Council, I bluntly told the top chief executives assembled there, “If you want to find the culprit behind the health care cost explosion in the U.S., go to the bathroom and look in the mirror.” After years of further study, I stand by that remark.

I can imagine that some would look instead to the usual suspects – Medicare, Medicaid and possibly even the Tricare program for the military – but that would be a stretch. The argument would be that the public programs shift costs to the private sector, causing the chaos there. Few economists buy that theory.

Most health-policy analysts I know regret that employers appointed themselves their employees’ agents in the markets for health insurance and health care, developing in the process the ephemeral insurance coverage that is lost to the family when its breadwinner loses his or her job.

Employers were able to capture that agency role during World War II when they successfully walked around the prevailing wage controls simply by having Congress exempt fringe benefits from the wage cap. Employers were able to retain their agency even after the wage controls ended by having Congress exempt employer-paid fringe benefits from the taxable income of employees, a tax preference not granted Americans who purchased health insurance on their own. Retaining their tax-preferred agency role has been of great help to employers in the labor market.

Alas, in their self-appointed role as purchasing agents in health care, American employers have arguably become the sloppiest purchasers of health care anywhere in the world. The chaotic price system for health care is one manifestation of that sloppiness.

For more than half a century, employers have passively paid just about every health care bill that has been put before them, with few questions asked. And all along they have been party to a deal to keep the chaotic price system they helped create opaque from the public and even from their own employees. Only very recently and very timidly have a few of them dared to lift the veil a little.

Employers may protest that they rarely purchase health care for their employees directly. The actual purchases are made by the employers’ agents, private health insurance carriers. But the latter are merely the conduits for the employers’ wishes. When agents perform poorly, one should look first for the root cause at the principals’ instructions.

One reason for the employers’ passivity in paying health care bills may be that they know, or should know, that the fringe benefits they purchase for their employees ultimately come out of the employees’ total pay package. In a sense, employers behave like pickpockets who take from their employees’ wallets and with the money lifted purchase goodies for their employees. Far too many employees have been seduced into believing that their benevolent employer pays for most of their health care.

The result of this untoward pas de deux is the system Ms. Rosenthal describes.

One consequence of this opaque pricing system has been that, according to the 2013 Milliman Medical Index, the average cost of health care of a typical American family of four under age 65, and insured through an employer-sponsored preferred provider plan, is now $22,000, up from about $10,000 a decade earlier. It is a staggering amount, not only by international comparison, but also when compared with the distribution of family income in the United States, with a median income of $50,000 to $60,000.

Another result has been that, according to a recent analysis published in the policy journal Health Affairs, a decade of health care cost growth under employment-based health insurance has wiped out the real income gains for an average family with employment-based health insurance. One must wonder how any employer as agent for employees can take pride in that outcome.

Yet a third consequence of the rampant price discrimination baked into this pricing system is that uninsured Americans with some financial means are often charged the highest prices for health care when they fall ill, exposing them to the prospect of financial bankruptcy.

How long must the opaque and chaotic health care pricing system of employment-based health insurance in the United States persist? I can envisage two alternatives.

The first would be an all-payer system on the German or Swiss model, perhaps on a statewide basis, with some adjustments for smaller regional cost differentials (urban versus rural, for example), as is now the practice in the Medicare price schedules. In those systems, multiple insurance carriers negotiate jointly with counter-associations of the relevant health care providers over common price schedules, which thereafter are binding on every payer and every health care provider in the region (an analysis in Health Affairs offered more details). One can easily link such a system to the growth of gross domestic product.

The second alternative would be a marriage in which the financial risks of ill health are shared up to a point and raw, transparent price competition for the remainder. In such a system, called “reference pricing,” a private insurer, as agent for an employer or for a government program, would cover only the price charged for a medical procedure by a low-cost provider in the insured’s market area, forcing the insured to pay out of pocket the full difference between that low-cost “reference price” and whatever a higher-cost provider in the area charges for the same procedure.

Such a system, of course, presupposes full transparency of the prices charged by alternative providers in the relevant market area.

Because an all-payer system is highly regulatory, I predict the private health care market in the United States will sooner or later lapse into full-fledged reference pricing. It would entail ever more pronounced rationing of quality, real or imagined, by income class.

But such tiering has long been the American way in other important human services – notably justice and education. Why would health care remain the exception?

Article source: http://economix.blogs.nytimes.com/2013/06/07/the-culprit-behind-high-u-s-health-care-prices/?partner=rss&emc=rss

Economix Blog: Uwe E. Reinhardt: The Culprit Behind High U.S. Health Care Prices

DESCRIPTION

Uwe E. Reinhardt is an economics professor at Princeton. He has some financial interests in the health care field.

Elizabeth Rosenthal’s eye-opening article about health care costs in The New York Times on Sunday was a reminder of how much more Americans pay for given procedures than citizens in health systems abroad. What was probably more surprising to most readers was the huge price differentials for identical procedures — not only across the United States, but even within American cities, where prices for a given procedure can vary tenfold.

Today’s Economist

Perspectives from expert contributors.

These price differentials, it should be noted, have never been shown to be related either to the cost of producing health care procedures or to their quality.

The question, not addressed in the article, is who bears the blame for this chaotic, private-sector price system. The only fair answer is: American employers. Who else could it be?

I have been critical of employment-based health insurance in this country for more than two decades. In the early 1990s, for example, at the annual gathering of the Business Council, I bluntly told the top chief executives assembled there, “If you want to find the culprit behind the health care cost explosion in the U.S., go to the bathroom and look in the mirror.” After years of further study, I stand by that remark.

I can imagine that some would look instead to the usual suspects – Medicare, Medicaid and possibly even the Tricare program for the military – but that would be a stretch. The argument would be that the public programs shift costs to the private sector, causing the chaos there. Few economists buy that theory.

Most health-policy analysts I know regret that employers appointed themselves their employees’ agents in the markets for health insurance and health care, developing in the process the ephemeral insurance coverage that is lost to the family when its breadwinner loses his or her job.

Employers were able to capture that agency role during World War II when they successfully walked around the prevailing wage controls simply by having Congress exempt fringe benefits from the wage cap. Employers were able to retain their agency even after the wage controls ended by having Congress exempt employer-paid fringe benefits from the taxable income of employees, a tax preference not granted Americans who purchased health insurance on their own. Retaining their tax-preferred agency role has been of great help to employers in the labor market.

Alas, in their self-appointed role as purchasing agents in health care, American employers have arguably become the sloppiest purchasers of health care anywhere in the world. The chaotic price system for health care is one manifestation of that sloppiness.

For more than half a century, employers have passively paid just about every health care bill that has been put before them, with few questions asked. And all along they have been party to a deal to keep the chaotic price system they helped create opaque from the public and even from their own employees. Only very recently and very timidly have a few of them dared to lift the veil a little.

Employers may protest that they rarely purchase health care for their employees directly. The actual purchases are made by the employers’ agents, private health insurance carriers. But the latter are merely the conduits for the employers’ wishes. When agents perform poorly, one should look first for the root cause at the principals’ instructions.

One reason for the employers’ passivity in paying health care bills may be that they know, or should know, that the fringe benefits they purchase for their employees ultimately come out of the employees’ total pay package. In a sense, employers behave like pickpockets who take from their employees’ wallets and with the money lifted purchase goodies for their employees. Far too many employees have been seduced into believing that their benevolent employer pays for most of their health care.

The result of this untoward pas de deux is the system Ms. Rosenthal describes.

One consequence of this opaque pricing system has been that, according to the 2013 Milliman Medical Index, the average cost of health care of a typical American family of four under age 65, and insured through an employer-sponsored preferred provider plan, is now $22,000, up from about $10,000 a decade earlier. It is a staggering amount, not only by international comparison, but also when compared with the distribution of family income in the United States, with a median income of $50,000 to $60,000.

Another result has been that, according to a recent analysis published in the policy journal Health Affairs, a decade of health care cost growth under employment-based health insurance has wiped out the real income gains for an average family with employment-based health insurance. One must wonder how any employer as agent for employees can take pride in that outcome.

Yet a third consequence of the rampant price discrimination baked into this pricing system is that uninsured Americans with some financial means are often charged the highest prices for health care when they fall ill, exposing them to the prospect of financial bankruptcy.

How long must the opaque and chaotic health care pricing system of employment-based health insurance in the United States persist? I can envisage two alternatives.

The first would be an all-payer system on the German or Swiss model, perhaps on a statewide basis, with some adjustments for smaller regional cost differentials (urban versus rural, for example), as is now the practice in the Medicare price schedules. In those systems, multiple insurance carriers negotiate jointly with counter-associations of the relevant health care providers over common price schedules, which thereafter are binding on every payer and every health care provider in the region (an analysis in Health Affairs offered more details). One can easily link such a system to the growth of gross domestic product.

The second alternative would be a marriage in which the financial risks of ill health are shared up to a point and raw, transparent price competition for the remainder. In such a system, called “reference pricing,” a private insurer, as agent for an employer or for a government program, would cover only the price charged for a medical procedure by a low-cost provider in the insured’s market area, forcing the insured to pay out of pocket the full difference between that low-cost “reference price” and whatever a higher-cost provider in the area charges for the same procedure.

Such a system, of course, presupposes full transparency of the prices charged by alternative providers in the relevant market area.

Because an all-payer system is highly regulatory, I predict the private health care market in the United States will sooner or later lapse into full-fledged reference pricing. It would entail ever more pronounced rationing of quality, real or imagined, by income class.

But such tiering has long been the American way in other important human services – notably justice and education. Why would health care remain the exception?

Article source: http://economix.blogs.nytimes.com/2013/06/07/the-culprit-behind-high-u-s-health-care-prices/?partner=rss&emc=rss

DealBook: Facing Possible Ban, Santander’s C.E.O. Resigns

Banco Santander's chief, Alfredo Saenz, has helped transform the firm from a regional lender to an international giant.Juan Carlos Hidalgo/European Pressphoto AgencyAlfredo Sáenz helped transform Banco Santander from a regional lender to an international giant.

8:29 p.m. | Updated

Alfredo Sáenz resigned on Monday as chief executive of Banco Santander, Spain’s largest bank, in a move that ends a period of uncertainty over the bank’s leadership. Mr. Sáenz had been facing a possible ban from banking after a criminal conviction.

Less than a week ago, the bank reported that first-quarter net profit fell 26 percent.

He will be succeeded by Javier Marín, 47, who has worked for Santander for two decades, mainly in its private banking arm, and is the head of its insurance, asset management and private banking operations.

Mr. Sáenz, 70, is departing with a retirement package worth 88 million euros (about $115 million). He was one of Spain’s highest-paid chief executives, earning 8.2 million euros last year despite a pay cut of 29 percent.

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Mr. Sáenz joined Santander in 1994 after the bank acquired a local rival, Banesto. Since then, he helped Santander’s chairman, Emilio Botín, 78, transform the company from a regional lender to an international giant.

Yet Mr. Sáenz also faced a series of legal problems, including his conviction in 2009 for making false accusations in the early 1990s in a case involving Banesto. He was pardoned by Spain’s departing Socialist government in 2011, though the country’s supreme court partly overturned that decision this year, renewing concerns over his tenure.

Santander has been hurt by persistent economic problems in Europe, as well as in emerging markets like Brazil. Last year, Santander set aside provisions totaling $25 billion to cover a rise in delinquent mortgages in Spain and an increase in other troubled loans across its businesses.

In Latin America, where Santander earns more than half of its net income, a slowdown in economic growth is starting to cause problems. First-quarter earnings for the region fell 18 percent, to 988 million euros ($1.3 billion), despite an increase in local lending and customer deposits. Profit from Continental Europe in that period plunged 27 percent, to 307 million euros.

Spain’s supreme court ruled in February that the previous government had gone too far in its pardon of Mr. Sáenz. The court reinstated Mr. Sáenz’s criminal record, casting doubt over whether he could continue as a senior executive at Santander.

The current government passed a law this month that allows bankers with criminal convictions to continue working, but that still left Mr. Sáenz exposed to a final ruling by the Bank of Spain. Analysts said the decision by Mr. Sáenz to step down was an attempt to ease the uncertainty.

Even though Santander described Mr. Sáenz’s decision as voluntary, “maybe it was too risky for Santander to be exposed to an inconvenient decision by the Bank of Spain in the next three or four weeks,” said Robert Tornabell, a professor of banking at the Esade business school in Barcelona.

Shares in Santander closed up 2.6 percent on Monday.

Mr. Sáenz’s successor, Mr. Marín, is credited with negotiating several important insurance alliances for Santander, notably with the Swiss company Zurich, covering its Latin American operations, and with Aegon last year.

Still, Mr. Marín’s appointment came as a surprise, given his relatively low profile.

“He would be relatively unknown to the wider investment community, so I guess it may take him a bit of time to establish a rapport with investors,” said Daragh Quinn, banking analyst at Nomura in London.

The appointment also puts Mr. Marín’s name on the list of candidates to succeed Mr. Botín. That list also includes Mr. Botín’s daughter, Ana Patricia Botín, who is in charge of the bank’s British operations.

Professor Tornabell said that Mr. Botín was maneuvering as “in a chess game,” strengthening his leadership during a decline in earnings before probably appointing his daughter as his replacement. Still, Professor Tornabell said that some institutional investors worried that Mr. Botín was running the bank as “a monarchy dynasty,” despite owning only about 2 percent of its equity.

A spokesman for Santander declined to comment. A representative for Mr. Sáenz was not immediately available to comment.

Article source: http://dealbook.nytimes.com/2013/04/29/santanders-chief-executive-resigns/?partner=rss&emc=rss

DealBook: Buffett’s Annual Letter Plays Up Newspapers’ Value

Warren Buffett, the billionaire investor and chief of Berkshire Hathaway.Cliff Owen/Associated PressWarren Buffett, the billionaire investor and chief of Berkshire Hathaway.

Over the last half-century, Warren E. Buffett has built a reputation as a contrarian investor, betting against the crowd to amass a fortune estimated at $54 billion.

Mr. Buffett underscored that contrarian instinct in his annual letter to shareholders published on Friday. In a year when Mr. Buffett did not make any large acquisitions, he bought dozens of newspapers, a business others have shunned. His company, Berkshire Hathaway, has bought 28 dailies in the last 15 months.

“There is no substitute for a local newspaper that is doing its job,” he wrote.

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Those purchases, which cost Mr. Buffett a total of $344 million, are relatively minor deals for Berkshire, and just a small part of the giant conglomerate. And Mr. Buffett has begun this year with a bang, announcing last month his takeover, along with a Brazilian investment group, of the ketchup maker H. J. Heinz for $23.6 billion.

Despite the Heinz acquisition, Mr. Buffett bemoaned his inability to do a major deal in 2012. “I pursued a couple of elephants, but came up empty-handed,” he said, adding that “our luck, however, changed early this year” with the Heinz purchase.

Written in accessible prose largely free of financial jargon, Berkshire’s annual letter holds appeal far beyond Wall Street. This year’s dispatch contained plenty of Mr. Buffett’s folksy observations about investing and business that his devotees relish.

“More than 50 years ago, Charlie told me that it was far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price,” Mr. Buffett wrote, referring to his longtime partner at Berkshire, Charlie Munger.

Mr. Buffett also struck a patriotic tone, directly appealing to his fellow chief executives “that opportunities abound in America.” He noted that the United States gross domestic product, on an inflation-adjusted basis, had more than quadrupled over the last six decades.

“Throughout that period, every tomorrow has been uncertain,” he wrote. “America’s destiny, however, has always been clear: ever-increasing abundance.”

The letter provides more than entertainment value and patriotic stirrings, delivering to Berkshire shareholders an update on the company’s vast collection of businesses. With a market capitalization of $250 billion, Berkshire ranks among the largest companies in the United States.

Its holdings vary, with big companies like the railroad operator Burlington Northern Santa Fe and the electric utility MidAmerican Energy, and smaller ones like the running-shoe outfit Brooks Sports and the chocolatier See’s Candies. All told, Berkshire employs about 288,000 people.

The letter, once again, did not answer a question that has vexed Berkshire shareholders and Buffett-ologists: Who will succeed Mr. Buffett, who is 82, as chief executive?

Last year, he acknowledged that he had chosen a successor, but he did not name the candidate.

He has said that upon his death, Berkshire will split his job in three, naming a chief executive, a nonexecutive chairman and several investment managers of its publicly traded holdings.

In 2010, he said that his son, Howard Buffett, would succeed him as nonexecutive chairman.

Berkshire’s share price recently traded at a record high, surpassing its prefinancial crisis peak reached in 2007 and rising about 22 percent over the last year.

The company reported net income last year of about $14.8 billion, up about 45 percent from 2011. Yet the company’s book value, or net worth — Mr. Buffett’s preferred performance measure — lagged the broader stock market, increasing 14.4 percent, compared with the market’s 16 percent return.

Mr. Buffett lamented that 2012 was only the ninth time in 48 years that Berkshire’s book value increase was less than the gain of the Standard Poor’s 500-stock index. But he pointed out that in eight of those nine years, the S. P. had a gain of 15 percent or more, suggesting that Berkshire proved to be a most valuable investment during bad market periods.

“We do better when the wind is in our face,” he wrote.

For Berkshire’s largest collection of assets, its insurance operations, the wind has been at its back. We “shot the lights out last year” in insurance, Mr. Buffett said.

He lavished praise on the auto insurer Geico, giving a special shout-out to the company’s mascot, the Gecko lizard.

Investors also keep a keen eye on changes in Berkshire’s roughly $87 billion stock portfolio. Its holdings include large positions in iconic companies like International Business Machines, Coca-Cola, American Express and Wells Fargo. He said Berkshire’s investment in each of those was likely to increase in the future.

Mae West had it right: ‘Too much of a good thing can be wonderful,’ ” Mr. Buffett wrote.

He also heaped praise on two relatively new hires, Todd Combs and Ted Weschler, who now each manage about $5 billion in stock portfolios for Berkshire. Both men ran unheralded, modest-size money management firms before Mr. Buffett plucked them out of obscurity and moved them to Omaha to work for him.

He called the men “a perfect cultural fit” and indicated that the two would manage Berkshire’s entire stock portfolio once he steps aside. “We hit the jackpot with these two,” Mr. Buffett said, noting that last year, each outperformed the S. P. by double-digit margins.

Then, sheepishly, employing supertiny type, he wrote: “They left me in the dust as well.”

A former paperboy and member of the Newspaper Association of America’s carrier hall of fame, Mr. Buffett devoted nearly three out of 24 pages of his annual report to newspapers.

While Mr. Buffett has been a longtime owner of The Buffalo News and a stakeholder in The Washington Post Company, he told shareholders four years ago that he wouldn’t buy a newspaper at any price.

But his latest note reflects how much his opinion has turned. His buying spree started in November 2011, when he struck a deal to buy The Omaha World-Herald Company, this hometown paper, for a reported $200 million. By May 2012, he bought out the chain of newspapers owned by Media General, except for The Tampa Tribune. In recent months, he continued to express his interest in buying more papers “at appropriate prices — and that means a very low multiple of current earnings.”

“Papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time,” wrote Mr. Buffett.

Mr. Buffett said in a telephone interview last month that he would consider buying The Morning Call of Allentown, Pa., a paper that the Tribune Company is considering selling. But Mr. Buffett said he had not contacted Tribune executives.

“It’s solely a question of the specifics of it and the price,” he said about the Allentown paper. “But it’s similar to the kinds of communities that we bought papers in.”

Mr. Buffett has plenty of cash to make more newspaper acquisitions. To cover his portion of the Heinz purchase, Mr. Buffett will deploy about $12 billion of Berkshire’s $42 billion cash hoard. That leaves a lot of money for Mr. Buffett to continue his shopping spree for newspapers — and more major acquisitions like Heinz.

“Charlie and I have again donned our safari outfits,” Mr. Buffett wrote, “and resumed our search for elephants.”

Article source: http://dealbook.nytimes.com/2013/03/01/buffett%E2%80%99s-annual-letter-plays-up-newspapers%E2%80%99-value/?partner=rss&emc=rss

Kloppers to Step Down as Chief of BHP Billiton

Mr. Kloppers, 50, will be succeeded by Andrew Mackenzie, the head of BHP’s nonferrous division, on May 10. Mr. Mackenzie, 56, was one of the first people Mr. Kloppers hired when he became chief executive in 2007.

The announcement came as BHP, the world’s largest mining company, reported a 58 percent drop in profit for the six months that ended Dec. 31 compared with the period a year earlier, partly because of lower commodity prices.

Mr. Kloppers is the latest chief executive to leave a big mining company over the last five months. The chief executives of Rio Tinto and Anglo American also stepped down.

Mr. Kloppers said in a statement that the decision to retire was difficult, but that after almost 20 years with BHP Billiton, it was “the right time to pass the leadership baton.”

“I am very proud of the achievements of our company and our people,” he said.

Mr. Mackenzie, who grew up in an industrial town near Glasgow in Scotland, said he planned to continue focusing “on our strategy of owning and safely operating large, low-cost, long-life assets diversified by commodity, geography and market.”

Mr. Kloppers’s departure was widely expected among investors. He came under increasing pressure after some failed acquisition plans, including one to buy Rio Tinto. Last year, Mr. Kloppers gave up his bonus after BHP had to reduce the value of some of its assets, including shale-gas holdings in the United States.

“Despite an exceptionally difficult economic environment during his tenure, Marius and his team have delivered for shareholders, significantly outperforming our peers in terms of total shareholder returns,” BHP’s chairman, Jac Nasser, said in the statement.

Article source: http://www.nytimes.com/2013/02/20/business/bhp-billiton-chief-will-step-down.html?partner=rss&emc=rss

DealBook: Commerzbank Chief Gives Up Bonus Amid Lackluster Results

Commerzbank's chief, Martin Blessing, did receive an increase in his base pay.Boris Roessler/European Pressphoto AgencyCommerzbank’s chief, Martin Blessing, did receive an increase in his base pay.

FRANKFURT — The chief executive of Commerzbank, one of Germany’s largest banks, on Friday became the latest in a series European bank leaders to recognize that collecting a big bonus might appear unseemly while banks struggle with layoffs and financial losses.

The chief, Martin Blessing, said Friday he would not take a bonus for 2012, after the bank reported a net loss of 716 million euros, or $959 million, in the fourth quarter. Other Commerzbank executives will also take steep cuts in their bonus pay, the bank said.

However, Mr. Blessing still collected a substantial raise for last year because his salary was no longer restrained by the terms of a government bailout in 2008. His base pay increased to 1.3 million euros, or $1.7 million, from 500,000 euros, the limit set by the government and then voluntarily extended by the bank.

Commerzbank, which is still 25 percent owned by German taxpayers, continues to struggle with bad investments made before the beginning of the financial crisis. The bank has said it would cut 4,000 to 6,000 jobs by the end of 2016.

Other bank chief executives have made similar gestures to give up bonuses. Antony P. Jenkins, the new chief executive of Barclays, said this month that he would forgo his bonus, which would have been £2.75 million on top of his £1.1 million salary. The British bank has struggled to rebuild its reputation after recent missteps.

Stephen Hester, the chief executive of the Royal Bank of Scotland, refused a bonus of £963,000, or $1.5 million, for 2011. But he will receive up to £7 million for 2012, including pension contributions and long-term investment deferrals, in addition to his £1.2 million salary, according to recent testimony.

Commerzbank had disclosed this month that it would have a quarterly loss, but offered more details about its earnings on Friday. Net profit for 2012 fell to 6 million euros from 638 million euros a year earlier, as the bank booked losses related to the sale of a unit and a recalculation of its tax liabilities.

Without those one-time items, net profit from the year would have been 990 million euros, the bank said.

Commerzbank said it increased the amount it set aside to cover bad loans in 2012 to almost 1.7 billion euros, from 1.4 billion euros in 2011. Most of the increase came from loans made to the shipping industry, which is in the midst of a severe downturn. Hundreds of ships are anchored idly in ports around the world because they lack customers, creating a severe burden for Commerzbank and other European lenders.

Mark Scott contributed reporting from London.

Article source: http://dealbook.nytimes.com/2013/02/15/commerzbank-chief-gives-up-bonus-amid-lackluster-results/?partner=rss&emc=rss

Deal Professor: When Picking a C.E.O. Is More Random Than Wise

Deal ProfessorHarry Campbell

What makes the perfect chief executive? If the way corporate boards at Yahoo and Duke Energy picked chief executives is any indication, it may be up to chance in large part.

Take Marissa Mayer, the newly appointed chief of Yahoo. She is a Stanford graduate, age 37, and Google’s 20th employee. Until her new gig, Ms. Mayer was one of Google’s stars and helped develop Gmail. She was a well-known face for Google, serving on the board of Wal-Mart Stores, attending White House state dinners and appearing as a regular member of Fortune’s 40 under 40 of the hottest young business executives. In the ultimate sign of tech prominence, she has almost 200,000 Twitter followers.

Why her? According to the tech blog All Things D, she was thought to be a decisive and “disruptive agent of change” pushed by Daniel S. Loeb, the manager of the hedge fund Third Point, which owns about 6 percent of Yahoo. (Third Point disclosed in a regulatory filing on Tuesday that it had purchased an additional 2.5 million Yahoo shares.) Ms. Mayer is also from Google’s technology and product side, an area that Yahoo wants to focus on as it struggles to define itself either as an Internet company like Google or a media company, its main source of revenue.

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Ms. Mayer is now the youngest chieftain of a Fortune 500 company. She has no experience running a public company or reorganizing one, something that Yahoo desperately needs. And in her previous job, she had an almost embarrassment of riches in terms of money and people, something that Yahoo lacks, at least on Google’s scale.

The Yahoo board decided to go with youth and decisiveness over experience. In doing so, the company has agreed to pay a package that could exceed more than $100 million over five years if Ms. Mayer works out.

Marissa Mayer, the new chief of Yahoo.Evan Agostini/AGOEV, via Associated PressMarissa Mayer, the new chief of Yahoo.James E. Rogers, her counterpart at Duke Energy.Scott Eells/Bloomberg NewsJames E. Rogers, her counterpart at Duke Energy.

Is she the right choice? It is hard to know.

There is little solid analysis on what makes an effective chief executive. Most of it is in the form of quasi self-help books like “The 7 Habits of Highly Effective People” and “Good to Great: Why Some Companies Make the Leap … and Others Don’t.” Even these are remarkably vague, often citing factors like being “proactive.” Academic research is also not particularly helpful either, and often looks at youth versus maturity and experience. (Maturity typically wins.)

The consequence of this uncertainty is reflected in the high failure rate of chief executives. According to the Harvard Business Review, two out of five chief executives fail in their first 18 months on the job.

This all makes the choice of a chief executive a product of the board’s vision and personalities rather than one of studied research on what characteristics the person needs.

This creates its own problems, as the drama unfolding in the merger of Duke Energy and Progress Energy illustrates. Directors took only hours after the merger to replace William D. Johnson, the Progress chief who was to run the combined company, with James E. Rogers of Duke.

The reason given in testimony by Ann Gray, the lead director of the combined company, is that Mr. Johnson withheld information about repairs at the company’s nuclear plan in Crystal River, Fla. More tellingly, Ms. Gray testified that the directors thought Mr. Johnson was imperious and that he had described himself to the board as “a person who likes to learn but not be taught,” leading the Duke directors to conclude that their input was not sought.

Both Mr. Johnson and Mr. Rogers are former lawyers who worked in private practice and appeared to graduate at the top of their class. Both also rode successive mergers to be leaders at their companies. They have remarkably similar backgrounds. This dispute can be chalked up to different personalities and cultures rather than finding the best person for the job.

All this suggests that boards picking chief executives are essentially acting on their hunches and reflecting their own biases in their decision-making.

Culture and personality appeared to play a part in Ms. Mayer’s selection as her search was reportedly heavily influenced by Mr. Loeb’s presence. He’s a brash, outgoing hedge fund activist who has made one of the biggest bets in his career with Yahoo. Picking someone like Ms. Mayer, who is known for her decisiveness, will play well with the Silicon Valley crowd, mitigating her negatives of inexperience and perhaps youth. After all, 37 is practically ancient in the hedge fund universe, as it is in Silicon Valley.

Compare this with how the search is likely to have unfolded if Yahoo’s board had viewed itself as a media company. In that industry, top executives come up through the ranks. Leslie Moonves, the chief of CBS, is typical. He’s 62 and has been in the industry almost his entire life. Robert A. Iger of the Walt Disney Company is 61 and is also deeply experienced of the industry. Ms. Mayer would never have come close to being picked.

This all means that the selection of a chief seems more about group decision-making than anything else. And group decision-making can be quite random.

I’m reminded of an exercise I once did at an old law firm retreat run by a group of consultants. We were divided into five groups of 10 people each. Each group was given the same 10 résumés and told to pick the best candidate for an executive position and rank the rest. Not surprisingly, group dynamics took hold and each group selected a different rank and almost all selected a different top pick.

This result is in accord with research on small-group dynamics and decision-making. The selection of executives is influenced by directors’ own biases and backgrounds. Media boards tend to be directors who pick media people of a certain type; similarly with technology boards. This is influenced by a group negotiation process that depends on the people and personalities involved. In the end, these boards tend to pick people who reflect themselves and the world they already know — something that psychologists call the confirmation bias.

The decision to pick a chief executive is often steered by flocks of high-level recruitment consultants. Recruiters are paid millions to have a stable of candidates that they feed to boards, steering the process in pursuit of the board’s sometimes ill-defined wishes. This inherently limits the pool of candidates and further pushes boards to confirm their own biases in any selection.

Ms. Mayer and Mr. Rogers may do terrific jobs at their companies. But their appointments do not necessarily mean that they are the best candidates. Rather, their selection is a result of random and nonrandom factors, something that is anything but a perfect process.


Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source: http://dealbook.nytimes.com/2012/07/24/when-picking-a-c-e-o-is-more-random-than-wise/?partner=rss&emc=rss