chief executives

DealBook: Bad Year for Wall Street Not Reflected in Chiefs’ Pay

January 21, 2012 by NewsMaker Leave a Comment

Wall Street stocks and profits took a beating in 2011. But there is one corner of the Street that took a lighter hit: the compensation paid to chief executives.

Three big banks disclosed on Friday what their top executives will receive in deferred stock for their work in 2011. Such stock is expected to make up most of their bonus as banks are increasingly paying employees more in deferred stock. Those awards to top bank executives are coming as lower-level employees are finding out that their own bonuses will be much smaller than a year ago.

Brian Foley, a compensation expert in White Plains, said that for top executives, he would have expected “the belt to come in a few more notches” this year given the banks’ lackluster stock performance. He added that executive suite pay packages this year might further lower morale inside the banks.

“A lot of people in the middle took big hits this year,” he said. “It could create some big ‘us versus them issues’ as to why the rank and file are taking a bigger hit than the senior executives.”

Peter Foley/Bloomberg NewsVikram S. Pandit, chief of Citigroup.

The chief executive of Citigroup, Vikram S. Pandit, was awarded deferred stock in the bank valued at $3.7 million based on the company’s current price, according to a regulatory filing. This is on top of his annual base salary of $1.75 million, and brings his disclosed pay so far for 2011 to $5.45 million.

Citigroup is expected to disclose the rest of his pay, cash, be it upfront or deferred, in March. In addition, while not necessarily for work performed in 2011, Mr. Pandit last year was awarded a $16.7 million retention bonus, plus stock options that could add $6.5 million to the package’s overall value.

To be sure, Mr. Pandit has gone through some lean days, at least by Wall Street standards. In 2010, he was paid just $1, a salary he agreed to take until Citigroup returned to profitability, which it did that year.

While Citigroup was profitable again last year — earning $11.3 billion — it was far from a banner year for the big bank as it and its rivals had revenues dip amid economic troubles abroad and a sluggish domestic economy. Citigroup’s stock fell 44 percent in 2011, and many employees were told this week they would be receiving no or small bonuses.

Randy L. Rasmussen/The Oregonian, via Associated PressJamie Dimon, chief of JPMorgan Chase.

Shares of Citigroup’s rival, JPMorgan Chase, also had a rough year, falling almost 22 percent. Still, JPMorgan’s chief executive, Jamie Dimon, was awarded $17 million in equity-linked stock for his work in 2011, according to a regulatory filing. Last year Mr. Dimon received $17 million in equity awards around this time of year and his total pay for the year came to $23 million. His total pay is expected to be roughly the same this year, according to a person close to company but not authorized to speak on the record.

Jin Lee/Bloomberg NewsJames P. Gorman, chief of Morgan Stanley.

Morgan Stanley’s shares dropped 44 percent in 2011. On Friday, it released details on all its chief executive’s pay. James P. Gorman is taking a 25 percent pay cut from 2010. Mr. Gorman will receive $9.7 million in deferred compensation for his work last year, according to a regulatory filing. This number includes $4.7 million in deferred cash and equity linked stock and an additional $5 million in restricted stock. In 2010, Mr. Gorman received $7.4 million in stock and his total compensation for the year was $14 million. These numbers include Mr. Gorman’s base salary of $800,000.

Citigroup also disclosed that its chief operating officer, John P. Havens, received a stock award valued at $3.47 million. Its consumer banking chief, Manuel Medina-Mora, got $2.64 million and its chief risk officer, Brian Leach, received an award valued at $2.36 million, according to regulatory filings.

At Morgan Stanley, pay for other senior executives was down roughly 20 percent. The wealth management chief, Gregory J. Fleming, and Paul J. Taubman, co-head of institutional securities, were both granted restricted stock valued at $3.4 million. Colm Kelleher, the other co-president of institutional securities, received restricted stock valued at $1.9 million. His grant is less because he is based in Britain and there are different requirements on the mix of his pay. Ultimately, he will receive the same as Mr. Fleming and Mr. Taubman, a company spokesman said. Morgan did not release how much deferred cash these senior executives will receive.

At JPMorgan, the head of investment banking, James E. Staley, was granted restricted stock valued at $7.8 million and he has options valued at an added $2 million. Mary E. Erdoes, head of asset management, received restricted stock valued at $7.1 million and a further $2 million in options.

Article source: http://feeds.nytimes.com/click.phdo?i=035753a40bf6486c324281bb763716c8

Filed Under: Business News Tagged With: chief executives, stock options, vikram s pandit

DealBook: U.S. Suit Says Loan Giants’ Executives Misled Market

December 17, 2011 by NewsMaker Leave a Comment

Win McNamee/Getty ImagesRobert Khuzami of the S.E.C. announcing the lawsuits against six former top executives of Fannie Mae and Freddie Mac.

9:30 p.m. | Updated

Regulators have accused the former chief executives of the mortgage giants Fannie Mae and Freddie Mac of misleading investors about their firms’ exposure to risky mortgages, one of the most significant federal actions taken against those at the center of the housing bust.

The lawsuits filed Friday against the two chief executives and four other top executives are an aggressive move by the Securities and Exchange Commission, and come after a three-year investigation.

The agency has come under fire for not pursuing top Wall Street and mortgage industry executives who contributed to the financial crisis. In cases contending the deceptive marketing of securities tied to mortgages, the S.E.C. has been criticized for citing only midlevel bankers while settling with the Wall Street firms themselves. Recently, the agency drew criticism from a federal judge after allowing Citigroup to settle a fraud case without conceding wrongdoing.

On Friday, S.E.C. officials trumpeted their actions in the Fannie and Freddie case as part of a renewed effort to crack down on wrongdoing at the highest levels of Wall Street and corporate America.

“All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors,” said Robert S. Khuzami, the agency’s enforcement chief. “Investors were robbed of the opportunity to make informed investment decisions.”

He noted that the agency had now filed 38 separate actions stemming from the 2008 financial crisis.

The former Fannie Mae and Freddie Mac executives have vowed to challenge the government, saying that the companies repeatedly disclosed the breakdowns of their loan portfolios.

As companies that fed both the housing bubble and Wall Street’s appetite for risk, Fannie Mae and Freddie Mac came under investigation quickly by federal agencies amid the financial crisis in 2008. But Freddie Mac disclosed this summer that the Justice Department’s inquiry into the company had ended without any charges. And the S.E.C stopped short of bringing actions against the two companies.

Instead, agreements with Fannie and Freddie will allow the now government-controlled companies to evade prosecution and fines so long as they cooperate with authorities. The deal does not require approval from a federal court, unlike the proposed settlement with Citigroup.

The case against the former executives, including Daniel H. Mudd, the former chief executive of Fannie Mae, and Richard F. Syron, the former chief of Freddie Mac, centers on a series of disclosures the firms made to investors at the height of the mortgage boom. The government contends that the firms played down the extent of their exposure to subprime mortgages, loans doled out to the riskiest of borrowers.

One S.E.C. complaint contends that Freddie Mac executives falsely proclaimed that the company had virtually no exposure to ultra-risky loans, despite internal warnings admonishing against such claims.

A separate complaint contends that Fannie Mae executives described subprime loans as those made to individuals “with weaker credit histories” while only reporting one-tenth of the loans that met that criteria in 2007. Both complaints were filed in the United States District Court in Manhattan.

Mr. Mudd, who was chief executive of Fannie Mae from 2005 until the government took control of the company in 2008, said that there had been no deception.

“The government reviewed and approved the company’s disclosures during my tenure, and through the present,” he said in a statement. “Now it appears that the government has negotiated a deal to hold the government, and government-appointed executives who have signed the same disclosures since my departure, blameless — so that it can sue individuals it fired years ago.”

The S.E.C.’s commitment to the long-running investigation — more than 100 depositions were produced over its course — highlights the major roles that Fannie Mae and Freddie Mac played in the financial crisis and subsequent government bailout. The Bush administration took over the teetering mortgage giants in September 2008, and taxpayers have since pumped more than $150 billion into the two companies. The Obama administration has vowed to wind them down, although the timeline remains unclear.

The case against the former mortgage executives resembles an earlier action against one of the nation’s biggest lenders to risky, or subprime, borrowers. Angelo Mozilo, the former chief executive and founder of Countrywide Financial, agreed to pay $22.5 million to settle federal charges along the same lines. The settlement was the largest ever levied against a senior executive of a public company, though Mr. Mozilo, who also agreed to forfeit $45 million in gains, neither admitted to nor denied wrongdoing.

Success for the S.E.C. in the Fannie and Freddie case will largely hinge on the meaning of the word subprime, which the government itself has never fully defined. While the term often refers to borrowers with low credit scores, Fannie and Freddie decided to classify loans as prime or subprime based on the lender type, not the borrower’s credit score. A Wall Street bank, for instance, was usually considered a prime lender, despite extending subprime loans.

But the government’s complaint contends that this kind of disclosure masked risk. Loans not considered subprime often defaulted at higher rates than those classified as subprime.

The government contends that the executives were less than forthcoming about that extra layer of risk. Mr. Syron told an investor conference in May 2007 that the company had “basically no subprime business.”

But a lower-level executive at the firm, who reviewed Mr. Syron’s speech in advance, warned that such a statement could be misleading.

“We need to be careful how we word this. Certainly our portfolio includes loans that under some definitions would be considered subprime,” the employee said, according to the complaint. “We should reconsider making as sweeping a statement.”

Mr. Mudd, meanwhile, testifying before Congress in April 2007, broadly defined subprime as “the description of a borrower who doesn’t have perfect credit.” But at the same hearing, he told lawmakers that “less than 2.5 percent of our book of business can be defined as subprime,” which the complaint says greatly understated the firm’s exposure based on his definition that day. Mr. Mudd’s estimate omitted some $50 billion in subprimelike loans, according to the complaint.

Lawyers for the executives, however, plan to argue that the firms did in fact disclose minute details of their loan portfolios, suggesting a potential weakness in the case. During the period under scrutiny, the companies produced “monster charts” breaking down their loan portfolios by borrowers’ credit scores and how much equity they had in their homes, among other information.

Lawyers for Mr. Syron called the S.E.C.’s case “fatally flawed” and “without merit.”

“Simply stated, there was no shortage of meaningful disclosures, all of which permitted the reader to assess the degree of risk in Freddie Mac’s guaranteed portfolio,” Thomas C. Green and Mark D. Hopson, partners at Sidley Austin, said in the statement.

The lawyers note that even the federal government never settled on a definitive meaning for subprime. Indeed, in a 2007 document, multiple federal agencies declined to define it.

Lawyers for two of the other executives named in the suit have also promised to fight the allegations.

The complaints also name Fannie’s former risk officer, Enrico Dallavecchia; an executive vice president for Fannie, Thomas A. Lund; Patricia L. Cook, Freddie’s former chief business officer; and its executive vice president, Donald J. Bisenius.

Still, Mr. Mudd and Mr. Syron are the two most prominent subjects of the complaint.

Since August 2009, Mr. Mudd has been chief executive of the Fortress Investment Group, the large publicly traded private equity and hedge fund company.

Mr. Syron is a former president of the American Stock Exchange and currently an adjunct professor and trustee at Boston College.

Article source: http://feeds.nytimes.com/click.phdo?i=bf9883ed2fef5a99a98d85d406156d75

Filed Under: Business News Tagged With: chief executives, corporate america, freddie mac

Low Expectations for Debt Deal, but Fears Remain

November 18, 2011 by NewsMaker Leave a Comment

But that does not mean failure will be met with a shrug.

At stake is not simply the country’s fiscal health, but also what remains of the government’s credibility. Without an agreement in sight, investors, business leaders and consumers, already worried about the deepening crisis in Europe, have begun to brace for the possibility of yet another blow to a fragile recovery, this time from Washington.

“The decision of the supercommittee goes beyond just the budget. It’s become a symbol now of the ability of our elected representatives to get something done,” said Frank Newport, the editor in chief of Gallup, which tracks public opinion of politics and the economy. “And if the supercommittee fails, I think the reaction of the public, based on the data, will be even more negative, not just about the government but their confidence in the economy in general.”

As if to underscore this point, the committee’s deadline arrives in perfect alignment with the holiday shopping season. Consumer confidence, which collapsed under the threat of a government default this summer, has just begun to convalesce. Business leaders have grown increasingly pessimistic since the summer, with many chief executives pleading for bold action to lower the deficit.

The debt woes now infecting even the larger economies in Europe should serve as a wake-up call in the United States, James Bullard, president of the St. Louis Federal Reserve Bank, said on Thursday.

Despite those warnings, the special committee has been unable to make much progress. If it fails, $1.2 trillion in cuts will begin to take effect. That outcome was built into the law in the summer, after the debate over raising the debt ceiling brought the country uncomfortably close to default, and was meant to pressure the committee into a resolution.

Lately, there has been talk of a possible two-step solution that merely sets goals for revenue and spending and leaves the details to be worked out later.

Pessimism is running so high, and public approval of Congress is so low, it is not clear that such an outcome would be perceived as a success.

“They’re going to agree on anything just to pacify everything for the next six months or a year,” said Tim Scott, 56, who owns a construction company in Washington State.

“All they’re doing is putting a Band-Aid on everything.” Mr. Scott said he had bought land for a new house but had put off building until the economy’s direction became clear.

A weak agreement could send the wrong signal to skittish investors. “That would introduce uncertainty, and demonstrate the inability of Congress to make decisions,” said Zane E. Brown, the fixed-income strategist at asset management firm Lord Abbett. “That supports S. P.’s contention behind why they downgraded us in the first place and perhaps justifies in their minds an additional downgrade. That is a risk few investors are anticipating.”

In August, Standard Poor’s, the ratings agency, cited political brinksmanship in Washington when it downgraded the country from AAA, the agency’s top credit rating.

While few analysts actually expect more reductions in the credit rating of the United States, the agencies have left open that possibility.

In mid-September, S. P. warned of a one-in-three chance that the rating would be cut again within the next two years. The agency has said it will be watching the committee’s deliberations.

Moody’s confirmed the top rating for American government debt over the summer but with a negative outlook. Even if the committee does not reach an agreement, Moody’s said it would probably not lead to a downgrade if the automatic spending cuts went into effect. Some Republicans, though, have promised to prevent the cuts if no agreement is reached.

Article source: http://feeds.nytimes.com/click.phdo?i=d727b7304a75f5b64353c2c2f993891b

Filed Under: Business News Tagged With: chief executives, frank newport, low expectations

DealBook: Board Pay Rises 49% at British Companies

October 28, 2011 by NewsMaker Leave a Comment

LONDON — Executives at Britain’s biggest companies received an average pay increase of 49 percent this year, with compensation rising faster than companies’ shares.

The annual average pay of executives, including chief executives and finance chiefs, at Britain’s 100 largest publicly listed companies rose to £2.7 million, or $4.3 million, according to research by Incomes Data Services published Friday. Chief executives received an average 43.5 percent pay increase, to £3.9 million, the report said. The FTSE 100 share index rose 15.8 percent in the period from February last year to April 2011.

“Britain’s economy may be struggling to return to pre-recession levels of output, but the same cannot be said of FTSE 100 directors’ remuneration,” Steve Tatton, editor of the report, said in a statement. The pay includes salary, benefits, bonuses and long-term incentive plans.

Deborah Hargreaves, chairwoman of the High Pay Commission, an independent group that examines private sector pay, told BBC radio that it was “very hard to justify these sorts of pay increases” and that it was in the interest of the executives to keep the market rate for their positions high.

Article source: http://feeds.nytimes.com/click.phdo?i=643277b00ae630e7203e29f9395a7047

Filed Under: Business News Tagged With: chairwoman, chief executives, economy

RIM Says BlackBerry Systems Are Restored

October 13, 2011 by NewsMaker Leave a Comment

Research in Motion said Thursday that it had resolved the technical issues that had frustrated BlackBerry users on five continents for several days, but that it might take a while yet for service to return completely to normal.

Jim Balsillie and Mike Lazaridis, the company’s co-chief executives, said that the backlog of e-mails and messages, which has been building since Monday in some parts of the world, was still creating delays for some BlackBerry users.

“I want to apologize to all the BlackBerry users we let down,” Mr. Lazaridis said during a news conference. “Our inability to quickly fix this has been frustrating.”

The service problems, the executives said, apparently resulted from the failure of a crucial piece of switching hardware in the closed network RIM operates for BlackBerry data services. That was followed by the failure of a backup system.

The result was the longest and most extensive disruption to BlackBerry service since the device was introduced 12 years ago. The hardware shut down service in Europe, the Middle East and Africa on Monday, which Mr. Lazaridis said created “a ripple effect” around the rest of the world.

While Mr. Lazaridis offered a separate video apology to customers, both he and Mr. Balsillie declined to answer questions about what compensation, if any, RIM intends to offer users.

“Our focus has been 100 percent on getting systems up and running,” Mr. Balsillie said, adding that the company will now begin to look at ways of placating customers.

This week’s hit couldn’t come at a worse time for the handset maker, which is fending off a growing crowd of agitated investors calling on the company to explore strategic options and new leadership. Shares of the company have fallen nearly 60 percent this year as smartphone buyers increasingly choose Android phones or iPhones. On Thursday, shares of RIM were trading 3.2 percent lower, at $23.10.

Analysts say that RIM was battling to restore more than service to the millions faced with glitches to BlackBerry cellphone service. The company was also fighting for its foothold in a rapidly changing industry.

“It’s symbolic of what’s going on at the company,” said Colin Gillis, an analyst at BGC partners who follows the telecom industry. “It’s a bloodbath.”

The Waterloo, Ontario, company’s grasp on the global smartphone market has steadily declined over the past few years. In 2008, the company commanded 46 percent of the market for smartphones around the world, according to data from IDC, a research firm. But by the first half of 2011, that hold had weakened under the surging popularity of the products from rivals, sliding to 12 percent. The company had hoped to revive its business and dazzle consumers with the BlackBerry PlayBook, a 7-inch touch-screen tablet, but the device has yet to gain traction among a broad audience.

At the same time, dozens of sleek new Android devices are arriving on store shelves in time for the holiday season and Apple is releasing the latest version of the iPhone on Friday.

Ken Dulaney, an analyst with Gartner, said that the biggest remaining question was whether the recent hiccups would prompt current BlackBerry owners to switch to other handsets. “Wireless access has become mission-critical and people depend on it,” he said. “Any kind of outage is a serious problem.”

Frustration erupted on social media sites like Twitter and online forums that cater to the owners of BlackBerry devices. “Uugh. If i don’t get back to you today, this is why. BlackBerry outage appears to be spreading,” a user named Diana_Knight posted to Twitter on Wednesday.

On CrackBerry.com, a popular online forum that caters to BlackBerry owners, a thread called “Enough is Enough” had attracted thousands of views and hundreds of comments by Wednesday afternoon. “This is it. This is the boiling point. Someone has to go over to Waterloo and slap those in charge at RIM,” wrote a user going by the name BlackLion15.

Such failures are not rare occurrences for RIM. Last month, BlackBerry’s popular messaging service crashed for several hours in parts of Latin America and Canada.

Because RIM sends its data through its own servers, any disruptions are felt by larger swaths of users than for other handset makers. That can be infuriating for wireless carriers who are helpless at the annoyances of their customers who are using BlackBerrys on their network.

Representatives for Verizon, ATT and Deutsche Telekom, all of which sell BlackBerry phones, declined to comment, deferring to RIM to address the outages.

On Thursday, Mr. Balsillie said senior executives at carriers around the world had been supportive rather than angry.

“People understand the complexity of these systems and when something like this happens everyone pulls together,” he said.

The RIM failure coincided with a major wireless industry conference in San Diego, where many companies that carry RIM’s traffic complained of getting little or no information about just what had gone wrong or how long it would take to fix. Others were less concerned about the industry than their own communications. “With this outage, people will say enough is enough.” said Frank Nein, an industry analyst with 9Sight2020, who said he had met representatives of RIM Tuesday. “And they didn’t have any answers about the network. They didn’t have any decent response to all these consumer devices coming into their turf.”

A few financial professionals saw a small silver lining on Wednesday. Alex Maloney, a director at Perkins Fund Marketing, a placement agent for hedge funds, said the service interruption was actually a nice vacation from gloomy e-mails.

“This is not necessarily the worst time for an outage,” he said. “It’s not like people are getting a whole lot of positive e-mails this day, given the turmoil in the financial markets.”

Quentin Hardy and Evelyn M. Rusli contributed reporting.

This article has been revised to reflect the following correction:

Correction: October 13, 2011

An earlier version of this article misidentified the market that RIM had a 46 percent share of in 2008, according to IDC, as the market for mobile devices.

Article source: http://feeds.nytimes.com/click.phdo?i=3aa01975053b37e20023666eae23f771

Filed Under: Business News Tagged With: chief executives, failure, iphones

Media Decoder Blog: Disney’s Iger to Step Down in 2015

October 7, 2011 by NewsMaker Leave a Comment

1:52 p.m. | Updated LOS ANGELES – Robert A. Iger, Disney’s chief executive, has signed a new contract that keeps him atop the world’s largest entertainment company until March 2015. But he will then move to a lesser role for a year before leaving Disney entirely, the company said Thursday.

Under the new contract – positioned by the Walt Disney Company as an effort to lock Mr. Iger up for as long as possible – Mr. Iger will gain the title of chairman in March of next year, succeeding John E. Pepper, who will step down after having served four years in that job. In March of 2015, Disney’s board will name a new chief executive and Mr. Iger will transition to executive chairman.

Mr. Iger will then leave Disney on June 30, 2016. He started his entertainment career at Disney-owned ABC in 1974. Mr. Iger will be 65 upon his departure; Disney’s mandatory retirement age for board members is 74.

Since chief executives are typically pulled from their corner offices kicking and screaming, attention is likely to focus on what Mr. Iger has planned for his long-term future. It has long been speculated that he has political ambitions, possibly in New York, where he grew up and worked early in his career.

Thursday’s announcement also raises the question of succession. Disney likes to promote from within and at the moment there appear to be two primary candidates to replace Mr. Iger: James A. Rasulo, Disney’s chief financial officer and former theme park chairman; and Thomas O. Staggs, currently theme park chairman and formerly C.F.O. (The two men switched roles at Mr. Iger’s behest in 2009.

Since becoming Disney’s chief executive in 2005, Mr. Iger has mostly kept the company sailing smoothly through a cluster of storms, chiefly the recession, which hammered television advertising sales and threatened the company’s theme parks.

Despite some messy quarters, Disney’s results for the last fiscal year were quite strong: Net income rose 20 percent, to $3.96 billion, from $3.31 billion. The company has outperformed the Standard Poor’s index by five times since Mr. Iger took over.

Mr. Iger’s accomplishments include the acquisitions of Pixar Animation Studios and Marvel Entertainment and securing approval from the Chinese government (after decades of efforts) for a sprawling theme park in Shanghai. ESPN, a Disney unit, continues to surge and other cable properties, notably ABC Family, have also picked up considerable momentum.

But there is plenty of work still to do. Disney has been inconsistent when it comes to adapting to new technology – on the one had becoming the first media company to make television shows available on iTunes and on the other struggling to turn around its unprofitable online division. ABC needs to find new hits, and a turnaround at Disney’s movie studio is still a work in progress.

The new contract, which replaces one that still had two years before expiring, contains notable changes to Mr. Iger’s compensation. His base annual salary will increase by 25 percent, to $2.5 million, with a higher annual bonus target. But unlike his previous contract, this one does not provide an upfront stock-option grant as an additional signing bonus; the previous contract provided one valued at $25 million.

Mr. Iger’s salary and bonus last year was about $16 million. His total compensation, including equity awards, was about $28 million, according to documents filed with the Securities and Exchange Commission.

Article source: http://feeds.nytimes.com/click.phdo?i=7ba0236fd5a75c84486f453d95674c15

Filed Under: Business News Tagged With: behest, chief executives, theme parks

Where Pay for Chief Executives Tops the Company Tax Burden

August 31, 2011 by NewsMaker Leave a Comment

The companies — which include household names like eBay, Boeing, General Electric and Verizon — averaged $1.9 billion each in profits, according to the study by the Institute for Policy Studies, a liberal-leaning research group. But a variety of shelters, loopholes and tax reduction strategies allowed the companies to average more than $400 million each in tax benefits — which can be taken as a refund or used as write-off against earnings in future years.

The chief executives of those companies were paid an average of more than $16 million a year, the study found, a figure substantially higher than the $10.8 million average for all companies in the Standard Poor’s 500-stock index.

The financial data in the report was taken from the companies’ regulatory filings, which can differ from what is actually filed on a corporate tax return. Even in a year when a company claims an overall tax benefit, it may pay some cash taxes while accumulating credits that can be redeemed in future years. For instance, General Electric reported a federal tax benefit of more than $3 billion in 2010, but company officials said they still expected to pay a small amount of cash taxes.

The authors of the study, which examined the regulatory filings of the 100 companies with the best-paid chief executives, said that their findings suggested that current United States policy was rewarding tax avoidance rather than innovation.

“We have no evidence that C.E.O.’s are fashioning, with their executive leadership, more effective and efficient enterprises,” the study concluded. “On the other hand, ample evidence suggests that C.E.O.’s and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”

The study comes at a time when business leaders have been lobbying for a cut in corporate taxes and Congress and the Obama administration are considering an overhaul of the tax code to reduce the federal budget deficit.

Many business leaders say that the top corporate statutory rate of 35 percent, which is higher than any country except Japan, is hobbling the economy and making it difficult for domestic companies to compete with overseas rivals. A coalition led by high-technology companies and pharmaceutical manufacturers have been pushing for a “repatriation holiday,” which would let them bring as much as $1 trillion in foreign profits back to the United States at substantially reduced rates.

But the Obama administration has said it will consider lowering the corporate rate only if Congress agrees to eliminate enough loopholes and tax subsidies to pay for any drop in revenue. Many policy experts estimate that the United States could lower its corporate rate to the high 20s if it eliminated the maze of tax breaks that favor specific industries and investors.

The report found, however, that many of the nation’s largest and highly profitable companies paid far less than the statutory rate.

Verizon, which earned $11.9 billion in pretax United States profits, received a federal tax refund of $705 million. The company’s chief executive, Ivan Seidenberg, meanwhile, received $18.1 million in compensation. The online retailer eBay reported pretax profits of $848 million and received a $113 million federal refund. John Donahoe, eBay’s chief executive, collected a compensation package worth $12.4 million, the study said.

Verizon officials disputed the report. Robert Varretoni, a company spokesman , said that the $18 million in compensation for Mr. Seidenberg was a target, which will only be paid in full if the company stock rises when his bonus is fully vested in three years. Mr. Varretoni also said it was misleading of the report to cite Verizon’s tax benefit without noting that the company also incurred billions of dollars in deferred taxes which “will be paid over time.”

“The fact is, Verizon fully complies with all tax laws and pays its fair share of taxes,” Mr. Varretoni said.

Chaz Bickers, a Boeing spokesman, said that the company’s taxes have declined in recent years because it has made huge investments in United States manufacturing.

Mr. Bickers said that the company also paid hundreds of millions in cash taxes and incurred an additional $1 billion in deferred taxes that it will pay at some date in the future.

“We pay our taxes and we have added 5,000 more U.S. manufacturing jobs that were incentivized by tax benefits,” he said.While the accounting strategies used to lower taxes varied from company to company, the report found that 18 of the 25 corporations had offshore subsidiaries, which can be used to shelter income.

To discourage companies from gaming the tax system, the report called for tighter rules on offshore tax havens and new restrictions on write-offs for executive compensation.

“Instead of sharing responsibility for addressing our nation’s fiscal challenges,” said Chuck Collins, a senior scholar at the institute who co-wrote the study, “corporations are rewarding C.E.O.’s for aggressive tax avoidance.”

Article source: http://feeds.nytimes.com/click.phdo?i=08d4cdd4d0f4702891dea301f3338c37

Filed Under: Business News Tagged With: chief executives, household names, tax burden

Small Business Guide: Getting Started as a Social Entrepreneur

August 26, 2011 by NewsMaker Leave a Comment

“I get the sense that the recession actually has resulted in more people taking interest in investing in companies that are doing the right thing right from the start,” said Wes Selke, investment manager at Good Capital, a social-impact venture capital firm in San Francisco. As one indicator, at least three social-impact funds have raised more than $100 million in the last couple of years: Ignia Fund, Leapfrog Investments and MicroVest.

Marrying mission and money in one business can be tricky. This guide focuses on commercial, profit-making businesses and entrepreneurs who want to build self-sustaining social ventures, a term that encompasses nonprofit and profit-making companies as well as some new types of legal hybrids, like an L3C, which stands for low-profit limited liability company. These ventures are commonly thought of as enterprises that serve a so-called triple bottom line: people, planet and profits.

At a social venture, the social mission is expected to be at least as important as the money-making mission. So, for example, the tobacco giant Philip Morris does not pass the test even though it donates generously to artistic and social causes. But a business that addresses a socioeconomic or environmental challenge as part of its DNA — for instance by selling low-cost solar-powered lanterns to villages that lack electricity — would be considered a social enterprise, according to Deb Nelson, executive director of Social Venture Network, an organization of some 500 chief executives, company founders, nonprofit leaders and investors.

To those looking to start such ventures, social entrepreneurs and investors offer the following pointers.

IT’S O.K. TO MAKE MONEY If you choose the profit-making model, stick with it — without apology. A few years ago, Assaf Shafran founded a nonprofit in Israel that offered a smartphone-based dispatching system for first responders, like firefighters and emergency medical technicians.

But his social venture, called IsraeLife, had an impossible time giving the system away to volunteer organizations, largely because the organizations were suspicious of giveaways — they demanded exclusive rights or they got mired in red tape related to receiving gifts. Mr. Shafran decided he could do more good by selling the systems. In 2008 he and his team formed a profit-making division, called NowForce, which has expanded into the United States. The business has raised $2.5 million from private investors, and Mr. Shafran expects sales to surpass $3 million this year.

Proudly embracing a profit-making model may require focusing on the balance sheet before unleashing the social mission. “You can’t pay employees a livable wage if you don’t have money in the bank,” said Lisa Lorimer, former chief executive of the Vermont Bread Company, which started making organic cookies in 1978.

VENTURE CAPITAL NOT THE SOLE OPTION Financing a social venture can be even more challenging than financing a traditional business. Some entrepreneurs prefer to self-finance with the help of bank loans. Others pursue venture capital, and they accept the loss of control that entails.

Vermont Bread began with a commitment to paying employees a “livable wage” — three to four times more than the minimum wage most competitors offered. It also offered employees health insurance and bought ingredients from local and sustainable farms, which further squeezed margins, according to Ms. Lorimer.

As a result, the company grew deliberately, mostly through bootstrapping and bank financing. At a time when many in the baking business said the company was unrealistic in trying to sell organic goods (with their brief shelf life) and to pay employees a premium, Vermont Bread was able to find a local bank that offered small loans so the fledgling business could buy equipment — one pan, one truck, one pizza oven at a time.

BE WARY OF GROWTH In 2005, James Gutierrez founded Progreso Financiero, a bank based in Mountain View, Calif. It offers small loans, averaging $1,000, to individuals and small businesses with little or no credit history, through staffed kiosks in Hispanic grocery stores and pharmacies in California and Texas. Borrowers often use the loans to buy a delivery truck or other equipment.

Mr. Gutierrez, 33, whose grandparents immigrated to the United States from Mexico, conceived Progreso Financiero as a “social entrepreneuring” research project when he was earning an M.B.A. at Stanford. He wanted to see if microlending, which was taking off in India, could help the millions of immigrants in the United States. He started in one Mexican supermarket in East Los Angeles. Before long he was operating staffed kiosks in 16 Sears and Kmart stores, which he figured would be magnets for many Latino families. “We thought this was a great opportunity, a great way to grow fast,” he said. It did not turn out that way.

Sears and Kmart shut down Progreso’s kiosks because their loan volume was thin. “We found out that the grass-roots supermarkets are where people go three times a week, not the national chain stores,” Mr. Gutierrez said, which ended up being a valuable lesson. The closings prompted Progreso to refocus on what Mr. Gutierrez called the basic building blocks: technology, automated credit scoring (yielding more loans per store per month), and the grass-roots supermarket channel.

Article source: http://feeds.nytimes.com/click.phdo?i=2b115a807fc77fe0048afb0cadf2de88

Filed Under: Small Business Tagged With: chief executives, company founders, small business guide

A Mobilization in Washington by Wall Street

July 31, 2011 by NewsMaker Leave a Comment

Wall Street is no longer watching from the sidelines as the most polarizing political fight in years plays out on Capitol Hill. In the last few days, top executives have been in close contact with Washington in a last-ditch attempt to prod lawmakers toward a compromise by Tuesday, the administration’s deadline to reach a deal.

On Friday, Jamie Dimon, JPMorgan Chase’s chief executive, raised concerns with Treasury Secretary Timothy F. Geithner about the standoff over the debt ceiling and its potential to disrupt the system through which JP Morgan and other big banks disburse federal payments. Mr. Geithner assured him that the Treasury and Federal Reserve had taken steps to keep the payment system functioning smoothly, according to individuals briefed on the call.

In addition, more than a dozen chief executives from the nation’s biggest financial services firms wrote a joint letter to President Obama and members of Congress on Thursday warning of “very grave” consequences for the economy and the job market if an agreement wasn’t reached.

It’s not just chief executives who are now doing the talking, either.

Bankers have deluged Congressional staff members with research reports outlining the bleak consequences of a default, or even a downgrade of United States government debt by the major rating agencies. And in corporate America’s version of grassroots mobilization, Allstate e-mailed 45,000 employees urging them to call their local members of Congress and demand a deal.

Hedge fund managers, normally among Wall Street’s most secretive tribes, have been stepping out of the shadows, too.

Marc Lasry, a major Democratic fundraiser who manages the $14 billion Avenue Capital hedge fund, said he spoke to half a dozen members of Congress from both parties on Thursday and Friday with blunt warnings that failure to compromise on the debt ceiling risked permanently damaging the nation’s financial standing.

“Over the last couple of weeks, everybody assumed it would get done,” said Mr. Lasry. “It’s only in the last couple of days that I’ve gotten worried it might not.”

Not since 2008 have federal officials and bankers been so clearly aligned in their push for the same policies. Back then, the industry and regulators pressed Congress to pass legislation allowing the federal bank bailout at the height of the financial crisis.

“They both have the same interests at the end of the day,” said Tom Block, a consultant and formerly the global head of government relations at JPMorgan Chase. “They both want the banking system to be safe and sound.”

To be sure, with market turbulence almost certain to follow a default, Wall Streeters also want to safeguard bank profits and their own bonuses. Nevertheless, for much of the spring and early summer, while battle lines were being drawn by Republican and Democratic lawmakers, financial executives mostly stayed out of the fray.

According to lobbyists and executives, banks believed the two sides in Washington would ultimately find a way to make a deal. Plus, there were worries that being too outspoken might spook the financial markets. Most important, with the industry’s image in tatters in the wake of the financial crisis and subsequent bailout, some bankers feared their involvement might actually be detrimental.

“Every time Wall Street raises its head, there are a lot of people ready to chop it off,” said one senior banking industry official.

But as the deadline approached, anxiety began to take hold. A turning point came on July 11, when top officials from some of Wall Street’s most powerful lobbying groups filed into an ornate conference room opposite Mr. Geithner’s office on the third floor of the Treasury Building to make their case about the danger of inaction.

Several of the representatives, like Frank Keating of the American Bankers Association and John Engler of the Business Roundtable, were former governors with deep political connections. Others, including Robert S. Nichols of the Financial Services Forum and Leigh Ann Pusey of the American Insurance Association, are among the most powerful lobbyists in Washington.

“Everyone was on the same page,” said Mr. Nichols. “We all said this had to get done and it was urgent.”

Mr. Geithner told the group that anything they could do to get the debt ceiling lifted would be helpful, according to Mr. Nichols.

Louise Story and Julie Creswell contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=510a0c439f5e80b97c1219a630264750

Filed Under: Business News Tagged With: capital hedge, chief executives, local members

Top Telecoms Chafe at Opening Up Networks to Rivals

July 12, 2011 by NewsMaker Leave a Comment

BERLIN — When the chief executives of Europe’s biggest telecom companies meet on Wednesday in Brussels with Neelie Kroes, the European Union commissioner who oversees their industry, they plan to present her with a list of 11 suggestions on how to spur investment in high-speed broadband networks.

Markedly absent from the list, a copy of which was obtained by the International Herald Tribune, is a proposal being considered by Mrs. Kroes that large operators do not necessarily like: the creation of high-speed fiber networks that operate like utilities and are open to their telecom competitors.

Instead, the group plans to restate a series of principles that big operators have long espoused to keep those competitors off any new networks they might build. The group is led by Ben Verwaayen, chief executive of Alcatel-Lucent; René R. Obermann, chief executive of Deutsche Telekom; and Jean-Bernard Lévy, chairman of Vivendi, which owns the French mobile operator SFR.

“Europe needs healthy companies willing and capable to invest,” the group said as part of their recommendations, which go on to underline the distinction between network operators and operators that seek to simply lease access to a network. “Players who add value should be stimulated by the right incentives.”

The defensive tone of the network operators underlines the impasse Europe faces as it tries to stimulate economic activity by wiring most of its population to high-speed data networks: Most large telecom operators, the likely investors and builders of these new networks, benefit from the status quo, and have little interest in creating new, faster networks — and new competitors.

The reason for their reluctance is understandable. Under European law, all operators must lease access to any new network to their competitors, which in turn can often undersell the same operator because they do not have to cover the costs of running a network.

Mrs. Kroes, a Dutch economist and previously the European Union’s competition commissioner, called together the group of 39 chief executives and high-level representatives from companies like Apple, Nokia, Google, Vodafone, Telecom Italia and BT on March 3 to prepare “concrete proposals” on how Europe could accelerate the construction of high speed broadband networks.

Higher speeds enable the inexpensive, efficient delivery of data-heavy services like video, high-definition television and real-time online gaming involving multiple participants.

The European Commission’s goal, laid out in its so-called digital agenda, is to make broadband service with download speeds of at least 30 megabits per second available to all 500 million E.U. residents by 2020. Only 29 percent of the E.U. population is now connected to such networks, according to the commission, and only 5 percent actually buys the service.

“When it comes to building high-speed fiber networks, Europe needs a new investment paradigm,” said Henry Piganeu, who participated in the deliberations and is the managing partner of Cube Infrastructure Fund, based in Luxembourg. “Unfortunately, there was no consensus on this approach from the telecom industry that came out of the discussions of the C.E.O. roundtable.”

The Continent’s largest operators — Vodafone, Deutsche Telekom, France Télécom, Telefónica and Telecom Italia — have lobbied unsuccessfully for legislation that will give them guaranteed investment returns on new fiber networks they build, or the ability to simply refuse to lease access to competitors.

During the roundtable’s work over the past four months, a group of banking and financial investors were asked whether they would be prepared to invest if Europe were to create a series of telecom network utilities, entities that operate much like public electric, water and gas companies and run a common infrastructure that is leased it to all operators.

Article source: http://feeds.nytimes.com/click.phdo?i=6d243e5b5ae8e184951635e0dadd3601

Filed Under: Business News Tagged With: chief executives, mobile operator, telecom operators