February 27, 2021

Media Decoder Blog: Disney Shareholders Endorse Pay of Chief Executive

LOS ANGELES – As expected, two shareholder resolutions challenging how the Walt Disney Company is managed were defeated on Wednesday at the entertainment conglomerate’s annual meeting in Phoenix.

At the same time, slightly more Disney shareholders supported the company in a federally required say-on-pay test, in which executive compensation is put to a vote. About 57.6 percent of shareholders supported Disney’s pay package for Robert A. Iger, chairman and chief executive, up from 56.9 percent last year.

Mr. Iger’s pay for 2012 totaled $40.2 million, a 20 percent increase from a year earlier. His compensation is largely tied to Disney’s financial performance; profit soared 18 percent last year, to $5.7 billion.

Because of its high profile, Disney is a routine target for shareholder advocates. But the company’s strong performance recently made this year’s push a difficult one. A proposal to allow some stock owners to nominate board candidates failed with only 39.8 percent of voters supporting it.

The more controversial proposal involved forcing the company to prevent future chief executives from also holding the title of board chairman. Mr. Iger has held both top jobs since last March. This proposal only received support from 35.2 percent of shareholders, despite media reports in recent weeks that Mr. Iger was under fire.

Speaking during the comment section of the meeting, Roy P. Disney, the grandson of the company’s co-founder, took aim at shareholder advocates. “It’s unfortunate that this company should be used as a podium” for those seeking to make a point about corporate governance, he said.

All 10 members of Disney’s board were also re-elected.

As part of the meeting, Mr. Iger showed a model of the castle planned as the centerpiece of a sprawling new theme park resort under construction in Shanghai. The Enchanted Storybook Castle, as Disney called it, is by far the largest featured at any Disney park and looked a smidge like the Hogwarts castle from the Harry Potter movies.

In one of the gathering’s livelier moments, a shareholder identifying himself as Dwight Morgan complained about Disney for the first time opening a Starbucks inside the Disneyland Resort in California; in particular Mr. Morgan was concerned about the role potentially played by Orin C. Smith, a Disney board member and the retired chief executive of Starbucks.

“I’ve heard nothing but bad comments,” Mr. Morgan said.

Mr. Iger responded that the deal was independently vetted and came after years of guest complaints about the quality of Disney’s coffee. “I don’t mean to be cheeky,” Mr. Iger said, “but that has become one of the most popular Starbucks in the country, and we’re going to add more.”

Article source: http://mediadecoder.blogs.nytimes.com/2013/03/06/disney-shareholders-endorse-pay-of-chief-executive/?partner=rss&emc=rss

DealBook: Morgan Chief’s Pay Is Cut for 2nd Consecutive Year

After a year of mixed financial performance at Morgan Stanley, the firm’s chief executive, James P. Gorman, is expected to take a second annual pay cut.

Mr. Gorman’s compensation for last year is estimated to be slightly less than the $10.5 million he took home in 2011, according to a person briefed on the matter. His 2011 pay was down 25 percent from the previous year.

The total value of Mr. Gorman’s compensation package for 2012 is not yet known, but according to a regulatory filing on Thursday, the bank’s board awarded him stock options valued at $2.6 million, on top of his base salary of $800,000. He is expected to earn another $2.6 million in deferred cash, according to this person, who spoke on condition of anonymity because some of the compensation details are not yet public.

Morgan Stanley had to contend with challenges in 2012. On the one hand, its stock rose 26 percent to $19.12, and its fourth-quarter earnings were fairly strong, exceeding analysts’ expectations. On the other hand, it managed to produce a return on shareholder equity of only 5 percent for the year, compared to 10.7 percent at its rival Goldman Sachs. Simply to cover its debt expenses and other capital costs, Morgan Stanley needs to achieve a return on equity closer to 10 percent.

While the firm has made progress in building out its wealth management operation, its fixed-income department, which was badly bruised during the financial crisis, continues to struggle. These issues, according to the person briefed on the matter, played a role in the board’s decision to cut Mr. Gorman’s pay.

The stock options Mr. Gorman was awarded give him the right to buy Morgan Stanley shares in the future at a preset price. But the options will be worthless if the company’s shares fell below that price. In previous years, Mr. Gorman had been granted restricted stock units, which are stock grants tied to the price of the firm’s shares when they vest down the road.

The board decided to grant options rather than restricted stock in 2012 because Morgan Stanley failed to meet the performance criteria set out in a 2001 shareholder resolution that would have allowed it to qualify for full corporate tax deductibility. One reason it failed to meet the conditions was an accounting charge that created huge volatility in its earnings but did not reflect its underlying performance. As a result, the company reported a loss of $117 million for last year. Excluding that charge, its profit was roughly $3 billion.

Mr. Gorman was not the only Wall Street chief to see his pay fall. JPMorgan Chase announced last week that its board was cutting in half the 2012 pay of its chief executive, Jamie Dimon, to $11.5 million, after the bank suffered an embarrassing $6 billion trading loss last year on his watch.

In contrast, Goldman’s chief executive, Lloyd C. Blankfein, is on track to get a raise. Last week, he was granted restricted stock valued at $13.3 million for 2012, nearly double his stock award the previous year. That was on top of a base salary of $2 million. Goldman has not yet revealed the size of Mr. Blankfein’s cash bonus.

Other top executives at Morgan Stanley are also expected to see their pay drop somewhat, according to the person briefed on the matter. Gregory J. Fleming, who leads the firm’s wealth management division, was granted stock options valued at $2.4 million, as was Colm Kelleher, who runs institutional securities. Their total compensation packages are not known, but the person briefed on the matter said their pay would be down from the previous year.

Article source: http://dealbook.nytimes.com/2013/01/24/morgan-stanley-chief-to-take-pay-cut-for-a-second-year/?partner=rss&emc=rss

Air France Fires Its Chief Executive

Mr. Gourgeon, 65, held the chief executive posts of the combined group and of its Air France unit. Alexandre de Juniac, 48, an adviser to the French finance minister, François Baroin, is expected to take the helm of Air France sometime next month, the company said. The appointment of Mr. Juniac, a civil servant who also has worked in the aeronautics industry, is subject to approval by a government ethics committee.

Air France-KLM said its chairman, Jean-Cyril Spinetta, would assume chief executive duties at the parent company until the creation of the new holding company structure. Mr. Spinetta ran Air France for a decade until 2009, with Mr. Gourgeon as his deputy.

Leo Van Wijk, the chief executive of KLM, will become the group’s deputy chief executive. Philippe Calavia will remain as chief financial officer, the company said.

Analysts said the surprise could well signal a major reorganization and a shift in strategy by the airline, which is Europe’s largest by revenue.

“This is a major shock — nothing like this has ever been seen at this company,” said Yan Derocles, an airline industry analyst at Oddo Securities in Paris. “I expect it will be accompanied by significant structural measures.”

The move came after Mr. Gourgeon was re-appointed in July to a new four-year mandate as head of the group holding company, part of a management reorganization that would have seen him give up his dual role at Air France in January. Mr. Gourgeon had personally advocated for Mr. Juniac, who has no previous experience in the airline industry, to succeed him at the French unit.

French media reports said Mr. Gourgeon was informed Friday of the decision to replace him, with some reports suggesting that the move was at the instigation of Mr. Spinetta, his one-time mentor, because of his frustration with the company’s financial performance.

Neither Mr. Gourgeon nor Mr. Spinetta could be reached to comment on the accounts.

Mr. Gourgeon, who trained as a fighter pilot, presided over a troubled two years that included the crash of an Airbus A330 over the mid-Atlantic in June 2009 that killed all 228 people on board. Both Air France and Airbus face accusations of involuntary manslaughter in the case, which is still under investigation.

An interim report by French accident investigators indicated that the pilots of the plane had not received training that could have helped them avert disaster. The airline’s management, which last year ordered a top-down audit of its safety procedures, has rejected criticism of its pilot training program and has asserted instead that a “misleading” pattern of cockpit alarms on the Airbus jet contributed to the crew’s difficulties.

The airline also has struggled more than many of its peers to recover from the economic crisis that followed the collapse of Lehman Brothers in late 2008. For the three months through June it swung to a net loss of €197 million, or about $270 million, from a €736 million profit a year earlier — a result the airline attributed to rising fuel prices and a drop in traffic linked to unrest in the Middle East and the nuclear crisis in Japan. The group has forecast a modest operating profit for 2011, though that is much weaker than the roughly €1 billion that analysts predict for Lufthansa this year and the €600 million for International Airlines Group, the parent company of British Airways and Iberia of Spain.

Analysts said its weak performance made the group particularly vulnerable if the global economy should slip back into a recession. Nonetheless, during a briefing with journalists in September, Mr. Gourgeon said he believed Air France-KLM had emerged from the “violent” 2009 downturn in a healthier position.

Article source: http://feeds.nytimes.com/click.phdo?i=8376609db0996ac83b16d8f637583f98

Air France-KLM Board to Meet Amid Reports of Ouster of Chief

The reports come just four months after Mr. Gourgeon, 65, was re-appointed to a new four-year mandate in July as head of the group holding company, though he had been expected to cede his role at the Air France unit in January.

Mr. Gourgeon was informed Friday of the decision to replace him, Les Echos, a French business newspaper, reported late Sunday. The newspaper cited disappointment with the company’s financial performance.

According to Les Echos, Air France-KLM’s current chairman, Jean-Cyril Spinetta, was expected to assume chief executive duties for the group until a permanent replacement is named. Mr. Spinetta ran Air France for a decade until 2009, with Mr. Gourgeon as his deputy.

A company spokesman confirmed Monday that the board was scheduled to meet at 4 p.m. in Paris, but declined to comment on the subject of the meeting. Shares of Air France-KLM were up nearly 4.5 percent on the reports in early afternoon trading.

Alexandre de Juniac, a former chief of staff to France’s former finance minister, Christine Lagarde, has been rumored since June to be the front-runner to replace Mr. Gourgeon eventually at Air France. Mr. Juniac, 48, is currently an adviser to François Baroin, who replaced Ms. Lagarde as finance minister after she stepped down in June to become managing director of the International Monetary Fund.

The French government owns nearly 16 percent of Air France-KLM, a stake worth about €272 million at current prices, and controls 3 of the 15 seats on the company’s board.

Air France-KLM, while one of Europe’s largest airlines, is one of the region’s least profitable. For the three months through June it swung to a net loss of €197 million, or about $270 million, from a €736 million profit a year earlier. The group has forecast a modest operating profit for 2011, though that is much weaker than the roughly €1 billion that analysts predict for Lufthansa this year and around €600 million for International Airlines Group, the parent company of British Airways and Iberia of Spain.

Air France-KLM has been preparing a major restructuring program aimed at slashing operating costs by up to €800 million. Mr. Gourgeon presented the outlines of a plan to unions in September, which includes a hiring freeze as a first step, but which unions fear may ultimately result of the elimination of as many as 10,000 jobs. A final decision on the plan was expected as early as this month.

Despite its financial straits, Air France-KLM proceded with an order last month for an order of up to 110 Airbus and Boeing long-range jets worth $12 billion as part of a plan to renew its fleet.

Article source: http://feeds.nytimes.com/click.phdo?i=8376609db0996ac83b16d8f637583f98

DealBook: Next Up: A Crackdown on Outside-Expert Firms

Manosha Karunatilaka pleaded guilty to insider trading, admitting that he leaked details about his company’s sales to clients of an expert network firm.Peter Foley/Bloomberg NewsManosha Karunatilaka admitted that he leaked details about his company to clients of an expert network firm.

With the government securing a conviction against Raj Rajaratnam of the Galleon Group on Wednesday, federal prosecutors will shift their focus to expert networks — the intricate web of money managers, corporate executives and consultants at the center of another wave of insider trading cases.

Over the last few years, the Justice Department has built dozens of insider trading cases. The government’s effort has sent shivers through the hedge fund industry, the influential investors that have figured prominently in an investigation into Wall Street.

Prosecutions have developed mainly along two tracks. One group of cases aimed at Mr. Rajaratnam, the founder of Galleon, and the cadre of corporate insiders and investment traders from whom he solicited confidential information. The other group has involved expert network firms, the Wall Street matchmakers who connect large investors with outside experts.

In several indictments involving expert networks, authorities claim that hedge fund managers paid outside consultants handsome fees for providing nonpublic information. The government has also charged executives at the expert network firms, the ones who brokered the connections, with knowingly facilitating the exchange of illegal stock tips.

Prosecutors say the money managers often sought impending information on large technology companies, like Apple and Dell, whose stocks can turn quickly on tidbits about financial performance and forthcoming products. On Wednesday, a former account manager at the Taiwan Semiconductor Manufacturing Company, Manosha Karunatilaka, pleaded guilty to insider trading, admitting that he leaked details about the company’s sales and shipping orders to clients of Primary Global Research, an expert network firm.

“The cases send a good signal that firms need to remain vigilant,” said Carlo V. di Florio, the Securities and Exchange Commission’s director of compliance.

The insider trading investigation has had a chilling effect on the expert network industry, which is struggling to maintain its Wall Street client base. Scared of being ensnared by scandal, large financial firms are reducing their use of expert networks and reviewing their internal policies regarding outside consultants. In the last year, revenue at these firms dropped 20 to 30 percent, according to Integrity Research, which tracks the industry.

“Managers are studying those complaints carefully and saying, ‘O.K., what can we do to make sure that we’re not doing anything like this?’” said Marc E. Elovitz, a lawyer at Schultz Roth Zabel, which represents some of the country’s largest asset management firms. “With the increased attention to it, there’s been some more selectivity in the use of these services.”

The expert network industry developed after the S.E.C. enacted the Regulation Fair Disclosure rule in 2000. The rule, which bans public companies from disclosing “material nonpublic information to certain individuals or entities,” makes it illegal for corporate executives to share information only with certain parties. Lacking that exclusive pipeline, some big investors began relying on expert networks to supplement traditional sources of research.

Now, Wall Street is distancing itself from the industry. The hedge funds Balyasny Asset Management, Millenium Partners and Och-Ziff Capital Management have suspended their use of such consultants, according to people close to the firms who were not authorized to speak publicly on the matter.

Other firms are adjusting their rules. Credit Suisse has restricted the use of expert networks to certain departments. Morgan Stanley is hammering out a firmwide policy that will effectively limit their use, according to one person with knowledge of the situation who was not authorized to speak publicly.

Some hedge funds are barring the use of consultants who work at publicly traded companies, while others are encouraging compliance officials to randomly monitor phone conversations.

Federal authorities have tried to quell the anxiety by drawing a distinction between the legitimate players and the bad actors. In March, Preet S. Bharara, the United States attorney in Manhattan, said that there was “nothing inherently wrong or bad about hedge funds or expert networking firms or aggressive market research, for that matter.”

Such statements have provided little reassurance. Many financial firms that are still using expert networks have moved their business to the largest outfits with the most established compliance practices

“If this little industry is to survive, it’s going to have to glow with virtue, which means a lot of self-regulation,” said Robert Weisberg, a professor of criminal law at Stanford.

But comprehensive systems to vet consultants, train employees and maintain sprawling databases requires significant capital and human resources. The Gerson Lehrman Group, the industry’s largest player with a roughly 60 percent share, employs a full-time compliance staff of about 20 people.

Compliance is a heavy burden for the smaller players. There are only about 40 expert network firms in the United States, according to Integrity Research, and only a handful have annual revenue in excess of $40 million. Given the costs associated with compliance, Professor Weisberg predicts that many smaller firms will have to team up with their larger brethren or shut down.

Mr. di Florio said the S.E.C. was paying greater attention to compliance by expert networks. “Firms recognize that regulators, like the S.E.C., have their radar up on these insider-trading practices, and we’re looking to see that they have effective regulatory compliance and risk management programs in place,” Mr. di Florio said.

Several states, using powers under the Dodd-Frank law to police hedge funds, are starting to outline new rules to govern the industry.

Earlier this month, William F. Galvin, the chief financial regulator in Massachusetts, proposed regulations to force investment advisers to obtain certification from expert network consultants that they will not provide any confidential information.

“I hope this leads to more sensitivity in the industry that they cannot simply purchase insider information,” said Mr. Galvin said. “We are going to be as aggressive as we can.”

Azam Ahmed contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=2fb017ab870d1eb2dd44a374d0a31e43

2 Years After a Bankruptcy, Chrysler Posts a Profit

Chrysler, the only Detroit automaker to lose money last year, earned $116 million in the quarter, after losing $197 million in the period a year ago. Revenue grew 35 percent, to $13.1 billion, while sales were up 18 percent.

“Chrysler Group’s improved sales and financial performance in the first quarter show that our rejuvenated product lineup is gaining momentum in the marketplace and resonating with customers,” Sergio Marchionne, the chief executive of Chrysler and its Italian partner, Fiat, said in a statement. “These results are a testament to the hard work and dedication of our employees, suppliers and dealers, all of whom are helping Chrysler create a new corporate culture built on the quality of our products and processes, and simple, sound management principles.”

Chrysler said it had $9.9 billion in cash on hand as of March 31, an increase of $2.6 billion in three months, and $13.3 billion in debt.

The results are a milestone for Chrysler, which narrowly avoided liquidation after its decade-long tie-up with the German carmaker Daimler dissolved and a private equity firm, Cerberus Capital Management, failed in its revival efforts. The profit comes almost exactly two years after President Obama forced Chrysler to file for bankruptcy protection and form a partnership with Fiat because he and other officials believed it could not survive on its own.

Chrysler reported operating profits in each quarter of 2010, but each time interest payments to the American and Canadian governments, which totaled $1.23 billion for the year, resulted in losses over all. Chrysler lost $652 million last year.

In its report the company reiterated its previous forecast for net income this year of $200 million to $500 million.

The company plans to significantly reduce its interest payments by refinancing the $7.5 billion in government loans it received before and during its bankruptcy. On Monday, Chrysler said it would repay the loans by the end of June by selling $2.5 billion in bonds and borrowing from new secured credit facilities totaling $5 billion.

Interest payments in the first quarter totaled $348 million, up from $311 million in the period a year earlier. Mr. Marchionne declined last week to say how much Chrysler would save through its refinancing.

Chrysler introduced or revamped 16 models in 2010, and it said increased sales of many of them played a role in its first-quarter profit, as market share increased in the United States and Canada, its two largest markets.

Jesse Toprak, vice president for industry trends and insight at TrueCar.com, said Chrysler still needed to make its vehicle lineup more appealing, particularly in the small-car segments that have become more popular amid rising gas prices.

“The outstanding issue for them is their continued reliance on S.U.V.’s and trucks,” Mr. Toprak said. “They’re on the road to recovery, but there’s much more to be done to really claim that Chrysler is back on their feet and healthy.”

Pickups and other light trucks accounted for 78 percent of Chrysler’s first-quarter sales in the United States compared with about 60 percent for General Motors and the Ford Motor Company.

Some Chrysler dealers began selling the tiny Fiat 500 car this spring, and it plans to bring out more small cars based on Fiat designs and technology within the next several years, but most of its focus since bankruptcy has been on redoing larger models like its Jeep Grand Cherokee and Dodge Durango sport-utility vehicles.

Chrysler remains far less profitable than its domestic competitors. Ford earned $6.6 billion last year and $2.55 billion in the first quarter of 2011. Ford’s sold 3.5 times as many cars and trucks as Chrysler last quarter, and its profit was 22 times as much as Chrysler’s.

G.M., which filed for and emerged from bankruptcy a month later than Chrysler, earned $4.7 billion in 2010. It is scheduled to reveal first-quarter results Thursday.

The United States and Canada own a combined 10.8 percent of Chrysler, which is expected to have an initial public offering later this year or in early 2012. Chrysler is 30 percent owned by Fiat, which plans to pay $1.27 billion for an additional 16 percent stake when the government loans are repaid. Chrysler’s majority owner is currently a trust fund set up to cover the cost of health care for hourly retirees.

Article source: http://feeds.nytimes.com/click.phdo?i=3a04cc2df5a185e55d07a064766299fc