By James A. Kaplan and Lev Janashvili Last year, we wrote extensively about the rising relevance of forensic accounting to the daily decisions of institutional investors, insurers and other market participants. Several reports in the first week of the New Year suggest that forensic measures of issuer risk will continue to gain prominence in 2013. [...]
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Forensic Measures of Fragility: Investing in an Era of Systemically Mispriced Risk
January 7, 2013 in AGR, Corporate Governance, Daily Viewpoint
More Than 100 Countries Pass Reforms Designed to Protect Investors
January 7, 2013 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter 108 economies around the world implemented 201 business regulatory reforms between June 2011 and May 2012, according to recent research by the World Bank Group’s private sector investment unit the International Finance Corp. Some of these reforms included measures intended to better protect investors. For its report titled “Doing Business [...]
Faith-Based Audits Prevail at One in Six US Firms
January 7, 2013 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research
By Kimberly Gladman Buried deep in the Wall Street Journal one day last month was a small but stunning article I thought worthy of the front page. The Public Company Accounting Oversight Board (PCAOB), the article reported, had stated that “the eight biggest accounting firms failed in 22% of the audits it reviewed last year [...]
Event Alerts for Responsible Investors, 01.04.2013
January 4, 2013 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research
In this week’s Event Alerts for Responsible Investors, we included 29 companies whose ESG and accounting risk profiles have been affected by recent events. Environmental Social Governance Accounting Royal Dutch Shell Plc (AMS: RDSA)Exelon Corporation (NYSE: EXC)Chevron Corporation (NYSE: CVX) Stryker (NYSE: SYK)Chevron Corporation (NYSE: CVX)Toyota Motors (NYSE: TM)Telstra Corporation (ASX: TLS)Singapore Airlines (SIN: C6L)Eli [...]
It’s Nice to be a Dillard at Dillard’s
January 4, 2013 in Corporate Governance, Daily Viewpoint, Ratings Watch
By Damion Rallis, Senior Research Associate While share prices at retailer Dillard’s, Inc. (NYSE:DDS) continue to soar to unprecedented levels, recent events serve as a reminder that the company’s long-term prospects may be muddled by a self-serving ownership and leadership structure dominated by Dillard family members. Despite a recent $5 special dividend along with impressive [...]
Recommended Reading on Forensic Accounting
January 3, 2013 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research
By Lev Janashvili Last year, GMI Ratings published several research reports and opinion pieces (see below) reminding our readers that aggressive accounting remains a widespread practice at public companies. We also argued that investors need to incorporate forensic accounting, along with ESG research, into their day-to-day decisions about stock selection and, importantly, stock rejection. In [...]
Your Bank’s 10-K: Clear as Mud, And Dangerous
January 3, 2013 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research
By Kimberly Gladman, CFA, Ph.D., Director of Research and Risk Analytics In an excellent article recently published in The Atlantic, University of San Diego law professor Frank Partnoy and ProPublica reporter Jesse Eisinger offer an incisive, lucid, and engagingly written critique of banks’ financial reporting. Using the example of Wells Fargo’s lengthy annual report, the authors [...]
Biweekly View: Petrobras Grapples With Oil Spill Prevention
January 3, 2013 in Corporate Governance, Daily Viewpoint, ESG Ratings & Research, Ratings Watch
By Sonja Ryst, Financial Reporter Alexandre Anderson de Souza, president of the Brazilian fishermen’s organization Associação Homens e Mulheres do Mar (AHOMAR), has been waging a war against Petroleo Brasileiro SA (PBR.) When the company also known as Petrobras failed to prevent the rupture of an underwater pipeline to its refinery in January 2000, oil [...]
More than 40% of Middleby Assets Consist of Goodwill
January 3, 2013 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter A significant chunk of The Middleby Corp. (MIDD)’s assets consist of goodwill, after a string of acquisitions such as the cooking equipment maker’s recent $380 million deal with Viking Range Corp. Fred Carl, Jr., a fourth generation building contractor, founded Viking in the 1980s after recognizing that some people wanted [...]
Liberty Global Avoids Sending Garbage To Landfills
January 2, 2013 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter Liberty Global Inc. (LBTYA) said recently that around 62% of its total garbage went to landfills in 2011, as the cable operator found other ways to manage much of it. The company recycled more than 2,119 metric tons of its 7,146 metric tons in total waste, according to its first [...]
AGL Discloses Effort To Improve Workplace Gender Equity
December 28, 2012 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter With a boost from new requirements in Australia, AGL Energy Limited (AGK) noted limited progress this year in its ongoing battle to make workplace policies more amenable to female staff. The Australian energy company said in its 2012 Sustainability Performance Report released this month that women made up 35% of [...]
Herbalife: With Vital Signs Flagging, the Company is Fighting Back
December 27, 2012 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research, Research Reports - GMI
By Lev Janashvili Herbalife’s battle with its detractors is heating up. The consumer products company (NYSE: HLF) has lost about 60% of its market value since April of 2012. Short interest in the stock, a gauge of investor pessimism, has increased by more than 500% over the past year. The latest data from ThomsonOne, published [...]
Samsung Requests Crack Down on Ericsson’s U.S. Sales
December 27, 2012 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter Samsung Electronics Co., Ltd. (SEO:005930) has requested an investigation of Ericsson Inc. (ERIC)’s compliance with laws intended to combat unfair importing practices and enforce U.S. intellectual property rights at the country’s border, as the two wireless communications companies continue their patent battles. The Korean consumer electronics maker filed a complaint [...]
Why sell and buy back stock at the same time?
December 24, 2012 in Corporate Governance, Daily Viewpoint
By Agnes Grunfeld Neither share repurchases nor insider sales necessarily point to hidden risks at public companies. Under certain circumstances, corporations can legitimately buy back attractively valued stock, and insiders can realize gains on their holdings of company stock or just diversify their positions. At other times, both buybacks and insider sales can serve [...]
Gilead Sciences: How Long Can the Giddiness Last?
December 19, 2012 in AGR, Corporate Governance, Daily Viewpoint, Ratings Watch
By Damion Rallis, Senior Research Associate While the share price of Gilead Sciences, Inc. (NASD:GILD) continues its steady and impressive climb—up more than 80% since the start of 2012—a closer look at the company’s governance profile reveals several troubling indications that there could be trouble ahead for the biopharmaceutical company. Despite the drugmaker’s announcements last week [...]
As Amgen Pleads Guilty, Supervisors Remain Overextended
December 19, 2012 in Corporate Governance, Daily Viewpoint
By Sonja Ryst, Financial Reporter Amgen Inc. (AMGN) pleaded guilty Tuesday to illegally marketing its anemia drug Aranesp, and agreed to pay $762 million in criminal penalties and settlements of whistle-blower lawsuits, media such as the New York Times reported. As this regulatory issue winds to a close for the Thousand Oaks, Calif.-based biotechnology company, Amgen’s senior [...]
GMI Ratings’ Investor Alert 12.18.12
December 18, 2012 in AGR, Corporate Governance, Daily Viewpoint, ESG Ratings & Research, Investor Alert
Recent events have significantly affected the ESG risk profiles of the following companies: Environmental Chevron: On December 15, 2012 Chevron agreed to pay 310 million reales ($155 million) to Brazil for an oil spill last year that fouled beaches in Rio de Janeiro. The November 2011 spill saw some 3,000 barrels of crude soil the [...]
Oi Complies With Higher Corporate Governance Standards
December 17, 2012 in Corporate Governance, Daily Viewpoint
Oi announced its compliance with higher disclosure and corporate governance standards, as the Brazilian telecommunications operator continues taking steps intended to improve its access to capital from investors. But Oi could still do more on this front. Oi’s shares began trading on the Brazilian stock exchange’s Special Corporate Governance Stock Index on December 17, the [...]
New Frontiers in Extra-Financial Research: A Year in Review
December 17, 2012 in AGR, Corporate Governance, Daily Viewpoint
By Lev Janashvili As usual, the end of the year has brought a new cycle commentary about the mix of risks and opportunities investors might find in the capital markets in 2013. Financial publications are enticing readers with nuggets of thoughtful prophecy shaded by a vague unease about apocalyptic scenarios for Friday, December 21 inspired [...]
SEC Alleges Aletheia Cherry-Picked Investments, New York Times Says
December 17, 2012 in Corporate Governance, Daily Viewpoint, GMI In the News
The Securities and Exchange Commission said Peter J. Eichler Jr., owner of the investment firm Aletheia Research and Management, had perpetrated a “cherry-picking” scheme, The New York Times reported. He allegedly steered profitable trades into his personal accounts while allocating money-losing investments into hedge funds that he managed. Mr. Eichler’s scheme, the government reportedly said, allowed his [...]