Unethical ethics

Events Analyst Marge Schwietering found this astounding set of admissions in a survey published on July 10^th.

A quarter of Wall Street executives see wrongdoing as a key to success, according to a survey by whistleblower law firm Labaton Sucharow released on Tuesday. In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.

Which begs a couple of questions, like what proportion of the 26 percent who observed such conduct reported it? And what about the 76 percent who didn’t believe that unethical or illegal conduct was necessary for success? Are they all unsuccessful?

“Don’t you worry your pretty little head about it….”

Compensation Analyst Team Leader Scott Patterson spotted this in Alliant Techsystems 2012 proxy statement

“Here’s 50 grand, no questions asked.” Comments Scott. He’s right that a perk allowance is fairly common but the lack of reporting is less common. And as he says, 50 grand is neither here nor there.

The table below shows the components of this [All Other Compensation] column for fiscal year 2012, which include perquisites, tax gross-ups, and Company matching contributions to ATK’s defined contribution plans. The amounts represent the amount paid or accrued by, or the incremental cost to, the Company.

(1) The allowance is not a reimbursement for perquisites. Instead, the annual amount is paid in cash in monthly installments. Accordingly, executive officers have the flexibility in determining how to spend their perquisite dollars and are not required to report how the amounts are used.

What I want to know is what’s the extra four dollars for CEO DeYoung for?

RIM shots

Events Team Leader Mark Magee read this LA Times report on an unfortunate marketing ploy by beleaguered Blackberry firm RIM.

Research in Motion can’t catch a break. A tweet sent out Wednesday meant to promote its BlackBerry brand has backfired on the Canadian company, with many people using the tweet to bash RIM’s phones. The company tweeted from its @BlackBerry account “Fill in the blank: BlackBerry helps me ________.” 

However, many of the people who responded didn’t find BlackBerry too helpful. “Realize how thankful I am for my #iPhone,” said one user, in one of the tamest yet worst responses RIM could have received. Not to be outdone, though, another user said the same about Android.

Another user said she throws her phone at the wall and that was in response to another user who was complaining about how BlackBerry phones require you to pull their batteries out when the phone freezes and crashes. “BlackBerry helps me with my _______. • Throwing skills,” said another user.

Fill in that blank! But surely someone there must have thought: boy that lays us out for some unwelcome comments. Next time they should provide a pull down list that is limited to nice things like “make blackberry and apple crumble….” But why would you need an iPhone to make blackberry crumble? Am I missing something here?

Give a new meaning to the term: generic drug

Events Analyst Dovid Muyderman offers this from a Dyax Corp 8-K on July 11^th.

Dyax Corp. (“Dyax”) and Fujifilm Diosynth Biotechnologies UK Limited (“Fujifilm”) have entered into an agreement, dated effective June 29, 2012, for the commercial manufacture and supply of bulk drug substance for KALBITOR® (ecallantide). Pursuant to the Agreement, Fujifilm has committed to be available to Dyax to manufacture bulk drug substance through 2020.

The agreement is non-exclusive and there are no financial obligations for Dyax under the agreement unless and until binding orders for drug substance are placed by Dyax.

I know the bottom’s fallen out of the film business, but what is Fujifilm doing providing bulk drug substance? What is bulk drug substance? Ground up rolls of film they can’t sell anymore? Develop that one.

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Research in Motion is giving Balsillie nearly $8 million and Lazaridis slightly more than $4 million. “Messrs. Lazaridis and Balsillie revolutionized the worldwide wireless industry with the introduction of the BlackBerry and forever changed how the world communicates,” the company explained in a regulatory filing on Thursday. Research in Motion also said it recognized their leadership as founders and noted that its annual revenues increased to just under $20 billion from $294 million over the last decade.

The explosive growth happened in the good old days, when status seekers proudly waved their BlackBerrys and Research in Motion had plenty of money to share with its investors. As the company struggles to compete in the new market for smartphones, its stock price has plunged nearly 70% in the past year to trade at $10.81 per share intra-day on Friday.

After investors led by Northwest & Ethical Investments L.P. criticized Balsillie’s and Lazaridis’ being both co-CEO and co-chairmen, they stepped down from the co-CEO role in January but remained on the board. Meanwhile Thorsten Heins became the new CEO.

Lazaridis said in a statement this January that he and Balsillie had told the board to make the move. “There comes a time in the growth of every successful company when the founders recognize the need to pass the baton to new leadership,” he said.

Heins, who had joined Research in Motion from Siemens Communications Group in December 2007, is taking the reins of a company whose finances are deterioriating. Research in Motion’s sales amounted to $18.4 billion in the year ended this March, down from $19.9 billion in the previous annual period, according to a regulatory filing.

To be fair, Heins said this January that the company had a strong foundation on which to build, noting positives such as its cash and negligible debt.

But much now depends on an uncertain future. With new products including the PlayBook 2.0 and BlackBerry 10 in the works, Research in Motion’s inventory rose to $1.03 billion in the quarter ended March compared to only $618 million during the same period last year. As the company bets that its supplies will be worth much more once they’re sold, the amount it spent to make them slipped to $2.79 billion as of March compared to $3.10 billion the same period last year.

As the relationship between Research in Motion’s sales and expenses grows increasingly uncomfortable, its financial statements as of March reflect an AGR score of 3. This doesn’t mean that Research in Motion has done anything wrong – its overall corporate governance rating is actually a B – but it does suggest higher accounting risk. In the quarters up until June 2011, when the AGR was a 41, Research in Motion’s score had been much better.

Research in Motion also said in the regulatory filing on Thursday that Antonio Viana-Baptista would not stand for board re-election at the company’s next meeting, and it had nominated Timothy Dattels to take his place.  Maybe Dattels, who had worked in investment banking at Goldman Sachs and is now a senior partner at the private equity firm TPG Capital, L.P., will have a few ideas for Heins in the coming months.

Region:   North America

Sector:   Technology

Industry:  Communications Equipment

Market Cap:   CAD 5,598.0mm (Large Cap)

ESG Rating:   B

AGR:   Very Aggressive (3)

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Unfeeling Company Layoff Term of the Week

This week’s winner in our Unfeeling Company Layoff Term of the Week Competition is Exar. Events Team Leader Mark Magee found this example in an 8-K filing from March 28^th.

On March 28, 2012, Exar Corporation (EXAR) implemented a reduction in force of approximately 120 employees. The Company determined to effect the reduction in force in order to reduce its operating costs and improve profitability. The Company estimates that the reduction in force will result in a reduction in annual operating expenses of approximately $12 million, not including charges associated with the reduction in force.

Not once, not twice, but three times. “Reduction in force.” It almost feels as if there is some team of boffins out there working on coming up with this stuff. Good job, guys and gals.

Nice to know someone’s taking care of the 1%

Mark also found this Reuters article from April 2^nd, describing the merger between two wealth management firms owned by Wells Fargo.

Wells Fargo & Co opened its new Abbot Downing business on Monday, merging two of its wealth management units under a new brand it hopes will expand its market share of America’s richest families.

The new business, catering to ultra-high-net-worth individuals and families with $50 million or more in investable assets, resulted from the combination of Wells’ Family Wealth unit and its Lowry Hill subsidiary. The name Abbot Downing comes from the 19th-century New Hampshire builder of the stagecoaches that have come to represent Wells Fargo.

Oh, just stuff it under the mattress. It’s the “no fee” way.

New to Small Print – Profanity

Events Analyst Marge Schwietering came across this piece of profanity from a commercial banker in a Bloomberg Businessweek article on Research in Motion’s latest earnings disaster and stock price plunge. Nobody seems to mind these woes in Waterloo, Ontario, where RIM is based. Feelings could be summed up with an: “it’ll be alright, ay”.

Explaining this loyalty, or trying to, is this quotation at the end of the article.

“You’re a bit of a dick if you abandon ship,” says Luis Temporao, a commercial banker who acknowledges the company’s failings but hopes RIM can pull itself together under new CEO Thorsten Heins. “This company has put so much into the community.”

Shocking the things that get into the papers nowadays. You wouldn’t get that in the U.K….

Holy Toledo Moment of the Week

Marge also found this article by my friend Michael Brush over at MSN Money. “Holy Toledo,” she said.

This is very much a “money goes to the outgoing and to the incoming” CEO.

Myron Ullman got $34.6 million in compensation for 2011 — about three times the average for large companies.

That included $15 million in stock and option awards and an enormous $15.3 million in “other compensation,” which included $10.1 million for “transition services” as he helped Johnson take the reins. Isn’t that part of the job?

Part of the job, indeed, Michael.

There was also a $1.9 million bonus, even though Penney sales fell 2.8% last year to $17.3 billion; sales have declined in four of the past five years; and Penney stock finished 2011 54% below where it was five years before, even though the S&P 500 has rebounded.

So what exactly was the bonus based on? Sales might be a good guess for a shop. But there you go.

And for the new CEO, a nice little golden hello to tempt him from Apple, whose shares, if I’m not much mistaken, are worth a few dollars more than Penney’s.

For the record, Johnson’s cash salary for 2011 was a modest $375,000. Virtually all of his pay came in the form of stock awards, valued at $52.6 million. Penney says in filings that the grant was meant to partially offset equity awards from Apple that were scheduled to vest in early 2012. That stock is meant to be incentive pay to encourage him to try harder over the next several years.

Except, of course, that this is not really incentive pay at all since it is not tied to performance in any meaningful way.

What century are we living in?

I have to admit to having found this one myself in a Bloomberg article on April 5^th. I’d read about it before, in Bloomberg as well, so its “gobsmackingchinonfloorness” had already registered, but at that point it was not known whether IBM would continue to sponsor the Masters – that’s a golf tournament, by the way, for those of you who don’t follow these things. I checked. Anyway, in the past, the CEO of IBM was invited to join this club, the Augusta National, as part of the sponsorship deal, but in the past, the CEO of IBM was a man. And the Augusta National doesn’t have women members, so the new CEO of IBM is out of luck. On the other hand, what the article doesn’t determine is whether Virginia Rometty actually cares. Who’d want to belong to a club that only has male members anyway? So here you go.

IBM, Exxon Mobil Corp. and AT&T Inc. are sponsors for the Masters, which began today at Georgia’s Augusta National, where no woman has been offered membership since its founding eight decades ago. Historically, the club has offered a membership to the CEO of IBM, allowing him to don the club’s green member blazer.

I’ve got an old green blazer from my school uniform that she can borrow if that’s what it’s about.

“There aren’t many events that pause the crazy world we live in — and this does,” O’Neil, who runs basketball’s New York Knicks and hockey’s New York Rangers, said in an e-mail.

“History and heritage matter.”

And sexism and prejudice seem to matter as well.

Augusta wouldn’t provide a membership list. A 2010 partial list obtained by Bloomberg News and 2004 documents published by the Augusta Chronicle and USA Today show the last four IBM CEOs were members, beginning with John R. Opel, who ran the company from 1981 to 1985 and died last year.

Augusta didn’t have a black member until 1990, when it extended an invitation to Gannett Co. television President Ron Townsend, who still belongs.

I’m not even going to comment on that one, except to refer readers to John Lennon’s pro-feminist song on “Sometime in New York City”.

So how does the Augusta National get away with it? It’s a private club, and they make their own rules.

Oh, come on, that didn’t even ride in the U.K. (according to my wife a far more sexist country than the U.S.) where all those gentlemen’s clubs in London and elsewhere were forced to drop such an outdated and preposterous rule from their books.

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