Tag Archives: Company coverage
by Chris Roush
Arik Hesseldahl of All Things D writes that CNNMoney.com has basically retraced a story about Hewlett-Packard that stated the computer company had hired dancers for $20,000 to encourage its workers to be creative.
Hesseldahl writes, “The extent of HP’s relationship with the dance troupe appears to be that it was invited to dance at the Boise campus on a day when local charitable groups — the Trey McIntyre Project is a not-for-profit organization — solicit contributions from employees.
“HP complained to CNNMoney, which has since altered the story considerably. A headline that first read, ‘Why Hewlett-Packard is hiring dancers’ now reads ‘Dance troupe markets creativity to cube-dwellers,’ and is accompanied by a lengthy correction note. I asked CNNMoney tech editor Stacy Cowley for a comment, and she basically pointed me to the editor’s note that’s now topping the story.
‘An earlier version of this story mischaracterized the relationship between Hewlett-Packard and the Trey McIntyre Project. The dance troupe has performed at HP’s Boise office several times as part of a company event showcasing the area’s artistic organizations and charities, but HP has not hired or paid TMP for its creative services. The text of this article has been updated and corrected. CNNMoney regrets the error.’
“I also reached out to Cheryl Strauss Einhorn, the writer of the piece, and haven’t yet heard back.”
Read more here.
The quarterly earnings call is much more than a casual conversation among a company’s executives, analysts, investors and the media — it’s a carefully scripted dialogue that is practiced well in advance of a call.
The planning and preparation that goes into an earnings call allow little room for journalists to fire questions that may throw an executive off message or make them appear ignorant about a topic in front of a large audience that has the power to push a company’s stock price upward or send it plummeting.
In fact, many publicly traded companies ban business journalists from asking questions during the call at all, and direct them to a specific public relations contact following the call for any follow-up questions. However, oftentimes analysts are permitted to ask questions on the live call.
So, then, why are business journalists prevented from asking executives questions during the call? And why are analysts allowed? Is this a smart tactic?
An Exclusive Club
Prior to 2000, quarterly conference calls were primarily reserved for large investors and analysts, and journalists, along with small investors, were often not even permitted to join in the earnings call. Many companies participated in selective disclosure during these calls, giving some investors an advantage over others.
However, in 2000, the U.S. Securities and Exchange Commission (SEC) mandated through Regulation Fair Disclosure (FD) that publicly traded companies must disclose material information to everyone at the same time. Therefore, publicly traded companies were forced to open their earnings calls to everyone, including journalists.
Even though others are now allowed to dial in and listen to these calls, there is still a sense of exclusivity, and the companies frequently cater to a select group of listeners.
The company earnings calls are held for the benefit of institutional investors and analysts covering the company for investment banks, Sapna Maheshwari, a business reporter at BuzzFeed said in an email on Thursday. The analysts, she said, who ask questions on the calls typically represent this cohort of people, which is why they are provided with greater access.
“Analysts often ask a lot of softball questions and offer many congratulations before saying anything on the calls,” Maheshwari said. “They are often scared of losing access.”
Investor relations practitioners anticipate the type of Q&A from analysts, and rehearse the questions with executives in advance. Further, some companies screen analysts in advance for the questions that they may ask through one-on-one emails and phone calls, according to an article from Inside Investor Relations. The investor relations team then often prepares a documented and suggested answers for possible questions that may come up during the Q&A portion of the call.
It’s possible that companies are better able to anticipate the questions analysts may ask, and that they allow them greater access for this reason. This isn’t to say that analysts won’t fire pointed questions; many have on occasion.
Lois Boynton, a professor at UNC-Chapel Hill’s School of Journalism and Mass Communication and former public relations professional, offers additional reasons for why companies provide analysts access to top executives during earnings calls while barring business journalists.
“One argument is that they just don’t want to answer the business journalists’ questions,” Boynton said in an email on Thursday.
“The reputation journalists have for being adversarial probably doesn’t endear them with companies. My guess is that the argument would be couched as their desire to use the limited time they have to talk with those who make decisions [analysts] and who they may feel are better informed.”
Adversarial topics are ones that public relations professionals take painstaking measures to avoid during conference calls that are being closely monitored by those who have the ability to influence the market, and why so much preparation goes into calls. One slip-up could have a significantly negative effect for a company.
Boynton also provided an alternative explanation, and said that companies may also not want journalists asking questions because they don’t want analysts to hear their questions and be influenced by them.
“What is the journalist asks something that could call the company’s reputation into question,” Boynton said. “Would that affect what the analysts do?”
Many companies justify the practice of not allowing journalists to ask questions during the earnings call because they defer them to the public relations department following the conference call, Boynton said.
Working at Bloomberg News last summer, I found this often to be the case. Some companies, Yum! Brands Inc. in particular, were excellent at fielding questions from reporters immediately following an earnings call, while it was nearly impossible to get in touch with others.
“There’s a misconception that is reinforced when the company shuttles the reporter to the PR person – the message is that the public relations person’s role is to keep journalists away from those sources who can answer their questions,” Boynton said. “Although there are PR practitioners who have that role, most see their role as opening doors to the exec level.”
One of the only companies that allow reporters to ask questions during the actual call is News Corp., hosting separate sessions for analysts and journalists to ask question.
“I haven’t run across companies that allow journalists to ask questions on what I cover [retail],” Maheshwari said. “In fact, there is only a handful of companies that are good about putting me in touch with executives.”
Should more companies open up earnings calls to journalists and be more transparent, like News Corp. or is it smart to limit questions to analysts during these sessions?
Given the events of last week, it seems appropriate to spend some time discussing communications principles in the time of a crisis for a business.
There are a number of ways to define a crisis, and in fact, there are many divergent views on how best to handle a corporate crisis from a PR perspective.
The simplest way to think about a crisis is an event that an organization does not expect and has the potential to cause significant long-term damage if not properly managed. Properly managed means that after some time an organization and those directly impacted by the crisis are able to get back to some state of normalcy.
As with pretty much every aspect of public relations, speed is a critical component to good crisis communications protocol. Once a crisis happens, the people directly impacted by it want to know who is responding to their needs. This is one of the trickiest moments for a communications leader because in the chaos of a crisis there are a lot of people saying what should and shouldn’t be done. At this time, it is best to focus on figuring out who is most affected and what do they need to hear that will assure them the business is responding.
Details are going to be sparse, but simple phrases that indicate the business is aware of a problem can go a long way in those early moments.
The key focus at this time is toward those most impacted by the crisis. This means that reporters should not be a primary focus in the immediate aftermath of any crisis. The challenge in staying focused on this approach is that the influx of media inquiries after a crisis can be crippling for nearly any communications team.
Just like always, all media calls should be returned, but the PR person should not get caught in long conversations with reporters. It is important to acknowledge the company is addressing the situation and that more detail will follow.
The goal is to project to the media a sense of calm, that the company is focused on the problem and not overwhelmed. Impacted parties will want to hear directly from the company. The more personal it can be delivered, the better.
In addition to a staggering amount of incoming inquires, there will inevitably be a similarly sized influx of stories. This coverage should be closely watched to ensure that in the fog of the immediate fallout damaging misinformation is not gaining traction as fact.
At the appropriate time, a company should address the media and discuss in as much detail as possible what caused the crisis, how it was handled and how the company is moving forward. This might be considered pulling the Band-Aid off all at once theory.
Media are important vehicle to convey important messages to impacted parties, but they are also focused on addressing the totality of a crisis all at once.
Communications teams are best to squarely focus on responding to the needs of those most impacted, as aiding those groups is not only the right thing to do but will also allow the company to eventually move past a crisis.
by Liz Hester
Koch Industries, controlled by billionaires Charles and David of the same name, is now looking to expand their reach to the media, something new for the conglomerate.
Here’s the story from the New York Times:
Other than financing a few fringe libertarian publications, the Kochs have mostly avoided media investments. Now, Koch Industries, the sprawling private company of which Charles G. Koch serves as chairman and chief executive, is exploring a bid to buy the Tribune Company’s eight regional newspapers, including The Los Angeles Times, The Chicago Tribune, The Baltimore Sun, The Orlando Sentinel and The Hartford Courant.
By early May, the Tribune Company is expected to send financial data to serious suitors in what will be among the largest sales of newspapers by circulation in the country. Koch Industries is among those interested, said several people with direct knowledge of the sale who spoke on the condition they not be named. Tribune emerged from bankruptcy on Dec. 31 and has hired JPMorgan Chase and Evercore Partners to sell its print properties.
The papers, valued at roughly $623 million, would be a financially diminutive deal for Koch Industries, the energy and manufacturing conglomerate based in Wichita, Kan., with annual revenue of about $115 billion.
Politically, however, the papers could serve as a broader platform for the Kochs’ laissez-faire ideas. The Los Angeles Times is the fourth-largest paper in the country, and The Tribune is No. 9, and others are in several battleground states, including two of the largest newspapers in Florida, The Orlando Sentinel and The Sun Sentinel in Fort Lauderdale. A deal could include Hoy, the second-largest Spanish-language daily newspaper, which speaks to the pivotal Hispanic demographic.
They’re not the only ones looking at the media properties. Here are a few more details from the Wall Street Journal:
The Kochs are among several parties that have shown interest in Tribune’s titles, the people said. Others include greeting-card magnate Aaron Kushner, who led a group that purchased the Orange County Register and six other Freedom Communications dailies last year. In an interview Sunday, Mr. Kushner reiterated his interest in a potential bid for all of the Tribune papers.
Koch Industries encompasses a vast array of mostly industrial businesses, from energy to paper milling, but to date has had little exposure to the media business.
The Koch brothers have been active funders of conservative causes such as the Americans for Prosperity political action committee, however, and Koch Industries has started its own website, KochFacts.com, to rebut what they see as inaccurate reporting about their activities.
The sale process is still in preliminary stages. Financial information on the papers is expected to go out next month, say people familiar with the situation. Formal bids wouldn’t be expected until some time later.
A representative for Tribune said it “our long-standing policy is to decline to comment on any speculation involving the company or its media businesses.”
The Times said the main competitor for the Los Angeles Times is a local group:
Koch Industries’ main competitor for The Los Angeles Times is a group of mostly Democratic local residents. In the 2012 political cycle, Mr. Broad gave $477,800, either directly or through his foundation, to Democratic candidates and causes, according to the Center for Responsive Politics. Mr. Burkle has long championed labor unions. President Bill Clinton served as an adviser to Mr. Burkle’s money management firm, Yucaipa Companies, which in 2012 gave $107,500 to Democrats and related causes. The group also includes Austin Beutner, a Democratic candidate for mayor of Los Angeles, and an investment banker who co-founded Evercore Partners.
“This will be a bipartisan group,” Mr. Beutner said. “It’s not about ideology, it’s about a civic interest.” (The Los Angeles consortium is expected to also include Andrew Cherng, founder of the Panda Express Chinese restaurant chain and a Republican.)
Apparently, the Tribune Co. is the preferred bidder for the newspapers, according to the New York Times:
At this early stage, the thinking inside the Tribune Company, the people close to the deal said, is that Koch Industries could prove the most appealing buyer. Others interested, including a group of wealthy Los Angeles residents led by the billionaire Eli Broad and Ronald W. Burkle, both prominent Democratic donors, and Rupert Murdoch’s News Corporation, would prefer to buy only The Los Angeles Times.
The Tribune Company has signaled it prefers to sell all eight papers and their back-office operations as a bundle. (Tribune, a $7 billion media company that also owns 23 television stations, could also decide to keep the papers if they do not attract a high enough offer.)
Koch Industries is one of the largest sponsors of libertarian causes — including the financing of policy groups like the Cato Institute in Washington and the formation of Americans for Prosperity, the political action group that helped galvanize Tea Party organizations and their causes. The company has said it has no direct link to the Tea Party.
A lot of the concern about the politicizing of the media reminds me of similar concerns voiced when Rupert Murdoch bought The Wall Street Journal. If people with the means are able to buy coverage or editorial page space, then there is the risk that others’ ideas won’t be covered.
Murdoch did institute changes to the structure of stories but not to coverage. Let’s hope that if the Koch brothers do win the Tribune properties, there won’t be any meddling in the editorial policies.
by Liz Hester
Remember when the market was peaking? Well, it seems that all that optimism on corporate performance was misplaced. Several companies have reported earnings that missed analysts estimates, prompting investors to pair back exposure to stocks.
Let’s start with the Wall Street Journal’s coverage of the market:
Technology and consumer stocks led the market’s decline following a basket of lackluster earnings reports.
The Dow Jones Industrial Average fell 63 points, or 0.4%, to 14559, in late trading Thursday. The Standard & Poor’s 500-stock index slid nine points, or 0.6%, to 1543, on pace for its lowest level since early March. The Nasdaq Composite Index sank 40 points, or 1.3%, to 3164.
Stocks have seen big swings this week, alternating between gains and losses, starting with Monday’s 266-point decline, the Dow’s biggest of the year. Tuesday’s rebound was nearly washed away by Wednesday’s 138-point drop for the blue chips.
Quarterly earnings reports from a host of major corporations set the tone of trading.
Through Thursday morning, first-quarter earnings growth for 82 of the S&P 500′s companies had declined 0.4%, according to FactSet, on pace to mark the second year-over-year decline in earnings in the past three quarters. Meanwhile, corporate revenue is expected to rise 3.2% in the first quarter, well below growth of 6% in the first quarter last year, according to S&P Capital IQ.
“The revenue side of the equation looks challenged on the whole,” said Bill Stone, chief investment strategist at PNC Asset Management Group. “That’s a testament, unfortunately, to a global economy that continues to struggle.”
Reuters decided that the declines were due to “weak economic data” and said it was the third day of losses:
Stocks fell on Thursday for the third day this week after data showed signs of slower growth ahead for the U.S. economy, while bearish technical signals added to doubts about the market’s strength.
Bloomberg led with earnings, but included the Philadelphia region manufacturing numbers, then returned with context about the quality of earnings this season.
Stocks kept losses after a measure of manufacturing in the Philadelphia region expanded at a slower pace and the index of U.S. leading indicators unexpectedly declined for the first time in seven months. The S&P 500 fell below its 50-day moving average for the first time this year. That level, currently at around 1543, is watched by some analysts to gauge the trend of the market.
Almost 30 companies in the S&P 500 were scheduled to post results today. Of the 82 that have reported since the season began, 74 percent have beaten analysts’ estimates for profit and 49 percent have exceeded sales forecasts, according to data compiled by Bloomberg. Analysts project first-quarter results dropped 1.4 percent, the first contraction since 2009.
The Chicago Board Options Exchange Volatility Index (VOL), or VIX, increased 4.9 percent to 17.31. The gauge briefly erased losses for the year after climbing as much as 10 percent. The VIX, which moves in the opposite direction to the S&P 500 about 80 percent of the time, reached a six-year low in March and has since risen 53 percent.
“When we were heading into this earnings season, the estimates had come down, but the S&P itself was still in a situation where sentiment was high and correcting,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in the phone interview. His firm manages $3.7 billion. “That can play itself out with a consolidation.”
And for the international perspective, let’s look at the Financial Times, which said investors were worried about global growth prospects:
Equity and commodity markets in the US and Europe had a choppy time as investors struggled to shake off lingering concerns about the prospects for global economic growth.
Gold also experienced a fresh bout of volatility but managed to keep intact its recovery from a two-year low struck earlier this week. The yellow metal was up 0.8 per cent to $1,387 an ounce, although silver edged back slightly.
The latest economic reports out of the US did little to quell worries that a slowdown could be under way.
The Philadelphia Federal Reserve’s April survey of manufacturing activity weakened slightly while the index of leading indicators for March also fell. Meanwhile, initial jobless claims edged up slightly last week – the survey period for the Bureau of Labour Statistics’ April non-farm payrolls report.
“The spring and summer dips in economic activity that dominated 2011 and 2012 look to be repeating this year again,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.
The data kept alive the sense of uncertainty in the markets prompted earlier in the week by unexpectedly weak Chinese GDP figures, some worrying numbers from Germany and the International Monetary Fund’s downgrade to its 2013 global growth forecasts. Indeed, Andrew Kenningham at Capital Economics argued that the IMF’s projections – while far from bullish – still looked too optimistic.
Either way, seems some of that investor optimism is heading out the door and money is being pulled out of the markets. No matter what you blame it on, it seems the stock market party might be over.
by Liz Hester
In a fun turn of events for technology reporters and Wall Street, Dish Network decided to put together a $25.5 billion bid for Sprint Nextel, offering a competing bid to Japanese Softbank’s.
Here are some of the details from the New York Times:
The pay-TV operator Dish Network said on Monday that it had submitted a $25.5 billion bid for Sprint Nextel.
The move is an attempt to scupper the planned takeover of Sprint Nextel by the Japanese telecommunications company SoftBank, which agreed in October to acquire a 70 percent stake in the American cellphone operator in a complex deal worth about $20 billion.
Dish Network thinks it can do better. Under the terms of its proposed bid, Dish Network said it was offering a cash-and-stock deal worth about 13 percent more than SoftBank’s bid.
Dish Network values its offer at $7 a share, including $4.76 in cash and the remainder in its shares. The offer is 12.5 percent above Sprint Nextel’s closing share price on Friday.
“The Dish proposal clearly presents Sprint shareholders with a superior alternative to the pending SoftBank proposal,” said Charles W. Ergen, Dish Network’s chairman.
Mr. Ergen said a “Dish/Sprint merger will create the only company that can offer customers a convenient, fully integrated, nationwide bundle of in- and out-of-home video, broadband and voice services.”
The Wall Street Journal put the latest move by Dish into great context in this piece:
The unsolicited offer is Mr. Ergen’s most audacious attempt yet to move from the slow-growing pay-television business into the fast-evolving wireless industry. The satellite TV pioneer eased into the industry by amassing spectrum and winning approval from regulators last year to use it to offer land-based mobile-phone service. But he lacks much of the rest of the operation, including a cellphone network, which would be costly and time-consuming to build.
Combining his company with Sprint would allow Dish to offer video, high-speed Internet and voice service across the country in one package whether people are at home or out and about, Mr. Ergen said. People who don’t have access to broadband from a cable company would be able to sign up for Internet service delivered wirelessly from Sprint cellphone towers to an antenna installed on their roof, Mr. Ergen said.
Taking over Sprint would be a big bite. The wireless carrier booked $35.3 billion in revenue last year, compared with $14.3 billion for Dish. The combined company would carry more than $36 billion in debt, according to CapitalIQ, even before loading on the $9 billion Dish indicated it would borrow to do the deal.
Dish said it would be able to execute a definitive merger agreement after reviewing Sprint’s books. The satellite company said it is being advised by Barclays, which is confident it can raise the funding.
Earlier this year, Dish made an informal offer to buy Clearwire Corp. —a wireless carrier that is half-owned by Sprint and that has agreed to sell Sprint the other half. Dish has yet to move forward with a formal bid.
Mr. Ergen said the “deck was stacked against us” with Clearwire due to a tangle of contractual obligations. With Sprint, the only obstacle is a $600 million breakup fee that would be due Softbank. He said he is willing to pay that.
Bloomberg Businessweek wrote a frequently asked questions piece, which offered this info on regulatory and David Einhorn’s position in Sprint:
Are there regulatory issues?
Probably not. Given the power of Verizon (VZ) andAT&T (T), analysts don’t expect a Dish, Sprint tie-up to hit anti-trust hurdles. On the contrary, Dish says the deal would be particularly good news for rural consumers who don’t have access to traditional broadband. If there’s anything FCC commissioners like, it’s rural consumers.
How about that David Einhorn?
Right? Einhorn’s Greenlight Capital snapped up a bunch of Sprint shares as the company swooned in recent years. At the end of the first quarter last year, when Sprint shares were wallowing below $3, Greenlight had 68 million of them.
The Bloomberg wire story quoted an analyst as saying the deal had some merits despite the heavy debt load the potential company might hold:
The combined company will have an estimated $40 billion in debt, a heavy load, said Philip Cusick, an analyst at JPMorgan Chase & Co. in New York. Still, the long-term synergies and cash generation make the idea “very compelling,” he said.
“The next question is the response from the Sprint board and whether Softbank comes back with another bid, potentially using its balance sheet advantage with more cash,” Cusick, who has a neutral rating on Dish, said in a report.
Dish’s offer extends a frenzy of consolidation for the U.S. wireless industry. Smaller carriers are seeking out merger partners to help wage a stronger attack against the two dominant competitors, Verizon Communications Inc. and AT&T Inc.
T-Mobile USA Inc., the fourth-largest U.S. carrier, is closing in on a merger with MetroPCS Communications Inc. (PSC), which is No. 5 in the industry. Deutsche Telekom AG (DTE), T-Mobile’s parent company, sweetened its offer for MetroPCS last week in order to get reluctant investors to agree to the terms.
It’s going to be interesting to see which deal the Sprint board selects and what reasons they offer for their choice. Dish obviously has grand ambitions and sees some part of Sprint playing into its plans. But does the Sprint board agree? Only time will tell.
by Liz Hester
The New York Times analyzed Nike’s recent fall from the top of the advertising file in an interesting story Sunday. After the misstep congratulating Tiger Woods on regaining golf’s top spot, Nike is searching for share of buzz.
Here’s the story:
It was once common for consumers to express excitement about the latest marketing efforts for the athletic footwear and apparel sold by Nike. The company filled an advertising hall of fame with energetic, confident, often cheeky commercials that became so popular you only had to refer to them by repeating the slogans, which became cultural catchphrases: “Gotta be the shoes,” “Chicks dig the long ball,” “You don’t win silver, you lose gold,” “There is no finish line” and “I am not a role model.”
But recently, it seems, Nike has had a harder time standing out amid the clutter, bringing out fewer ads that are widely deemed hot, or cool.
Some point to the fact that Nike is an older brand as part of its problem marketing to youth.
Nike is now a behemoth with $24 billion in annual sales rather than an upstart that famously used unconventional marketing tactics to gain attention and favor. Nike spent more than $3.2 billion to run ads in major media from 1995 through 2012, according to the Kantar Media unit of WPP, including $115.7 million last year, an increase of 20.2 percent from $96.3 million in 2011.
“The maturity of the brand creates an inherent challenge because you’re no longer the new kid on the block,” said Mr. Swangard, and as a result Nike executives “run the risk of being the victim of their own success.”
Allen Adamson, managing director of the New York office of Landor Associates, a brand and corporate identity consultancy, said: “The bigger the brand, the harder it is to stay trendy and current. It’s hard to be cutting edge when you’re established.”
Also, being a leader, means that others will follow and that can dull the affect of your marketing.
Another problem facing Nike is that the way the brand speaks in ads is no longer that novel. Many marketers now emulate the company’s irreverent, assertive tone and tack.
“Nike really revolutionized the sports advertising industry, and sports, especially, is a copycat industry,” said Steve Smith, a sports lawyer who is a partner at the Bryan Cave law firm. “You see somebody doing something that works, you’ll do it, too.”
“It’s a tribute to Nike,” he added, “but I’m sure it puts pressure on Nike and its advertising agencies.”
Some brands that emulate Nike, like Adidas, Reebok and Under Armour, are also its competitors. Others, like ESPN, Old Spice and Red Bull, are in different fields.
Nike does seem to be using social media and other alternative marketing to reach different audiences.
And like all marketers, Nike is coming to terms with the biggest shift in the landscape: the fragmentation of audiences, and media, makes it difficult to get the proverbial “everyone” discussing the same ads at the same time as was the case decades ago.
“Fifteen years ago, people could have been reached primarily with TV, print, out of home and radio,” Mr. Grasso said, which represent “a fraction” of the media they consume now.
Here, Nike has excelled, uploading to YouTube big commercials for big events like the Olympics and the World Cup and maintaining a major presence in other social media like Twitter, where Nike has more than a million followers, and Facebook, where more than 12.6 million people “like” the brand.
In fact, the ad last month that congratulated Mr. Woods appeared as posts on Facebook and Twitter rather than television or print ads.
I found this story interesting and a good example of company coverage. It’s a great analysis of an older firm that’s struggling to reinvent itself in a different age. While Nike is still thought of as a great marketer, it’s an interesting take on the challenges that it will face going forward.
by Chris Roush
James Breiner, who teaches business journalism at Tsinghua University, writes about Loren Feldman, the small business editor at the New York Times, who writes a blog called “You’re the Boss: The Art of Running a
Small Business“ that appears in the small business section of the Times’s website.
Breiner writes, “Feldman started the blog from scratch in 2009. He had considerable experience with the small business niche as an editor of Inc. magazine and then web editor for Inc.com and FastCompany.com.
“It was at Inc. that he met Jay Goltz, a Chicago-based entrepreneur profiled in the magazine. Goltz launched into a critique of the existing small business publications. He thought they weren’t focused on the nuts and bolts that help business owners solve the problems they face every day. Goltz then proceeded to give Feldman dozens of story ideas that would be more relevant.
“Most entrepreneurs know how to do two or three things really well, Feldman says, but they might have no idea how to pick a law firm or how to run a payroll system or how to run a marketing campaign in social media.
“So when he came to the Times, Feldman decided that most of the You’re the Boss’s bloggers would be business owners themselves describing their own problems and how they tried to solve them. They would chronicle their mistakes and ask for help. He started with four and now has 13. (The bloggers are paid for their work)”
Read more here.
by Liz Hester
There were two similar stories in the Wall Street Journal and the New York Times on Thursday about the complexity of large financial firms and what they’re doing to simplify their structures.
The Journal story focused on the number of subsidiaries that many of the largest financial firms have and where they’re located.
Wells Fargo & Co. Chief Executive John Stumpf has described the bank’s business model as “meat and potatoes.” But the fourth-largest U.S. lender has 3,675 subsidiaries, up 8.6% from five years ago, according to an analysis provided to The Wall Street Journal by Swiss research firm Bureau van Dijk Electronic Publishing Inc.
Wells Fargo isn’t alone. In all, the six largest U.S. banks have 22,621 subsidiaries, according to the Journal’s analysis.
While that is down 18% in the past five years, regulators said they are getting frustrated with banks’ slow and uneven progress in streamlining their labyrinths of business units, offshore entities and other appendages.
Comptroller of the Currency Thomas Curry, whose agency oversees national banks, said in an interview that his staff intends to pay closer attention to “needless corporate complexity” and “whether it’s time to start cutting some of the brush out.”
The sprawling nature of the largest U.S. banks will be on display starting Friday, when Wells Fargo and J.P. Morgan Chase Co. report first-quarter financial results. A Wells Fargo spokesman declined to comment on the data provided by Bureau van Dijk “because we do not know its methodology” and said its filings show subsidiaries down by 23% since the end of 2008, to 1,361. The number of legal entities “is not an indicator of risk and Wells Fargo has a long track record of prudent risk management in all our businesses.”
Complexity in the banking sector has vexed regulators since the financial crisis, when troubles at big U.S. firms quickly spread throughout global markets. The U.S. government intervened to prop up the largest firms, prompting calls to break up those deemed “too big to fail.”
Regulators have introduced rules requiring banks to maintain a fatter financial cushion against losses than other institutions, accept strict limits on the biggest banks’ exposure to one another and submit a new set of plans showing how they would be unwound in the crisis.
And according to the Times, some of the largest firms are shifting assets and risk to other parts of the market, which may cause regulators to have a skewed picture of their capital.
Banks have been shedding risky assets to show regulators that they are not as vulnerable as they were during the financial crisis. In some cases, however, the assets don’t actually move — the bank just shifts the risk to another institution.
This trading sleight of hand has been around Wall Street for a while. But as regulators press for banks to be safer, demand for these maneuvers — known as capital relief trades or regulatory capital trades — has been growing, especially in Europe.
Citigroup, Credit Suisse and UBS have recently completed such trades. Rather than selling the assets, potentially at a loss, the banks transfer a slice of the risk associated with the assets, usually loans. The buyers are typically hedge funds, whose investors are often pensions that manage the life savings of schoolteachers and city workers. The buyers agree to cover a percentage of losses on these assets for a fee, sometimes 15 percent a year or more.
The loans then look less worrisome — at least to the bank and its regulator. As a result, the bank does not need to hold as much capital, potentially improving profitability.
Some regulators say they are concerned that in some instances these transactions are not actually taking risk off bank balance sheets. For instance, a financial institution may end up lending money to clients so they can invest in one of these trades, a move that could leave a bank with even more risk on its books.
Critics point to other reasons to worry. Most of these trades are structured as credit-default swaps, a derivative that resembles insurance. These kinds of swaps pushed the insurance giant American International Group to the brink of collapse in September 2008. Another red flag is that banks often use special-purpose vehicles located abroad, frequently in the Cayman Islands, to structure these trades.
Both these stories, while different in focus and tone, tackle the complicated issue of simplifying the banks and determining if they’re making progress toward complying with new laws. As the rules continue to be shaped, coverage of the banks and if they’re working to prevent a collapse will be increasingly important and likely to go on for years.
by Chris Roush
Two conversations I’ve had this week about board members of publicly traded companies have got me thinking about directors and business journalists.
The first conversation was with a student in my “Business Reporting” class.
Each student in the class has to write a final project paper on a publicly traded company here in North Carolina. I encourage them to talk to as many people as possible, from company executives to analysts to investors to customers to, yes, members of the board of directors.
The student told me that she had found a board member of her final project company was a business school professor. She had approached him for an interview, but he declined. She couldn’t understand why he didn’t want to talk.
The second conversation was with someone who has been on a number of boards, including at least one Fortune 500 company, over dinner and drinks last night.
He wondered why, in the coverage of the departure of the J.C. Penney CEO, there wasn’t any mention in the stories about its board of directors — whether any of them had retail experience and who among them was the leading force in making a change in the executive suite. He noted that he had yet to see a board member quoted.
All of this leads me to wonder why companies, especially publicly traded companies, put such a lid on having their board members talk to the media.
Board members, above anyone else, should be great people to put in front of business journalists. They are the ones who know the company’s strategy and what the CEO is trying to accomplish. Whether the strategy is good or the CEO is being fired, these board members — particularly outside directors — are the most objective sources that a company can have, or that a business reporter can interview.
Yet I know of few companies who allow their board members to talk freely to the media. Virtually all of the time that a business reporter called a board member, the director refers the journalist back to the public relations staff. As a result, they come off as being afraid to talk, or ignorant of what is really going on at the company.
Why would seeing board members quoted in stories be good? Let me give you an example.
In 1997, I covered the Coca-Cola Co. for the Atlanta Journal-Constitution. CEO Roberto Goizueta was diagnosed in September with cancer, which was a big story. He had been the CEO for 15 years and had led the company to great success. The question was what was going to happen to the company if he should die — and he did die two months later.
I called a Coke board member, SunTrust’s Jimmy Williams. He had visited with Goizueta in the hospital, and his comments to me, which I included in the story, were reassuring to investors in the company who were likely nervous about its future prospects.
That’s unlikely to happen today. In the 21st century, in the wake of Enron, WorldCom and other corporate scandals, directors don’t want to talk to the media. They’re afraid their comments might be misconstrued or that they will come off ignorant about what’s going on at the company.
I say that’s bunk. If you’re a board member of a company, you should be willing to stand up for it, talk about it with the business press. By doing so, the public will have a better understanding about what is going on at the company.
And the company’s relationship with the business media will be less adversarial.