Receiving Wide Coverage ...
A Battle over Board Member Bonuses: A small bank holding company has set the stage for a battle over whether activist hedge funds should be allowed to pay preferred board members bonuses. More specifically, Institutional Shareholder Services (of "dethrone Jamie Dimon" fame) is calling on shareholders to vote out three Provident Financial Holdings directors after they unilaterally approved a bylaw barring investor-paid incentives. The vote is indicative of larger tensions that have resulted after several hedge funds tried to compensate certain directors. Law firm Wachtell, Lipton, Rosen & Katz recommended companies adopt bylaws prohibiting any third party from paying board members for their service. The activists argue that their bonuses link pay to performance and help companies attract better board members. But critics think the incentives are actually more like bribes and create decided conflicts of interest. Calmer heads suggest a compromise is in order: let hedge funds, for instance, compensate their directors for campaign expenses or allow directors' incentives based on the company's results, not the hedge funds'. Wall Street Journal, New York Times
Bad Week at RBS: Royal Bank of Scotland is facing a barrage of criticism and some negative press, following the release of two reports highly critical of its lending practices. One report from government advisor Lawrence Tomlinson found, largely anecdotally, that the bank forced business customers to default on loans in order to turn a profit. U.K. Chancellor George Osborne has promised an investigation. The second report, conducted by Andrew Large, former deputy governor of the Bank of England, cites poor management and inadequate quality controls. Large issued this statement to the FT: "If I was another bank, I would want to review my own organization very carefully and make sure I was not doing anything that I would feel uncomfortable with and make sure governance is in place." Still, the FT believes RBS is "likely to be more exposed" than other U.K. financial firms since it made the lion's share of commercial real estate loans. Lombard columnist Jonathan Guthrie calls Tomlinson's report "a stick to beat the bank rather than a tool for change," citing a murky methodology and a litany of unnamed sources. But "whatever their relative merits, the two studies' broader message for investors is that RBS remains in the doghouse," notes Andrew Peaple in the Journal's Heard of the Street column. "It will likely remain in government ownership for some time."
Wall Street Journal
Columnist Francesco Guerrera debunks some misconceptions associated with JPMorgan Chase's landmark $13 billion settlement. For instance, he argues, citing shareholders as the biggest losers in the settlement, though technically true, ignores the big picture since a large chunk of the fines are potentially tax-deductible. Additionally, "removing the uncertainty of the case has helped the stock," Guerrera writes. "Since last Tuesday, the bank's shares are up more than 3%, outperforming the market. If this trend continues, by next week JPMorgan's market value would have increased by more than the $13 billion it paid the government, a testament to the strength of its business."
New York Times
Dealbook's Andrew Ross Sorkin takes on Bitcoin: "If it all feels a bit like a 1999-style craze, that's because it is. Peter Leeds of the Penny Stock newsletter put it to me this way: 'In a matter of months you won't be hearing about it. It will go the same way of Paris Hilton. People will move on to the next thing.'" Sorkin, in agreement with Leeds, focuses on Bitcoin's shortcomings as an investment and a currency. He doesn't, as American Banker Executive Editor Marc Hochstein would no doubt point out, discuss Bitcoin's potential as a rival payment system.