Category Archives: Miscellaneous

Does “Gordon Gekko” Target Female CEOs?

Gordon Gekko from the film “Wall Street” Courtesy 20th Century Fox/The Everrett Collection

Do activist investors target female CEOs.

WSJ’s John D Stoll seems to believe they may well do so. He reports that academics have started to take a look at potential bias after a string of prominent women leaders—including Marissa Mayer ( Yahoo ), Mary Barra (GM), Meg Whitman (HP), Indra Nooyi ( Pepsi ) and Sandra Cochran (Cracker Barrel)—had battles with activists, who are almost exclusively men. But was the activism targetted towards women seen either as easy targets of under-performers in a rough and tumble corporate world?

Although women make up half of the nation’s workforce, only 5 percent of Fortune 1000 companies have female chief executives. Now, new research from Arizona State University reports that female CEOs are far more likely to be pressured and second-guessed by shareholders than men occupying the same leadership position.

A recent study from Arizona State University’s W. P. Carey School of Business examined “shareholder activism,” which occurs when shareholders seek to affect a corporation’s behavior by exercising their rights as owners. Though shareholders don’t run a company, there are ways for them to influence the board of directors and top management.

Reported in the 2016 paper, “The Glare of the Spotlight: Female Leadership and Shareholder Activism,” Christine Shropshire, associate professor of management at the W. P. Carey School of Business, noticed that a disproportionate amount of shareholder activism was aimed at companies with women in charge. The research examined shareholder proposals at Fortune 1000 companies during the time period 2003 to 2013.

“Controlling for other reasons investors target certain firms, our models show that gender alone explains significant activism specifically toward female CEOs,” Shropshire said. “All else held equal, female CEOs have a 27 percent likelihood of facing activism, while their male counterparts have a near zero predicted likelihood of being targeted.”

Christine Shropshire, associate professor of management at the W. P. Carey School of Business

If I were an activist investor keen to maximise profit I would certainly consider the temperament of the CEO and the BoD, as public corporate activism is risky and expensive. That said more than likely women CEOs with less M&A experience might indeed make a target corporation with unrealized shareholder value more attractive.

Gordon of course will deny any bias, indeed Gordon will deny just about everything!

36 Million User Accounts Used to Study Corporate Misconduct – Is Yours?

Ashley Madison Home Page

Remember back in 2015 when the dating site, Ashley Madison (AM), was hacked and 36 million user details were posted online, causing some level of personal angst for those named? Finance faculty members John M. Griffin and Samuel Kruger from the McCombs School of Business at The University of Texas at Austin published a study yesterday, using the AM data and public records, of the relationship between spousal infidelity and corporate misconduct in the Proceedings of the National Academy of Sciences. There was a surprisingly strong correlation within the data.

Griffin and Kruger examined professional behavior in 4 groupings totalling more than 11,200 individuals: Chicago police officers with substantial complaints, financial advisors engaging in misconduct, US Securities and Exchange Commission (SEC) white-collar criminals, and CEOs and CFOs of firms that engage in misconduct. In all 4 settings, they measured the relation between professional misconduct and personal usage of AM by matching data on individuals in the professional setting to AM transaction data. The first 3 settings demonstrated a link between personal AM usage and professional misconduct. The fourth setting goes a step further by linking the personal conduct of CEOs and CFOs to corporate outcomes. Detailed firm-level data allowed the researchers to examine this last setting most thoroughly.

They concluded that police officers and financial advisors who use the infidelity website are significantly more likely to engage in professional misconduct. Results are similar for US Securities and Exchange Commission (SEC) defendants accused of white-collar crimes, and companies with chief executive officers (CEOs) or chief financial officers (CFOs) who use the website are more than twice as likely to engage in corporate misconduct.

“This is the first study that’s been able to look at whether there is a correlation between personal infidelity and professional conduct,” Kruger said. “We find a strong correlation, which tells us that infidelity is informative about expected professional conduct.”

“More broadly, our findings suggest that personal and professional lives are connected and cut against the common view that ethics are predominantly situational. This supports the classical view that virtues such as honesty and integrity influence a person’s thoughts and actions across diverse contexts and has potentially important implications for corporate recruiting and codes of conduct. A possible implication of our findings is that the recent focus on eliminating sexual misconduct in the workplace may have the auxiliary effect of reducing fraudulent workplace activity”.

Abstract

Read the Paper
We study the connection between personal and professional behavior by introducing usage of a marital infidelity website as a measure of personal conduct. Police officers and financial advisors who use the infidelity website are significantly more likely to engage in professional misconduct. Results are similar for US Securities and Exchange Commission (SEC) defendants accused of white-collar crimes, and companies with chief executive officers (CEOs) or chief financial officers (CFOs) who use the website are more than twice as likely to engage in corporate misconduct. The relation is not explained by a wide range of regional, firm, executive, and cultural variables. These findings suggest that personal and workplace behavior are closely related.

Interesting Outcomes

“In 1923, seven men who had made it to the top of the finan­cial success pyramid met together at the Edgewater Hotel in Chicago. Collectively, they controlled more wealth than the en­tire United States Treasury, and for years the media had held them up as examples of success.

Who were they? Charles Schwab, president of the world’s largest steel company, Arthur Cutten, the greatest wheat spec­ulator of his day, Richard Whitney, president of the New York Stock Exchange, Albert Fall, a member of the President’s Cabinet, Jesse Livermore, the greatest bear on Wall Street, Leon Fraser, president of the International Bank of Settlement, and Ivan Kruegger, the head of the world’s largest monopoly.

What happened to them? Schwab and Cutten both died broke; Whitney spent years of his life in Sing Sing peni­tentiary; Fall also spent years in prison, but was released so he could die at home; and the others Livermore, Fraser, and Kruegger, committed suicide”.                                       

Donald McCullogh,  Waking from the American Dream

Charles Schwab

Charles Michael Schwab (February 18, 1862 – September 18, 1939)

Charles Michael Schwab (February 18, 1862 – September 18, 1939) was an American steel magnate. Under his leadership, Bethlehem Steel became the second largest steel maker in the United States, and one of the most important heavy manufacturers in the world.  A fortune of $500 million prior to 1929 was all but wiped out in the October collapse and he spent his final years in a small apartment.  Shortly after his death, World War 2 restored the fortunes of his steel company, Bethlehem Steel.

Arthur William Cutten (July 6, 1870 – June 24, 1936)

Arthur Cutten

Arthur William Cutten (July 6, 1870 – June 24, 1936) was a Canadian-born businessman who gained great wealth and prominence as a commodity speculator in the United States. He was all but wiped out in the 1907 collapse of the cotton markets.

He appeared before the Banking and Currency Committee during its investigation of the Wall Street Crash of 1929. The government issued indictments against him for tax evasion.  He died of a heart attack a few weeks short of his sixty-sixth birthday. The tax suit was settled by the executors of his estate as his fortune was vastly depleted by the stock market crash and the cost of lawyers to defend him from the government lawsuits.

Richard Whitney (August 1, 1888 – December 5, 1974)

Richard Whitney

Richard Whitney (August 1, 1888 – December 5, 1974) was an American financier and president of the New York Stock Exchange from 1930 to 1935. Having retired as president of the New York Stock Exchange in 1935, Whitney remained on the board of governors, but in early March 1938, his past began to catch up with him when the financial controller of the exchange reported to that Richard Whitney was an embezzler and that his company was insolvent. Within days, events snowballed, and Whitney and his company would both declare bankruptcy. He was convicted of embezzlement and imprisoned.  On April 12, 1938, six thousand people turned up at Grand Central Terminal to watch as Whitney was escorted in handcuffs by armed guards onto a train that delivered him to prison.

Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940)

Jesse Livermore

Jesse Lauriston Livermore (July 26, 1877 – November 28, 1940) was an American investor.  A legendary trader who worked alone without partners and in isolation from others in an office of advanced technology for the time, receiving price data directly from the floor of the NYSE.  He made and lost his fortune on numerous occasions.  His skill was market timing combined with considerable mathematical skills and a clear trading strategy. He would invest a small portion of his planned amount and see how the market reacted.  If the price continued to increase, he would invest yet more until he was convinced of the general trend of the market before securing his ultimate position.  He would not tolerate a fall in price of more than 10% and would sell his position quickly, thereby not endangering his capital.

On November 28, 1940, Livermore fatally shot himself in the cloakroom of the Sherry Netherland Hotel in Manhattan. Police found a suicide note of eight small handwritten pages in Livermore’s personal, leather bound notebook. The note addressed to Livermore’s wife Harriet (whom Livermore nicknamed “Nina”) read, “My dear Nina: Can’t help it. Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure. I am truly sorry, but this is the only way out for me. Love Laurie”

Leon Fraser

Leon Fraser (born November 27, 1889 in Boston, April 8, 1945) was an American manager. 

Fraser graduated from Columbia University and from Colgate University Law School. He worked as a reporter for New York World until he was admitted to the bar in 1914. He enlisted in the US Army and fought in WW1 leaving with the rank of officer.  From 1922 to 1924 he practiced international law in Paris. He was a consultant for the Dawes Plan and from 1924 to 1927 was the Paris representative for reparations payments.

In 1930 he became president of the newly established Bank for International Settlements.  In 1937 he became president of the First National Bank of New York. He also held senior positions with General Electric, US Steel and the Federal Reserve Bank of New York.  In the courtyard of his Granville home, Fraser shot himself in the head. His farewell letter pointed to depression.

Ivan Kruegger

Ivar Kreuger (2 March 1880 – 12 March 1932)

Ivar Kreuger (2 March 1880 – 12 March 1932) was a Swedish civil engineer, financier, entrepreneur and industrialist. In 1908, he co-founded the construction company Kreuger & Toll Byggnads AB, which specialized in new building techniques. By aggressive investments and innovative financial instruments, he built a global match and financial empire. He ultimately controlled between two thirds and three quarters of worldwide match production, becoming known as the “Match King”.

Kreuger’s financial empire collapsed during the Great Depression. A subsequent audit of his more than 400 companies concluded that “The manipulations were so childish that anyone with, but a rudimentary knowledge of bookkeeping could see the books were falsified.”  In March 1932, he was found dead in the bedroom of his flat in Paris. The police concluded that he had committed suicide although his family believed he had been murdered.

Albert Fall

Albert Bacon Fall (November 26, 1861 – November 30, 1944)

Albert Bacon Fall (November 26, 1861 – November 30, 1944) was a United States Senator from New Mexico and the Secretary of the Interior under President Warren G. Harding, infamous for his involvement in the Teapot Dome scandal. Fall was appointed to the position of Secretary of the Interior by President Warren G. Harding in March 1921. Soon after his appointment, Harding convinced Edwin Denby, the Secretary of the Navy, that Fall’s department should take over responsibility for the Naval Reserves including the Teapot Dome Naval Reserve in Wyoming.

In April 1922 Wall Street Journal reported that Secretary Fall had issued oil drilling permits within the Teapot Dome Naval Reserve in Wyoming to two of his friends, oilmen Harry F. Sinclair (Mammoth Oil Corporation) and Edward L. Doheny (Pan-American Petroleum and Transport Company) after receiving a bribe of $385,000. 

Fall was found guilty of conspiracy and bribery and was jailed for one year as a result—the first former cabinet officer sentenced to prison as a result of misconduct in office.

This doth remind me

Credit: Origin Unknown. Arc de Triomph, Paris

“HARK! Hark! on yonder distant shore,
The noisy din of war I hear;
The sword’s unsheath’d—the cannons roar,
And Gallia’s sons in arms appear,
‘Tis France, ’tis France, the people cry,
Fighting for sacred Liberty.”    Thomas Spence, 1794

A truly remarkable image of the Arc De Triomph with a  vast crowd of angry French Yellow Jackets.

The Benefits of a Standup Desk

New Standup Desk

Just got a new Standup Desk.    If you are spending all day sitting you might consider this –  it is a lot healthier and far better for blood circulation and general physical fitness.  It is not so easy to stand all day and I have added 15 cms of foam to the floor and a nice red bar-stool.  Strongly recommended.  Beware –  it does change the way you work but it makes it far more productive on telephone calls as I can easily walk to the white board for note taking etc.  At sunset the barstool also comes in useful 🙂You might note the wall map,  we reprocessed 6 million km2 of gravity data to better understand Tertiray basin structures and to assist in a regional geological and structural interpretation.

What is Your Real Age?

How old are you?  Before you respond, there might be more than one answer.  We have all noticed that there are always some individuals who seem to age slowly, have plenty of energy and vitality and don’t suffer from too many diseases.  There is a reason for this.

Heart Rate during exercise

The first answer to this question is of course your astronomical age, the number of times the Earth has rotated on its axis or around Sol.  If this metric was relevant then we might all age in precisely the same manner.  There is another metric that likely offers a more realistic measure of biological age and offers some indication about your likely longevity.  Fitness Age!

Exercise Analysis by Zone

This measure was created by Ulrik Wisloff and his team  from the Norwegian University of Science and Technology.  It takes into account your  respiratory health with such measures as heart rate and weight, bodily dimensions, exercise routine and little more.  

This test is hosted by and managed by the university and has no advertising or “payment options”.

There are a  number of reasons why this test is significant.  The lower your Fitness Age relative to your astronomical age, the lower your mortality risk and that has to be a good thing.  Secondly you can use the “Back” key to alter the inputs and see what changes to your lifestyle mean to your effective mortality risk.

Fantastic Oatmeal Muffins

Healthy Oatmeal Blueberry Muffins

We all love muffins, but they are not the healthiest of snacks.  Here is an alternative, which is free of flour, refined sugars and added oils.  For those that believe they are gluten intolerant these contain no wheat flour!  This is a genuinely healthy alternative, high in fibre and essential nutrients.

In this recipe minimally processed rolled oats replaces refined flour, bananas or mangoes replaces oil or butter and a little honey sweetens the recipe and replaces refined sugar.  To take this a step further you can replace the eggs with chia seeds, just soak I tablespoon of chia in three tablespoons of water and allow to stand for 30 minutes.  I usually replace the banana with a large ripe mango for a different flavour and Rhum Clements 1952.

Ingredients

  • 2 ½ cups rolled-oats
  • 2 overripe bananas
  • 2 large eggs (beaten)
  • 1/3 cup honey
  • ¾ cup milk
  • 2 tsp vanilla
  • 2 tsp baking powder
  • ½ tsp baking soda
  • 1 tsp cinnamon
  • 1 cup sultanas
  • 1 cup blueberries
  • ½ cup Pumpkin seeds

Step I (30 minutes)

  • Preheat the oven to 170°C
  • Place all the oats on a baking sheet or whatever and toast until very lightly brown – but no more than 6 minutes.  Let them cool to room temperature.  This gives a slightly nutty taste.
  • Put 1 ½ cups of toasted oats into a blender – and blend to a fine flour
  • Place bananas or mango (yes take the skin off!) in the food blender with milk and honey and vanilla and – blend until smooth.  No not 30 minutes!
  • Mix the dry ingredients, oats and your blended oat meal, baking powder, baking soda and cinnamon in a large bowl
  • Add the sultanas and pumpkin seeds and lightly mix (its about time for a little Rum, we strongly recommend the Rhum Clement 1952 – you deserve it)
  • Fold in the dry ingredients and allow to soak for 10 minutes (the unprocessed oats will absorb some of the fluids)
  • Fold in the blueberries lightly
  • Spray a 12-pot muffin tray with olive oil
  • Spoon a generous portion of the mix into the muffin tins
  • Bake at 170° C for 20 minutes. Insert a tooth pick into the centre of a muffin –  if cooked it should come out clean.

Step 2

  • Allow to cool
  • Best served with anything cold and accompanied by tea or of course more the of the Clements.

Rhum Clements 1952

Alternatives

You can replace the eggs with Chia –  see above.  You can replace the blueberries with, dried cranberries, apple and walnuts, frozen raspberries, diced dried apricots, pecans or virtually anything else you must hand.

Cost

Likely about 50 cents per muffin and US$1,000 for the Rhum Clements 1952.

If this recipe results in a hangover –  Enjoy!

Understanding Donald J. Trump & Many Entrepreneurs

No-one likes me and that is Perfect! Image: CNN

To understand Trump (and a sizeable portion of the entrepreneur class) you only need one photograph and this is the one.

His level of trait Agreeableness is exceedingly low.  Sub traits Compassion and Politeness are  without question in the zero percentile.  What does that mean? If there were 100 people in a room, 99 of them would be more compassionate and polite than Donald J. Trump.  Likely,  its 1 in 10,000.  Importantly he understands this and he truly owns his low trait Agreeableness.

Courtesy of CNN

This is not a criticism of DJT, it is simply his  personality and likely a significant portion of that is genetic.  Is he so different to his father –  it would not appear so.  There is a  reason for the preservation of personality traits within the human population, those variations enhance the potential for survival of the species.

Now interestingly, those at different ends of trait Agreeableness (in particular) find it remarkably hard to understand the position of the other and this trait more than any other seems to be a determinant of political persuasion.  Low trait Agreeableness (plus low trait Openness)  and you are much more likely to be Conservative while high trait Agreeableness (plus high trait Openness), far more likely to be left leaning.

The challenge for those with high trait Agreeableness and high sub-trait compassion is that you are easy to manipulate and both the politicians and the media have become expert in your manipulation.  Why? It triggers the release of neurotransmitters Dopamine and Serotonin and it results in selling more newspapers and winning seats.  There are logical reasons for the evolution of the political environment in this direction!

Combine low trait Agreeableness and modest trait Conscientiousness (in the case of DJT it is off the charts trait Industriousness but low trait organisation) you have the perfect entrepreneur, who will never stop and who is not concerned about the consequence of action as long as their trait Neuroticism is low and DJTs is very low.  His level of trait Neuroticism, sub-trait Volatility is high but simply an act while his neuroticism, sub-trait Withdrawal is in the zero percentile.  Both sub-traits of Enthusiasm are.. off the charts.

There you have Donald, easy enough to understand.  As to outcomes, he will never stop, he speaks without preparation, he is not concerned about consequences and does not care what people say about him.  He cannot be understood by the left and never will be.  If within the sphere of DJT and you have similar personality traits to DJT, your days are numbered.  Those that survive likely are more Open, more Agreeable, more Conscientious and probably more Neurotic.

Where are you?

Institutional Investors led the way in proxy fights in 2017 and won!

Canadian law firm Fasken Martineau DuMoulin LLP has released its as always engaging review of proxy contests in Canada during 2017.

A proxy fight is an unfriendly contest for the control of in this case, a public listed company.  Proxy fights usually occur when shareholders become unhappy with management’s behaviour (corporate governance) or where economic outcomes are disappointing and generally involve disputes over directorships and management positions.

The disaffected group, sometimes a corporate activist, will solicit the proxies of shareholders via a proxy solicitation.  A proxy allows for an individual or institution to become the shareholders authorised representative.

Incumbent directors and management have a number of distinct advantages over the disaffected shareholder group.  They have access to the corporate treasury and can use it in a largely unrestricted manner, they can hire very expensive proxy solicitation firms, can engage in disparaging public relations campaigns though their existing public relations and shareholder list channels and lastly they can rely on the corporations law requirements to easily disqualify entire actions or individual proxies.  Boards can simply ignore the actions of disaffected groups who then must rely on the courts to seek remedy.

I have been involved in a number of proxy battles.  I have initiated and managed two and actively participated in a  third, all of which were  resounding successes for the dissidents.  A proxy fight should not be considered lightly,  it can be very public, is time-consuming and expensive and outcomes can be uncertain.  

The Fasken study concludes:

The number of proxy fights is about the same for the last three years, 2015-2017

75% of proxy contests targeted small capitalisation companies
Unlike 2016, when management dominated and largely lost,  institutional investors dominated the proxy contests in Canada during 2017 and won

If you get the opportunity attend the Fasken lectures at their offices in Toronto during the 2018 PDAC.   They were most informative in 2017.  Contact them here.

Resources

Ethical boardroom Article
How do proxy fights work
Typical proxy solicitation firm
Harvard Law School Library  – Proxy fights