Gluttons at the gate

By Duncan Hood - Tuesday, May 5, 2009 at 12:20 PM - 10 Comments

Michael Sabia, BCE; Robert Prichard, Torstar; Tom Parkinson, Hydro One; Robert Nardelli, Home Depot

It was a bitterly cold February morning in Toronto just over a year ago when Gary Hawton witnessed a miracle. As CEO of Meritas Mutual Funds, a socially responsible investing company in Kitchener, Ont., he had been watching executive pay levels surge from generous to ridiculous over the last 15 years, and he’d had enough. As of 2007, the collective compensation of Canada’s 100 best-paid CEOs had crashed through the billion-dollar mark, and average individual pay packages were topping $10 million apiece. As a professional investor, Hawton knew that most CEOs were simply not worth that kind of money.

He sent letters to all the big Canadian banks asking them to allow shareholders to vote on CEO pay packages. He spoke out at shareholder meetings and talked up the issue to the press. At first, he was completely ignored. But Hawton, a former investment banker raised with strong Christian values, is a bit of a crusader. So last year, he decided to try a different strategy. He would introduce a shareholder’s motion that, if passed, would pave the way for a vote on executive pay whether the banks liked it or not. He knew it was a long shot. He knew it would take at least two years, quite a lot of money and infinite reserves of patience. He also knew that his mission would quite likely make him the financial world’s Don Quixote.

Continue…

When the next domino falls, look out Canada

By Jason Kirby - Monday, September 22, 2008 at 2:46 PM - 3 Comments

Via Paul Kedrosky’s blog, I came across this column by Nouriel Roubini, whose predictions about this financial crisis so far have come true with astonishing precision. He address where he sees the contagion spreading next. In short, first the hedge funds will fall, then private equity firms will crumble:

Even private equity firms and their reckless, highly leveraged buy-outs will not be spared. The private equity bubble led to more than $1,000bn of LBOs that should never have occurred. The run on these LBOs is slowed by the existence of “convenant-lite” clauses, which do not include traditional default triggers, and “payment-in-kind toggles”, which allow borrowers to defer cash interest payments and accrue more debt, but these only delay the eventual refinancing crisis and will make uglier the bankruptcy that will follow. Even the largest LBOs, such as GMAC and Chrysler, are now at risk.

Roubini doesn’t mention that other gargantuan private equity buyout of the last year, BCE, at $50 billion. Wait a minute, you say, the buyer wasn’t a shodily-run Wall Street firm, but the highly-respected investment arm of the Ontario Teachers’ Pension Plan. Doesn’t matter. To do the deal Teachers’ teamed up with U.S. firms Providence Equity Partners and Madison Dearborn Partners. In fact, a large number of Canadian companies were gobbled up by, or received huge investments from, U.S. private equity players (CanWest, Masonite, Hudson’s Bay Co., the list goes on… ) The obvious question is, what happens if Roubini is proven right yet again, and those PE firms controlling a vast swath of the Canadian corporate landscape go the way of Bear Stearns and Lehman Brothers?

Biz Fix

By Jason Kirby - Friday, July 4, 2008 at 12:51 PM - 0 Comments

In the money: Who wins when President Bush doles out $168 billion to stimulate the American economy? Pornographers, it turns out. AIMRCo, a market research company focused on the adult online industry, says many porn websites have aroused interest from new customers since the checks first went out in mid-May. Some sites have experienced a 20-30 per cent growth in membership rates. A spokeswoman for one site said they polled new customers and found one-third were using Bush bucks to buy smut. “Getting more people to buy porn was probably the last thing Bush had on his mind when he came up with his ‘stimulus package,’ but we’ll take it.”

Trading down: Bad news for Sw33t_Tush, a.k.a. Lloyd, the 48-year-old mechanic from rural Kansas. A U.S. District judge has ordered YouTube to hand over reams of data about the viewing habits of millions of users. Viacom sued to get access to the records to prove that viewers seek out its programming (ie. the Colbert Report) far more than user generated content. While that would be interesting to know as a cultural factoid, given all the hype about social networking and viral media, the judge’s decision means Lloyd’s online proclivities will wind up in a court docket on some lawyers desk.

Number cruncher: As gasoline prices march higher, many pundits have suggested the situation will correct itself when consumers cut back on consumption. I guess we’ll soon see. Today StatsCan said sales of motor gasoline fell 3 per cent in May. Oops, since then the average price for gas in Canada has risen from $1.28 per litre to $1.39. I’m sure it’s just a lag effect.

Ticker tape: Words that would never, ever, ever have appeared in the same headline before now: General Motors, mini car, U.S…. The BCE deal is done, though investors still aren’t fully convinced…

Biz Fix

By Colin Campbell - Monday, June 30, 2008 at 11:10 AM - 0 Comments

In the money: Google’s stock price may not have hit anywhere near the $1,000 a share many analysts were predicting last year. (In fact, it’s been slogging along in the $550 range). But the company is still dreaming up ways to try and boost its online ad revenue. The latest is a deal with Seth MacFarlane, creator of  the television cartoon The Family Guy.  MacFarlane, the New York Times reports, is working on an Internet animation series (called “Seth MacFarlane’s Cavalcade of Cartoon Comedy”) that will appear on thousands of web sites using Google’s advertising system, AdSense. The short, two-minute episodes will appear with ads, facilitated by Google, attached to the beginning, or somehow worked into the videos. Google seems intent on setting up its own little online television network, not just selling ads but distributing the content.  “We feel that we have recreated the mass media,” Google tells the Times. Unlikely. But Google, to its credit, continues to defy its critics by luring ad dollars that once would have gone to television over to the Internet. 

Trading down: Don’t mess with French fashion. A French court ruled that the online auction site eBay, must pay $61 million to LVMH, a company that makes perfumes and luxury fashion goods. LVMH argued that eBay hasn’t done enough to stamp out the sale of cheap, designer knock-off goods (90 percent of Louis Vuitton bags and Dior perfumes sold on the site are fakes, it argued). This isn’t the beginning or end of eBay’s legal troubles.  Hermes International successfully sued the company in June. Tiffany & Co has also sued.  eBay is appealing the LVMH decision. 

Number cruncher: The $35-billion BCE takeover fracas continues. And it may not be resolved until the end of the year, the Globe and Mail reports today. With the legal issues seemingly put to bed, the issue now is the $42.75 a share purchase price.  The banks that are financing the deal think the number should be as low as $35 a share, according to the Globe.  That’s a big difference from the number the BCE board has settled on. 

Boom or gloom: Surprise, surprise. Statistics Canada reports today that the nation’s GDP actually grew slightly in April, following declines in February and March. So, that was a short lived recession. But with an increase of just 0.4 per cent, we’re inclined to say this is still a bit more gloom than it is boom. 

Ticker tape: We’re transfixed with the price of oil, which moved past $143 a barrel this morning. Where will it stop; nobody knows!  Also on the rise: demand for the new Apple iPhone. An RBC report says it’s unprecedented.