Posted by Marc Hodak on July 28, 2015 under Governance | 
Mylan’s anaphylactic reaction to a generous offer
The headline quote comes from Mylan’s Executive Chairman Robert Coury, in response to why his firm was rejecting a rather generous buyout offer from Teva.
I get it. Coury believes in the long term. He believes that “shareholders benefit from a well-run business, and to run a business well, you need to focus on all of the stakeholders we touch on a daily basis, including customers, patients, employees, suppliers, creditors and communities.” Mylan used that to defend a decision that would cause its stock to drop over 30 percent below the value of Teva’s offer, yielding a collective value deficit of $10 billion.
As a shareholder, I would love to know how Mr. Coury’s expansive focus on his stakeholders will make up for that $10 billion opportunity cost. That’s a lot of EpiPens.
Alas, Mr. Coury doesn’t have to give a [vloek] about what shareholders want to know. Even if they voted off all of the board members, he retains the sole right to appoint new ones. That’s the kind of power that would get good governance folks in America to freak out.
Or be perfectly OK with it, depending upon one’s perspective.
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Posted by Marc Hodak on July 13, 2015 under Economics, History, Politics |
“We can make them sign it. What can go wrong?”
The Germans, who are normally quite astute about the lessons of history, are now acting against Greece with what looks like a vindictive intransigence that would have made Allied negotiators at Versailles nod approvingly. The Greek’s choice now appears to be between another bailout and continued harsh austerity, or default and financial collapse. Who in Europe believes that pushing Greece into desperate economic straits is good for their stability? Will it take the rise of someone much more extreme than Tsipras to make the Germans, French, and others understand what they are really getting in exchange for avoiding another haircut on the loans, and accepting any responsibility for the bad judgments of the lenders as well as the borrowers?
Greece may have another choice. Two choices, actually: an economic choice and a political choice.
The economic choice, under a rational leadership, may enable Greece to default on their outstanding debt and quickly resurrect their access to global capital markets at reasonable rates. This choice would merely require a couple of changes in their constitution. It has been done before. To see how, we need to step further into history.
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Posted by Marc Hodak on July 6, 2015 under Executive compensation, Pay for performance |
Time to turn in your papers
Today was the last day of the comment period for the SEC’s proposed disclosure rules on pay-for-performance. My own submission offers a few relevant points:
1. There are two reasons why investors would care about pay-for-performance: (a) to judge compensation cost and (b) to judge alignment of interests between managers and owners.
2. The SEC proposal does injustice to the first reason, and completely ignores the second.
3. As a result, the proposed disclosure will create a potentially, grossly distorted view of pay-for-performance.
4. If the SEC wants good disclosure on this matter, its requirements must acknowledge the investors’ perspective with some significant changes (which I propose).
5. If they can’t or won’t make those changes (and they probably shouldn’t at this point), the SEC should revert to a principles-based disclosure, and let the market sort out whatever resonates with investors.
I consider this rule one of the most important that the SEC will devise this year. In the long run, pay-for-performance disclosure will have far more impact than the more controversial rules on CEO pay ratios and compensation clawbacks. If the disclosure rule ends up close to its current form, it could be just one more nail in the coffin of public companies.
