More on Pennant and PHH

In its last proxy statement prior to the stockholder's meeting, Pennant had to warn investors not to "read too much into today's stock price."

PHH stock had been rallying, and of course Pennat was concerned that the rally could work to the advantage of the incumbent board in the eyes of shareholders. So Pennant wrote, "The stock still trades below its price one year ago. We seriously question whether the run-up is attributable to the leadership, performance, and credibility of the incumbent Board. Rather, we think there are much better expanations, such as the industry-wide refinancing boom that has emerged from massive government intrervention in the financial markets."

Hmmmm. This kind of reasoning could confirm a cynic. "I try to be cynical, but I can't keep up," as Lily Tomlin said.

When the stock price goes down, it proves that there is rot at the top, and new board members are necessary.

When the stock price goes up, it is irrelevant to the question of the leadership of the board, because there are always broader economic factors involved.

Of course, if you're writing a proxy contest letter for the incumbents, both of those arguments are reversible.

A heck of a lot of what looks like reasoning in the public world -- political, financial, etc. -- is simply an effort to put something together that LOOKS like reasoning.

And about that "refinancing boom," I suppose this is a good time to add my own voice to that of some other observers that the so-called "boom" is a trap for the unwary. We as a nation are in the position of a drunk who solves his hangover by drinking "a hair of the dog." What we need is something more akin to some aspirin and a 12 step program.

PHH Will Need a New Chairman

Pennant Capital Management LLC has won a proxy contest over representation on the board of PHH Corp., a company with what would seem two very different types of operation: its a vehicle fleet management company as well as an originator of residential mortgages.

The contest came to a head Wednesday, at PHH's annual shareholder meeting.

PHH and Pennant jointly announced the results Friday. There were only three seats up for a vote, given the classified nature of the board, and Pennant only contested two of those three. So it now has two seats witin a seven seat board.

At first blush, one might not see that as too dramatic a turnover. But the two board members it displaces are: A.B. Krongard, the Chairman, and Terence W. Edwards, the CEO.

The loss of his board seat won't affect Edwards' position as CEO. The loss of a board seat on the other hand, does mean that Krongard can't continue as chairman, so someone new will have to be chosen.

Congratulations to the new board members, Allan Loren and Greg Parseghian. Loren is a former chairman of Dun & Bradstreet. Parseghian is former chief investment officer of Freddie Mac.