More on AIG. Robert Willumstad is now chairman and CEO of AIG.
Willumstad isn't someone who was groomed within the company, one of Hank Greenberg's protoges. He was brought onto the board of directors and made its chairman (nothing like starting at the top) only a little more than two years ago, and almost a tear AFTER Greenberg's departure.
RW comes from Citigroup, where he was the chief operating officer and a candidate for the CEO post, though that never materialized.
A possible problem here is that although banking and insurance are related industries, they are sufficiently distinct (different sets of regulators and so forth) that some might question the relevance of RW's Citi experience.
At any rate, his appointment may head off any proxy fight. Greenberg remains an important stockholder -- sufficiently important that any new CEO will have to make peace with him -- will have to "reach out," as the cliche goes.
Willumstad, according to reports, has already done so.
In a letter he wrote in May, Greenberg stated the reasons for his dissatisfaction thus: "The company's problems are more than financial and extend far beyond its subprime credit exposure or approach to capital management. Core businesses are also deteriorating. U.S. life operations are stagnant. The company has lost its leading and unique market positions in China and Japan. The life business in Asia had been a crown jewel, but now the company's position has eroded. In Taiwan, the company must now find up to an additional $1 billion to cover losses. To what extent are Taiwan losses due to regulatory changes, as has been suggested, and to what extent are they attributable to the failure to hedge certain non-Taiwanese dollar denominated investments?"
Not a bad summary.
Showing posts with label Taiwan. Show all posts
Showing posts with label Taiwan. Show all posts
Monday, June 16, 2008
Saturday, February 2, 2008
Importance of stock markets
I received a review copy recently of a new book by Frank B. Cross and Robert A. Prentice, LAW AND CORPORATE FINANCE.
I'm not going to review it here, but I would like to quote one passage from the first chapter that piqued my interest and that relates to the issues I discuss on this blog.
"The value of stock market financing was disputed for some time, when East Asian countries' success was fueled by bank lending and cross-ownership arrangements for investment, without much in the way of freely traded national equity markets. Some even suggested that the developed equity markets of countries such as the United States could be counter-productive, by creating demands for short-term performance at the expense of long-run economic success. Time has not been supportive of these theories, though, and empirical research generally bears out the importance of developed and free equity markets, although the incentive for short-term focus by American companies remains a concern."
He gives no citation for the ideas he's referencing there. As I understand it, though, he's referencing the 1980s and the first half of the 1990s, when the term "the four tigers" [sometimes, confusingly, the four dragons instead] became popular for South Korea, Taiwan, Hong Kong, and Singapore. There are also in a further confusion of the metaphor, "aspiring Tigers" in Malaysia and Indonesia.
It was in 1994 that Foreign Affairs posted an interview of the long-time prime minister of Singapore (then in retirement) Lee Kuan Yew which has been much-quoted in this line.
Eastern societies are different from Western ones, he said, because easterners believe "the individual exists in the context of his family. He is not pristine and separate. The family is part of the extended family, and then friends and the wider society."
Tu Wei-Ming, a philosophy professor at Harvard University, is one of the scholars who has helped promulgate similar arguments about the connection between "Confucian values" and the dynamism of certain societies such as Singapore.
While it's too easy to bloviate in these areas, it may be safe to say there was a dispersion after 1949. The entrepreneurial segment of China's population left ahead of the communist takeover. The sizeable Chinese minorities in several adjacent countries have become relatively prosperous and politically influential there. This in turn has left them open to periodic bouts of race-baiting, but it has proved beneficial in terms of the growth of the host societies.
Two of the dragons, of course, ARE Chinese. Hong Kong and Taiwan. The other two, Singapore and South Korea, have benefitted from this dispersion, as have the aspirants.
The post-1949-dispersion model appeals better to my own intuitive sense of how the world works than does the sort of Kiplingesque East/West dichotomies of former prime minister Lee.
At any rate, it does seem likely that amidst the dispersants and their descendants there would develop interpersonal connections that would be more important than the impersonal market operations one experiences through a stock exchange. When a company borrows money from a bank, one person speaks directly to another, they discuss the terms, they fill out the forms together. In issuing stock to raise money, abstraction of a different order is at work. So we're bank to the passage in the Cross and Prentice book with which we began -- a preference for bank lending over stock market financing might have become a feature of the development of some nations, and might even have been praised as an element in their success.
The crisis of 1997-98 would naturally have put the kibosh on such talk. Can we infer, then, that stock exchanges have become more important in the countries I've named over the last ten-eleven years?
Yes, we can. We can also see as a matter of fact that some of the phenomena that come with public markets for equity, including proxy fights, have become more prominent in east Asia recently. I'll say something about South Korea in particular tomorrow.
I'm not going to review it here, but I would like to quote one passage from the first chapter that piqued my interest and that relates to the issues I discuss on this blog.
"The value of stock market financing was disputed for some time, when East Asian countries' success was fueled by bank lending and cross-ownership arrangements for investment, without much in the way of freely traded national equity markets. Some even suggested that the developed equity markets of countries such as the United States could be counter-productive, by creating demands for short-term performance at the expense of long-run economic success. Time has not been supportive of these theories, though, and empirical research generally bears out the importance of developed and free equity markets, although the incentive for short-term focus by American companies remains a concern."
He gives no citation for the ideas he's referencing there. As I understand it, though, he's referencing the 1980s and the first half of the 1990s, when the term "the four tigers" [sometimes, confusingly, the four dragons instead] became popular for South Korea, Taiwan, Hong Kong, and Singapore. There are also in a further confusion of the metaphor, "aspiring Tigers" in Malaysia and Indonesia.
It was in 1994 that Foreign Affairs posted an interview of the long-time prime minister of Singapore (then in retirement) Lee Kuan Yew which has been much-quoted in this line.
Eastern societies are different from Western ones, he said, because easterners believe "the individual exists in the context of his family. He is not pristine and separate. The family is part of the extended family, and then friends and the wider society."
Tu Wei-Ming, a philosophy professor at Harvard University, is one of the scholars who has helped promulgate similar arguments about the connection between "Confucian values" and the dynamism of certain societies such as Singapore.
While it's too easy to bloviate in these areas, it may be safe to say there was a dispersion after 1949. The entrepreneurial segment of China's population left ahead of the communist takeover. The sizeable Chinese minorities in several adjacent countries have become relatively prosperous and politically influential there. This in turn has left them open to periodic bouts of race-baiting, but it has proved beneficial in terms of the growth of the host societies.
Two of the dragons, of course, ARE Chinese. Hong Kong and Taiwan. The other two, Singapore and South Korea, have benefitted from this dispersion, as have the aspirants.
The post-1949-dispersion model appeals better to my own intuitive sense of how the world works than does the sort of Kiplingesque East/West dichotomies of former prime minister Lee.
At any rate, it does seem likely that amidst the dispersants and their descendants there would develop interpersonal connections that would be more important than the impersonal market operations one experiences through a stock exchange. When a company borrows money from a bank, one person speaks directly to another, they discuss the terms, they fill out the forms together. In issuing stock to raise money, abstraction of a different order is at work. So we're bank to the passage in the Cross and Prentice book with which we began -- a preference for bank lending over stock market financing might have become a feature of the development of some nations, and might even have been praised as an element in their success.
The crisis of 1997-98 would naturally have put the kibosh on such talk. Can we infer, then, that stock exchanges have become more important in the countries I've named over the last ten-eleven years?
Yes, we can. We can also see as a matter of fact that some of the phenomena that come with public markets for equity, including proxy fights, have become more prominent in east Asia recently. I'll say something about South Korea in particular tomorrow.
Monday, January 28, 2008
New York Times Inc.
New York Times Inc. has its annual shareholders' meeting in April.
Activist investors have indicated there will be a proxy fight. Two funds who've made those statements, Harbinger and Firebrand, now own between them 4.9% of the company's equity.
When these two firms buy a significant share, they're implying (a) we think the underlying assets are valuable, and (b) we think that existing management is depressing that value.
This isn't the first time Harbinger and Firebrand have worked together. They pushed for a change on the board of Gateway, a computer manufactuer, in 2006. As a result Scott Galloway, Firebrand's chief executive, ended up on that board.
I don't know how cause and effect work out here, but Gateway was acquired by a Taiwanese company, Acer, a year later. Did Galloway press for that? Will he press for NYT Inc. to put itself on the auction block too, if he ends up on their board? I don't know.
I do know, though, that newspaper-companies have been attractive takeover targets in the last two years.
So far the Harbinger/Firebrand forces seem to be emphasizing divestiture, not consolidation. They're suggesting that the NYT company owns too many non-core products.
Activist investors have indicated there will be a proxy fight. Two funds who've made those statements, Harbinger and Firebrand, now own between them 4.9% of the company's equity.
When these two firms buy a significant share, they're implying (a) we think the underlying assets are valuable, and (b) we think that existing management is depressing that value.
This isn't the first time Harbinger and Firebrand have worked together. They pushed for a change on the board of Gateway, a computer manufactuer, in 2006. As a result Scott Galloway, Firebrand's chief executive, ended up on that board.
I don't know how cause and effect work out here, but Gateway was acquired by a Taiwanese company, Acer, a year later. Did Galloway press for that? Will he press for NYT Inc. to put itself on the auction block too, if he ends up on their board? I don't know.
I do know, though, that newspaper-companies have been attractive takeover targets in the last two years.
So far the Harbinger/Firebrand forces seem to be emphasizing divestiture, not consolidation. They're suggesting that the NYT company owns too many non-core products.
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