It’s time for Cisco to cough up shareholder cash
What is it that Cisco CEO John Chambers and his executive corps don’t get about their patient, loyal shareholders? It is called an appreciation of shareholder value.
As the owner of 18,000 Cisco shares, I’ve recently taken a closer, vested interest in the company’s remarkable lack of understanding of what Cisco’s owner-investors want from their very well-paid management.
In 2000, Cisco shares reached a peak of about $82 a share. Since then it has been downhill for the share price, notwithstanding the company’s continued growth, diversification and profits. The very much larger Cisco is now selling for around $19 a share — with no intervening stock splits. The first paltry quarterly dividend of 6 cents a share just started in 2010.
The consistent upward trajectory of Cisco’s economic indicators has given loyal shareholders a sustained hope that has gone unrequited. In the past decade, thanks to Chambers’ penchant for stock buybacks, these have totaled $60 billion, leaving shareholders with nothing to show for them but a low and stagnant stock price. Still, Cisco presently has liquid assets of about $45 billion, growing at almost $3 billion a quarter.
In the past year, I and other shareholders have stepped up our demand for an increase in dividends to 50 cents a year plus a $1 special dividend. That is the least Cisco’s officers should do for their shareholders, many of whom trusted Cisco for over a decade and relied on management to reverse the tiny rate of return that they received for their loyalty. To no avail.
Three principles for a new Wall Street
By Don Tapscott The view expressed here are his own.
Protesters set up the “Occupy Wall Street” base camp in New York a month ago because the location epitomizes the economic forces that control the U.S. and global economies. As one sign read: “This is not a recession. It’s a robbery.” To many it feels like just that. The financial services industry is in desperate need of reform. Many bankers have behaved as secretive corporate titans serving only their own interests, and insist the devastating consequences are not their fault. They are failing to fulfill their obligations to society—in some cases, even to shareholders–and a growing number of critics view the day-to-day behavior of the financial services industry as unacceptable. If the industry doesn’t initiate reform from within then it will eventually have more extreme reform imposed from outside.
In 2008, the routine gambles of Wall Street almost brought down global capitalism and yet, so far, nothing fundamentally has changed. Restoring long-term confidence in the financial services industry requires more than individual banks changing their behavior or even governments intervening with new rules. The industry needs a new modus operandi, where all of the key players (banks, insurers, investment brokers, rating agencies and regulators) adopt the three facets of collaboration: integrity, transparency, and embracing the commons.
Integrity. Trust is the expectation that the other party will act with integrity – be honest, considerate, and abide by its commitments. To re-establish trust, the financial services industry needs to have integrity as part of its DNA. But the cavalier manner in which many banking executives violated integrity was stunning. For example they sold sub-prime mortgages to people who could never make the payments; bundled them into securities and convinced rating agencies to classify them as AAA, and insurance companies to insure them. They then sold these to unsuspecting investors. They violated all the values of Integrity. Everyone in the process suffered and the global economy was sent into a tailspin.
The 2008 meltdown and the Euro crises we face today illustrate how interconnected our world has become. Organizations must be much more aware of what is going on around them. It’s important to know the behavior of others and the potential impacts of the actions of distant third parties. If there is anything Wall Street should have learned from the mess they created it was that business cannot succeed in a world that is failing.
In everything from motivating employees, negotiating with partners, disclosing financial information, or explaining the environmental impacts of a new factory, companies and other organizations must tell the truth, be considerate of the interests of others, and be willing to be held accountable for delivering against their commitments.
Companies need to act with integrity – not just to secure a healthy business environment, but for their own sustainability and competitive advantage. Increasingly, firms that exhibit ethical values and candor have discovered that they can build trust with customers, employees, shareholders and business partners. This makes them more competitive and profitable.
A beautifully crafted article by Shoshana Zuboff describing the unspeakable suffering unleashed by the ‘banality of evil’ of those we entrusted with our economic welfare is worth a read. It ends with;
That in the crisis of 2009 the mounting evidence of fraud, conflicts of interest, indifference to suffering, repudiation of responsibility, and systemic absence of individual moral judgement produced an administrative economic massacre of such proportion that it constitutes an economic crime against humanity.
Note: The author is famous in the ‘social, p2p world’ after writing a book called The Support Economy (2003/4) with co-author Jim Maxmin. Amongst other things, the book foretells the failure of managerial capitalism (or the end of command-and-control) and a shift to collaborative capitalism. Rather prescient given where we are right now.
How big banks can fix their leadership blindspots
By Katrina Pugh The opinions expressed are her own.
In the jitteriness over the stock market’s worst quarter in two years, a racing volatility index, and protests spreading across the nation’s major cities, all bank leadership (and perhaps all corporate leadership) needs to ask a fundamentally new question: “What blindspots are dogging us?” This hardly seems like a radical question. After all, most arbitrators make their money off of other people’s blindspots by seeing around corners where others can’t.
But often, leaders are unaware of blindspots in their own organizations. And they are unaware that they are unaware.
At UBS, blindspots led to $2.3 billion in undetected rogue trading losses, and the ouster of CEO Oswald Gruebel. Analysts have widely criticized UBS’s lax accountability, and oblique, easily-gamed bank systems. Corporate insider Sergio Ermotti brings a strong track record to UBS’s post of interim CEO. Entering this maelstrom, however, will put his leadership to the test.
UBS is far from alone. Many other banks have disclosed the unhappy results of ignoring blindspots, such as Bank of America’s Countrywide loan portfolio, Citibank-Japan’s clumsy disclosure process, and the French banks’ Greek loan portfolios.
We, the investors and consumers need a new cry: “These banks are too big to go stale!” They all need a good air flow. Knowledge flow, that is.
We can learn from UBS’s example. Regardless of whether Ermotti’s destiny is from interim to permanent CEO, he must start on the pathway toward greater transparency at the bank. He needs to act like an outsider in an insider’s clothing. Acting like an insider, he needs to quickly map out how knowledge has failed to reach across the vast network of traders, investment groups, and risk managers. Acting like an outsider, Ermotti needs to stride across the room and open a window. He needs to seize this moment to launch a knowledge overhaul.
I agree with the last comment that “transparency culture is obviously not what banks want to create.” Banks are kicking and screaming (privately), but publicly they are showing some readiness. Do you think these two postures will come into alignment, if they can see transparency as a sign of leadership?
Time for fund managers to act
– Alexander Smith is a Reuters columnist. The opinions expressed are his own –
It is time for shareholders to start behaving like the owners of listed companies rather than appearing as hapless bystanders as corporate disasters unfold around them.
In the U.S., the SEC move to allow institutional investors to nominate directors is a small but welcome step in the right direction. To some degree it echoes existing arrangements in Sweden, where shareholders already play a greater role in nominating and approving directors.
But a more fundamental power shift in favor of the owners of publicly quoted companies is urgently needed and the big question is whether institutional investors, chastened by the huge hits they’ve taken as their investments in companies have crumbled, have got the will and the wherewithal to redefine their relationship with the firms they own.
If past performance is any indication of future performance — which thankfully as fund managers’ disclaimers remind us, it is not — the omens are not good.
It is company managers, particularly of failed financial institutions, who have largely and justifiably taken the rap for poor decision making, some shoddy examples of corporate governance, a few cases of unbelievable greed and an underlying short-term outlook.
But where were the investors all this time?
“Their line is that they are in for the long term and not there to manage companies.”
Come on that’s BS. 99% of investors are in it for that quick quarterly (or less) profits. They have absolutely no interest in anything about the companies – they’re just symbols that can be traded. They want their return this quarter or they dump. And the CEOs want their bonus this quarter (or this year) or they jump. The only people who can claim a genuine interest are the customers and the managers & engineers who produce the products. And they are the same people who get downsized as soon as the numbers do not satisfy Wall Street ‘investors’. In the US/UK, this strategy is called de-industrialization and the brain trust is the institutional ‘investors’.
I have owned Cisco for years. It is the best company in the world. I recommend buy up all of the shares you can at these bargain prices. Cisco is in the heart of the computer technology business especially with UCS. It will only continue to grow and prosper. Nader must see this and is bewildered that Mr. Chambers and company are not feeling that loyal shareholders like himself (15,000 shares) are entitled to a sizable dividend increase commensurate with the company’s vast free cash flow and improved business conditions. If Ralph Nader is making such recommendations, Cisco ought to capitalize on accepting his very prestigious opinion. In recent months and years, Cisco has been the victim of a lot of negative publicity from Wall Street analysts; it’s now time for them to rise to the occasion – a boost in the dividend would most certainly result in an enhanced business climate and do much to keep Cisco at the forefront of the networking industry.