Opinion

The Great Debate

Time for a shareholder revolt

jamessaft1(James Saft is a Reuters columnist. The opinions expressed are his own)

There are encouraging signs that shareholders are becoming more assertive in defending their interests.

The Financial Times reported on Monday that some of Britain’s largest institutional shareholders – including Standard Life, Legal & General and M&G – are working on a plan to bypass investment banks by creating a club to underwrite new issues of equity by small and medium-sized British companies, a move that could save hugely on fees.

What, you may wonder, took them so long?

Second only to taxpayers, investors have been the great patsies of the financial crisis, paying massive costs to a financial services industry which has, to put it mildly, not served them well.

Activist shareholders and investors could be a key force in fixing what is wrong with the financial system. Unleashing their power to act in their own best interests should be a main thrust of new regulation.

The British investor group, reportedly being assisted by mergers and acquisition advisors Lazards, would effectively cut out the middle men by agreeing to take up any unwanted new shares in an offering. This is an idea which if successful could save companies and their owners huge amounts in fees and at the same time deal a blow to investment banking profitability.

Fee bonanza spells more trouble for banks

Alex Smith-GreatDebate– Alexander Smith is a Reuters columnist. The views expressed are his own –

Investment banks are going to have a lot of explaining to do. After the lows of 2008, and despite the mauling they’ve had from politicians and the public, 2009 is going to be a bumper year for those that lived to tell the tale. The banks have pocketed an incredible $16 billion in fees in the second quarter, according to Thomson Reuters first half data on deals and fee income, released on Friday. Click here for related news.

True, this is down from Q2 2008, when fees were almost $24 billion. But it should not come as a surprise to anyone who has been watching — often in disbelief — the huge amount of capital raising that has been going on in both the equity and bond markets.

Beware Goldman’s “dutiful” TARP repayment

(Republished to clarify time period of data in fifth paragraph)

Trading specialists work on the floor of the New York Stock Exchange trading shares of Goldman Sachs, in New York, April 14, 2009. REUTERS/Chip East Patriotism, as Dr Johnson once observed, is the last refuge of a scoundrel. So when you hear words like “duty” drip from the lips of a senior executive at Goldman Sachs, you instinctively count the spoons.

You’d be right to do so too. Chief financial officer David Viniar’s observation that Goldman has a duty to repay the money it received last autumn from the U.S. government as part of the Troubled Asset Relief Program may be marginally less cynical than the apercu flung out recently by his boss, Lloyd Blankfein, that investment bankers should be paid less and shouldn’t be rewarded for failure.

But not much less.

And my, do Blankfein’s comments seem cynical in light of the bank’s first quarter results. After all, Goldman accrued 50 percent of its quarterly revenues (yes, that’s revenues) against payments it plans to make to its employees. That is broadly the same proportion that it paid out to them throughout the boom. No question, then, that Goldman’s bankers should do without to pay back the TARP money. With breathtaking cheek, Goldman has also used taxpayers’ cash to bail out Jon Winkelried, one of its wealthiest and most senior executives, after he lost too much money in its own hedge funds. And as for clawing back past rewards that turned out to be excessive — well what about that $70 million you got in 2007, Blankfein?

  •