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.
Public shareholders should wield their power
- David H. Webber is a Boston University School of Law professor. The opinions expressed here are his own -
Like a well-armed, well-trained army standing idly by while the citizens it is supposed to protect get crushed, public pension funds have done little to protect public employees from the well-financed corporate attack on their rights. It’s time they join the fight.
Public pension funds invest the retirement savings of public workers, with total assets of around $2.7 trillion. One out of 10 U.S. corporate securities is owned by public pension funds — in other words, owned by public employees. Skillful use of this shareholder power could swiftly and decisively push back the power of corporate lobbies and help fend off attacks on workers.
Consider an example. Last year, a senior adviser of Blackstone Group, one of the world’s largest financial advisers with $111 billion in assets, publicly touted the standard line about how public employees are purportedly overcompensated. But last month, the company released an extraordinary public statement: “Blackstone’s view on public employee pensions is clear and unambiguous … We oppose scapegoating public employees by blaming them for the structural budget deficits that cities and states face.”
What prompted this paean to public workers from one of Wall Street’s most elite institutions? Answer: 37% of Blackstone’s assets belong to state and local public pension funds. Unhappy with what it perceived to be Blackstone’s wavering commitment to these workers, New York City’s public-pension fund recently cancelled a meeting with the company. The Blackstone flip-flop took place right afterwards.
Blackstone is not alone in its constant pursuit of public-employee money to invest. Wall Street and the corporate elite participate in a nearly constant effort to attract labor’s massive capital, with money managers hoping to profit from management fees and corporations hoping to boost share price and broaden their investment base. Public pension assets constitute an untapped source of public employee power. Here are examples of how they can start using it.
It is widely understood that corporate interests have helped fund, through campaign contributions or through donations to lobbies and other organizations, entities that support attacks on the jobs and retirement security of public employees.
Yes, of course. Excellent! And if the pension funds don’t want to fight for the public workers whose funds they manage the management should be replaced.
New BofA chairman must prove independence
– Jonathan Ford is a Reuters columnist. The opinions expressed are his own –
Shareholders in Bank of America must be hugging themselves at their sheer audacity. They have plucked up the courage to say boo to Ken Lewis, the bank’s all-powerful chairman and chief executive.
A shareholder vote on April 29 forced Lewis to relinquish the first of those roles to an “independent chairman”. This role will now be taken by Walter Massey.
Their celebration, however, should be muted. Massey doesn’t seem very independent. He has been a director of BofA since 1998 and therefore participated in all the contentious decisions the board took during Lewis’s tenure as CEO, especially the financially crippling acquisitions of Countrywide Financial and Merrill Lynch.
So shareholders should put Massey under pressure to demonstrate whose side he is really on. And here are two suggestions as to how they might go about this.
First, shareholders should insist that the board cut Lewis’s compensation now that he has given up part of his responsibilities. Lewis has a base salary of $1.5 million, and notched up a further $275,000 in compensation last year, largely for personal use of a corporate jet. That could easily come down by a third or more.
Second, Massey and the board should conduct an independent review of the disastrous Merrill acquisition. In particular, he should get to the bottom of the dispute between BofA and former Merrill chief John Thain about the payment of $3.6 billion in accelerated bonuses to Merrill bankers. If Lewis has abused his position or lied, he must go at once.
If the leadership in North Korea can’t pretend (even under a communist system) that the props in place are noting more than a hereditary monarchy in disguise, how can a corporation pretend to bow to the wishes for independent (meaning outside the established board of directors) by merely playing musical chairs amongst themselves?
This is not capitalism, free market leadership or even remotely democratic. It’s just another sad example of a corporado/politician/religious leader wrapping themselves in a corporate chater/flag/bible to justify activities that are a blatant abuse of the trust and responsibility of their position.
Don’t dare object, or their own homespun version of McCarthyism will lable and ruin you. Just shut up and let them raid the cookie jar until the money they loot is printed into worthlessness.
from The Great Debate UK:
Don’t say aye, aye to 3i
-- Neil Collins is a Reuters columnist. The opinions expressed are his own --
It's hardly surprising that the shareholders in 3i, the listed private equity group, are deeply unhappy at the prospect of having to return 700 million pounds of the 1.75 billion pounds of capital they have received from the company in recent years.
The board has got itself into a hole. That paid-out capital, plus a further 400 million pounds in share buy-backs, was largely financed with borrowed money, and those debts are now coming up for repayment.
A 550 million euro convertible bond launched in August 2003 was designed to provide fresh equity, but it had to be rolled into a 430 million pound convertible bond, and the conversion terms are now pie in the sky. That bond falls due in 2011.
Were 3i an industrial company, it could blame hard times; were it a bank, it would already have abandoned any pretence that a rights issue was anything less than a rescue. It's neither. It's a sort of glorified investment company, valued in normal times by reference to its net asset value per share.
Analysts at Cazenove calculate the current NAV at 521 pence, against the credit-crunched market price of 330 pence. The brokers suggest a one-for-one issue at 175 pence, which would raise 738 million pounds before expenses.
It's almost impossible for an investment company to issue new shares at a significant discount to NAV. It's highly dilutive to shareholders, and begs the question: if the assets are really that valuable, why not sell some to raise the cash?
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.