By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It takes a lot for Citigroup and Bank of America to make JPMorgan look deficient. Jamie Dimon’s Paleolithic board does just that, though. Last week’s protest vote and the rising losses from knuckle-headed trades at its chief investment office highlight the need for JPMorgan to recruit some new directors to help keep the boss on his toes.

As the bank built up trades that may cost shareholders over $2 billion, JPMorgan’s board members were getting too nestled in their seats. Until last week’s shareholder meeting added a fresh body, JPMorgan directors had served an average of more than 12 years. Only one director had joined since the financial crisis of 2008 delivered the biggest shock in a generation.

By contrast, BofA and Citi have made substantial changes, albeit because they required government bailouts. Most of Citi’s 12 directors, including a former New York banking superintendent and president of the Philadelphia Fed, joined post-crisis. And eight of BofA’s 12 directors are new since 2007, including a former FDIC chairman, Fed governor and top executive at Morgan Stanley. Both banks also separated the CEO and chairman roles, something 40 percent of JPMorgan shareholders voted to do last week.

More specifically, JPMorgan’s risk policy committee looks short of modern financial acumen. Its chairman, James Crown, has been on the board for over two decades. As the president of Henry Crown and Co, an investor in JPMorgan and General Dynamics, he’s no dupe. But his last relevant stint in finance was at Salomon Brothers in the 1980s.

David Cote, the chairman and CEO of Honeywell International, another committee member, is no shrinking violet. But it’s hard to see how he complements Crown’s gaps with, say, complex securities. Ellen Futter is, somewhat fittingly given the board’s collective tenure, president of the American Museum of Natural History.

Even the sharpest bunch might not have prevented the bank’s bad bets. But executives with stronger, more current, financial knowledge also might have asked more probing questions about the CIO. Comfortably navigating the crisis kept attention off the entrenched JPMorgan board. That’s an oversight by Dimon, the chairman, and shareholders that can no longer be ignored.

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Facebook has reminded investors of a simple lesson: Avoid companies whose bosses don’t care about you. From the get-go, Mark Zuckerberg, the social network’s not very sociable founder, made clear he had little interest in welcoming public shareholders. That indifference set a tone for his executives, venture capitalists and bankers that arguably contributed to the glaring flaws in Facebook’s initial public offering last week.

True, the company’s earlier backers, who were able to unload more than $10 billion of stock at the highest possible price, may consider the deal worthy of high-fives and Cristal. But the combination of a stock already trading well below its offer price, annoyed retail investors – many of them Facebook users – and regulatory probes constitutes a botched deal. And that’s without mentioning trading glitches, which were presumably beyond the company’s control.

There’s also the impact on Facebook’s reputation and morale. Where the Silicon Valley titan was once viewed as a benign force connecting people, albeit with occasional privacy concerns, it now risks being synonymous with Wall Street money-grubbing. That’s bad for a product dependent on consumers. It’s also harmful for morale internally and, along with a listless stock price, for recruitment.

The irony is that these issues – along with the lawsuits now piling up on Hacker Way – may be exactly what Zuckerberg hoped to avoid by keeping his company private for so long. As he made plain in his letter to prospective investors, “we’re going public for our employees and our investors.”

Contrast his hands-off approach with the attitude of Microsoft’s Bill Gates back in 1986. Gates insisted the company’s IPO underwriters set a lower price range than they thought achievable, according to a Fortune story on the process, settling on $21 a share. That helped make the IPO an easy hit for incoming investors, even in the early days of trading.

By all accounts, Zuckerberg is Steve Jobsian in his attention to detail when it comes to coding for his internet creation. But the vacuum created by his distance from the IPO allowed underlings to make decisions – for instance in pricing and allowing early VC investors to ratchet up their sales – that may have damaged Facebook. In this respect, Zuckerberg has failed an early test as the CEO of a public company.

By Rob Cox This column appeared in the May 21 edition of Newsweek magazine. The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It must be killing Gary Bettman to keep so much good news on ice. The National Hockey League is Bettman’s business, and business is the best it has been since he became its commissioner nearly 20 years ago. Thanks to ferocious competition inside the rink and the biggest broadcasting commitment in league history, more Americans are debating the finer points of penalty kills and two-line passes than ever.

But Bettman can’t skate a victory lap. Right after the Stanley Cup is awarded in a couple weeks, the NHL will square off in a brawl of its own. For the first time since ending the disastrous lockout that froze the 2004-05 season and even spurred a leveraged buyout for the NHL itself, the 30 league owners will head into negotiations with players, who are led by the fearsome enforcer Donald Fehr, to thrash out a collective-bargaining agreement. As much as Bettman might like to celebrate, he will have to downplay the league’s success as a negotiating posture.

Last time around, the NHL Players Association made concessions, including a relatively low ceiling on salaries. With the league much improved, Fehr, who successfully fought such restrictions when he represented Major League Baseball players in their clash with owners in the mid-1990s, will undoubtedly seek to raise the salary cap, if not eradicate it.

Hockey’s recent success gives him plenty to target. Revenue has surged to $3.2 billion from $2 billion in 2003, the year before the lockout. Viewership is up, too. On NBC, NBC Sports Network, and CNBC – all controlled by cable operator Comcast, which also owns the Philadelphia Flyers – more than 39 million viewers have tuned in to the playoffs, up 23 percent from last year, according to Nielsen.

Though a handful of the league’s newer franchises (Carolina Hurricanes) and even older teams (New York Islanders) are struggling, some of the NHL’s financial laggards have gotten their skates on. To wit: the Phoenix Coyotes, which went bankrupt two years ago, went to the Western Conference finals and will soon land a new owner. “There’s an increased awareness and buzz across the game,” Bettman says, edging as close as he can to a boast. But make no mistake: it won’t be long before the gloves come off.

By Rob Cox This column appeared in the May 21 edition of Newsweek magazine. The author is a Reuters Breakingviews columnist. The opinions expressed are his own. A time-honored tradition for handling executive succession on Wall Street is the practice of putting two ferrets in a sack, figuratively speaking. That’s when a bank takes two promising managers and makes them co-heads of the same business. The expectation is that, like two feral mammals clawing each other in the darkness, one will emerge victorious. He will become CEO. The other is named deputy vice chairman of Bolivian equities. JPMorgan has yet to officially haul out the burlap sack, but the $2 billion trading loss it disclosed two weeks ago has accelerated the contest to succeed Jamie Dimon at the top of America’s biggest financial institution.

Not that Dimon is leaving anytime soon. His hair may be silver, but he’s only 56 and has every intention of running the place into his 60s. Moreover, the losses from bets on funky derivatives incurred by the chief investment office in London look manageable for a bank that minted a $5.4 billion profit in the first quarter and boasts nearly $200 billion in capital. But as Dimon readily admits, the trades were dumb. They certainly undermined many of his public arguments for resisting additional regulation of the banking industry. As a consequence, the question of who will one day fill Dimon’s wingtips has become a money-industry parlor game.

For clues, look no further than the cleanup crew for the trading snafu. Two of Dimon’s most capable lieutenants, Michael Cavanagh and Matt Zames, have been handed high-profile roles that will help determine their suitability in the eyes of the board, investors, and regulators to eventually run the $2.32 trillion bank. Zames, 41, is taking over the unit that made the crummy trades. Cavanagh, 46, is leading a team of senior officers to “oversee and coordinate” the bank’s response to the affair.

Both are important tasks. Zames must unwind the problem trades while minimizing losses. Given the size and public nature of JPMorgan’s wagers, that won’t be simple. Having run JPMorgan’s bond trading desk, he should be well-suited to the challenge, though it may be his stint at Long-Term Capital Management, the hedge fund that collapsed in 1998, that’s more applicable to the current situation.

But it’s Cavanagh’s job that has far larger ramifications for the bank as a whole. As Dimon says, “Mike will ensure that best practices and lessons learned are carried across the firm.” Read between the lines, and that means the former chief financial officer’s recommendations may include changes to governance, risk management and corporate controls that implicate flaws in Dimon’s stewardship. How successfully Cavanagh can constructively criticize his boss for the greater good of the institution may determine whether he emerges from the sack as bloodied ferret or CEO.

By Rob Cox

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

It’s easy to sympathize with the collective glee that greeted JPMorgan’s shock revelation of some $2 billion of trading losses. The bank and its chief executive Jamie Dimon have received their long-awaited comeuppance. But this emotion – Dimonfreude, if you will – is dangerous. If one of the few big banks that managed to sidestep most of the credit crisis is proven fallible, confidence in the system itself will be shaken.

Dimon and JPMorgan deserve a good knocking, to be sure. After all, this is the firm widely credited, if somewhat unfairly, with hammering the final nail into the coffins of not just Bear Stearns – which it bought for a pittance in 2008 – but also of Lehman Brothers and later MF Global, mainly through collateral calls. Rivals on Wall Street and in financial centres across the world may take some satisfaction from seeing JPMorgan stumble.

And Dimon has not taken kindly to the march of new regulation of the financial industry. He has called tough capital standards proposed by the Basel Committee “anti-American.” A little over a year ago he publicly carpeted Ben Bernanke over whether the Fed had properly analyzed the costs and benefits of the Dodd-Frank Act. Regulators everywhere may find succor in JPMorgan’s failed whaling voyage.

All this may prove salutary if it serves as a reminder to Dimon and his managers that they, too, are human, and like all humans prone to err. As a consequence, the bank should toughen up its controls, take its lumps, stamp down its rhetoric and conduct a more rigorous and honest appraisal of its businesses. It might even soften Dimon’s stance on accepting new capital standards, and perhaps lead to some comity with regulators over interpreting and implementing admittedly complicated rules like the one named after Paul Volcker.

By all means, those who have been on the receiving end of JPMorgan’s arrogance or flexing of financial power – be they rivals, regulators, politicians, customers or even journalists – may savor this moment. But they must be careful what they wish for. A swift but humbling lesson in fallibility would do some good. A prolonged loss of confidence in the financial system could bring back some pretty dark days.

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own. This column appears in the May 14 issue of Newsweek.

It’s worrying to think that shareholder democracy is needed to rectify shortcomings of the real thing. Yet this week two of the nation’s biggest corporations will give their investors precisely that opportunity. Motions on the ballots at the annual meetings of Bank of America and 3M will effectively act as referendums on the U.S. Supreme Court’s flawed decision in the Citizens United case to effectively hand companies the same freedoms of speech accorded to people. Happily, supporting proposals to restrict the use of corporate money in politics isn’t just good for democracy, it is good business.

In the Citizens United ruling of 2010, the court struck down limits on spending by corporations and unions in politics, holding that such restrictions were prohibited under the First Amendment. The ruling may undermine faith in the democratic process by opening the floodgates for an unprecedented flow of money into campaigns. Justice John Paul Stevens summed it up best in his dissent: “A democracy cannot function effectively when its constituent members believe laws are being bought and sold.”

The Supreme Court could get another crack at the issue thanks to Montana’s high court, which decided the ruling did not supersede state laws on political corruption. In the meantime, though, it will be up to shareholder-citizens to blunt the impact of Citizens United.

They can start on Tuesday in St. Paul and Wednesday in Charlotte when the shareholders of 3M and BofA, respectively, gather. In addition to choosing directors and auditors, they’ll be voting on proposals submitted by Trillium Asset Management of Boston to “request that the board of directors adopt a policy prohibiting the use of corporate funds for any political election or campaign.”

Unsurprisingly, both the maker of Post-it notes and the nation’s largest bank recommend that shareholders turn down the proposals. The companies say they need to have as free a hand as their competitors in, as 3M puts it, “supporting candidates whose views are aligned with the company’s business interests.”

But shareholders must also consider that playing politics can backfire, as the retailer Target <TGT.N> discovered two years ago. After the Citizens United ruling, Target donated $150,000 of its shareholders’ money to a political fund, MN Forward, which supported the gubernatorial campaign of an anti-gay Republican. That led to an embarrassing customer boycott supported by intense social media campaigns. At best Target shareholders received no benefit from company management’s use of their treasure in the political game. At worst, the bosses’ behavior hit the bottom line.  

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

It’s easy to spot vestiges of the old Predators’ Ball at this year’s Milken Institute Global Conference. The Ferraris and Bentleys jamming the Beverly Hilton driveway, for example, are evocative of the annual shindigs that Michael Milken put on for his Drexel Burnham Lambert clients in the go-go 1980s. Yet there’s a consensus emerging even among this elite demimonde that the rising disparity between the rich and the rest is a problem in need of attention. They disagree, however, on the solutions.

At its heart, this gathering of some 3,000 folks is an opportunity for Milken to reunite former cronies and customers from the Drexel diaspora to talk business and big ideas – and maybe party a little (though the legendary exploits of its precursor have been replaced with the mellower tones of Lionel Richie). Among the more notable Friends of Mike are Leon Black, who went on to start private equity powerhouse Apollo after Drexel went under, and Joshua Friedman, who established hedge fund Canyon Capital.

Among the attendees, there are more successful bankers, traders and investors who worked for Drexel or one of its many offshoots – from Jefferies to DLJ to Credit Suisse – than there are valet parking spots. They’re clogging conference rooms to hear panels on “Easy Money: Consequences of the Global Liquidity Glut” or “The Art of Collecting: Los Angeles and the Global Art Market.”

Despite the concentration of wealth, the most talked-about event was a lunch panel entitled “What’s Happened to the American Dream?” Most surprising was the absence of any apparent disagreement over its premise: that a decline in economic mobility and rising wealth disparity creates risks that endanger the stability of the capitalist system that has been so kind to Milken’s adherents.

Panelists sparred over possible remedies. Congressman-turned-banker Harold Ford took issue with Harvard University fellow Niall Ferguson’s contention that government welfare programs bear much of the blame. And judging by the applause for Ferguson’s position, it’s safe to assume there’s little sympathy for the redistributive chants emanating from a revived Occupy Wall Street movement. Either way, it’s clear that these one-time predators aren’t comfortable with the idea that the status quo will make them prey.

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Facebook hasn’t even gone public yet. But it looks as though the social network is already being viewed with concern by acquisition targets. Instagram, the revenue-challenged, lightly staffed startup Facebook just agreed to acquire for $1 billion, has snagged a whopping 20 percent break fee if the sale isn’t consummated by December. That’s a wise safety measure given the life cycle of mobile apps. It could also be a comment on Facebook’s lurking antitrust risks.

To understand why Instagram boss Kevin Systrom might be worried, rewind the tape to last April. That’s when the U.S. Department of Justice allowed Google to acquire ITA Software, a startup active in the online travel business. That deal took nine months to close, and required a host of concessions to American competition authorities.

In the fast-moving economy of mobile applications, that’s an eternity. It took a mere weekend for Facebook founder Mark Zuckerberg to hustle together his offer for Instagram. Or look at it another way: nine months is half of Instagram’s life to date.

Naturally, Facebook doesn’t think Instagram has anything to worry about. The company, which on Monday filed a revised prospectus for its initial public offering, said it expects to close the purchase in the current quarter. In his zeal to acquire the upstart Zuckerberg may not even have put up a fight on the break fee – though a hands-on board might have. But to the extent Instagram’s hefty insurance policy stems from concern over how much of a Google-like target Facebook has already become for competition authorities, that’s another red flag for IPO investors to consider.

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

S. Robson Walton, Wal-Mart’s multi-billionaire chairman, is about to prove money can’t buy happiness. He’ll need to channel his father’s spirit of integrity and initiate an independent probe into how top executives, possibly the chief and another director, participated in an alleged cover-up of widespread bribery and corruption at the company’s successful Mexican subsidiary. It won’t be fun for the son of Wal-Mart’s founder. But the $213 billion company can recover by doing the right thing.

The alleged infractions revealed in an in-depth New York Times investigative report over the weekend are less worrisome than the way the mega-retailer appeared to handle them. Through 2005, the newspaper reported, millions of dollars of bribes were paid by Wal-Mart to fixers, who then sprinkled them around to local officials to remove impediments to Wal-Mart’s growth in the country. Illegal though this may be for a U.S. corporation, it’s not uncommon in Mexico and other parts of the developing world.

The trouble is that top brass at Wal-Mart’s Bentonville, Arkansas, headquarters had been made aware of the shenanigans and willfully sought to sweep them under the carpet, according to the Times. Among the executives were two current directors, then-CEO H. Lee Scott and his successor Michael Duke, who ran international operations at the time. Current Wal-Mart vice chairman, Eduardo Castro-Wright, ran the Mexican unit.

Rather than root out the problem, Bentonville asked the general counsel of the Mexican business, who allegedly approved the bribes, to investigate, the Times reports. Not surprisingly, the scandal disappeared. Now that it’s public, any attempt to whitewash the charges risks sinking Wal-Mart further into the mire. U.S. authorities are investigating possible violations of the Foreign Corrupt Practices Act, the Times reports.

Walton and his board have only one good option: to get to the bottom of what happened and come clean. The company notes that many of the alleged activities are six years old and do not reflect “who we are and what we stand for”. That may be true. But if Duke and Scott ignored the law, they must go. As Sam Walton once said, “high expectations are the key to everything.” That’s as true in merchandising as it is in ethics.

By Rob Cox The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

There was no more coveted piece of New York City real estate on Tuesday night than standing room in the Museum of Modern Art’s Marron Atrium. And so it shall be for seven more evenings as Kraftwerk, the German electronic outfit from the 1970s, plays to a scant crowd of about 450 lucky souls. That this quartet, which includes just one of its original members, can command a showcase like the MOMA – and sell out in a drumbeat – provides a useful lesson in technology’s risk of obsolescence.

It would be easy to dismiss Kraftwerk as a relic from the dawn of the digital age, and its ardent fans a weird cult in turtleneck sweaters and 3D glasses. But the eight-night retrospective of the band helmed by Ralf Hutter provides surprising insight into why some innovations fade and others flourish. Ultimately, success in technology – as in art – is derived more from the expression of big ideas than a mastering of its circuitry.

Kraftwerk is best known for harnessing new gadgets, primarily synthesizers like the Minimoog, to create industrial rhythms and electronic drum beats that broke new ground in pop music. Its sounds have been copied, built upon and sampled by artists from Afrika Bambaataa to Pink Floyd to Jay-Z. Today’s auto-tuned pop stars owe a direct debt to the musical sequencing that Hutter and his former partner Florian Schneider pioneered at their Kling Klang Studios in Düsseldorf four decades ago.

Yet funky sounds alone fail to explain how the group’s four musicians – looking more like engineers in Tron-era spandex suits – can rivet the attention of New York’s cultural elite for an entire week. That speaks more to the larger concepts embraced by Kraftwerk, chiefly the power of technology – specifically computing, transportation and communications – to transform human relationships; and, particularly in the German context, to erase the scars of a dark past with visions of a unified, harmonious Europe.

Take Tuesday’s performance of the 1974 breakthrough “Autobahn.” The song, with its signature electronically-modified vocals, “Wir fahr’n fahr’n fahr’n auf der Autobahn,” against a rhythm of padded drum beats, is sonically unforgettable. But so, too, is the song’s message, enhanced at the MOMA by 3D screens looming behind the stage, of a peaceful Europe where new highways cut through green fields and the edifices of a modern industrial complex compete with church spires in the middle distance. Like the space-agey sounds emanating from Kraftwerk’s instruments of the era, the limited torque of a 1973 Mercedes diesel sedan might seem obsolete in today’s world. Yet the freedom of the open road remains an eternal longing.

Similarly, the electronic arrangements of the 1977 composition “Trans Europe Express” may sound old-fashioned to 2012 ears. But the song’s message, that modern transportation (in this case high-speed rail) offers the possibility of stitching together a continent that just a generation before was at war, is timeless and transcends the music.