EDITION 13Weekly October 19, 2012 Citizens United Are Shareholder Revolts in the Offing?
03 Contents           04   Citizens United                Are Shareholder Revolts in the Offing?           08   Citibank &...
[United:] Citizens                                                      here’s now reason to feel           At the same ti...
Weekly     “                                                                                                              ...
When it comes to social media’s impact on America’s                                                  largest financial ins...
Weekly     Data SecuritY In The Digital Age                                                                          NACD ...
Weekly     Tyler Nurnberg                                            on     Bankruptcy                             &     R...
Weekly     We have also witnessed growth in the num-            Once a company files bankruptcy, the board           bankr...
how new   Stock Exchanges          Can Leverage          Global          Economic          Opportunity          Richard S....
Weekly     In                June of this year, a Bank of Amer-       Nurturing Confidence                                ...
Weekly                                                                                                                   B...
IN THE NEWS     ArticlesLos Angeles Times | October 19, 2012Google releases earnings prematurely, triggering stock sell-of...
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LEVICK Weekly - Oct 19 2012


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Citizens United

Citibank & Social Media

Data Security in the Digital Age

Bankruptcy & Restructuring

New Stock Exchange


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LEVICK Weekly - Oct 19 2012

  1. 1. EDITION 13Weekly October 19, 2012 Citizens United Are Shareholder Revolts in the Offing?
  2. 2. 03 Contents 04 Citizens United Are Shareholder Revolts in the Offing? 08 Citibank & Social Media Succeeding Where Banks Fear to Tread 10 Data Security in the Digital Age 11 Adjusting Executive Compensation Plans 12 Bankruptcy & Restructuring A Changing Landscape 16 New Stock Exchanges Leveraging Opportunity 21 Blogs to followWeekly 22 LEVICK In THe News
  3. 3. [United:] Citizens here’s now reason to feel At the same time, Mr. Freed’s enthusiasm is T good―or at least a bit bet- ter―about Citizens United, the landmark case in which the not wholly driven by confidence in the civic right-mindedness of global corporations. To the contrary, coverage of the study has duti- Supreme Court ruled that the First Amend- fully underscored self-interest as a compelling ment prohibits the government from restrict- motivation, quoting the study’s own emphasis ing political expenditures by corporations and on shareholder relations. unions. The decision caused a flurry of spend- Outside interest groups and politicians usu- ing by trade associations and non-profit groups ally have multifarious agendas and, as a result, that are not required to disclose their corpo- shareholders may become aware of financial rate donation sources―and near-apoplexy contributions that unwittingly disserve their among some people who were anticipating own interests. For example, four of the seven covert corporate control of the political system. biggest manufacturers of birth control drugs But lo and behold, a study released last month and devices donated to a trade association Are Shareholder by the Center for Political Accountability (CPA), supporting Republicans who were presumably in partnership with the Zicklin Center for Busi- pro-business, but who had also vowed to limit ness Ethics Research at the University of Penn- access to birth control-related products. Not all Revolts in the Offing? sylvania‘s Wharton School, found a significant increase in the number of large companies voluntarily disclosing their political contribu- businesses are created politically equal. Heretofore, most of the talk about marketplace impact as a corporate concern in the wake of Richard S. Levick, Esq. tions. Among 88 such companies, 45 chose to Citizens United was really about how consum- Originally Published on Forbes.com disclose, up from 36 the year before. The study ers might react. Such pressures are not to awarded particularly high marks to Microsoft, be taken lightly as Target learned in 2010 Merck, Aflac, and Gilead for their disclosure when gay rights groups started a boycott policies and procedures. because the company donated $150,000 to a The ideological dynamics are fascinating and by business group supporting Minnesota’s guber- no means glibly predictable. “We’re encouraged natorial candidate Tom Emmer, who opposes that even when the stakes are highest, leading same-sex marriage. companies are refusing to engage in hidden Yet the real pressure points, or at least the most spending,” said CPA president Bruce Freed. This consistent ones, are likelier to be felt among is the very same CPA castigated earlier this year shareholders who may be upset over negative in the Wall Street Journal as a well-armed sol- consumer opinion triggered by a donation, or dier in the war against corporate free speech. who are themselves directly opposed to a par- It’s always a good sign when public figures ticular donation. Shareholder activism, about undermine their own stereotypes. 05
  4. 4. Weekly “ pressures driving companies like Aflac and Chubb to reveal their contributions seem very Consider the Center for Political genuine indeed. Accountability itself as a barometer of the On the left, observers like Craig Holman of activist sea change. According to its own Public Citizen argue that shareholders are in- reports, shareholders working with CPA creasingly less amenable to “squander” money on the political enthusiasms of their CEOs. Nor have filed a total of 51 resolutions in 2012.” are all conservatives as disturbed as Smith by the trend. Jim Bopp Jr., who has sued to over- turn disclosure requirements, has no problem which we’ve written so frequently in these is a lot more form than there is substance in with voluntary action. “If [companies] think pages, is thus a salient countervailing force the agreements that shareholder groups have Luís Brás / Shutterstock.com they get a competitive advantage by disclos- against the oligarchic trends purportedly un- struck with public companies,” says Kelner, ing their contributions, we are fine with that. The move toward transparency applauded by leashed by Citizens United. And corporations chair of the Election and Political Law Practice That’s the marketplace.” Bruce Freed and others is in and of itself a know it, as the mounting number of voluntary Group at Covington & Burling LLP. “The vast Yet disclosure is only one aspect of the problem sign of progress but, like all progress, it begets disclosures clearly suggests. majority of what they are disclosing was al- for corporations. As Smith correctly suggests, new problems. In fact, it opens up a Pandora’s ready publicly available. For the most part, they Consider the Center for Political Accountability Box as we’re no longer just talking about a are just pulling it all together in one place.” they must still decide if they even want to itself as a barometer of the activist sea change. marketplace for the products and services that participate in the political process given the According to its own reports, shareholders But there’s no gainsaying that the CPA/Zicklin corporations exist to sell. We’re also talking increased scrutiny to which Citizens United has working with CPA have filed a total of 51 reso- Center report touched a political nerve if only about a marketplace of ideas, where more inspired the watchdogs. There’s a communica- lutions in 2012. Of those, 13 led to agreements because the narrative has shifted, from debate than a few corporate angels have historically tions challenge layered over any decision that with the company. For example, the New York about Citizens United itself to a discussion of feared to tread. companies make. After all, once they disclose State Pension Funds “successfully engaged” how corporate stakeholders will or will not how much they’ve contributed and to whom, The lesson is that, if you do tread there, watch Safeway, Kroger, CSX Corp., Sempra Energy, hold public companies accountable for their it stands to reason that shareholders and other your step. Think very hard about the questions R.R. Donnelley & Sons, and Reynolds Ameri- decisions. On the right, former Federal Elec- interested parties will also want to know why. you may be asked and the answers you’ll have can. Trillium Asset Management “reached tion Commission Chairman Bradley Smith has At that point, the penalties for miscommuni- to give. You may pay dearly for the “favor” the agreements” with Halliburton, Chubb Corp, averred that shareholders “regularly defeat” cating accelerate. How justify a donation to Supreme Court did you with its fateful decision and State Street Corp. The list goes on, en- proposals to compel donation disclosures. In a pro-industry candidate who might have a in Citizens United. L compassing both individual shareholders and the same breath, however, Smith laments that other institutional investors. “many corporations are feeling pressure from problematic position on abortion or gay rights? Richard S. Levick, Esq., President and CEO of LEVICK, faux ‘shareholder rights’ groups to adopt such Conversely, how justify not contributing to a represents countries and companies in the highest-stakes Robert Kelner offers an important general global communications matters—from the Wall Street policies, or to exit the political arena entirely.” prominent industry supporter because he or caveat to any such evidence of a ground-break- crisis and the Gulf oil spill to Guantanamo Bay and the she happens to have a strong position on an ing rapprochement between shareholders It’s hard to imagine that those shareholder Catholic Church. unrelated social issue? You risk being per- and corporate political contributors. “There rights groups are all that “faux” when the ceived as either knave or fool.06 07 07
  5. 5. When it comes to social media’s impact on America’s largest financial institutions, one can’t help but think of the ways that the Occupy movement and other consumer activists have used platforms such as Twitter and Facebook to grow their ranks, organize their efforts, and disseminate scathing critiques of the industry. But as reported last week in the Wall Street Journal, at least one major financial services provider is embracing social media to get closer to its customers. When Citibank customer Stacy Small tweeted that it is actively gaining ground in an indus- about being left on hold for 40 minutes during try with a spotty history of customer service a routine call to the bank’s customer service through traditional channels. department, a Citibank agent responded within Key to Citibank’s success (as evidenced by the minutes with a message that read “Send us your anecdote above) is an understanding that even phone number and we’ll call you right now.” the most critical commentary posted to a Face- Not moments later, Ms. Small was speaking book page or Twitter account is only the begin-Citibank’s Social to one of approximately 30 Citibank customer ning of a conversation that could potentially service representatives who have received transform a negative customer experience into special training in social media monitoring and a positive one. response. The experience was so overwhelm-Media Effort Even better, Citibank’s social media efforts ingly positive that Ms. Small doesn’t even call provide potential customers with a look at the Citibank customer service anymore. Instead, lengths it will traverse to ensure an optimal she simply tweets the address @askCiti when- banking experience for all. L ever a question or problem arises.Succeeding Where Many Banks Still Fear to Tread While such interactions may be nothing Michael W. Robinson is an Executive Vice President at LEVICK and a contributing author to LEVICK Daily. new to the social media mavens who protectBy Michael W. RobinsonOriginally published in the LEVICK Daily online brands at hotels, airlines, and major consumer product companies, Citibank is something of a pioneer for the simple reason 09
  6. 6. Weekly Data SecuritY In The Digital Age NACD Boardroom: Adjusting Executive Compensation from PicewaterhouseCoopers’ Shane Sims Plans During a Turnaround This week’s edition of NACD BoardVision focuses on adjusting executive compensation plans during a turnaround. Join Steve Kalan, associate publisher of NACD Directorship, and Glenn Bor- romeo, of Meridian Compensation Partners, in this video interview as they discuss changing pay I recently sat down with Shane Sims, a Director in PricewaterhouseCoopers’ U.S. Forensic Services strategies for companies pivoting to turnaround mode. practice, to discuss data security in the Digital Age. Mr. Sims outlined the specific risks presented to companies and countries by the five primary threat groups when it comes to data loss and theft: foreign intelligence services; terrorist organiza- tions; transnational criminal enterprises; global competitors; and insiders. With so many potential threats, companies must establish a data breach response plan that enables fast action and effec- Financial Communications tive outreach to all concerned stakeholders. Litigation As a former Supervisory Special Agent with the Federal Bureau of Investigation (FBI) who has more than 24 years experience in forensic investigations, cybercrime, national security, and crisis Corporate & Reputation management, Mr. Sims shared these insights and many more with Bulletproof™. Public Affairs Crisis Sign Up Today10
  7. 7. Weekly Tyler Nurnberg on Bankruptcy & Restructuring Richard S. Levick, Esq. Over the next several weeks, LEVICK Daily How has the bankruptcy and Originally Published on LEVICK Daily will share selected interviews from our recent restructuring landscape NACD Directorship article entitled “What’s changed in the wake of the Next? The Top Issues of 2013 and Beyond.” global financial crisis? Today, we feature a discussion on bankruptcy Tyler Nurnberg: Europe is still very much in and restructuring with Tyler Nurnberg, a Part- the midst of a financial crisis and the effects ner in Kaye Scholer’s Bankruptcy & Restructur- are multifaceted. Notably, we have seen an ing Group and Managing Partner of the firm’s increase in the number of cross-border insol- Chicago office. vency cases, which is a trend we fully expect to continue. In particular, there has been a rise in Mr. Nurnberg represents troubled companies cases filed under Chapter 15 of the Bankruptcy in restructurings throughout the U.S. He Code, which provides a framework for multi- also advises lenders, funds, institutional national companies to have foreign insolvency investors, and private equity sponsors on proceedings recognized in the U.S. The laws restructuring matters. governing these cases are still being devel- At the conclusion of the interview, you can oped, and courts are struggling with how much find LEVICK’s own communications best weight to give foreign insolvency laws when practices appended. they conflict with U.S. law.12 13
  8. 8. Weekly We have also witnessed growth in the num- Once a company files bankruptcy, the board bankruptcy. The benefits of getting this done business and, while bankruptcy can be a ber of foreign companies looking to file under should appreciate that the decision-making before filing can include greater flexibility in powerful tool, it is not a panacea for the Chapter 11 of the Bankruptcy Code. The rules process becomes much more transparent. In developing an incentive bonus plan for the problems that led the company to file on eligibility for a foreign company to file general, the company can operate as usual but company and avoiding potential liability for bankruptcy in the first place. L bankruptcy here are lenient, and our bank- will need prior court approval for “non-ordi- premature layoffs. Richard S. Levick, Esq., President and CEO of LEVICK, ruptcy laws are biased towards rehabilitating nary course” transactions such as sales, financ- represents countries and companies in the highest-stakes Lastly, the board needs to stay focused on the a troubled company to preserve its “going ings and the like. A question that frequently global communications matters—from the Wall Street business plan during the bankruptcy. While concern” value―as opposed to most foreign gets asked is whether a director should resign crisis and the Gulf oil spill to Guantanamo Bay and the Catho- external factors may have contributed to the lic Church. insolvency regimes, where the focus is on liqui- once the company files bankruptcy―there need to file, larger underlying problems with dating a troubled company’s assets quickly and are exceptions but in most cases, the answer This post is excerpted from Richard Levick’s recent NACD the business model or the balance sheet likely distributing the proceeds to creditors. is “no,” the director is better off staying on the Directorship feature “What’s Next? The Top Issues of 2013 drove the decision. Those issues need to be and Beyond.” board and guiding the company to conclusion resolved for the company to emerge as a viable How can directors best serve a of the bankruptcy process. company during bankruptcy or restructuring? How can a company best position itself for post-bankruptcy BEST COMMUNICATIONS PRACTICES: Tyler Nurnberg: A board will want practical operations? outside advice early in the process on how to fulfill its fiduciary duties, and how those duties Tyler Nurnberg: The company should deter- Boards must ensure that exit strategies and future growth are the may change when the company is insolvent or mine its exit strategy before it files bankruptcy 1. hallmarks of communications during bankruptcy, beginning with the approaches insolvency. The board will want to wherever possible, and view the process as initial announcement. When companies control the “new day” narrative, maintain a proper supervisory role and not ex- an opportunity to fix both financial and op- internally and externally, they keep stakeholders focused on future ercise undue influence over day-to-day opera- erational problems. Get as much negotiated in success, not past mistakes. tions. Prior to filing bankruptcy, the board and advance of filing as possible. There has been Every ruling, decision, and development in the restructuring process is its advisors should also assess the adequacy an increase in the number of “prepackaged” or 2. an opportunity to communicate the new day message. Adversaries will of the D&O insurance policies. Also, directors “pre-negotiated” cases in recent years and we should be alerted to the discrete areas where see that trend continuing. Filing with an exit use these milestones to disseminate their own messages. Don’t let them operate in a vacuum. they could potentially be liable personally for plan already negotiated enables the company the bankrupt company’s debts. Every case is to shorten the time it spends in bankruptcy, Boards must understand the power of social and digital media to disclose. different, but these pitfalls can include person- maintain control over the process and reduce 3. Teams need to be ready to respond publically from the very moment a al liability for “responsible persons” when a restructuring costs. company begins to seriously consider restructuring—in other words, go on company fails to pay wages or segregate certain the offense so you don’t have to play defense. Another piece of practical advice is for the taxes, or for knowingly permitting the company company to get the right managers and finan- to incur debts beyond its ability to pay. cial advisors in place, and develop a plan to “right-size” the employees, before it files14 15
  9. 9. how new Stock Exchanges Can Leverage Global Economic Opportunity Richard S. Levick, Esq. Originally Published on Fast Company
  10. 10. Weekly In June of this year, a Bank of Amer- Nurturing Confidence on multiple exchanges in New York, London, significantly driving down the price. That kind ica poll found that investors are Hong Kong, and other major financial hubs. of volatility can keep investors and compa- still sitting on their hands as the Investors—especially today’s anxious breed— As such, it is incumbent on new exchanges to nies on the sidelines. As such, new exchanges global economic recovery inches need to feel that the exchange facilitating their highlight six key selling points: need to identify ways to encourage long-term forward. According to the study, they are hold- trades is a safe and protected environment. investing. ing more cash than at any point since 2009. That means fairness and transparency need to be seen as paramount concerns by all the Given the high levels of anxiety still present in right stakeholders, including governments, six key selling points the marketplace, one might conclude that this investment bankers, accountants, ratings is perhaps not the most opportune time to es- agencies, institutional investors, and financial tablish a new stock exchange such as those that advisors. For a nascent exchange, this point 1. Liquidity — The deeper and more liquid the market, the more companies have been created in Egypt, India, and even is especially critical as new and uncharted will want to be there; Cambodia in recent years. But because inves- frontiers inherently conjure fears of tors aren’t finding attractive options on the ex- potential problems. New capital — Companies seeking investment have a new venue in which changes that traditionally dominate the capital 2. to access capital that likely wouldn’t have been invested elsewhere; markets (such as the NYSE or FTSE), the door As such, a strong regulatory infrastructure is open for these and other new exchanges to needs to be implemented and articulated to Governance — Attracting market participants means promoting the brand themselves as true players on the global the point that the dominant perception by 3. experience, capital, and management capabilities of those running the economic stage. investors and listed companies alike is one of safety and security. New exchanges often exchange in order to build the needed trust; And it isn’t just investors who may be seeking bring unfamiliar trading partners together. Global regulatory cooperation — If companies don’t see a strong new opportunities. As the world gets smaller, This is another point that ups the ante for 4. commitment to the rule of law, administered via clear and consistent legal big companies are looking for ways to access emerging exchanges. When buyers and sellers pools of capital that exist in regions they have don’t know each other, they need to know guidelines, they will see risk rather than opportunity. yet to tap into. At the same time, these regions that the institution standing between them are home to growing companies that need to will ensure the best price, facilitate a complete Technology — State of the art trading systems can help prevent the raise capital, but can’t get themselves listed on transaction, and prevent any underhanded 5. problems that derailed the high-profile IPOs of Facebook and others. They the major exchanges. dealings. also support robust market surveillance and stand as a bulwark against hacking and cybercrimes; and All of this means that the time is right for new and nascent exchanges to begin aggressively Articulating the Competitive Listing fees – The more reasonable, the better. promoting their value propositions to inves- Advantage 6. tors and public companies alike. Right now, they have the chance to breed confidence; Equally as important to new stock markets articulate their unique competitive advantages; as fairness and transparency are concrete and attract the committed, long-term invest- demonstrations of the value and advantages That means helping global investors better un- ment so essential to reducing volatility and that come with being listed on the exchange. Attracting Committed Investors derstand the intricacies of the market and how ensuring steady growth. Most new exchanges rely heavily on local and they represent fertile ground for long-term During the first three days of trading on the regional companies’ participation, so there growth. To some extent, this means controlling Cambodian Stock Exchange (CSX), which Confidence, competitiveness, and commit- exists a need to discuss the ways that the ex- the digital conversation surrounding the re- opened last year, the share price of a local wa- ment are the “three Cs” of creating and grow- change benefits local and regional interests. gional economy. For example, a Google search ter utility shot up 60 percent. It wasn’t long be- ing an exchange today—and to develop these performed as of this writing for the generic fore investors looking for a quick buck began necessary elements of success, new exchanges At the same time, there is also a desire to at- term “Middle East Investment” returns not selling their stakes and pocketing the profits, need to rely on the fourth C that brings them tract global companies who are often listed one result owned by a regional exchange. That all together: communication.18 19
  11. 11. Weekly BLOGS to follow Thought leaders Industry blogs Amber Naslund Holmes Report brasstackthinking.com holmesreport.com Amber Naslund is a coauthor of The Now A source of news, knowledge, and career Revolution. The book discusses the impact of the information for public relations professionals. social web and how businesses need to “adapt to the new era of instantaneous business. NACD Blog blog.nacdonline.org Brian Halligan The National Association of Corporate Directors hubspot.com/company/management/brian-halligan (NACD) blog provides insight on corporate HubSpot CEO and Founder. governanceand leading board practices. Chris Brogan PR Week prweekus.com Chrisbrogan.com PRWeek is a vital part of the PR and Chris Brogan is an American author, journalist, communications industries in the US, providing marketing consultant, and frequent speaker about timely news, reviews, profiles, techniques, and social media marketing. ground-breaking research. David Meerman Scott PR Daily News davidmeermanscott.com prdaily.com David Meerman Scott is an American online PR Daily provides public relations professionals, marketing strategist, and author of several books social media specialists and marketing on marketing, most notably The New Rules of communicators with a daily news feed. Marketing and PR with over 250,000 copies in print in more than 25 languages. means other voices are controlling the conver- access to the resources they need to grow, sation and establishing the dominant percep- create jobs, and perhaps even become econom- Guy Kawasaki BUSINESS Related tions about opportunities in the region—and ic engines for parts of the world that guykawasaki.com FastCompany their messages are not always what investors sorely need them. Guy Kawasaki is a Silicon Valley venture capitalist, fastcompany.com would hope to hear. bestselling author, and Apple Fellow. He was one Fast Company is the world’s leading progressive of the Apple employees originally responsible for business media brand, with a unique editorial That’s a rising tide that lifts all boats—and one marketing the Macintosh in 1984. focus on business, design, and technology. that can help motivate those global investors Why New Exchanges Need to still sitting on the sidelines. L Jay Baer Forbes Succeed jaybaer.com Forbes.com Richard S. Levick, Esq., President and CEO of LEVICK, Jay Baer is coauthor of, “The Now Revolution: 7 Forbes is a leading source for reliable business Shifts to Make Your Business Faster, Smarter and news and financial information for the Worlds By aggressively communicating the three Cs, represents countries and companies in the highest-stakes business leaders. More Social. new exchanges have the chance to benefit the global communications matters—from the Wall Street global economy in two distinct ways. First, by crisis and the Gulf oil spill to Guantanamo Bay and the Mashable Rachel Botsman mashable.com providing large, established companies with Catholic Church. rachelbotsman.com Social Media news blog covering cool new web- access to investment capital that might not find Rachel Botsman is a social innovator who writes, sites and social networks. its way to the NYSE, FTSE, or any of the other consults and speaks on the power of collaboration traditional exchanges. And second, by provid- and sharing through network technologies. ing small regional companies that could never be listed on those traditional exchanges with Seth Godin sethgodin.typepad.com Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing.20
  12. 12. IN THE NEWS ArticlesLos Angeles Times | October 19, 2012Google releases earnings prematurely, triggering stock sell-offMSNBC | October 18, 2012Google delivers 3Q letdown early, stock plummetsESPN | October 17, 2012Armstrong out as Livestrong head, loses sponsors VideoFox 5 News CNNLance Armstrong Steps Downas Livestrong Chairman,Loses Sponsors The Situation Room With Wolf Blitzer THE URGENCY OF NOW. 23