PROFNET EXPERT ALERTS: Policing Bank Pay / Swine Flu / Viral Marketing


More News related to Press Releases

More News related to Press Releases
October 28, 2009 3:57 PM EDT 

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    TOPIC ALERTS

    Fed Plan to Police Bank Pay (10 responses)
    Swine Flu (continued, 1 response)
    Health Care Reform (continued, 1 response)

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    EXPERT ALERTS

    1.  Law: Unforeseen Legal Issues with Viral Marketing Campaigns
    2.  Economy: European Commission Forces ING to Break up its Holdings

FED PLAN TO POLICE BANK PAY

A proposal by the Federal Reserve would allow the central bank to review -- and veto -- banks' pay policies. Following are experts who can discuss the legalities and viability of the proposal:

1. JOHN ALAN JAMES, adjunct management professor at PACE UNIVERSITY's Lubin School of Business in New York City, and expert on corporate governance and regulatory issues, created the first texts in English on laws governing companies in key European countries: "Does the federal government, TARP and all, have the legal right to mandate behavior in institutions registered under state law? I do not believe it does, and this is worthy of a debate on its constitutionality, starting at the Chancery Court in Delaware, and going all the way to the Supreme Court. Will we all have to adopt one particular approach to risk management? Impossible. Each organization has to design and develop its own individualized policies relating to risk. Policies must reflect the company's industry, its position and resources. These will always be different. Therefore, the role of the Fed should be restricted to evaluating the risk management policy and program, and periodic evaluation and assessment of its effectiveness." At Lubin, three years ago, James was the first to introduce into an MBA curriculum anywhere in the world a course covering corporate governance systems in the leading world economies. He recently appeared on Bloomberg radio and television to discuss the Madoff scandal and, among other media appearances, was quoted on CFO.com about the Satyam scandal. James is located in Stamford, Conn. News Contact: Bill Caldwell, wcaldwell@pace.edu Phone: +1-212-346-1597 Web site: http://www.pace.edu (10/26/09)

2. THOMAS MONDSCHEAN, professor of economics at DePAUL UNIVERSITY, Chicago, is an expert on economic conditions and international economics, who has done economic research as a consultant with the Federal Reserve: "Bank regulators have a responsibility to manage risk-taking by banks mainly because of deposit insurance, but also because of the important role banks play in providing payment services and business credit (especially to small and medium-sized businesses). The current crisis has demonstrated that poorly designed compensation systems can lead to increased risk-taking. For example, bonus programs that rewarded origination of mortgage loans, without regard to their quality, clearly contributed to the subprime debacle. So there is no doubt in my mind that monitoring compensation schemes should be part of regulatory risk management. As for what types of compensation systems should be adopted, I would generally favor plans that align more closely management with the long- term interests of shareholders. For example, I would favor using restricted stock awards that must be held for at least five years and can be taken back if the bank has excessive losses during the holding period. This would focus management attention on long-term performance and hopefully avoidance of excessive risk-taking." News Contact: Robin Florzak, rflorzak@depaul.edu Phone: +1-312-362-8592 (10/26/09)

3. JAMES BRICKLEY, Gleason Professor of Business Administration, William E. Simon Graduate School of Business, UNIVERSITY OF ROCHESTER: "The Fed's oversight would not be limited to top executives, but would include lower- level employees, such as traders and loan officers. It is expected to affect around 5,000 firms and tens of thousands of employees, with special attention being paid to the nation's 25 largest banks. Compensation is currently a hot- button issue, and attempts to limit the level and form of compensation in banks and other corporations are likely to receive political support from the general public. However, the Fed's actions are premature and ill conceived. The likely negative consequence of the proposed action would be to reduce the competitiveness of America's top banks -- through the loss of productive employees and adoption of suboptimal pay practices. The Fed is unlikely to have sufficient knowledge of either organizational theory or of a given institution to do a good job, even if they appropriately focused more broadly on a bank's overall organizational system. It will almost certainly get it wrong if it focuses myopically on compensation. The result of this regulatory oversight is likely to be a less efficient banking industry in the United States." News Contact: Charla Kucko, charla.kucko@simon.rochester.edu Phone: +1-585-273-4806 (10/26/09)

4. DAN BORGE, director in LECG's New York consulting firm, was the principal designer of the first enterprise risk-management system, Bankers Trust's risk- adjusted return on capital (RAROC), which became the model for the financial services industry. Borge provided the following quote in a recent article, "Will Fed's Exec Comp Rules Have Big Impact?" (American Banker, Oct. 23): "It's a huge deal. Compensation committees at banks will be on the spot to demonstrate they've chosen a compensation system that will not incentivize risk. Doing that requires knowing who is taking the risk. Given the public attention on this whole issue of pay, that tells me the Fed is serious about transmitting that pressure to the banks." Borge is the author of "Boards: Consider Risk When Determining Compensation" (September 2009), "A Return to Credibility" (June 2009), and a forthcoming book, "The CFO's Role in Navigating the Known, the Unknown, and the Unknowable." News Contact: Robin Brassner, rbrassnernyc@gmail.com Phone: +1-212-262-7472 (10/26/09)

5. RANDALL HOLCOMBE, research fellow at THE INDEPENDENT INSTITUTE, is the co- editor of the new book "Housing America: Building Out of a Crisis": "The idea that bureaucrats have a better idea for how compensation contracts should be structured than those in the business community makes little sense on the face of it. But I see another danger here that hasn't been sufficiently explored: even if some oversight over bankers' compensation were warranted, the Fed is not the right organization to do it. For one thing, the Fed itself has relatively little oversight. But the largest factor is that the Fed's primary responsibility is controlling the money supply to ensure price level stability. The Fed will be most effective in that task when that is its primary focus, and giving it the power of oversight over bankers' compensation will be an added distraction. Bureaucratic oversight of executive compensation is a bad idea by itself, but it's a really bad idea to give this power to the Fed." Holcombe is located in Tallahassee, Fla. News Contact: Wendy Honett, whonett@independent.org Phone: +1-510-632-1366, ext. 116 Web site: http://www.independent.org/aboutus/person_detail.asp?id=528 (10/26/09)

6. TERRY CONNELLY, dean of the Ageno School of Business, GOLDEN GATE UNIVERSITY: "This move by the Fed has been coming like Christmas; it is clearly legal, with the cover of the Fed's supervisory powers. The Fed is only trying to do what Warren Buffett tried and failed to do unilaterally while he was in charge of Salomon Brothers. A lot of good and very talented people left the firm when others swooped in to hire them." Connelly, who has 30 years experience in investment banking, law and corporate strategy and has run Wall Street compensation systems, asserts that the Fed will impose the same standard on every firm. He is based in San Francisco. News Contact: Serene Buckley, serene@mortarpr.com Phone: +1-415-772-9907, ext. 117 (10/26/09)

7. STEVE STANEK, policy advisor on tax issues and managing editor of Budget & Tax News, a monthly publication of THE HEARTLAND INSTITUTE, a libertarian free-market think tank based in Chicago: "I can think of nothing that encourages reckless risk-taking more than what the government has already done: rescue companies that should have failed. Executive pay would not be an issue if the executives had lost their shirts and professional reputations, as should have happened in a country that supposedly believes in free markets and capitalism. The best regulator of executive pay is a free market in which executives lose their jobs when they drive their companies to ruin." Web site: http://www.heartland.org (10/26/09)

8. MAUREEN MARTIN, attorney and senior fellow for legal affairs, THE HEARTLAND INSTITUTE, a libertarian free-market think tank based in Chicago: "I question the legal authority of the Fed to regulate bank compensation policies in the manner proposed. The Fed is using 'guidance' to accomplish this, rather than through formal regulations. This decision to use guidance means the Fed can proceed in looser fashion. First, it takes the proposal out of the requirements of due process -- formal notice and an opportunity to be heard -- that apply when regulations are proposed. A step of this importance ought to be accomplished by a formal deliberative process with full participation, not only by the public, but also the full regulated community. Second, the Fed is proposing to tailor standards for its review of compensation policies on a bank-by-bank basis. That means there will be differing conclusions reached about whether the policy is 'unsound' or unsafe. Without a bright line standard, abuses can proliferate." Web site: http://www.heartland.org (10/26/09)

9. ANDREW LUND, associate professor of law, PACE LAW SCHOOL: "So much energy has been focused on executive compensation, which no one has demonstrated had anything to do with the crisis (in fact, some researchers have shown that no link between the two appears to exist). This may be because executives' behavior is constrained in any number of ways beyond the parameters of their compensation. What the Fed's rules do is reach down to the level of the employee who seems less constrained, i.e., more likely to have their behavior swayed by strange compensation-related benefits. In that sense, it might actually make a difference in ways that changing strictly executive compensation wouldn't. The open question is whether the change is for the better or the worse. Only time will tell, of course, but I would note that the fears of rampant defections by employees to unregulated firms seem misplaced." Lund is based in White Plains, N.Y. News Contact: Gladwyn Lopez, glopez@rubenstein.com Phone: +1-212-843-9231 (10/26/09)

10. MARK ZUPAN, dean, Simon Graduate School of Business, UNIVERSITY OF ROCHESTER: "While the move is politically expedient (like providing bread and circuses and human/animal sacrifices in Roman times), it is economically unwise." News Contact: Charla Kucko, charla.kucko@simon.rochester.edu Phone: +1-585-273-4806 (10/26/09)

HEALTH CARE REFORM (continued)

We've added the following to items posted previously at http://budurl.com/healthcarereform

1. DR. DEBRA A. SMITH, a physician, economist, and author of new book "Healthcare Solved -- Real Answers, No Politics," who has worked in public health, health care financing, administration and insurance, can discuss how reforming healthcare will require us to take bold steps to reduce costs and increase quality of care delivered: "Congressional Budget Office estimates don't analyze the effect of the proposals on national health expenditures. Increased utilization will change the entire dynamic and may throw all the current cost estimates out the proverbial window." News Contact: Jennifer Thomas, jennifer@publicityresults.com Phone: +1-239-573-0088 Web site: http://www.drdebraasmith.presskit247.com (10/28/09)

SWINE FLU (continued)

We've added the following to items posted previously at http://budurl.com/swinefluexperts3

1. DR. DEBRA A. SMITH, a physician, economist, and author of new book "Healthcare Solved -- Real Answers, No Politics," has advice for those wanting to receive the H1N1 vaccine, but cannot due to national shortage. Her tips also are preventative steps to help maintain people's health during this outbreak: "To increase your chances of staying healthy while waiting to receive the H1N1 vaccine, I recommend the following: vigilant hand washing and/or use of alcohol-based sanitizers; don't touch eyes, nose or face without washing first; stay away from sick people, aka 'social distancing'; my personal favorite: supplement with extra vitamin C; and get plenty of rest -- this is no time to skimp on sleep." News Contact: Jennifer Thomas, jennifer@publicityresults.com Phone: +1-239-573-0088 Web site: http://www.drdebraasmith.presskit247.com (10/28/09)

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EXPERT ALERTS

1. ECONOMY: EUROPEAN COMMISSION FORCES ING TO BREAK UP ITS HOLDINGS. JOHN ALAN JAMES, adjunct management professor at PACE UNIVERSITY's Lubin School of Business in New York City, and expert on corporate governance and regulatory issues, created the first texts in English on laws governing companies in key European countries: "The decision by the European Commission to force ING to break up its holdings into diverse banking and non-banking activities, and sell assets to repay the Dutch government for its bailout funds, clearly indicates the plan of Neelie Kroes, the European Commissioner for Competition, to move towards a 'Glass-Steagall' restructuring of financial institutions in the 27 European Union countries. This approach to separating banking and non- banking functions, especially trading, is also supported by Mervyn King, Governor of the Bank of England. Recent statements by President Sarkozy of France and Chancellor Merkel of Germany indicate that they are also leaning to restructuring as the solution to preventing future threats to the national and global economies. This plan, when implemented, will have major impact on any U.S.-owned banks operating within the EU." At Lubin, three years ago, James was the first to introduce into an MBA curriculum anywhere in the world a course covering corporate governance systems in the leading world economies. He recently appeared on Bloomberg radio and television to discuss the Madoff scandal and, among other media appearances, was quoted on CFO.com about the Satyam scandal. James is located in Stamford, Conn. News Contact: Bill Caldwell, wcaldwell@pace.edu Phone: +1-212-346-1597 Web site: http://www.pace.edu (10/28/09)

2. LAW: UNFORESEEN LEGAL ISSUES WITH VIRAL MARKETING CAMPAIGNS. E. THOMAS WATSON is an attorney with ROBINSON, BRADSHAW & HINSON in Charlotte, N.C., who practices in the area of intellectual property law, trademarks and copyright use: "Creating a catchy viral marketing campaign or YouTube clip can be a big boost for business, but these endeavors are not a panacea for sluggish sales. Despite the flexibility and creativity the Internet provides as a means of consumer outreach, companies cannot throw legal restraint to the wind when developing these campaigns. There are a number of critical and often unforeseen legal issues that these campaigns can create without proper vigilance." Watson's practice has a focus on all lines of business involving trademark and copyright use, risks, rights, protection and licensing. He previously served as the assistant general counsel for Bank of America where he managed entire portfolios for over 600 U.S. trademark registrations in multiple classes and 700 international trademark registrations. News Contact: Michael Henry, mhenry@wrayward.com Phone: +1-704-926-1364 (10/28/09)

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