Mike Mayo, CLSA’s bank analyst, told Bloomberg TV’s Stephanie Ruhle
and Erik Schatzker on “Market Makers” today that “We are about to see a
rebirth of shareholder rights…I will be going to the annual meetings for
the first time ever.”
Mayo also said, “Come back as a corporate director, you get fired one
out of three thousand times, you get paid a lot of money. A lot of
times it is very incestuous. It is a country club sort of attitude.
Everybody is looking after each other. That is not what we need,
especially among banks, which have been some of the worst long-term
performers.”
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Mayo on the banking industry:
“We’re about to see a rebirth of shareholder rights. That rebirth of
shareholder rights is the owners, the large institutional investors
taking control of their ownership stake. Consider this statistic. one
out of every 3000 corporate directors in the United States gets fired so
the average person on the street is 200 times more likely to be
unemployed than a corporate director. i don’t think all those corporate
directors are that good. This isn’t being lost on the big owners. I
think this season you are going to have more no votes for corporate
directors I think we need some of that in the banking industry. I think
Keycorp should change some of their directors around. And the feedback
that I’ve gotten from investors is, yeah, they could use some changes.
It’s not just Keycorp, it is not just the banks, It is overall corporate
America.
Look at the world’s largest asset manager, BlackRock. Almost $4
trillion of money that they manage. They have a 20 person dedicated to
group that looks at corporate governance. They vote against management
proposals about one third of the time in different meetings around the
United States. They are stepping up to the plate. If the thousand pound
gorilla sets up to the play, you will see others doing it too.
On whether he believes shareholders will refused to be sweet talked by bank management, CEOs or directors themselves:
“What I’m focused on are those big banks where the parts are worth
more than the whole. And the shareholders are speaking up more. I am
speaking up more. I am going to the annual meeting. We start off on
April 24–Citigroup at the New York Hilton. I’ll be there. I will be
asking the directors, how will you realize value when you consider
breaking up the company? It has been 15 years since Citigroup has been
formed. We are all focused on earnings season and that is good for three
months, but instead of focusing on earnings season, we should be
focused on the annual meetings season when the directors who oversee the
companies can be held more accountable.”
On why these directors don’t challenge their banks more:
“It is a sweetheart deal. I mean, come on, it’s a nice gig. Hopefully
you can take off a couple of months, Stephanie, but come back as a
corporate director, you get fired one out of three thousand times, you
get paid a lot of money. A lot of times it is very incestuous. It is a
country club sort of attitude. Everybody is looking after each other.
That is not what we need, especially among banks, which have been some
of the worst long-term performers.”
On what banks need to do:
“It starts with the owners, the shareholders and people who represent
the shareholders. Other sell-side analysts like myself. So I will be
going to the annual meetings for the first time ever. Other
institutional investors have said, Mike, way to go, we like you doing
that. Other investors say that we are more apt to vote against these
companies and the investors are more likely to talk to them behind the
scenes. what the activist investors have started–you’ve seen a few,
Nelson Peltz’ firm, Trillium Asset Management try in Citigroup, Dan Loeb
at Third Point–start the ball rolling a little bit more. Now the big
investors take the ball.”
On CEO compensation:
“I do not think we will see as much of a milestone event as we saw at
Citigroup with say-on-pay, but I do think that was a warning shot to
say hey, we spoke up about say on pay, and it had an influence and
eventually Vikram Pandit got fired. Now we’re speaking up about the
directors at Keycorp, we’re talking about the costs at Morgan Stanley,
we’re talking about the capital return at State Street, we’re talking
about the business mix at Citigroup. So once you have success in one
area, you get people’s attention and we might have success in other
areas.”
On why banks haven’t woken up to the need for more qualified directors:
“Why doesn’t bank management say, hey, let me have someone tougher
who is going to evaluate me? I would love a soft boss. I want some of
these corporate directors as my boss. They’re tough on me where I work.
They want me to work hard and pay me for my performance.”
“People do what they’re incented to do and we’ve run all sorts of
correlations in the banking industry. The larger the bank a CEO runs,
the more money they make, regardless of performance and one reason is
because the directors are not doing a well enough job.”
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