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Friday
Feb222013

Judge Grants Hedge Fund’s Injunction Against Apple Inc.

Chris Ratcliffe/Bloomberg via Getty Images(NEW YORK) -- A federal court judge in New York Friday granted a request by hedge fund Greenlight Capital to block Apple Inc. from including a measure on its shareholder ballot that would limit the iPhone maker’s ability to issue preferred stock.

Greenlight Capital’s David Einhorn, whose firm owns more than 1.3 million Apple shares, sought the injunction after complaining that Apple was hurting shareholder value by holding too much of its $137 billion cash hoard, the most of any firm.

U.S. District Judge Richard Sullivan granted the preliminary injunction stopping the vote on that proposal, set for Feb. 27 at the company’s annual stockholders’ meeting. He ordered the two sides to submit briefs outlining the next steps in the case.

Apple CEO Tim Cook has defended the company’s use of its cash: “We do have some cash, but it’s a privilege to be in this position …where we can seriously consider returning additional cash to our shareholders,” he told the Goldman Sachs Technology and Internet Conference.

“Apple doesn’t have a depression-era mentality” about cash, he said. The company, he added, makes “bold bets,” investing $10 billion in research and development last year.

Cook said Apple will “thoroughly consider” a proposal by Einhorn, who wants the company to issue preferred shares that pay a high dividend.

“Apple must examine all of its options to unlock the growing value of its balance sheet for all shareholders,” Einhorn said.

He’s urging Apple shareholders to vote down a proposal to eliminate preferred stock and sought a federal court order to bar the firm from certifying votes cast in favor the proposal. Preferred shares often pay a higher dividend than common shares.

Cook had called the Einhorn suit a “silly sideshow” that detracts from Apple’s real mission of creating top products. “Our north star is great products. When everyone comes to work every day they think about that.  We wouldn’t do anything we don’t think is a great product,” he said.

A Greenlight Capital spokesman had said in an email in response to Cook’s comments, “If Apple thinks the lawsuit is a waste of resources, it could simply end the matter by complying with existing law and filing a new proxy that unbundles the proposed changes to the charter so that shareholders can express their views on each matter separately.”

Copyright 2013 ABC News Radio

Wednesday
Dec192012

The 10 Largest Fiscal Cliff Dividend Tax Winners

Jerome Favre/Bloomberg via Getty Images(NEW YORK) -- While Congress and the White House negotiate a mix of tax increases and budget cuts, many firms decided to pay shareholders an early or special dividend ahead of an anticipated increase in the dividend tax rate.

Not surprisingly, the largest individual shareholders of these companies often sit on the board of directors, reaping millions of dollars in tax savings.

Wealth-X, an information research firm of ultra high-net worth individuals worth over $30 million, compiled a list of the 10 largest special dividend-paying companies based in the U.S. this year as of Dec. 12 and the tax savings their largest individual shareholders are receiving ahead of the fiscal cliff.

The dividend tax rate is currently at 15 percent but the president has proposed increasing it to upwards of 43.4 percent starting in 2013 to plug the ballooning trillion-dollar budget deficit.

All 10 individuals, led by Sheldon Adelson, chairman and CEO of the Las Vegas Sands, either sit on the board of directors, are senior executive directors, chairmen or CEOs of the listed companies.

In the fourth quarter, the total dividends received by these shareholders exceeded $2.1 billion, which is $602 million more than what they would receive should tax rates increase.

The combined wealth of the shareholders on the list is $110.4 billion, representing one fifth of the combined market capitalization of the top 10 largest dividend-paying companies.

The dividends received by the shareholders on the list represent 15 percent of the more than $14 billion payout by the top 10 companies:

  1. Sheldon Adelson, Las Vegas Sands: $1.2 billion
  2. Thomas Frist III, HCA: $497 million
  3. Lawrence Ellison, Oracle: $200 million
  4. Charles Johnson, Franklin Resources: $105 million
  5. Stephen Wynn, Wynn Resorts: $75 million
  6. Vincent Ryan, Iron Mountain: $29 million
  7. Russell Wight Jr., Alexander's: $27 million
  8. James Sinegal, Costco: $14 million
  9. Cornwell Appleby, Booz Allen Hamilton: $10 million
  10. James Walton, Walmart: $4 million

Copyright 2012 ABC News Radio

Monday
May212012

Shareholders Cut CEO Pay in Backlash

Adam Gault/Thinkstock(NEW YORK) -- Amidst a climate of populist outrage and corporate missteps, shareholders are voting en mass to cut executive pay thanks to a new government rule called "say on pay." The board of directors, who determine CEO pay, don't have to listen to the shareholder vote but most of them are listening.

Sprint CEO Dan Hesse received a $3.25 million pay cut after shareholders expressed concern with a deal Hesse cut with Apple to carry the iPhone on the Sprint Network. The deal will cost Sprint $15.5 billion and the Sprint will reportedly not profit from the move until 2015.

But are "say on pay" shareholder votes, while non-binding, a helpful feedback tool or do they encourage Monday morning quarterbacking?

"I think that there is the risk of a knee-jerk reaction," said Wayne Guay, an accounting professor at the Wharton School of Business. Critics of "say on pay" argue that shareholders don't read proxy statements and are less likely to make an informed decision.

Supporters of the policy say that if a CEO can expect an unscrutinized "golden parachute," he or she may have more of an incentive to engage in risky short-term behavior.

But some experts point out that underperforming CEO's are already punished because many of them own a large amount company stock.

Still, compensation packages are often generous enough to offset the loss in stock value. The most famous example was in 2008 when executives from Lehman Brothers collected $483 million in compensation before the company went under in a bankruptcy that is credited with starting the recent financial meltdown. Without worthless stock options, Lehman's CEO Richard Fuld still made close to $350 million.

"It's risk-free for the individual [the CEO] but it's risky for the company," said Rep. Barney Frank, D-Mass., back in 2009 while the law was being debated. "And when you accumulate risks for companies, it's risky for the economy," said Frank.

When big companies fall, like they did in 2008, there is often a domino effect that takes down other companies that rely on their business.

Will "say on pay" have a long-term positive effect?

The rule has been in effect for only one year here in the U.S. but the law was adopted in the U.K. in 2002.

One study on the U.K. system done by a professor from the Columbia Business School and one by a professor at the University of Southern California found that their system encouraged an enhanced dialogue between the board and shareholders. Those shareholders were most likely to punish a CEO by objecting to a generous severance package. When the boards ignored the "say on pay" vote, the next vote was almost always lopsided against the board.

The boards in the U.K study almost always capitulated after the third vote.

Here in the U.S., say on pay is likely too new to be able to assess the effects.

JPMorgan Chase CEO Jamie Dimon last week apologized immediately and profusely for the company's trading fiasco that reportedly cost the company $3 billion. "We made a terrible egregious mistake. There's almost no excuse for it," said Dimon on NBC's "Meet the Press."

Two days after the apology, 91.5 percent of the company's shareholders voted to approve of Dimon's $23 million pay package. However, many of those votes were likely submitted before the trading fiasco was disclosed.

Copyright 2012 ABC News Radio

Monday
May212012

Yahoo Selling Half of Its Stake in Alibaba for $7.1 Billion

Daniel Acker/Bloomberg via Getty Images(NEW YORK) -- In a decision that may satisfy its shareholders, Yahoo has reached an agreement with Alibaba to sell half of its stake in the Chinese e-commerce group for over $7 billion.

Under the move, Yahoo would receive $6.3 billion in cash and up to $800 million in Alibaba preferred stock.

The deal will enable Yahoo to return cash to unhappy shareholders who have been angered by the sharp drop in their shares.

"Today's agreement provides clarity for our shareholders on a substantial component of Yahoo!'s value and reaffirms the significance of our relationship with Alibaba," Yahoo Interim CEO Ross Levinsohn said in a statement Sunday.  "We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba's future.

Copyright 2012 ABC News Radio

Tuesday
May152012

JPMorgan Execs to Hear from Shareholders Following $2B Loss

STAN HONDA/AFP/Getty Images(TAMPA, Fla.) -- JPMorgan Chase executives are likely to get an earful from shareholders on Tuesday when they convene in Tampa, Fla.

The bank's $2 billion in-house trading operating loss is expected to be a hot topic at the annual shareholders meeting.  JPMorgan's stock price has dropped dramatically since it reported the loss last week.

Despite the huge loss, Aaron Tasker with Yahoo Financial says the firm is still very strong.

"Two billion dollars is a lot of money.  But for JPMorgan, it's 0.1 percent of their assets.  I mean the bank is gigantic, it's huge, it's very strong," he says.

But Tasker adds that recent history makes investors nervous.

"You remember in the summer of 2007 Bear Stearns announced it had some big losses in two of its hedge funds.  And people said ok that's a problem, but nobody thought Bear Stearns was gonna go out of business over that.  So again it's that little nagging voice in the back of your head that says this is probably nothing but it could be something," he says.

Copyright 2012 ABC News Radio

Friday
Apr202012

Will Citigroup Shareholders Sue over Executive Compensation?

Justin Sullivan/Getty Images(NEW YORK) -- Citigroup may get one step closer to a potential legal onslaught from shareholders if it proceeds with its compensation package, which was contested by investors in a rare failed "say-on-pay" vote this week.

Citigroup shareholders voted to reject the company's executive compensation plan during an annual stockholders meeting in Dallas on Tuesday after critics complained that top officials, including CEO Vikram Pandit, enjoy high pay that's not well-connected to increasing shareholder value.

The pay proposal received just 45 percent of votes cast and followed Citigroup's announcement on Monday that profits fell two percent to $2.9 billion from a year earlier, missing analysts' expectations.

Many "say-on-pay" lawsuits against companies do not survive the motion for summary judgment in court, said Brian Foley, pay consultant and managing director of Brian Foley & Co. in White Plains, N.Y.  Still, Foley said it is "highly likely" there will be one or more lawsuits against Citigroup if the company proceeds with its pay package.

"If Citigroup acts quickly and significantly maybe that reduces that likelihood or makes an impact.  It depends on what they do," Foley said.

Foley said one driving factor on whether the financial giant moves forward with its executive package is how Citigroup CEO Pandit responds.

"He was paid a very significant amount in 2011 in which they made award commitments to him.  Those don't come off the table unless he or they act," Foley said.  "If they act and he doesn't acquiesce, [the awards] are still his.  As a practical matter, it would have to be a joint action."

Pandit, 55, had $15 million in compensation for 2011, which included a base salary of $1.7 million, a cash bonus of $5.3 million, almost $4 million in deferred stock and another near $4 million in deferred cash.

Included in the compensation package detailed in Citigroup's 2012 annual proxy were multi-year retention award packages for the senior management team.  Pandit's "executive long-term performance retention award" could be worth $40 million, Bloomberg reported. 

Copyright 2012 ABC News Radio

Monday
Mar192012

What Will Apple Do With $97.6 Billion Surplus?

Chris Ratcliffe/Bloomberg via Getty ImagesUPDATE: Apple announced Monday morning that it will initiate a quarterly dividend of $2.65 per share sometime in the fourth quarter of 2012, as well as a $10 billion share repurchase program in its fiscal year 2013.

In a statement, Apple CEO Tim Cook said, "We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure.  You’ll see more of all of these in the future.  Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.  So we are going to initiate a dividend and share repurchase program."

The company's CFO, Peter Oppenheimer, added, "Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs."

(CUPERTINO, Calif.) -- With nearly $100 billion in extra cash sitting around, will Apple use the surplus to pay its shareholders some kind of dividend?

That's the question on many people's minds Monday as the company prepares to hold a conference call at 9 a.m. ET.

Apple CEO Tim Cook and CFO Peter Oppenheimer are expected to announce what the company will do with the $97.6 billion in cash and securities it had accumulated by the end of 2011.

Should the company reward its investors with a dividend, it would mark the first time Apple has done so since 1995.

Copyright 2012 ABC News Radio

Tuesday
Oct252011

Rupert Murdoch, Sons Draw Substantial Negative Vote

WILLIAM WEST/AFP/Getty Images(LOS ANGELES) -- A third of News Corp. shareholders voted against the election of Rupert Murdoch's sons to the board, the company reported Monday.

Although the sons will stay on the board in the wake of a phone-hacking scandal, the negative ballots are highly unusual in corporate America, where directors almost always win election with overwhelming pluralities.

The son with the most negative votes at 35 percent, James Murdoch, 38, deputy chief operating officer, was most closely linked to the wrongdoing at the company's London newspaper The News of the World, which shuttered amidst the scandal.  He testified before Parliament over the summer about his role and has been asked back a second time next month.

Lachlan Murdoch, 40, got a 34 percent negative vote, and Rupert himself tallied a 14 percent negative vote from shareholders.  There was little danger any of the Murdochs would be thrown off the board because the elder Murdoch controls 40 percent of the Class B voting shares.

But the non-Murdoch shareholders voted loudly for more oversight at the company, which owns such ventures as Fox News. According to the company, 67 percent of non-Murdoch shareholders voted against James and 64 percent against Lachlan.  Of those votes, three other directors didn't get a majority.

On Friday, when News Corp. held its annual shareholders meeting in Los Angeles, the company stated: "All Directors were elected, the advisory vote was in favor of executive compensation, and the other management proposals were approved.  The floor proposal regarding an independent Chair of the Board was not approved."

Copyright 2011 ABC News Radio

Friday
Oct212011

Rupert Murdoch and Sons Blasted By Shareholders

Jonathan Alcorn/Bloomberg via Getty Images(LOS ANGELES) -- Rupert Murdoch and his sons James and Lachlan got a dressing down from shareholders at the company's annual meeting Friday amid the fallout from a hacking scandal at its UK newspapers.

At the News Corp. annual meeting in Los Angeles on Friday, shareholders had time on the floor to voice their opinions in favor of new board oversight for the media conglomerate. A proxy vote on whether to retain the current directors, including the Murdochs, was being counted Friday afternoon.

Representatives from the Christian Brothers Investment Service, the Church Commissioners of England and the California Public Employees' Retirement System (Calpers) made the requests in front on the meeting floor.

"It is an investment risk to have a weak board with a conflicted chairman," Julie Tanner assistant director of socially responsible investing for Christian Brothers Investment Services, said. The organization manages about $4 billion for Catholic institutions.

Rupert Murdoch was both courteous and combative, telling one disgruntled investor: "I hate to call you a liar but I don't believe you."

Tom Watson, a member of Britain's Parliament in the Labour Party who has led investigations into the phone-hacking allegations, attended the meeting by obtaining a shareholder proxy.

Watson said he hoped Murdoch "would respond to some of the independent investors, readers and customers" in the U.K. and "put this right."

Murdoch reiterated his regret over the hacking scandal.

Murdoch said he wanted "to reaffirm the seriousness of what is going on in London as well as putting the controversy in context" though "there is simply no excuse for such unethical behaviors." He said the company has been under both "understandable scrutiny and unfair attack."

The Murdoch family owns 40 percent of the company, though some shareholders have urged others not to re-elect Rupert Murdoch, founder, chairman and CEO, and his sons who sit on the 15-person board.

Murdoch's son, James, oversees the company's operations in Europe and Asia. The company has been under investigation regarding phone-hacking scandal allegations against its former tabloid newspaper in London, News of the World, which closed on July 7 in the media spotlight.

Though the News of the World closure was at financial cost to the company, Murdoch said it was the "right thing to do" which is "why we have devoted so many resources to get to the heart of this matter." He said the company is fully cooperating with the Metropolitan police in London and other authorities.

Simon Dumenco, media columnist for Advertising Age, said it is a "lose-lose situation" for News Corp.

"If the Murdochs are reelected to the board, the company's credibility is further trashed and the parties that have been calling for James and Lachlan and even Rupert to step down will be livid. If the Murdochs are forced off of the board, News Corp. has to admit that the whole company -- which has always revolved around the whims of Rupert -- is in disarray and now faces an incredibly uncertain future."

David Bank of RBC Capital Markets said it would have taken "extraordinary momentum" by the opposition to not re-elect the three Murdochs.

"If they remove the Murdoch board members it would be to punish the actions of past rather than react to commitments for the future," he said, adding that Wall Street is not as interested in the issue of re-election to the board.

Jeffrey Logsdon, analyst with BMO Capital markets said he agrees there was a high probability Murdoch will be re-elected because he controls over 40 percent of the vote and "the opposition has been fairly civil." He said some investors have for years resisted the notion that a family member will succeed Rupert Murdoch as chairman one day.

"Some have looked at the issues out of the U.K. as a last straw," Logsdon said. "Some just don't line up well politically with Mr. Murdoch or the Fox News perspective. Perhaps the compounding effect might make it "closer"?"

Logsdon said investors do not usually show their concern about management through elections.

"They vote by selling their stock," Logsdon said.

Copyright 2011 ABC News Radio







ABC News Radio