Boardroom Battles

Fri, 2017/08/18 - 12:29pm | Your editor
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On the bus yesterday. I sat next to an African-American senior woman busily praying and crossing herself so I looked at what she was reading. It was a novena for Virgin and Martyr Saint Theresa Benedicta against racism and hatred. St. TB was the former Edith Stein, a German Jewish woman who converted to Catholicism and became the head of a convent. She was murdered in a concentration camp by the Nazis for being Jewish which doesn't make her a Catholic martyr in my view.

The reason I know this because Rabbi Cohen of the German Jewish reform synagogue where I was married, Temple Habonim, was a first cousin of Stein's. He warned us to make sure our kids had a Jewish background so they would have a place if they wanted religion in their lives as his cousin, who was Jewishly illiterate,had done.

As we wound up raising our family mostly in France where religious education is compulsory (the kids get off early every Wednesday for religious instruction and the default choice is Catholicism.) I am too tactful to have interrupte4d my praying neighbor on the bus.

So far this calendar year, there have been 6 changes of CEO at companies we cover and own. One was voluntary, a normal succession. One was ambiguous, because there were political elements in the switch we could not exactly determine. One resulted from a board losing its confidence in the CEO. And two were good old-fashioned battles between the company chief and the board carried out in public with maximum deleterious impact on the company share price. Both of the latter two episodes occurred at companies from India, where founder or oligarch chairmen got fed up with their own selected and often overpaid managers. One of these occurred today taking down a high-flyer stock by double digits as the two sides engaged in warfare via press release to try to get support from management, other board members, stockholders, and the public.

The share at issue today is Infosys, a tech company which is the second Indian multinational corporation hitting a strategy impasse this year, following that of Tata Motors earlier. We have sold both in good time without having had any particular insight into the factions that were fighting each other, mainly because the problems the companies faced were visible. TTM hit a wall trying to use the funds garnered by its global holdings like Jaguar-Landrover, to build out a mass market for cheap cars inside India. It is hard to build really cheap cars which have to be appealing to buyers and meet safety and exhaust standards while also making a profit.

INFY has to figure out how to deal with restrictions on its parachuted staffers coming in to the US with H1-B visas to do high-level technology adjustment on the cheap, taking the business away from their locally hired staffers who are paid US. There are similar problems also in other developed countries in Europe. Because of laxcorporate governance rules in the India private sector. large egos, and a receptive and virulent local press at the ready, you get to know when boards or the executive suite disagree.

The other companies which had boardroom battles are still in the portfolio and discussed below for subscribers.

The big news today from China was buried under the resignation of Vishal Sikka, Trump commentary, and the horrors on the Rambla and the beach in Catalonia. Under direct orders from Pres. Xi Jinping, China formally set new restrictions on overseas investment by private-sector Chinese companies. It banned so-called "irrational” asset acquisitions in industries ranging from real estate to hotels, sports and entertainment alongside sin businesses like gambling or the sex trade. Chinese companies were encouraged to invest alongside Beijing in the “one belt, one road” land and sea geopolitical expansion, what I like to think of as the “belt and suspenders” program.

More for paid subscribers follows: Pharma first.

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