Across the Board
Late-Night Negotiation Frenzy that Left First Republic in J.P. Morgan’s Control
The deal is similar to the 2008 acquisitions of Bear Stearns and Washington Mutual.
"At about 1 a.m. Monday, hours after the Federal Deposit Insurance Corporation had been expected to announce a buyer for the troubled regional lender, government officials informed JPMorgan executives that they had won the right to take over First Republic and the accounts of its well-heeled customers, most of them in wealthy coastal cities and suburbs…When the F.D.I.C. began the process to sell First Republic, several bidders including PNC Financial Services, Fifth Third Bancorp, Citizens Financial Group and JPMorgan expressed an interest…At around 3 a.m., the F.D.I.C. announced that JPMorgan would acquire First Republic." THE NEW YORK TIMES
FDIC Points Finger at Signature Bank’s Board and Leadership
The FDIC investigation blames the bank’s directors and management for causing Signature to fail amid uncontrollable growth.
“The United States Federal Deposit Insurance Corporation’s (FDIC) post-mortem assessment of Signature Bank (SBNY) revealed poor management and inadequate risk management practices as the root cause for its collapse. Federal regulators shut down Signature Bank on March 12 to protect the U.S. economy and strengthen public confidence in the banking system. The FDIC was appointed to handle the insurance process…The FDIC blamed Signature’s board of directors and management for pursuing ‘unrestrained growth’ using uninsured deposits without implementing liquidity risk management strategies. The final nail in the coffin for Signature came when it could not manage liquidity, which was required to fulfill large withdrawal requests.” COINTELEGRAPH
How Banks Can Finally Get Risk Management Right
Go straight to the source of risk expertise.
“Banks have three lines of defense for managing risk — and then regulators are the fourth line of defense. In the case of Silicon Valley Bank, all four failed. If banks want to manage risk better, one good place to start is making sure a Chief Risk Officer is in place and a board-level risk committee is in place. And the people on that committee should have real experience in managing enterprise risk.” HARVARD BUSINESS REVIEW
Revlon Shakes Up Board in Wake of Bankruptcy Filing
New board includes former executives from Bloomin’ Brands, Sephora, and Walgreens.
“The reorganized beauty products company’s new board was selected by Glendon Capital Management LP, King Street Capital Management LP, Angelo Gordon & Co. and Nut Tree Capital Management LP, lenders to the business that are taking control in chapter 11…Revlon’s bankruptcy ended nearly four decades of ownership by billionaire financier Ronald Perelman, who bought the company in 1985. It sought protection from creditors last year as it faced a heavy debt load, inflation and supply-chain pressures.” THE WALL STREET JOURNAL
It Pays–Literally–to Have Women in the Boardroom
Study shows that companies with gender diversity in the boardroom have 10x profitability over less diverse companies.
“This link between women board directors and profitability was corroborated by Women Count 2022, a study of FTSE350 companies by diversity consultancy, The Pipeline. It showed that corporates with more than a quarter of women on their executive committees realized a profit margin of 16% - more than 10 times higher than those with no female board members. The authors say that if the latter were to perform with the same profit margin as companies with more than a quarter women board members, this would result in an additional $67 billion (£54 billion) income to the UK economy. It would also mean an extra $1.1 billion (£900 million) in pre-tax profit on average for each of these businesses…’Each year, the UK is losing the equivalent of more than the defense budget, the entire schools budget, and triple the police budget, because of gender imbalance at the top of our companies,” the report concludes.’” WORLD ECONOMIC FORUM
Minimizing Culture Hiccups with Mergers and Acquisitions
Lack of culture alignment can lead to bumps in the road for mergers and acquisitions. It doesn't have to.
“When embarking upon a culture change there are three important disciplines that must be adhered to. The first is not to embark on a culture change without first knowing empirically what the culture is — its strengths as well as what is missing. Failing to understand this at the outset risks changing something that shouldn’t be changed or missing the issue that no one is willing to address out loud…Second, expect the culture change to meet some resistance, and make sure to address this with your CEO in advance. Asking managers in an organization to change their priorities challenges what made them successful…The third discipline is to make sure your company is not just relying on its compensation plan to reset priorities. Culture is communicated every day by the managers who are given priority in the organization. This includes whom we select, promote, assign key projects and assignments to or highlight at town hall meetings. All of these gestures send messages to employees about who (and what) the company values.” DIRECTORS & BOARDS
Does Board Size Matter?
Germany has a minimum board size requirement. Does it hurt effectiveness?
“Our study (Does Board Size Matter?) exploits a minimum board size requirement in Germany to show that excessively large boards of directors reduce firm performance and value. Boards play a crucial role in corporate governance, and regulators in many countries have tried to improve their effectiveness by discouraging large boards. The academic literature, however, provides little causal evidence on the effects of board size. Empirical studies, going back to at least Yermack (1996), have mostly found negative correlations between board size and firm performance. However, because large boards are a choice, and because this choice is likely to be correlated with other drivers of performance, these correlations are difficult to interpret.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
