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3/16/23 – Issue 8.09 – Your weekly news on all things board. 

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After Silicon Valley Bank’s seemingly sudden collapse and the tumultuous week that followed, board members and corporate leaders are asking: What happened? And, what’s next? Unimaginable events and black swan crises seem to be less unusual all the time, prompting many boards to focus more attention on risk. 

 

In other news: Meta announces more layoffs and project cuts; Even on diverse boards, Latino directors are not proportionally represented; And Carl Icahn is in the news again as he sets his sights on Illumina. 

 

In the Spotlight

 

An Overview of the Silicon Valley Bank Collapse

What happened, and could it have been prevented? The New York Times takes a thorough look at the events so far. 

 

“Gregory Becker, the chief executive of Silicon Valley Bank…told the audience of investors…Tuesday afternoon that the future of the tech industry was sparkling — and so was Silicon Valley Bank’s place within it. What he didn’t say was that, roughly a week earlier, the rating agency Moody’s had called to tell Mr. Becker that his bank’s financial health was in jeopardy, and its bonds were in danger of being downgraded to junk.” THE NEW YORK TIMES

 

The SEC and Justice Department Launch Investigation into SVB 
Several bank executives sold shares of the bank in the weeks prior to the crisis.

 

“For example, under a prearranged plan, Silicon Valley Bank’s former chief executive, Gregory Becker, exercised options in late February that permitted him to sell shares worth about $3 million for around $287 a share; the sales were disclosed in a regulatory filing on March 1. The filing also shows that the stock trading plan was set up on Jan. 26 when shares of the bank closed at $296.” THE NEW YORK TIMES

 

Signature Bank: An “Old School” Institution Undone By Crypto

On the surface, Signature Bank might seem like an identical domino falling. But its struggle was a different sort. 

 

“It was the third-largest bank failure in the US ever, behind Washington Mutual in 2008 and Silicon Valley Bank’s cataclysmic drop days ago. But (Signature) wasn’t a national giant or a new-fangled tech star, it was old school…The firm had overcome setbacks including questions over dealings with Donald Trump’s inner circle, rampant lending to cab owners and even accusations of funding slumlords…Then a big pivot to crypto changed the lender’s focus — and its fate.” BLOOMBERG

 

HSBC Buys UK Arm of SVB
In a frantic quest to find a buyer for SVB, HSBC stepped up to acquire the bank’s UK business.

 

“HSBC, the biggest bank in Europe, agreed to buy the U.K. unit of Silicon Valley Bank in a deal brokered by the British government and the Bank of England…‘This acquisition makes excellent strategic sense,’ said HSBC Chief Executive Officer Noel Quinn. ‘It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors.’” BARRONS

 

Big Banks See Flood of New Deposits

Institutions deemed “Too big to fail” saw a rush of depositors hoping to safeguard their assets. 

 

“After the back-to-back collapse of three smaller banks, their biggest US counterparts are seeing a rush of depositors fearful the crisis will spread. JPMorgan Chase & Co., the largest US bank, alone received billions of dollars in recent days, and Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. are also seeing higher-than-usual volume…Representatives for the firms declined to comment or didn’t respond to messages.” BLOOMBERG

 

Fed Rate Pivot is Back in Play

The Fed is weighing options in the wake of the crisis, in terms of both rates and a return to tighter regulations for regional banks.

 

“Suddenly, it feels like we’ve been catapulted into an obscene combination of the dot-com bubble and the global financial crisis. There were many weekends spent waiting to find out how regulators resolved the fate of a failing bank back in 2008; it’s not great to return to them.” BLOOMBERG

 

Fed Weighs Tougher Rules

“The Federal Reserve is considering changes to its oversight of mid sized banks following the collapse of three lenders in the past week…Regulators at the US central bank are weighing rules that could bring capital and liquidity thresholds closer to strictures that the largest Wall Street firms face. One change under consideration could impact so-called stress tests, an exercise that examines lenders’ ability to withstand a crisis.” BLOOMBERG

 

From Boardspan this Week:

 

Navigating Disruptive Risk

Every company is susceptible to risks that are potentially disruptive to operations and the future. Knowing how to navigate these risks is invaluable for boards.

 

"Envisioning a company’s future is hard and imprecise work. But it’s increasingly clear that dedicating time to think about the future is vital to navigating the disruptive risks that are shaking up industries and upending business models. Here we explore the topic of disruptive risks—such as technological innovation, the Internet of Things, the digital economy, demographic changes, and ecosystem changes—that may threaten the core assumptions underlying a company’s strategy and business model.” KPMG via LINKEDIN 

 

Across the Board

 

Meta Plans 10,000 Job Cuts

In the name of a leaner organization, Mark Zuckerberg emails the Meta workforce announcing plans for significant layoffs in the near future.

 

"Meta Platforms Inc. said it would cut roughly 10,000 jobs over the coming months, the Facebook parent’s second wave of mass layoffs in what it says is an effort to be more efficient in a difficult economy. Meta Chief Executive Mark Zuckerberg said in an email to staff on Tuesday that the company would in the coming months conduct multiple rounds of job cuts, as well as cancel some projects and reduce hiring rates as part of what he has dubbed the ‘year of efficiency’.” THE WALL STREET JOURNAL

 

Latinos Are Left Behind on Diverse Corporate Boards

Relative to their numbers as customers, employees, and suppliers, Latinos are underrepresented on corporate boards, this LA Times story reports.

 

“Cisco Systems, the multinational tech giant based in San Jose, has no Latino on its board of directors. Ditto for Intel, the world’s largest semiconductor manufacturer, headquartered in Santa Clara, Calif. Ditto for Tesla — which moved offices to Austin, Texas, from Palo Alto last year — and for a host of other Fortune 100 companies with millions of Latino customers, employees and suppliers…” LOS ANGELES TIMES

 

Carl Icahn Prepares for a Proxy Fight

Illumina braces itself for an activist investor takeover as three nominations are made to the company’s board.

 

“Carl Icahn is preparing a proxy fight at Illumina Inc., arguing the biotechnology company cost its shareholders roughly $50 billion by plowing ahead with a risky acquisition despite opposition from regulators. The billionaire activist plans to nominate three people to the San Diego company’s board.” THE WALL STREET JOURNAL

 

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    Seat at the Table 

    • Microsoft welcomes to its board Sandra Peterson, Operating Partner at private equity firm Clayton, Dubilier & Rice

    • GE announced to its board Darren McDew, retired General of the U.S. Air Force and Commander of the U.S. Transportation Command; and Jessica Uhl, former Chief Financial Officer of Shell

    • Marriott International elects to its board Lauren Hobart, President and CEO of DICK’s Sporting Goods; and Grant Reid, former President and CEO of confectionery company Mars Incorporated

    • Freight container company Triton International adds to its board Terri Pizzuto, former EVP, Chief Financial Officer and Treasurer of supply chain firm Hub Group

    • Infrastructure company EnLink Midstream welcomes to its board Matthew Harris, Founding Partner of Global Infrastructure Partners

    • Cherry Hill Mortgage Investment Corporation elects to its board Sharon Cook, Founder and President of management advisory firm OLE Three Consulting

    • Digital transformation company EPAM System appoints to its board DeAnne Aguirre, former Senior Partner & Principal at PricewaterhouseCoopers’ strategy consulting business unit Strategy&

    • Solar technology company SunPower welcomes to its board Steve Louden, Chief Financial Officer at digital equipment manufacturer Roku

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