Lehman in fresh shake-up of top executives

The head of Lehman Brothers’ international operations is stepping down, triggering a broader shake-up of senior management at the embattled Wall Street bank. Jeremy Isaacs, the long-serving chief executive of Lehman’s businesses in Europe and Asia, is giving up his executive role and will leave the bank at the end of the year.

Benoit Savoret, chief operating officer for Europe and the Middle East, and Andrew Morton, promoted this year to run Lehman’s key fixed income division, are also stepping down. The shake-up, the latest in a series of management changes at Lehman in recent months, comes as the bank tries to shore up its balance sheet, which has been weakened by the credit crunch. The bank has been talking to the Korea Development Bank about buying a stake and the Financial Times has learnt that Royal Bank of Canada considered buying the bank in July, but decided against a deal.

One leading institutional shareholder in Lehman says the investment bank’s negotiations with RBC and other potential investors raise doubts about whether the current round of talks will succeed. Lehman’s executives had taken on new jobs in recent months and the latest appointments are likely to trigger further management changes. Mr Isaacs’ position has been in question since Dick Fuld, Lehman’s chairman and chief executive, in June chose Bart McDade, head of the bank’s equities division, as president, replacing Joe Gregory, who was ousted after heavy losses.

Mr Isaacs, a respected former Goldman Sachs banker who has masterminded Lehman’s expansion in Europe and Asia, was also considered for the role but was passed over. Though he signalled his desire to leave at the time, he was persuaded to stay on for the summer. In his place, Lehman is promoting two highly regarded younger bankers to take joint charge of operations in Europe and the Middle East. They are Christian Meissner, currently head of Lehman’s investment banking division in the region, and Riccardo Banchetti, the bank’s chief executive in Italy.

Mr Savoret’s departure has come after he was passed over as a possible replacement for Mr Isaacs. Mr Morton leaves after Lehman’s fixed-income business reported disappointing results. He will be replaced by Eric Felder, currently Lehman’s head of global credit products and municipal finance, and Hyung Lee, head of capital markets in Asia. Lehman’s international businesses have accounted for much of the bank’s growth in recent years and are expected to play an increasingly important role.

In 2007, Lehman’s operations in Europe, the Middle East and Asia accounted for more than half the bank’s income of $6bn. However, the expansion has involved heavy investment which rival bankers believe may prove difficult to maintain during a downturn. By promoting Mr Meissner and Mr Banchetti, Lehman is attempting to maintain the confidence of its clients while tackling the problems in the fixed-income business. Mr Meissner, who has helped to raise Lehman’s profile in investment banking in Europe since joining from Goldman Sachs, is well regarded by colleagues and by corporate clients. Mr Banchetti, a former fixed income salesman, brings expertise on the trading side of the business.

In recent months a number of former Lehman executives have returned to the firm. They include Michael Gelband, the bank’s former fixed income chief, who is now global head of capital markets.

Source: FinancialTimes

Top 20 Risks U.S. Tech Companies Are Losing Sleep Over

source: informationweek

If you think the slow U.S. economy is the biggest worry for U.S. tech companies right now, you're wrong. In fact, large U.S. technology companies are more concerned about other troubles -- like what's going on with their businesses outside the United States.
The 100 largest publicly traded U.S. technology companies are most nervous about industry consolidation and competition; uncertainty about U.S. and foreign government regulations, including taxes; and risks involving their international operations, according to a new report.

The report by professional services firm BDO Seidman lists the "top 20 risk factors of the 100 largest U.S. technology companies" based on risk information culled from those companies' fiscal 2007 Securities and Exchange 10-K filings. The general condition of the U.S. economy ranked seventh on the risk list.

"I would've thought the U.S. economy would be a bit higher on the list, but tech companies seem to be a bit insulated from the slow economy this time around, maybe because of their global expansion," said Doug Sirotta, a BDO Seidman Technology Practice partner, in an interview with InformationWeek.

And with that emphasis on global expansion, it's not so surprising that concerns and uncertainty related to international operations ranked higher -- and frequently -- in those companies ' risk factors, he says.
Based on BDO Seidman's analysis of the SEC filings, as U.S. tech companies are expanding globally -- including into developing markets -- the top risks they face include challenges in managing merger and acquisition transactions (86%), inability to market or develop new products and services for global regions (84%), and intellectual property infringements (84%).
Competition and consolidation in the tech industry was the number-one risk, faced by 92% of the companies, followed by changes to government regulations and taxes both inside and outside the U.S., which is a risk for 87% of companies.

For instance, "there is a lot of uncertainty right now about India, its regulations are very complex," Sirotta said. "India requires a lot of reports and disclosures," and some of those rules are continuing to evolve, he says.

Risks to international operations ranked third, with 86% of companies facing those challenges. However, several of the other top 20 risks were also related to global challenges, including U.S. and foreign supplier and vendor concerns, which ranked 13th on the list.
The risks were ranked by order of the frequency cited in the SEC filings.
Here's BDO Seidman's full list of "Top 20 Risk Factors of the 100 Largest U.S. Technology Companies." Percentages represent the portion of companies facing a particular risk based on their fiscal 2007 SEC 10-K filings.

1. Competition and consolidation in technology sector (92%)
2. Changes to federal, state, and local regulations, including tax (87%)
3. Management of current and future M&A or divestitures (86%)
4. Risks associated with international operations (85%)
5. Inability to develop or market new products/services (84%)
6. Intellectual property infringement (84%)
7. U.S. general economic conditions (73%)
8. Inability to attract, retain personnel, including management (72%)
9. Pressures on pricing, margins, and cost-cutting (71%)
10. Legal proceedings (70%)
11. Cyclical revenue (and subsequent fluctuating stock price) ( 69%)
12. Product liability, quality, and safety concerns (68%)
13. U.S. and foreign supplier/vendor concerns (68%)
14. Inability to acquire capital or financing (66%)
15. Predicting customer demand (65%)
16. Financial risk of customer (58%)
17. Failure to properly execute corporate growth strategy (52%)
18. Changes to accounting standards/regulations (47%)
19. Internal controls and Sarbanes-Oxley compliance (45%)
20. Indebtedness (44%)

Largest Companies in the World

Source: www.seekingalpha.com

Below we highlight the 30 largest companies in the World by market cap ($). As shown, Exxon Mobil (XOM) is the top dog by about $70 billion. Exxon is trailed by another energy company, Petrochina (PTR), then General Electric (GE) and Microsoft (MSFT).

Eleven of the top 30 are based in the United States. The Energy sector has the largest representation at 8, followed by Technology at 5. Only 3 companies in the top 30 are up in 2008 -- Wal-Mart (WMT), IBM (IBM) and Johnson & Johnson (JNJ). And Apple (AAPL) and Google (GOOG) followers will be happy to see them ranked 25th and 26th in the world.

Bringing biz logic to search for a Prez

Think about how most large organizations hire a new leader. Then think about our presidential campaigns. Is this the best way to evaluate candidates vying to become the nation's chief executive? You know, the person who will lead a trillion-dollar global organization, command the world's most lethal military, wield the power to write and enforce laws, and maintain the authority to print money.

Most organizations looking for a new boss start with an executive search firm. They write a job description. They create selection criteria, solicit applications, review résumés and then conduct interviews. The presidential process reverses this logic. Voters meet and "interview" the candidates first. Then they just keep doing that for months, in all the states and U.S. territories.

Candidates tell the voters what criteria we should use to evaluate them. And as for qualifications, we let the candidates self-certify as well: "I'm the best-qualified candidate running for president." So what if we used the 2008 election for an experiment? Instead of voting, let's say we hired an executive search firm to find the next president of the United States.

How might the headhunters work? Which qualities and qualifications, traits and experience would they deem crucial to this position as the most powerful of all CEOs? "Being president shares an important and defining similarity to every CEO position: There's no one above you," said Paul Schneider, a partner in Chicago's SSP BPI Group, a leading international executive coaching firm. "However, what we observe repeatedly ... is that reaching the top requires one skill set, while a distinctly different set is needed to work effectively from the top," Schneider said.

So what does working effectively from the top as president entail?

In my own White House experience under President Bill Clinton in the mid-1990s, I looked at the presidency as akin to being an NFL coach—except the president was running all 32 teams at once, all playing at the same time.

The White House is a most dynamic environment. And unlike the CEO of a Fortune 500 corporation, a president faces the scrutiny of the Congress, the public, the media, even the world, with almost every decision.

"It is interesting that we have no requirements other than age and citizenship to become president," said Edward Santimauro of Korn/Ferry International. "When we do CEO searches, we labor very hard to define the specific requirements and competencies necessary for the successful placement."

Santimauro's firm focuses on "20 key leadership characteristics."

"We have our clients rank these and arrive at their top seven mission-critical factors organized into categories of: strategic skills, operating skills, courage, energy and drive; organizational positioning skills, and personal and interpersonal skills," Santimauro said. "The candidates' skills are then matched with mission-critical skills."

Jason Hanold, a search executive with Russell Reynolds Associates in Chicago, said the best candidates combine hard skills that can be measured and quantified; and soft skills that generally refer to how well someone works with people.

"Most leaders fall down on the soft issues like relationships/chemistry/values/ability to motivate," said Jack Clarey, president of Clarey, Andrews & Klein in Northbrook. "Very seldom do I see failure because the person was simply not smart enough or lacked the technical skills to perform.

"All the more important in the presidency, because this isn't office politics, this is real politics!" Clarey added.

Santimauro agreed: "Study after study says that executives fail not because of their technical skills or industry experience, but because of their [lack of] ability to lead and fit into a culture."

So how can voters evaluate these skills in the candidates?

Hanold provided a chart that lists some of the hard and soft skills a firm might evaluate if searching for a president, something that each of us voters is already engaged in. A handy checklist, perhaps, for the electoral booth in November?

Finding one person who is an ideal fit for such a profile is a tall order, but the competencies and personal qualities are a valuable tool.

So what is the most important competency that search executives look for? Teamwork and whether the candidate can lead, create and play well on the best teams.

Source: chicagotribune

Developing Trend: Sustainability-Recruitment Battle Looms in Brazil, Russia, India, China

Source: www.thecro.com
How to attract environmental staff when Western-educated talent looks for new challenges

For decades, U.S. and European corporations have been importing talent--programmers from India, researchers from China, and many other permutations of competence and geography. But in sustainability, Western-trained talent will reverse the tide, as individuals increasingly seek opportunities to work in the BRIC (Brazil, Russia, India, China) countries and other developing nations. To win the war for this increasingly valuable human resource, Chief Responsibility Officers (CROs) of multinationals and domestic companies operating in those countries must understand the dynamics of this movement of environmental talent--and they must act strategically to tap into it.

Members of this “Have Green: Will Travel” generation will migrate to BRIC for two reasons. First, they want to go there. Because the explosively growing BRIC countries cannot afford to waste resources, companies operating there will need to pursue sustainability and innovation on a vast scale. Meanwhile, sustainability efforts in the U.S. and Western Europe will remain comparatively incremental, given existing infrastructure and years of work at it. As a result, much Western-trained talent will look to the developing world for opportunities to have an impact that matches their passion and aspirations.

Second, they will be in great demand there. Multinationals and domestic businesses in those regions will increasingly need highly talented people who can establish sustainability as a core principle of operations, and profitably address the enormous challenges of sustainability their companies face. Sustainability will not be a corporate luxury but a strategic necessity as resource availability--from metals to water--presents real limits to growth. Because such talent is disproportionably cultivated in the U.S. and Europe, supply and demand will be geographically unbalanced.

On the face of it, these conditions appear to be in sync: the talent wants to go where it’s needed most. But in this emerging talent market, the intensifying demand for environmental talent will likely outstrip supply in the near term. Faced with these conditions, CROs can do three things to make sure they will be able to secure and retain the people they need:

Map the talent
Knowing where the environmental talent is, tracking it, and being poised to cultivate relationships with it are the first steps in a comprehensive talent strategy. Much young talent will emerge from a number of leading academic institutions, which have created strong programs in sustainability. For a pool of more experienced talent, CROs can look to extractive industries like oil, paper, coal, and other markets where regulation has driven significant advances in sustainability.

The best of this talent combine three essential ingredients for success: environmental understanding focused on sustainability, experience in a demanding business context focused on value creation, and knowledge of how to harmonize both.

Balance company and candidate recruiting needs
To attract candidates who expect--and are expected--to take on assignments that are both challenging and unforeseeable, offers must be both sensible and equitable, which means less cookie-cutting and more tailoring. Opportunities to work in developing countries will attract talent, but companies shouldn’t assume that the lure will be sufficient without competitive compensation. These professionals might be expats, with the tax and other issues that living abroad brings, or they might be returning to their home country after studying in the U.S. or Europe, all of which must be taken into consideration.

Drive retention through talent development: Many members of the “Have Green: Will Travel” generation want ever bigger and more challenging assignments, and if they don’t get them they are likely to seek them elsewhere. The CRO can do two things to ensure that this talent--often driven as much by the desire for impact as by personal economics--will stay with the company for the long term: (1) consistently demonstrate the importance of sustainability to the company and (2) pay close attention to talent development--the sequence, size, and complexity of the assignments of high-potentials.

By adopting these principles, CROs can find the right people for the developing world and ensure that they have maximum impact on company value as they take on bigger projects, responsibility for larger regions, and greater leadership roles.

Christoph Lueneburger specializes in sustainability talent for Egon Zehnder International, a leading global firm in executive search, management appraisal, and talent management. Prior to joining Egon Zehnder, he was a principal at private equity house 3Stone Advisors, leading the partnership’s water investment practice. He has been published in Global Water Intelligence and Environmental Finance, among others, and is a frequent speaker and moderator at forums devoted to Cleantech in general and the water industry in particular. He has lived and worked in the United States, Germany, and France.

America for Sale

Foreign companies emboldened by a weak dollar are on the prowl for undervalued U.S. assets, and more deals are likely in the pipeline.

American companies are on sale. Foreign buyers are circling, taking advantage of a weak U.S. dollar and a depressed stock market to snap up U.S. companies at discounted prices.

Recent big deals include the July 13 acquisition of Anheuser-Busch (BUD), the owner of Budweiser and other iconic American beer brands, by Belgian brewer InBev (INBVF) for $52 billion. On July 21, Swiss biotech company Roche Holdings (RHHVF) said it will swallow the rest of San Francisco-based Genentech (DNA) that it doesn't already own for $43.7 billion. And on July 23, Japanese insurer Tokio Marine Holdings (TKOMF.PK) announced plans to buy U.S. insurance company Philadelphia Consolidated Holding (PHLY) for $4.39 billion.

The headlines are enough to give some Americans the queasy feeling their country is being sold out from under them. "It's the End of an Empire Sale and everything must go!" comedian Lewis Black said on Comedy Central's The Daily Show. "We're so hard up for cash we're dismantling America and selling it for scrap." He cited the Anheuser sale as well as this month's $800 million purchase by the Abu Dhabi Investment Council of a 90% stake in New York's Chrysler Building.

Feeding Frenzy
In the past five years, 2,331 U.S. firms with a total value of $772.3 billion were purchased by foreign buyers, according to data provider Capital IQ (like BusinessWeek, Capital IQ is a unit of The McGraw-Hill Companies (MHP)). In 2007, 614 U.S. firms, valued at $294.4 billion, were acquired by foreign entities, up from 226 firms valued at $49.6 billion in 2003.

Foreign buying in 2008 has slowed slightly, reflecting the global slowdown in merger-and-acquisition activity in recent months. However, foreign dealmaking could still match 2006's healthy pace: At mid-July, 266 deals valued at $121 billion had been announced, compared to 541 deals, totaling $155.1 billion, in all of 2006.

Bankers and M&A specialists interviewed by BusinessWeek said there were several reasons foreign buying of U.S. firms can be expected to continue and even accelerate. One factor is the weak U.S. dollar. The euro is near record highs against the dollar, up 13.6% in the past year. The dollar index, measuring the U.S. dollar against a basket of foreign currencies, is down 9% from a year ago.

There's disagreement about how much a weak dollar actually entices buyers. A foreign company might pay less in its native currency, but it's also getting less, because a U.S. firm's cash flow and profits are also denominated in American currency, says H. Hiter Harris III, co-founder of boutique investment banking firm Harris Williams. However, that logic doesn't apply if you're buying a hard asset, Harris says. Just as foreign tourists take advantage of the weak dollar to buy clothes, jewelry, and other items at steep discounts, foreign firms can buy assets such as land, buildings, and especially brands—like Budweiser, for example.

An Opportune Moment
While the weak dollar may not be a decisive factor, it can speed up deals. Buyers are thinking, "if we were going to make a move in the next 10 years, this would be as good a time as any," says Herald Ritch, president and co-CEO of investment bank Sagent Advisors.

Another factor may be the availability of credit. While the financial crisis is a global phenomenon, foreign buyers "seem to have a little better access to financing than we do in the U.S.," says John LaRocca, a partner at Dechert who specializes in M&A. However, even if the price is right and credit is available to buyers, bankers say a potential acquisition must make strategic sense. For example, by combining with U.S. companies, foreign consumer companies often are seeking to make global distribution systems more efficient. "You can get more products through the same distribution channels," says Paul Smith of FTI Consulting (FCN). "The U.S. is still the biggest and richest market in the world," says Ritch. "If you have global aspirations, you need to be in the U.S."

Buyer Profiles
Where are the all the buyers coming from? Companies in Canada and Europe's developed countries have consistently been the most aggressive buyers of U.S. companies and initiated 69% of deals last year, according to Capital IQ.

Asian companies have stepped up their buying, particularly those from emerging economies such as India and China. Emerging Asian companies launched 23 buyouts so far in 2008 and 62 in 2007, nearly double 2006's total and more than four times 2005's. But emerging Asian companies, which tend to focus more on growing within their own borders, make up a small portion of the buyers. Foreign buying of U.S. firms could accelerate if worries ease about the U.S.'s credit troubles and weak economy. "They want to look before they leap," Ritch says.

U.S. financial companies, which have had their market values slashed in the last year, are among the industries that could eventually attract interest from abroad, bankers say. But buyers don't want to own these kind of distressed businesses just yet, Harris says, because they aren't sure when those industries will hit bottom.

Prospective buyers are sticking to safer, more secure parts of the U.S. economy. "We see a lot of action [in] high-quality growth companies," Harris says, who notes that energy businesses are favorite buyout targets now.

Political Angles
One thing that's not clear is how much politics will affect the pace of U.S. buyouts. In 2006, DP World, owned by the United Arab Emirates, was blocked in its efforts to buy the management of several U.S. ports, with critics citing national security concerns. But between then and the announcement of InBev's bid for Anheuser, there have been few concerns raised about foreign buyouts of U.S. companies. Although there was an emotional reaction to seeing a major U.S. brand such as Budweiser end up in foreign hands, the Anheuser buyout is expected to be approved.

U.S. shareholders usually lift a glass to acquisition proposals—wherever they come from—because they boost stock prices. Also, employees and their communities sometimes prefer foreign investors, LaRocca says. Overseas buyers often have a longer-term view, which makes them more likely to invest in building the business, he says.

The 2008 Presidential election and a new Administration could change the climate. Until then, like the cheap U.S. dollar, foreign buyouts will be another reminder that U.S. economic growth is falling behind much of the rest of the world.

Excerpts sourced from www.BusinessWeek.com

Consolidation across metals & mining industries

Like many other players in the mining industry, Pan American Silver Corp., which owns mines in Peru and Mexico, is apparently digging up for development-stage acquisitions before the end of 2008, according to a Reuters article.

CEO Geoff Burns said that credit conditions have forced small players to seek financing from established miners. This has lead to consolidation across the mining sector. While consolidation in the steel industry has been the most active, there has been consolidation in the copper, coal and silver industries worth noting.

• Vancouver, British Columbia's Minco Silver Corp. announced plans to acquire Idaho's Sterling Mining Co. in a deal worth roughly $62.3 million.
  
• Canada-based Aurcana Corp. acquired the Shafter silver mine from Silver Standard Resources Inc.
• Cleveland-Cliffs Inc., the largest producer of iron ore pellets in North America, announced it will acquire coal miner Alpha Natural Resources Inc. earlier this July.
• In China, two government-owned steel companies Hebei Iron and Steel Group Co. formed the fifth-biggest steelmaking company in the world in late June, replacing Baosteel Group as China's biggest steel company.
• The world's No. 1 steel company, Luxembourg-based ArcelorMittal, formed a $729 million automobile steel JV with two Chinese companies .
• Australian construction firm Macmahon Holdings Ltd. put forth a A$436 million ($424 million) hostile bid for mining and utilities contractor Ausdrill Ltd.
• Mumbai-based Tata Steel is looking at acquiring an iron ore mine in Western Australia.
  
• A $140 billion-plus indicative offer for copper and coal miner Rio Tinto Group plc has eased its way past U.S. antitrust authorities earlier this July.
• Kazakhmys plc, a Kazakh copper miner listed in London, is a target of Russia's ZAO Metalloinvest.

Chances are that as raw material costs continue to soar, the global consolidation will continue.