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EDITION 14

Weekly October 26, 2012

THE FISCAL

CLIFF Look Who’s Leading Now


03 Contents 04 09 10 13 14 17 18 COVER Image: In late February 2012, Ben Bernanke, chairman of the U.S. Federal Reserve, was the first person to use the term “fiscal cliff” for this crisis. Before the House Financial Services Committee he described “a massive fiscal cliff of large spending cuts and tax increases” on January 1, 2013.

The Fiscal CLiff

Look Who’s Leading Now

CFIUS Re view With Mark Cowan

Mergers & Acquisitions With William Wynne

Proxy Proposals

Regarding Disclosure of Political Activity

Susan G. Komen

Decentralized Communications Puts the Focus Back Where it Belongs

Blogs

Worth Following

LEVICK

In the news


The Fiscal Cliff: Look Who’s Leading Now Richard S. Levick, Esq. Originally Published on Forbes.com

Leadership doesn’t usually happen in a vacuum. Often, the soundest decisions cannot be implemented absent some compelling pretext.

In February 2012, Federal Reserve Chairman

Flash forward eight months. This week General

Ben Bernanke provided business with just such

Electric announced a $7 billion bond sale (the

a pretext when he coined the now familiar

first such by GE in five years) and a $5 billion

phrase “fiscal cliff.” Bernanke was referring

refinancing of bonds reaching maturity early

to the $600 billion in spending cuts and tax

next year. The move was deemed important

increases that will be triggered on January 1,

enough by the Financial Times to warrant page

2013, according to a provision of the Budget

one above-the- fold coverage. According to CFO

Control Act of 2011 (BCA). That legislation

Keith Sherin, GE has been strengthening its bal-

created a “super-committee” to decrease the

ance sheet against the risk of “choppy” condi-

deficit by $1.2 trillion over the next 10 years or,

tions early next year. It’s a prudent exercise

alternatively, enforce harsh austerity measures

in risk management by a company that lost its

that will likely drive us into another deep re-

triple-A credit rating and cut its dividend dur-

cession by levying a 4% gross domestic product

ing the financial crisis.

reduction in 2013.

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CEO Jeffrey Immelt’s comments are predict-

By contrast, the preparatory measures now

Third—particularly instructive as a measure

the very same austerity measures might only

ably germane. He calls the fiscal cliff the “big

being taken by GE and the others sends a most

of proactive leadership —major corporations

deepen the current pessimism and even cause

variable” for 2013—and Immelt is “ready”

welcome counter-message—that we know

are seizing on the current crisis to do what

some panic were there no fiscal cliff to force

if that situation is not resolved—even as he

what might happen next and that, under those

they are going to have to do anyway. “Busi-

their hand.”

avers that 2013 will look a lot like 2012.

circumstances, we will safeguard the interests

nesses are trying to accommodate an inevi-

of our investors and other stakeholders.

table belt-tightening,” says Andrew Zausner,

Importantly, other corporations have been following a similar path. Dealogic reported that,

Second, these businesses seem to be taking a

last week, large companies sold $26 billion in

rather forbearing approach with respect to

investment grade bonds. Meanwhile, Oracle

Beltway decision-makers. While there’s no

sold $5 billion at some of the lowest yields

doubt some tumultuous behind-the-scenes

a member of Dickstein Shapiro’s Public Policy & Law Practice, who specializes in legislative activities. “To that end, they are being very responsive to a situation that is not of their

tions don’t actually anticipate a real crisis. On the one hand, we have Goldman Sachs CEO Lloyd Blankfein telling CNBC that the fiscal cliff is “specifically…one of the major ways in which the slow recovery that we have could

ever recorded in the corporate sphere while

be completely derailed… We just met with a

United Health Care and Xstrata were among

dozen of the largest high-tech company CEOs

other big names acting in advance of any po-

in the country. Not only are they hoarding

tential tumble over the fiscal cliff.

“...the very fact that many big businesses seem so strategically like-minded a few months ahead of a legislative drop-dead day (literally) suggests a quieter brand of leadership, one wholly appropriate to the current exigent circumstance.”

True, as indices of resolute leadership, corporate bond sales aren’t exactly the stuff of high Churchillian drama. Yet the very fact that many big businesses seem so strategically likeminded a few months ahead of a legislative drop-dead day (literally) suggests a quieter brand of leadership, one wholly appropriate

cash—all their customers, all their suppliers are. They’re scared to death we’re going to go over this cliff and it could be a catastrophe.” On the other hand, a survey by the National Association for Business Economics (NABE) shows that economists from Ford, DuPont, JPMorgan Chase, and others, are confident that the worst fiscal cliff impact is unlikely. A whopping four-fifths of respondents do not

to the current exigent circumstance.

anticipate draconian spending cuts, while 55%

First, caution rather than bold initiative is

say the Bush tax cuts will be extended next

the order of the day. Think Eisenhower, not

06

The further irony is that many large corpora-

Churchill. Think too about the real bellwether

conversations occurring between corporate

of perceived corporate irresponsibility dur-

lobbyists and lawmakers, the public demeanor

ing the last five years. It’s been all about

is, again, prudent. The implicit message is that

financial speculation, rapacious (rather than

business will support any sane agreement

strategic) risk-taking, and wild gambling with

year for all taxpayers. Caution may be the making, but that does serve as a pretext for

watchword but the economists surveyed do

the specific measures they need to take to get

anticipate a 0.5% increase in economic growth

them where they need to be.”

in 2013 over the 2012 rate.

legislators reach, and won’t at this critical

Business leaders may thus welcome the fiscal

Meanwhile, Morgan Stanley Wealth Manage-

other people’s money. As a result, many of the

juncture publicly impose untenable pressures

cliff crunch as a salient opportunity. “Because

ment’s Global Investment Committee takes

world’s major financial institutions utterly

that only make it tougher to achieve the

they are responding proactively to an impend-

an even more markedly different tone from

relinquished any credible presumption to

fairest, most disinterested deficit reduction

ing crisis, they are able to inspire confidence

Blankfein’s. On Monday, the committee wrote

marketplace leadership.

plan possible.

in the marketplace,” adds Zausner. “Ironically,

in a note that “regardless of who wins the

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Mark Cowan “Some people might call that prevarication, not leadership. We disagree. As Machiavelli advised, the prince must imitate the fox as well as the lion.”

White House, we expect action to both mitigate

There is no monolithic business view of the

and delay higher taxes and spending cuts…

fiscal cliff nor are the motives behind even

Congress has already approved a continuing

straightforward prognostications like Gold-

resolution to fund the government into 2013.”

man’s or Morgan’s necessarily what they seem

In fact, Morgan Stanley simply doesn’t think

on the surface. That’s the whole point. Busi-

Congress will implement the automatic cuts.

ness is playing this “crisis” close to its vest in

Somewhere between these two polarized visions, companies like Caterpillar are reducing their current earnings outlooks—a cautious approach

order to maximize its immediate options even as its reassures the marketplace in a way it’s failed to do since 2008.

in line with what GE and others have done in the

Some people might call that prevarication,

bond market—but very judiciously commenting

not leadership. We disagree. As Machiavelli

In this LEVICK Daily video interview, we look at the CFIUS (Committee on Foreign Investment in

that, as Chairman and CEO Doug Oberhelman

advised, the prince must imitate the fox as

the United States) process with Mark Cowan, Senior Executive Vice President for International

put it, “We’re not expecting rapid growth, and

well as the lion. L

Business with Cassidy & Associates. When foreign companies consider transactions that could po-

we’re not predicting a global recession.” Hardly the sentiments of a man who expects to fall off a fiscal cliff. To the contrary, like GE (which also trimmed its 2012 forecast), Caterpillar says it expects next year to look very much like this year: the tone is neither Goldman Sachs’ dire anxiety nor Morgan Stanley’s glib assuredness.

08

on CFIUS Review

Richard S. Levick, Esq., President and CEO of LEVICK, represents countries and companies in the highest-stakes global communications matters—from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church.

tentially impact national security, it is always best to initiate the CFIUS application process as early as possible so problems can be addressed before they damage the brand.


CEO cash

terms

Weekly

buisness

shareholder

inventory

M&A accounting

liabilities

Mergers & Acquisitions With William Wynne Richard S. Levick, Esq.

How can boards best serve a company seeking to make itself attractive to potential buyers?

How can boards of directors effectively prepare for inadequate hostile takeover bids?

William Wynne: The fastest way to derail a

William Wynne: Boards should periodically

sale process is to have a compliance problem

review their companies’ structural defenses to

“discovered” in the course of a buyer’s due

an unsolicited offer: a staggered board, abil-

diligence. Given the ever-increasing size of the

ity of shareholders to act by written consent,

penalties being extracted by governments, even

poison pills, etc. Just as important, however, is

routine compliance issues take on a dispropor-

being comfortable with the transaction process

tionate dimension. A board contemplating a

and not panicking upon receipt of a hostile

sale process is well advised to update its compli-

offer. A team of advisors that has the board’s

ance review and have well-prepared answers to

confidence should be immediately available.

any questions that may be uncovered.

This team should not just include bankers and lawyers, but public relations professionals and

What steps can boards take to convince shareholders that they got the best deal in the wake of a major transaction?

proxy solicitors as well.

William Wynne: The board must be seen to

directors know what to expect and allow them

have asserted itself to control the transaction

to learn from their competitors’ successful

process. If the board is seen to have been reac-

tactics and missteps.

tive, activist shareholders are more likely to

Originally Published on LEVICK Daily

question and challenge the transaction. Share-

O

ver the next several weeks,

and acquisitions, international corporate debt

holders, and indeed the general public, are

LEVICK Daily will share select-

restructurings, and public and private securi-

questioning management’s motives more ag-

ed interviews from our recent

ties offerings. As lead counsel for principals

gressively. There is also growing malaise about

NACD Directorship article

in mergers and acquisitions transactions, Mr.

corporate governance. Again, it is imperative

entitled “What’s Next? The Top

Wynne is involved in all aspects of structuring,

that the board be seen to take charge. That

negotiating, and documenting deals.

means forming a committee of independent di-

Issues of 2013 and Beyond.” Today, we feature a discussion on mergers & acquisitions with William Wynne, a Partner in the New York office of White & Case.

At the conclusion of the interview, you can find LEVICK’s own communications best practices appended.

rectors; participating in the retention of financial and legal advisors; and requiring periodic

Boards should also review what similar companies in their space have done in response to hostile transactions. This will let

Finally, maintaining good relationships with major shareholders is always good business; but it pays particular dividends once a hostile offer is made. A shareholder who is familiar with management’s strategy and aware of the board’s involvement in setting that strategy will be much more receptive and supportive than the shareholder who only hears from the board once the hostile offer has arrived.

updates on the transaction process.

Mr. Wynne represents principals in major corporate transactions and financings, mergers

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What’s next with regard to M&A law? Are there issues or opportunities on the horizon of which all public companies need to be aware? William Wynne: Merger-related litigation has reached epic proportions. In 2007, 53 percent of mergers valued at $500 million or greater attracted litigation. In 2011, almost all deals (96 percent) attracted litigation. The reality is

of interest, both actual and perceived. Boards should record their deliberations over the pros and cons of each potential conflict in the context of how the proposed relationship will bring value to the shareholders in spite of the conflict. considered by the board, exposure to shareholder litigation increases significantly. L Richard S. Levick, Esq., President and CEO of LEVICK, represents countries and companies in the highest-stakes global communications matters—from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the

to be prepared.

Catholic Church.

Process is paramount. Boards should hold

This post is excerpted from Richard Levick’s recent NACD

meetings to discuss and decide all materials

Directorship feature “What’s Next? The Top Issues of 2013

Courts will hesitate to overturn board deci-

Proxy Proposals Regarding Disclosure of Political Activity

Without evidence that such conflicts have been

that parties to a merger will get sued and need

issues, and careful minutes should be taken.

NACD BoardVision

and Beyond.” To read the full article and learn more about the most significant issues impacting boardrooms today, click here.

sions if there is a solid record. In particular, boards need to be acutely aware of conflicts

BEST COMMUNICATIONS PRACTICES: 1.

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Boards need to ensure that every employee understands the confidential nature of M&A transactions—and that they know what can and cannot be said, especially in the social media (and then be certain aggressive monitoring is in place to detect even a hint of a leak).

2.

Boards that are seen as in control of the transaction process are best positioned to deflect criticism and defend against the inevitable litigation.

3.

Directors that demand strong investor relations in peacetime will build a trust bank among stakeholders that will serve the company well, especially if a hostile offer is made.

This week’s edition of NACD BoardVision focuses on proxy proposals. Join Steve Kalan, associate publisher of NACD Directorship, and Ken Gross, partner at Skadden Arps, as they discuss proxy proposals regarding disclosure of political activity.

Financial Communications Litigation Corporate & Reputation Public Affairs Crisis Sign Up Today13


Weekly

Gene Grabowski Originally Published on LEVICK Daily

Throughout October, Susan G. Komen for

Noticeably absent from the online, print, and

messaging to its local chapters. In places such

the while, central leadership resisted the urge

the Cure has been leveraging the opportunity

earned-media effort is embattled founder and

as Austin, Tucson, Reno, and Arkansas, volun-

to defend itself and remained virtually silent.

afforded by National Breast Cancer Aware-

former CEO Nancy Brinker, who transitioned

teers with local affiliates have been fielding

ness Month to rebuild a brand tarnished

into a “new management role” in August. In-

angry calls, responding to outraged emails,

by controversy.

stead, the spotlight has been firmly affixed on

and meeting face-to-face with donors whose

everyday cancer survivors who are still here

support could have dried up entirely in the

today because of the new treatment options

wake of the Planned Parenthood fiasco.

Since the national non-profit made, and then reversed, its decision to halt funding for Planned Parenthood back in February, dona-

a brand that may have been destroyed has survived to fight the good fight another day. While Komen still has a long way to go and will no doubt have to apply other creative

Having had no say in the decision to defund

communications strategies to regain its former

tions are down approximately 30 percent.

That’s a smart move for two reasons. First, it

Planned Parenthood, these local messengers

prominence, the organization has reminded

Participation in the organization’s marquee

takes the focus off past mistakes and the leaders

delivered Komen’s crisis messages with a de-

every other group facing crisis that your

fundraising races is down as much as 35 per-

who made them. And second, it’s the continua-

gree of caring and credibility that the organi-

messengers are often more important than

cent in some parts of the country. Now, Komen

tion of a decentralized communications strat-

zation’s central leadership simply could not

your message. L

is counting on an advertising blitz to reverse

egy that might very well have saved the organi-

attain. In the end, they were uniquely quali-

these troubling trends and remind the public

zation during the controversy’s earliest stages.

fied to criticize the decision from afar, even as

of the important work at the heart of its lifesaving mission.

14

that Komen fundraising helped bring about.

As a result of this decentralized approach,

For much of the past year, Komen’s central leadership has wisely ceded control of its

Gene Grabowski is an Executive Vice President at LEVICK and a contributing author to LEVICK Daily.

they reminded Komen stakeholders of all the cancer-fighting work that remains undone. All

15


BLOGS worth following Thought leaders

Industry blogs

Amber Naslund

Holmes Report

brasstackthinking.com

Amber Naslund is a coauthor of The Now Revolution. The book discusses the impact of the social web and how businesses need to “adapt to the new era of instantaneous business.

Brian Halligan

PR Week

social media marketing.

David Meerman Scott davidmeermanscott.com

David Meerman Scott is an American online marketing strategist, and author of several books on marketing, most notably The New Rules of Marketing and PR with over 250,000 copies in print in more than 25 languages.

Download Here: A2LC.COM

PRWeek is a vital part of the PR and communications industries in the US, providing timely news, reviews, profiles, techniques, and ground-breaking research.

PR Daily News prdaily.com

PR Daily provides public relations professionals, social media specialists and marketing communicators with a daily news feed.

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guykawasaki.com

FastCompany fastcompany.com

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Jay Baer

Forbes

jaybaer.com

Forbes.com

Jay Baer is coauthor of, “The Now Revolution: 7 Shifts to Make Your Business Faster, Smarter and More Social.

This e-book is offered as a free download for a limited time. Don’t wait to download and miss out.

prweekus.com

Guy Kawasaki Guy Kawasaki is a Silicon Valley venture capitalist, bestselling author, and Apple Fellow. He was one of the Apple employees originally responsible for marketing the Macintosh in 1984.

• This book is for those who try antitrust cases or those who support the people who do

blog.nacdonline.org

Chris Brogan Chris Brogan is an American author, journalist, marketing consultant, and frequent speaker about

• 25 articles packed with litigation tips and trial tactics

NACD Blog

HubSpot CEO and Founder.

Chrisbrogan.com

• 100 pages of valuable antitrust litigation and trial technology related articles

A source of news, knowledge, and career information for public relations professionals.

The National Association of Corporate Directors (NACD) blog provides insight on corporate governanceand leading board practices.

hubspot.com/company/management/brian-halligan

Packed with decades of knowledge and billions of dollars of successful outcomes in antitrust litigation, this reference guide is a must-have for any litigator or litigation support professional. In it, you’ll find:

holmesreport.com

Rachel Botsman rachelbotsman.com

Rachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration and sharing through network technologies.

Seth Godin sethgodin.typepad.com

Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing.

Forbes is a leading source for reliable business news and financial information for the Worlds business leaders.

Mashable mashable.com

Social Media news blog covering cool new websites and social networks.


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THE URGENCY OF NOW. 19


LEVICK Weekly - Oct 26 2012