Billabong Writes Down Its Brand to Zero

HONG KONG-It was a literal wipe out, but not the kind you experience on the waves.

On Tuesday, the Australian surf wear company Billabong International reported its worst financial results ever â€" a net loss of 859.5 million Australian dollars, or about $772 million, for the fiscal year that ended in June.

Most of that was due to accounting charges, but one of the heftiest of those spoke to the strong undertow that has been pulling the company down for more than a year now, making it the target of progressively lower takeover offers: On Tuesday, Billabong announced it had written down the value of its namesake brand to zero, compared with a carrying value of 252.1 million dollars a year earlier.

Billabong is dealing with weak demand for its products even as it tries to engineer a corporate turnaround and entertains much needed financing offers from private equity groups.

Last week, Billabong said it was that it was considering a proposal from the private equity groups Centerbridge Partners, based in New York, and Oaktree Capital, headquartered in Los Angeles, that would amount to 492.5 million dollars in new debt and equity financing.

The Centerbridge-led proposal is seeking to trump a refinancing deal that Billabong had agreed to last month involving Altamont Capital Partners, a private equity investor; GSO Capital Partners, the credit arm of the Blackstone Group; and GE Capital. The Altamont-led financing package would be worth 520 million dollars.

As part of the Altamont deal, Billabong announced last month that Scott Olivet, a former chief executive of the sunglasses maker Oakley, would succeed its chief executive, Launa Inman, who had been in the job for about a year. Ms. Inman stepped down on Aug. 2, but Billabong has delayed the appointment of Mr. Olivet â€" which would be unlikely to proceed if it chooses the Centerbridge deal instead.

Billabong’s board continues to weigh the two offers, and has said it wants to make a decision as soon as possible.

‘‘We are nearing the end of a long process that has caused distraction, impacted on staff morale and has been very costly,’’ Ian Pollard, Billabong’s chairman, said Tuesday in a statement. ‘‘The company looks forward to refocusing, reinvigorating its brands and rebuilding the business on a solid, long term financial footing.’’

Founded in 1973 by Gordon Merchant, a surfer who started out making board shorts in the kitchen of his home on Australia’s Gold Coast, Billabong has seen sales decline in recent years as it struggled to bolster its balance sheet and has fended off a number of takeover offers.

Early in 2012, Mr. Merchant snubbed a takeover bid by TPG Capital that valued Billabong at 851.4 million dollars, or about 3.30 dollars a share, saying then that even an offer of 4 dollars a share ‘‘would still represent a discount on the true value of Billabong.’’

The shares traded midday on Tuesday in Sydney at 51 Australian cents apiece, down 9.7 percent from their previous closing price.

Billabong Writes Down Its Brand to Zero

HONG KONG-It was a literal wipe out, but not the kind you experience on the waves.

On Tuesday, the Australian surf wear company Billabong International reported its worst financial results ever â€" a net loss of 859.5 million Australian dollars, or about $772 million, for the fiscal year that ended in June.

Most of that was due to accounting charges, but one of the heftiest of those spoke to the strong undertow that has been pulling the company down for more than a year now, making it the target of progressively lower takeover offers: On Tuesday, Billabong announced it had written down the value of its namesake brand to zero, compared with a carrying value of 252.1 million dollars a year earlier.

Billabong is dealing with weak demand for its products even as it tries to engineer a corporate turnaround and entertains much needed financing offers from private equity groups.

Last week, Billabong said it was that it was considering a proposal from the private equity groups Centerbridge Partners, based in New York, and Oaktree Capital, headquartered in Los Angeles, that would amount to 492.5 million dollars in new debt and equity financing.

The Centerbridge-led proposal is seeking to trump a refinancing deal that Billabong had agreed to last month involving Altamont Capital Partners, a private equity investor; GSO Capital Partners, the credit arm of the Blackstone Group; and GE Capital. The Altamont-led financing package would be worth 520 million dollars.

As part of the Altamont deal, Billabong announced last month that Scott Olivet, a former chief executive of the sunglasses maker Oakley, would succeed its chief executive, Launa Inman, who had been in the job for about a year. Ms. Inman stepped down on Aug. 2, but Billabong has delayed the appointment of Mr. Olivet â€" which would be unlikely to proceed if it chooses the Centerbridge deal instead.

Billabong’s board continues to weigh the two offers, and has said it wants to make a decision as soon as possible.

‘‘We are nearing the end of a long process that has caused distraction, impacted on staff morale and has been very costly,’’ Ian Pollard, Billabong’s chairman, said Tuesday in a statement. ‘‘The company looks forward to refocusing, reinvigorating its brands and rebuilding the business on a solid, long term financial footing.’’

Founded in 1973 by Gordon Merchant, a surfer who started out making board shorts in the kitchen of his home on Australia’s Gold Coast, Billabong has seen sales decline in recent years as it struggled to bolster its balance sheet and has fended off a number of takeover offers.

Early in 2012, Mr. Merchant snubbed a takeover bid by TPG Capital that valued Billabong at 851.4 million dollars, or about 3.30 dollars a share, saying then that even an offer of 4 dollars a share ‘‘would still represent a discount on the true value of Billabong.’’

The shares traded midday on Tuesday in Sydney at 51 Australian cents apiece, down 9.7 percent from their previous closing price.

Five Years After TARP, Misgivings on Bonuses

“There was such a total lack of awareness from the firms that paid big bonuses during this extraordinary time.”

That is what Henry M. Paulson Jr., the former Treasury secretary, said last week. We were discussing the 2008 financial crisis in light of the approaching five-year anniversary of those white-knuckled days, when Lehman Brothers collapsed and the government stepped in to bail out the American International Group and then the banking system.

Mr. Paulson’s comments about the outsize bank bonuses paid after the bailouts might sound de rigueur given all the frustration that has already been expressed by others. But Mr. Paulson had never been so emphatic about the bonuses in public.

Five years on, Mr. Paulson, assessing the success of a bailout program that clearly helped stabilize the economy, said that the bonuses that the banks paid after the bailouts â€" a record $140 billion in 2009 â€" were a primary reason for the public outrage over the program he worked so hard to persuade Congress to pass and the country to support.

“To say I was disappointed is an understatement,” he said. “My view has nothing to do with legality and everything to do with what was right, and everything to do with just a colossal lack of self-awareness as to how they were viewed by the American public.”

For Mr. Paulson, the bailout, known as the Troubled Asset Relief Program, was his crowning achievement during a historic financial crisis in which the global economy nearly toppled. While TARP was terribly unpopular, most economists now credit it and the extraordinary measures taken by the Federal Reserve with helping to prevent another depression.

Yet questions about the bailouts remain.

One of them is: Why did Mr. Paulson and Congress not seek tighter restrictions on pay, especially given Mr. Paulson’s new acknowledgment?

It is a question Mr. Paulson said he hears often and alludes to in a new prologue to his book, “On the Brink,” which looks back on the crisis and is being reissued this week to coincide with its anniversary. He told me he is as convinced today as he was then that it would have been impossible to persuade the majority of the banks to participate in the program with significant restrictions on pay. And, to him, the most important aspect of TARP’s success in stabilizing the system was that the entire industry participated at the same time.

“We got out in one fell swoop, recapitalized the banking system,” he told me. “The other way to do it is wait until they serially fail, which is what the Europeans did. It’s what the Japanese did. It’s what the British did with R.B.S. and Lloyds.”

When I pressed him about whether the United States banks would have truly been in a position to reject the recapitalization plan had tighter restrictions been put in place, he replied, “Just look how fast so many of them tried to pay back the capital once it was stigmatized.” He added: “How do you ever implement restrictions like that on pay and do it in a way” that included all the banks, and not just those that “desperately needed the capital or were getting ready to fail? I don’t know.”

Indeed, the biggest banks sought to pay the money back more quickly than anyone in the Treasury Department had ever expected, some in less than a year. In truth, the quick return of the bailout money, which the White House heralded as a success, may have slowed down the recovery by making it even harder for some banks to make loans.

Which brings us to another lingering question of the bailout, as Mr. Paulson articulated it to me: “Why didn’t you track the capital? Why didn’t you make them say how they spent their dollars to see whether they loaned it?” It is a question that Mr. Paulson said he gets regularly, but that he said he believes “borders on the ridiculous.”

“I don’t know anyone in the banking community that believes that you could realistically measure that or force them to do that,” he said. “If you have a banker say, ‘Here’s my capital: I levered it 8 to 1 and here’s where this dollar went,’ and the banks fill out a report every quarter on their lending, you’ll know whether it’s going up or down. But of course their lending goes down in a recession! When you say you want them to lend, lend more than what? More than they would have lent if they collapsed? More than they would have lent at the height of the bubble? Of course not, you don’t want that, there’s not the demand.”

Mr. Paulson speaks a sensible yet uncomfortable truth about the bailouts. And for all the Monday-morning quarterbacking, the bailouts worked. The United States banking system is much more highly capitalized than those in most European countries.

And for all the talk of reform on Wall Street, Mr. Paulson said he was still most concerned about rule-making in Washington.

“I believe that the root cause of every financial crisis, the root cause, is flawed government policies,” he said. He added that while he is hopeful that the tools in the Dodd-Frank financial overhaul law will help avoid the next crisis, “We’re not going to know how these rules work until we have a crisis, until we have someone sitting in the seats to say how are they going to use these authorities. Given how unpopular our actions were, I think it makes it even more difficult for those that come after us.”

He said he remained particularly anxious about the number of regulators overseeing the industry, especially in the midst of a crisis. “I’m most concerned about the multiple regulators falling all over each other and the confusion that regulatory competition creates.” He said he did not advocate cutting back regulators for the sake of it, but instead favors streamlining the number of agencies with overlapping interests.

In the new prologue to his book, he addresses the crisis’s catchphrase, “too big to fail.” “ ‘Too big to fail’ is a misnomer in any case,” he said. “Complexity and interconnectedness matter as much as size in assessing risk in banking.” But he acknowledges a thorny reality: “No bank should be too big or too complex to fail, but almost any bank is too big to liquidate quickly, particularly in the midst of a crisis.”

Asked why he held his tongue until now about his misgivings on the way Wall Street paid bonuses after the crisis, Mr. Paulson, who was formerly the chief executive of Goldman Sachs, said he didn’t want to be “piling on.”

Banking is “not only a very honorable profession,” he said, “it’s a very necessary profession.”

He said the hardest part of the bailouts for him was in the disconnect between the bailouts’ ugly image with the public and his faith that the bailouts would help keep the economy from collapsing.

“I understood that people were angry,” Mr. Paulson said. “They wanted to hear that those that made the mistakes were going to be held responsible. Then on the other side was stability. It’s hard to punish and save the banks at the same time.” He paused for a moment. “I was much more concerned with stability.”

Andrew Ross Sorkin is the editor-at-large of DealBook. Twitter: @andrewrsorkin

Five Years After TARP, Misgivings on Bonuses

“There was such a total lack of awareness from the firms that paid big bonuses during this extraordinary time.”

That is what Henry M. Paulson Jr., the former Treasury secretary, said last week. We were discussing the 2008 financial crisis in light of the approaching five-year anniversary of those white-knuckled days, when Lehman Brothers collapsed and the government stepped in to bail out the American International Group and then the banking system.

Mr. Paulson’s comments about the outsize bank bonuses paid after the bailouts might sound de rigueur given all the frustration that has already been expressed by others. But Mr. Paulson had never been so emphatic about the bonuses in public.

Five years on, Mr. Paulson, assessing the success of a bailout program that clearly helped stabilize the economy, said that the bonuses that the banks paid after the bailouts â€" a record $140 billion in 2009 â€" were a primary reason for the public outrage over the program he worked so hard to persuade Congress to pass and the country to support.

“To say I was disappointed is an understatement,” he said. “My view has nothing to do with legality and everything to do with what was right, and everything to do with just a colossal lack of self-awareness as to how they were viewed by the American public.”

For Mr. Paulson, the bailout, known as the Troubled Asset Relief Program, was his crowning achievement during a historic financial crisis in which the global economy nearly toppled. While TARP was terribly unpopular, most economists now credit it and the extraordinary measures taken by the Federal Reserve with helping to prevent another depression.

Yet questions about the bailouts remain.

One of them is: Why did Mr. Paulson and Congress not seek tighter restrictions on pay, especially given Mr. Paulson’s new acknowledgment?

It is a question Mr. Paulson said he hears often and alludes to in a new prologue to his book, “On the Brink,” which looks back on the crisis and is being reissued this week to coincide with its anniversary. He told me he is as convinced today as he was then that it would have been impossible to persuade the majority of the banks to participate in the program with significant restrictions on pay. And, to him, the most important aspect of TARP’s success in stabilizing the system was that the entire industry participated at the same time.

“We got out in one fell swoop, recapitalized the banking system,” he told me. “The other way to do it is wait until they serially fail, which is what the Europeans did. It’s what the Japanese did. It’s what the British did with R.B.S. and Lloyds.”

When I pressed him about whether the United States banks would have truly been in a position to reject the recapitalization plan had tighter restrictions been put in place, he replied, “Just look how fast so many of them tried to pay back the capital once it was stigmatized.” He added: “How do you ever implement restrictions like that on pay and do it in a way” that included all the banks, and not just those that “desperately needed the capital or were getting ready to fail? I don’t know.”

Indeed, the biggest banks sought to pay the money back more quickly than anyone in the Treasury Department had ever expected, some in less than a year. In truth, the quick return of the bailout money, which the White House heralded as a success, may have slowed down the recovery by making it even harder for some banks to make loans.

Which brings us to another lingering question of the bailout, as Mr. Paulson articulated it to me: “Why didn’t you track the capital? Why didn’t you make them say how they spent their dollars to see whether they loaned it?” It is a question that Mr. Paulson said he gets regularly, but that he said he believes “borders on the ridiculous.”

“I don’t know anyone in the banking community that believes that you could realistically measure that or force them to do that,” he said. “If you have a banker say, ‘Here’s my capital: I levered it 8 to 1 and here’s where this dollar went,’ and the banks fill out a report every quarter on their lending, you’ll know whether it’s going up or down. But of course their lending goes down in a recession! When you say you want them to lend, lend more than what? More than they would have lent if they collapsed? More than they would have lent at the height of the bubble? Of course not, you don’t want that, there’s not the demand.”

Mr. Paulson speaks a sensible yet uncomfortable truth about the bailouts. And for all the Monday-morning quarterbacking, the bailouts worked. The United States banking system is much more highly capitalized than those in most European countries.

And for all the talk of reform on Wall Street, Mr. Paulson said he was still most concerned about rule-making in Washington.

“I believe that the root cause of every financial crisis, the root cause, is flawed government policies,” he said. He added that while he is hopeful that the tools in the Dodd-Frank financial overhaul law will help avoid the next crisis, “We’re not going to know how these rules work until we have a crisis, until we have someone sitting in the seats to say how are they going to use these authorities. Given how unpopular our actions were, I think it makes it even more difficult for those that come after us.”

He said he remained particularly anxious about the number of regulators overseeing the industry, especially in the midst of a crisis. “I’m most concerned about the multiple regulators falling all over each other and the confusion that regulatory competition creates.” He said he did not advocate cutting back regulators for the sake of it, but instead favors streamlining the number of agencies with overlapping interests.

In the new prologue to his book, he addresses the crisis’s catchphrase, “too big to fail.” “ ‘Too big to fail’ is a misnomer in any case,” he said. “Complexity and interconnectedness matter as much as size in assessing risk in banking.” But he acknowledges a thorny reality: “No bank should be too big or too complex to fail, but almost any bank is too big to liquidate quickly, particularly in the midst of a crisis.”

Asked why he held his tongue until now about his misgivings on the way Wall Street paid bonuses after the crisis, Mr. Paulson, who was formerly the chief executive of Goldman Sachs, said he didn’t want to be “piling on.”

Banking is “not only a very honorable profession,” he said, “it’s a very necessary profession.”

He said the hardest part of the bailouts for him was in the disconnect between the bailouts’ ugly image with the public and his faith that the bailouts would help keep the economy from collapsing.

“I understood that people were angry,” Mr. Paulson said. “They wanted to hear that those that made the mistakes were going to be held responsible. Then on the other side was stability. It’s hard to punish and save the banks at the same time.” He paused for a moment. “I was much more concerned with stability.”

Andrew Ross Sorkin is the editor-at-large of DealBook. Twitter: @andrewrsorkin

Third Point Hedge Fund Increases Sotheby’s Stake

The activist investor Daniel S. Loeb disclosed on Monday that he had acquired a large stake in the auction house Sotheby’s, sending its shares up 3 percent.

Mr. Loeb’s hedge fund, Third Point, is now one of Sotheby’s biggest shareholders, with a 5.7 percent stake, according to a filing with the Securities and Exchange Commission. Third Point joins two other funds, Trian Partners and Marcato Capital, among the company’s top shareholders.

Third Point said it planned to “engage in a dialogue” with the board at Sotheby’s.

Mr. Loeb is a prominent art collector and the walls at his Park Avenue office are covered with paintings. In the business arena, he is better known for his combative style and penchant for boardroom battles. He typically increases his stake in a company with the intention of instigating change at the top. He is known for directing sharp invective at corporate executives.

One of Mr. Loeb’s most well-known boardroom brawls was with Yahoo in 2011. After disclosing a large stake in the company, Mr. Loeb called it “undervalued” and submitted a list of what he called “all-star” candidates to replace some of the directors.

The board rejected the proposal and instead hired Scott Thompson, whom Mr. Loeb promptly accused of faking his credentials. Mr. Thompson was fired and the board gave Mr. Loeb three seats on the board.

Mr. Loeb has demonstrated a more conciliatory approach to dealing with board members more recently.

Earlier this year, he announced a large stake in Sony and called for a breakup of the company. After his proposal was rebuffed, Mr. Loeb praised the company’s chief executive, Kazuo Hirai.

In an interview with Variety, Mr. Loeb called Mr. Hirai’s rejection letter “thoughtfully written,” adding that the discussion of profits gave shareholders a lot “to hang their hats on.”

Mr. Loeb has declined to comment on what he intends to do with his stake in Sotheby’s. Two other activist investors, Nelson Peltz and Mick McGuire, have also acquired stakes in the company. Mr. Peltz’s Trian Partners has a 3 percent stake, and Mr. McGuire’s Marcato Capital has a 6.6 percent stake.

Sotheby’s said in a statement: “Sotheby’s board of directors and management team are committed to building long-lasting value for all of Sotheby’s shareholders and we welcome investment in the company.” Its shares closed at $47.21, up $1.37.

If Mr. Loeb chooses to take a combative stance with the Sotheby’s board, it will not be the first time the company has had to contend with a large shareholder.

Nearly a decade ago, the New York money manager Ronald Baron questioned the independence of Sotheby’s board in a filing with the government. At the time, the Justice Department’s antitrust division was investigating whether the auction house had conspired with its rival Christie’s to fix commissions. Sotheby’s pleaded guilty to colluding to fix commission rates in March 2001 and was fined $45 million.

Growth in Global Disputes Brings Big Paychecks for Law Firms

Debt woes, broken contracts and soured business deals may cost global investors billions in losses and create seemingly never-ending headaches for policy makers. But there is a set of specialists profiting from such geopolitical problems: arbitration lawyers.

The legal profession is facing corporate cutbacks in spending and pushback over billable hours, but at least a dozen law firms based in the United States are in line for huge paydays stemming from myriad international issues.

About a dozen legal heavyweights like White & Case, Shearman & Sterling and King & Spalding are benefiting from the growing number of lucrative, complex international disputes. About 120 such actions worth more than $1 billion each are pending at international arbitration tribunals worldwide, according to a recent tally by American Lawyer magazine.

Often, these awards result from suits brought by companies or commercial interests against foreign governments or entities they control, invoking investment protections in international or bilateral treaties. Big awards also stem from contract disputes between two or more private entities that have invested internationally.

Among the eye-popping claims that have already reached resolution is a $2.2 billion decision against Kuwait’s Petrochemical Industries in favor of Dow Chemical over a joint plastics venture that the Kuwaitis canceled. Dow Chemical was represented by the Atlanta-based King & Spalding and Shearman & Sterling, based in New York.

King & Spalding also represented Universal Compression, a Houston-based natural-gas compression services provider, when it landed a $442 million arbitration award last year from Venezuela to make good on the nationalization of its operations in the country.

King & Spalding, which began as a regional firm 128 years ago, has handled nearly two dozen international arbitration cases in the last two years, of which 20 are disputes between corporate entities or other groups and the countries where they invested. The firm has 64 lawyers and associate lawyers working on global arbitrations that are valued at $60 billion, according to American Lawyer’s scorecard, issued in July.

Edward G. Kehoe, co-head of King & Spalding’s international arbitration practice, said the firm spotted the potential of such commercial disagreements a decade ago and began to “slowly build the business, because we saw increasing need for investor protection against appropriation.”

“We wanted to catch a rising wave of business,” said Mr. Kehoe, whose firm is also handling the arbitration in the fractious legal feud between the Chevron Corporation and Ecuador. (Chevron bought Texaco in 2001, and inherited a court case in which Texaco was accused of dumping billions of gallons of toxic waste and causing major environmental damage in the Amazon rain forest. Chevron was ordered in 2011 to pay $9 billion in damages.)

Ecuador, along with Argentina, Venezuela and the Czech Republic, are defendants that appear most often in claims brought by dissatisfied parties, according to the United Nations Conference on Trade and Development, which tracks worldwide investment. Canada, Egypt, the United States and Poland are next on the list.

Worldwide, at least 518 treaty claims cases were pending last year against 95 countries, according to the United Nations body, and more than 100 known arbitrations between feuding private investors. The World Bank’s International Center for the Settlement of Investment Disputes, located in Washington, logged 50 new cases last year, up from one in 1982.

Law firms charge either by the hour (the going rate at top firms hovers around $1,000 an hour) or take a percentage of the final arbitration award. As more countries include arbitration clauses in bilateral trade pacts and more investors plow money into infrastructure and other big overseas projects, the prospects for rising revenue are not lost on law firms.

“The volume and complexity of deals are ramping up, illustrated by the 163 percent growth in the number of U.S. law firm offices opened overseas last year,” said William D. Henderson, director of the Center on the Global Legal Profession at Indiana University’s Maurer School of Law.

Law firms are vying to recruit law partners with international experience, and law schools like Columbia University’s are adding graduate courses in the field, said George A. Bermann, who teaches arbitration at Columbia and is director of its new Center for International Commercial and Investment Arbitration.

“Not only are courses multiplying,” he said in an e-mail, but “enrollment â€" in all â€" is growing.”

The United Nations Conference on Trade and Development makes public basic information on cases. But most such commercial conflicts can be hidden from public view because there is no incentive for aggrieved plaintiffs or the recalcitrant countries being sued to air their issues in public. Some cases are settled through private arbitration and others come before tribunals, including the International Chamber of Commerce’s International Court of Arbitration in Paris.

Corporations triumph in most of the disputes that are made public, with two-thirds of tribunal decisions favoring their claims, according to the U.N. scorecard. Nine public decisions last year awarded damages to the party claiming injury, with a record award of $1.77 billion against Ecuador for terminating an oil contract in 2006 with Occidental Petroleum.

Some countries, however, are beginning to dig in against arbitration claims, not only because of the staggering dollar amounts, but also because they can disrupt national decision-making. Uruguay and Philip Morris International, for example, are wrangling over the country’s restrictions on tobacco use, which the tobacco giant says violates a bilateral investment treaty.

Those who favor international forums for settling disputes â€" where arbitrations are presided over by one arbitrator or a panel of three â€" say that such tribunals avoid local courts, which can tilt in favor of parochial interests.

“It’s a big improvement from historical gunboat diplomacy,” said Edna Sussman, an arbitrator and mediator with experience in more than 100 international and other arbitrations. She helped spearhead the opening of the New York International Arbitration Center in Manhattan to encourage holding such proceedings in the city.

Such “arbitration will definitely grow as international commerce grows,” she said, adding that some question whether secretive arbitration bodies should be deciding cases with billions of dollars on the line that can impinge on a government’s regulatory powers.

The small circle of arbitrators, who are typically lawyers or experts who have other employment, is also seen as too clubby and riddled with conflicts of interest from their day jobs as practitioners.

As recently as two decades ago, such international arbitration was not a big revenue generator, said Carolyn B. Lamm, a White & Case partner who specializes in the field.

Most treaties, intended to give foreign investors like corporations an avenue outside of local courts in case their investments were nationalized, “did not take effect until the 1980s, and we had two or three cases a year,” she said.

White & Case since has grown to a 150-person arbitration practice and currently oversees 223 arbitration matters valued at $73 billion, according to Global Arbitration Review, a law journal. Those cases included a $2.5 billion dispute in which the Canadian mining company Gold Reserve is claiming that Venezuela seized its mining properties.

“If an investor is confronted with a dispute, arbitration as means of enforcement is much better,” Ms. Lamm said.

“You can go anywhere you can find an asset. But if you use the courts, you really have to rely on deference to the local court, and that might not turn out as well.”

Ackman Moves to Sell Stake in J.C. Penney

The hedge fund manager William A. Ackman moved on Monday to sell his roughly 18 percent stake in J.C. Penney, nearly two weeks after he resigned from the board amid an unusual public battle with his fellow directors.

Penney filed a prospectus with regulators giving notice that Mr. Ackman’s firm, Pershing Square Capital Management, plans to sell its 39.1 million shares. The company, which will not receive any proceeds from the sale, did not list an expected selling price.

Shares in Penney closed at $13.35 on Monday, valuing the stake at about $522 million. Pershing first began buying stock in the retailer three years ago at an average price of about $21.06, about 37 percent higher than where it trades now.

A spokeswoman for Mr. Ackman declined to comment beyond the prospectus.

The stock sale came six days after the retailer announced its latest quarterly earnings. Under an agreement with Penney’s board, Mr. Ackman could not begin disposing his stake until then because he still possessed some material information about the company’s finances.

By selling his stake, Mr. Ackman will wash his hands of a drawn-out and ultimately disappointing investment in Penney. He first emerged as a big investor three years ago, believing that the retailer could be turned around with new management. To that end, he enlisted Ron Johnson, the celebrated architect of Apple Inc.‘s retail strategy.

But Mr. Johnson’s tenure proved to be disastrous, with numerous initiatives â€" eliminating discount sales, a pricey renovation of Penney’s stores â€" serving only to drive away existing customers while failing to bring in new ones. Earlier this year, the board fired Mr. Johnson and brought in his predecessor, Myron Ullman III, on an interim basis.

Earlier this summer, Mr. Ackman again grew anxious that Penney was on the wrong track, fretting about executive appointments by Mr. Ullman that the hedge fund manager believed did not follow established procedures. Concerned that the board was becoming fractured, he later publicly called for the replacement of its chairman, Thomas Engibous, with Allen Questrom, a former Penney chief.

The two sides negotiated a truce: Mr. Ackman would step down, while Ronald Tysoe, a retail veteran, would join the board, with another new director to follow soon afterward.

Yet as Mr. Ackman sells off his position, other investors appear to be betting that Penney is on the verge of a turnaround. The investment firm founded by George Soros now owns a roughly 9 percent stake, while Perry Capital recently unveiled a 7.3 percent stake.

And Hayman Capital, a firm run by Kyle Bass, reportedly has both bought up shares and made a bullish bet on the retailer’s debt, according to news reports.

Remembering Muriel Siebert, an ‘Icon’ for Women

For a generation of women on Wall Street, Muriel F. Siebert was more than just a leader in finance; she was their point of reference.

“The conversations always begin with Muriel,” said Susan S. Solovay, who, as one of the few women at the brokerage firm E.F. Hutton & Company, first met Ms. Siebert in the early 1980s. “All roads led to her. She was at the very beginning for women.”

Ms. Siebert, who died on Saturday in Manhattan at the age of 84, was in many ways a leader: the first woman to buy a seat on the New York Stock Exchange, a pioneer of the discount brokerage business and the first woman to be superintendent of banking for New York State.

On Monday, her friends and admirers remembered the more intimate aspects of her personality: her infectious smile, the red cowboy boots she wore and the pub on the Upper East Side, Neary’s, where she was a regular.

“I and so many women on Wall Street are so grateful for what a trailblazer she was,” said Sallie L. Krawcheck, 48, a former big bank executive who is the owner of the women’s network 85 Broads. “We talk about the challenges women face today â€" and they do exist, and they can be significant. But at least we’ve got ladies rooms.”

It was Ms. Siebert, of course, who lobbied to get a ladies room on the seventh floor of the New York Stock Exchange by warning the exchange’s chairman that she would arrange to have a portable toilet delivered.

That pragmatic approach to effecting change characterized many of accomplishments, her admirers said.

“I don’t think she sat there and beat the drum a lot,” said Adena T. Friedman, 44, the chief financial officer of the Carlyle Group, a large private equity firm. “But she beat the drum through her actions.”

Ms. Friedman, a former executive at the Nasdaq stock exchange, never met Ms. Siebert. But in the stock exchange business, “hers was a name everyone knew,” Ms. Friedman said.

Years of working in a male-dominated world gave Ms. Siebert a thick skin, and she had a reputation for toughness. But her friends said she also had a warm side.

“Every time I saw her, she told me she loved me,” said Ann F. Kaplan, 66, the chairman of the Circle Financial Group, who was a longtime partner at Goldman Sachs.

At holiday parties and other gatherings, Ms. Siebert, who was known as Mickie, was an unmistakable presence.

“Despite her tiny stature, she really filled a room,” said Jacki Zehner, 48, a former Goldman partner who is the president of Women Moving Millions, a nonprofit focused on philanthropy. “You knew when Mickie arrived.”

Ms. Siebert was involved in a number of women’s groups, allowing her to meet women of a younger generation who were making their way on Wall Street. She was a founding member of one such group, the Committee of 200, in 1982.

“Muriel is an icon for women in finance,” said Kathryn Swintek, 60, the chair of the Committee of 200. “She is bigger than anybody.”

And yet, Ms. Siebert was disappointed that the rest of Wall Street was not moving as quickly as she was. After buying her seat on the exchange in 1967, she remained the only woman admitted for nearly a decade.

Today, despite progress in some areas, women make up a small percentage of top executives in finance - suggesting that Ms. Siebert’s work is still unfinished. Though Ms. Siebert owned her own financial firm, women-owned firms are still a rarity.

“A lot has changed on Wall Street for women, but there’s still so much farther that we all have to go,” said Alexandra Lebenthal, 49, the chief executive and principal owner of the financial firm Lebenthal & Company, which her grandparents founded in 1925.

Ms. Lebenthal, who said she was in her late 20s when she met Ms. Siebert, has recently been a “direct competitor” of Ms. Siebert’s firm. Yet they shared a common bond.

“There are very few women-owned businesses on Wall Street,” Ms. Lebenthal said. “It’s interesting because that is an area where there actually is opportunity for advancement if you have the strength to go out and start your own firm.”

Several women recalled encountering Ms. Siebert a number of times over the course of their careers, running into her at parties or seeking out her advice.

Ms. Solovay, who was at E.F. Hutton, met with Ms. Siebert again before starting a hedge fund, Pomegranate Capital, in 2006. The idea behind Pomegranate was to invest in other hedge funds run by women.

“She was very smart, very intense and very direct,” Ms. Solovay, now 54, recalled. “Her advice was always very supportive â€" you have to stick it out, get through it and just do what you need to do.”

Trump Further Sullies For-Profit Schools

Leave it to the real-estate mogul Donald Trump to give the for-profit education industry an even worse rap than it already has. Schools looking to make a buck have come under scrutiny recently for taking students’ money but providing lackluster job results. New York State’s $40 million lawsuit over Mr. Trump’s foray into the industry underscores the need for these institutions to make credentials clear.

It’s hard to take anything The Donald does seriously. Although he started off as a genuine businessman several decades ago, he has since used his gilded empire to spawn a reality-TV career and even a much-derided presidential run. You can now sip from gold-accented Trump champagne flutes, even douse yourself with his “Success” cologne.

Given Trump’s financial achievements, and his lack of modesty, it is no surprise he opened a school to pass on the secrets of his success. Though Trump University seemed a dubious enterprise out of the gate, its legitimacy is now formally in question thanks to the lawsuit brought this week by New York Attorney General Eric Schneiderman. He contends that the billionaire made false claims about the school’s classes and instructors.

While it’s hard to sympathize with the 5,000 students foolish enough to pay for Mr. Trump’s insights, the suit gives the broader for-profit college industry another black eye. Just last Friday, a day after announcing a new plan to slow growth in college tuition, President Obama made disparaging comments about for-profit schools. He complained that some are notorious for making big bucks but failing to prepare students for jobs.

In theory, schools can make a profit and prepare students for the work force simultaneously - particularly when high-priced university degrees provide few practical skills. The trick is distinguishing the educators from the fraudsters. To that end, a ranking system like the one President Obama proposed is a step in the right direction.

In the meantime, here’s a hint to prospective students: if a school is named after a guy better known for firing people on television than closing deals, it’s best to steer clear.

Daniel Indiviglio is Washington columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Trump Further Sullies For-Profit Schools

Leave it to the real-estate mogul Donald Trump to give the for-profit education industry an even worse rap than it already has. Schools looking to make a buck have come under scrutiny recently for taking students’ money but providing lackluster job results. New York State’s $40 million lawsuit over Mr. Trump’s foray into the industry underscores the need for these institutions to make credentials clear.

It’s hard to take anything The Donald does seriously. Although he started off as a genuine businessman several decades ago, he has since used his gilded empire to spawn a reality-TV career and even a much-derided presidential run. You can now sip from gold-accented Trump champagne flutes, even douse yourself with his “Success” cologne.

Given Trump’s financial achievements, and his lack of modesty, it is no surprise he opened a school to pass on the secrets of his success. Though Trump University seemed a dubious enterprise out of the gate, its legitimacy is now formally in question thanks to the lawsuit brought this week by New York Attorney General Eric Schneiderman. He contends that the billionaire made false claims about the school’s classes and instructors.

While it’s hard to sympathize with the 5,000 students foolish enough to pay for Mr. Trump’s insights, the suit gives the broader for-profit college industry another black eye. Just last Friday, a day after announcing a new plan to slow growth in college tuition, President Obama made disparaging comments about for-profit schools. He complained that some are notorious for making big bucks but failing to prepare students for jobs.

In theory, schools can make a profit and prepare students for the work force simultaneously - particularly when high-priced university degrees provide few practical skills. The trick is distinguishing the educators from the fraudsters. To that end, a ranking system like the one President Obama proposed is a step in the right direction.

In the meantime, here’s a hint to prospective students: if a school is named after a guy better known for firing people on television than closing deals, it’s best to steer clear.

Daniel Indiviglio is Washington columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.

Justice Dept. Again Signals Interest to Pursue Financial Crisis Cases

Patience is a virtue, and waiting for cases from the financial crisis has certainly called for such a temperament. In a recent interview, Attorney General Eric H. Holder Jr. indicated that the wait might be over, but it is unlikely to satisfy those who have found the Justice Department’s response to be tepid at best.

“My message is, anybody who’s inflicted damage on our financial markets should not be of the belief that they are out of the woods because of the passage of time,” Mr. Holder said in an interview with The Wall Street Journal last week. “If any individual or if any institution is banking on waiting things out, they have to think again.”

The attorney general has hinted at future cases before. Over three years ago, in January 2010, he told the Financial Crisis Inquiry Commission that

the Justice Department is using every tool at our disposal - including new resources, advanced technologies and communications capabilities, and the very best talent we have - to prevent, prosecute and punish these crimes. And by taking dramatic action, our goal is not just to hold accountable those whose conduct may have contributed to the last meltdown, but to deter such future conduct as well.

It is certainly questionable whether there has been any “dramatic action” involving the financial crisis, at least on the criminal front. The government already had to significantly revise downward the number of cases that it had boasted of bringing in 2012 related to distressed homeowners - the very type of inflating of numbers that it has accused others of doing.

The latest talk about impending cases does not appear to involve criminal charges. In his recent interview, Mr. Holder chose his words carefully and did not talk of prosecutions, instead only saying that “significant matters” would be brought.

The hesitancy over criminal actions, however, does not seem to be influenced by the statute of limitations. Mail and wire fraud statutes can incorporate older conduct into a broader scheme, and securities fraud can be prosecuted up to six years after the last act.

But pursuing criminal cases from the financial crisis gets increasingly difficult, especially against individuals, because unlike a good bottle of wine, evidence does not age well. Memories dim and the chance of finding the “smoking gun” e-mail or recording that can help implicate a defendant in a fraudulent scheme becomes less likely with the passage of time.

Mr. Holder will more likely pursue charges under a civil statute that has become the Justice Department’s favorite tool of late against banks: 12 U.S.C. 1833a. The statute provides for civil penalties for violations “affecting a financial institution” of up to $5.5 million or the amount the defendant gained from the misconduct.

Congress enacted this provision in 1989 during the savings and loan crisis as part of the Financial Institutions Reform, Recovery and Enforcement Act to give prosecutors another tool to pursue cases involving fraud and other misconduct at banks.

The law is a hybrid: it requires prosecutors to establish that criminal conduct occurred while using the lower civil burden of proof to establish the violation. That makes it easier for the Justice Department to make its case and can even allow a court to make a favorable ruling based solely on written evidence without a trial.

Section 1833a contains other favorable measures for the government. The law extended the statute of limitations for a host of banking crimes to 10 years from the usual 5-year period, so the Justice Department faces little time pressure in pursuing cases involving the mortgage market during the lead up to the financial crisis.

The statute only requires that the violation affect a financial institution, a term that has been broadly construed in recent district court decisions. Last week, Judge Jed S. Rakoff of Federal District Court in Manhattan rejected a challenge by Bank of America to a lawsuit involving the sale of faulty mortgages by its Countrywide Financial subsidiary. He found that the financial institution affected by the fraud could be Bank of America itself, so that even a self-inflicted wound could be the basis for pursuing a civil penalty action.

The range of potential violations is quite broad in the statute, covering more than just frauds. In a lawsuit filed on Aug. 6 against Bank of America related to its sale of $850 million worth of mortgage-backed securities, prosecutors charged that the bank made false statements in violation of 18 U.S.C. § 1014 by not disclosing that the loans packaged for sale had not been properly evaluated. This is a much easier case because it does not require proving intent to defraud, only that the bank knew it had not made complete disclosure of material information.

Whether the public will view cases brought under Section 1833a as significant is a different issue. Unlike a criminal prosecution, civil filings - many of which are ultimately settled - result only in the payment of money, giving the impression that the punishment is just another cost of doing business.

And at some point you wonder whether more lawsuits against Bank of America, JPMorgan Chase (which has disclosed that its own mortgage-backed securities offerings are being scrutinized by the Justice Department) and other big banks are particularly meaningful. When cases are filed for discrete acts, it is hard to see how they have much effect on the banks beyond making another payment or the public perception that misconduct is being successfully redressed.

The Justice Department has already filed a number of lawsuits under the 1989 act, and if past practice continues, then it is unlikely any individuals will be named in the cases Mr. Holder said will be filed. Unlike a claim against a corporation in which the conduct of a range of employees can be aggregated to show a violation, proving an individual committed a crime is much more difficult.

So the question is whether a stream of civil actions naming various banks for their role in the financial crisis will be the type of “dramatic action” that deters future misconduct.

Activists Seek Short-Term Gain, Not Long-Term Value

Bill George, a professor at Harvard Business School, is a former chief executive of the medical device company Medtronic and is a director at Goldman Sachs and Exxon Mobil.

Activist investors are making waves in the stock market, but their game has changed. Instead of taking on sluggish, poorly managed businesses, they want to restructure many of the world’s most profitable, best-managed companies. Their targets â€" PepsiCo, Apple, Target, Whole Foods, Procter & Gamble, Kraft and Dell â€" represent the gold standard of corporate governance. These companies are run by highly engaged, professional leaders. So why are activists like Carl C. Icahn, William A. Ackman, Nelson Peltz and Ron Burkle taking aim at them?

While activists often cloak their demands in the language of long-term actions, their real goal is a short-term bump in the stock price. They lobby publicly for significant structural changes, hoping to drive up the share price and book quick profits. Then they bail out, leaving corporate management to clean up the mess. Far from shaping up these companies, the activists’ pressure for financial engineering only distracts management from focusing on long-term global competitiveness.

These activists have a keen sense of timing, buying up shares when the stock is down because of near-term events. There is nothing wrong with that. Warren E. Buffett does the same. The difference is that Mr. Buffett invests for the long term in companies like Coca-Cola, Wells Fargo and I.B.M. He says his ideal holding period is “forever,❠and he leaves management alone to focus on results.

A relevant example is Mr. Peltz’s demands to restructure PepsiCo. After forcing the spinoff of Kraft’s North American business into a company called Mondelez, Mr. Peltz’s Trian Partners is left holding 3 percent of a company that cannot compete with global leaders like Nestlé and Unilever. So Mr. Peltz wants PepsiCo to buy Mondelez and then split into two companies: beverages and snacks, including Mondelez. This financial engineering makes no sense. Rather, it demonstrates Mr. Peltz’s lack of understanding of what is required to run successful global enterprises.

PepsiCo’s results demonstrate the validity of the “performance with purpose” strategy of its chief executive, Indra K. Nooyi. It recently reported its sixth consecutive quarter of solid organic revenue growth as core earnings per share grew 17 percent and gross margins expanded. Its global portfolio of snacks, beverages and healthy foods has high co-purchase and co-consumption levels, generating $1 billion a year in scale benefits. Ms. Nooyi uses cash flow from traditional beverages to finance investments and growth in emerging markets, innovation and healthy brands, which now account for 20 percent of PepsiCo’s revenue. PepsiCo’s stock is up about 25 percent over the last two years, compared with 11 percent for its archrival, Coca-Cola.

Mr. Peltz is not the only activist going after healthy companies. Here are some other examples:

Whole Foods

Mr. Burkle moved in on Whole Foods when its stock was at its 2009 low of $4, having fallen from $39. Whole Foods’ leadership ignored Mr. Burkle’s pressure, stayed true to its mission and strategy, merged with Wild Oats and invested in deluxe new stores while expanding sales at stores open more than a year. Today its stock is above $50 and has traded above $55.

Target

In 2009, Mr. Ackman tried to pressure Target to break up its integrated portfolio of retail, real estate and credit card holdings, mimicking Eddie Lampert’s disastrous strategy at Sears. Target fought back, won 80 percent of shareholder votes in a proxy fight over Mr. Ackman’s proposed board slate and focused on its long-term strategy to compete with Wal-Mart Stores. Since then, Target’s stock is up 64 percent.

J.C. Penney

Mr. Ackman next bought into J.C. Penney with a stake that now amounts to about 18 percent and hired Ron Johnson from Apple as chief executive. They hastily undertook a complete remake, abandoning traditional customers and losing 30 percent of revenue. When Myron E. Ullman, the former chief executive who was brought back, tried to stabilize the company, Mr. Ackman publicly attacked the board. Finally, the board forced Mr. Ackman to resign, leaving him with an estimated $500 million in losses. To his credit, Mr. Ackman is acknowledging his mistakes.

Procter & Gamble

Mr. Ackman also went after venerable Procter & Gamble and its chief executive, Bob McDonald, proposing questionable short-term actions to drive up the stock price. He personally attacked Mr. McDonald even as the company posted two strong quarters. Under pressure, the board decided to replace Mr. McDonald with his predecessor, A.G. Lafley. Meanwhile, P.&G. continues to lose ground globally to its archrival, Unilever.

Dell

Michael S. Dell proposed taking private the company he founded at a 40 percent premium so he could operate it without stock market scrutiny. Hoping to squeeze $1 to $2 more a share out of Mr. Dell, Mr. Icahn bought up Dell stock and proposed his own financial structure. Now the company is in limbo, posting declining results while the ownership struggle continues.

Chief executives are responsible for building their companies for the long term, while delivering near-term results. When economic conditions and market changes put pressure on quarterly results, it takes wise and steady leadership at the top to avoid the pitfalls of cutting investments to achieve quarterly targets. Chief executives who “borrow from tomorrow” to meet today’s numbers inevitably jeopardize the future of their companies. For poignant examples, review the histories of Hewlett-Packard, General Motors, Sears and Kodak.

The best chief executives â€" including Alan R. Mulally of Ford, Paul Polman of Unilever and Ms. Nooyi of PepsiCo â€" anticipate short-term challenges but don’t react to them by sacrificing long-term strategies. They know how to compete globally by creating sustainable value for customers and their shareholders.

In attacking well-run companies, activists are overplaying their hand. The only way to sustain growth in shareholder value is by creating competitive advantage to provide superior value for your customers. Corporate leaders should stay laser-focused on this goal.

Activists Seek Short-Term Gain, Not Long-Term Value

Bill George, a professor at Harvard Business School, is a former chief executive of the medical device company Medtronic and is a director at Goldman Sachs and Exxon Mobil.

Activist investors are making waves in the stock market, but their game has changed. Instead of taking on sluggish, poorly managed businesses, they want to restructure many of the world’s most profitable, best-managed companies. Their targets â€" PepsiCo, Apple, Target, Whole Foods, Procter & Gamble, Kraft and Dell â€" represent the gold standard of corporate governance. These companies are run by highly engaged, professional leaders. So why are activists like Carl C. Icahn, William A. Ackman, Nelson Peltz and Ron Burkle taking aim at them?

While activists often cloak their demands in the language of long-term actions, their real goal is a short-term bump in the stock price. They lobby publicly for significant structural changes, hoping to drive up the share price and book quick profits. Then they bail out, leaving corporate management to clean up the mess. Far from shaping up these companies, the activists’ pressure for financial engineering only distracts management from focusing on long-term global competitiveness.

These activists have a keen sense of timing, buying up shares when the stock is down because of near-term events. There is nothing wrong with that. Warren E. Buffett does the same. The difference is that Mr. Buffett invests for the long term in companies like Coca-Cola, Wells Fargo and I.B.M. He says his ideal holding period is “forever,❠and he leaves management alone to focus on results.

A relevant example is Mr. Peltz’s demands to restructure PepsiCo. After forcing the spinoff of Kraft’s North American business into a company called Mondelez, Mr. Peltz’s Trian Partners is left holding 3 percent of a company that cannot compete with global leaders like Nestlé and Unilever. So Mr. Peltz wants PepsiCo to buy Mondelez and then split into two companies: beverages and snacks, including Mondelez. This financial engineering makes no sense. Rather, it demonstrates Mr. Peltz’s lack of understanding of what is required to run successful global enterprises.

PepsiCo’s results demonstrate the validity of the “performance with purpose” strategy of its chief executive, Indra K. Nooyi. It recently reported its sixth consecutive quarter of solid organic revenue growth as core earnings per share grew 17 percent and gross margins expanded. Its global portfolio of snacks, beverages and healthy foods has high co-purchase and co-consumption levels, generating $1 billion a year in scale benefits. Ms. Nooyi uses cash flow from traditional beverages to finance investments and growth in emerging markets, innovation and healthy brands, which now account for 20 percent of PepsiCo’s revenue. PepsiCo’s stock is up about 25 percent over the last two years, compared with 11 percent for its archrival, Coca-Cola.

Mr. Peltz is not the only activist going after healthy companies. Here are some other examples:

Whole Foods

Mr. Burkle moved in on Whole Foods when its stock was at its 2009 low of $4, having fallen from $39. Whole Foods’ leadership ignored Mr. Burkle’s pressure, stayed true to its mission and strategy, merged with Wild Oats and invested in deluxe new stores while expanding sales at stores open more than a year. Today its stock is above $50 and has traded above $55.

Target

In 2009, Mr. Ackman tried to pressure Target to break up its integrated portfolio of retail, real estate and credit card holdings, mimicking Eddie Lampert’s disastrous strategy at Sears. Target fought back, won 80 percent of shareholder votes in a proxy fight over Mr. Ackman’s proposed board slate and focused on its long-term strategy to compete with Wal-Mart Stores. Since then, Target’s stock is up 64 percent.

J.C. Penney

Mr. Ackman next bought into J.C. Penney with a stake that now amounts to about 18 percent and hired Ron Johnson from Apple as chief executive. They hastily undertook a complete remake, abandoning traditional customers and losing 30 percent of revenue. When Myron E. Ullman, the former chief executive who was brought back, tried to stabilize the company, Mr. Ackman publicly attacked the board. Finally, the board forced Mr. Ackman to resign, leaving him with an estimated $500 million in losses. To his credit, Mr. Ackman is acknowledging his mistakes.

Procter & Gamble

Mr. Ackman also went after venerable Procter & Gamble and its chief executive, Bob McDonald, proposing questionable short-term actions to drive up the stock price. He personally attacked Mr. McDonald even as the company posted two strong quarters. Under pressure, the board decided to replace Mr. McDonald with his predecessor, A.G. Lafley. Meanwhile, P.&G. continues to lose ground globally to its archrival, Unilever.

Dell

Michael S. Dell proposed taking private the company he founded at a 40 percent premium so he could operate it without stock market scrutiny. Hoping to squeeze $1 to $2 more a share out of Mr. Dell, Mr. Icahn bought up Dell stock and proposed his own financial structure. Now the company is in limbo, posting declining results while the ownership struggle continues.

Chief executives are responsible for building their companies for the long term, while delivering near-term results. When economic conditions and market changes put pressure on quarterly results, it takes wise and steady leadership at the top to avoid the pitfalls of cutting investments to achieve quarterly targets. Chief executives who “borrow from tomorrow” to meet today’s numbers inevitably jeopardize the future of their companies. For poignant examples, review the histories of Hewlett-Packard, General Motors, Sears and Kodak.

The best chief executives â€" including Alan R. Mulally of Ford, Paul Polman of Unilever and Ms. Nooyi of PepsiCo â€" anticipate short-term challenges but don’t react to them by sacrificing long-term strategies. They know how to compete globally by creating sustainable value for customers and their shareholders.

In attacking well-run companies, activists are overplaying their hand. The only way to sustain growth in shareholder value is by creating competitive advantage to provide superior value for your customers. Corporate leaders should stay laser-focused on this goal.

A Reader’s Question: How Do You Hang Up on Voice Command?

From today’s mailbag:

Dear Mr. Pogue:

Three years ago, my husband suffered an accident and is now a quadriplegic. He can never be alone without a reliable fully voice-activated phone.

As you pointed out in your column this week, with Android, you have to swipe the screen to reach the mike button, and with the first iteration of Siri, you also had to push the home button â€" all impossible for a quad to do. We bought a Blue Ant device a few years back, which worked nicely (sometimes) with his old HTC. When the phone was last updated, that was the end of a beautiful relationship. I spent hours with both Blue Ant and HTC, and both blamed the other and neither had a solution.

So what do you suggest?

While you’re at it: The command to terminate a call doesn’t exist yet. When your call goes into voice mail, you can’t hang up by a voice command; you must physically terminate the call. We have discussed this problem with multiple brain trusts and no one has the solution yet.

My reply:

Unfortunately, I’m afraid I haven’t done any research on this problem in particular. But the Moto X, as I mentioned in my review, is listening for voice commands all the time â€" you don’t have to touch it to start issuing commands.

Among the many Android apps, perhaps there’s one that lets you hang up with a voice command?

I’ll ask my blog readers. Maybe they know of some solutions!

BATS and Direct Edge to Merge, Taking On Older Rivals

Several weeks ago, William O’Brien, the chief executive of Direct Edge, and several of his senior managers took a discreet flight to Kansas City, Mo. Waiting for them at the Charles B. Wheeler Downtown Airport were Joe Ratterman, head of the rival BATS Global Markets, and his team.

Working under cover of secrecy - Mr. O’Brien’s company was code-named “Delta,” while Mr. Ratterman’s was “Blue” - the two sides negotiated many of the finer points of a merger. The talks moved so quickly that their meeting finished an hour ahead of schedule.

The fruits of their efforts were on display Monday morning, as BATS and Direct Edge announced their plans to combine under the BATS name. The goal: to displace the New York Stock Exchange and the Nasdaq atop the world of stock markets.

“It pretty much guarantees you’re going to have a significant force to be reckoned with in the global exchange place for decades to come,” Mr. O’Brien said by phone.

The deal is the latest in the world of market operators, as companies seek more efficiencies and broader global reach by combining. Last year, the IntercontinentalExchange agreed to buy the N.Y.S.E.’s parent, NYSE Euronext, for $8.2 billion. Also last year, the parent of the Hong Kong Stock Exchange paid over $2 billion to buy the 136-year-old London Metal Exchange.

The pressure to join forces is a result of the challenges and changing environment facing exchanges. Technological advances and regulations have encouraged competition between markets, driving down the profitability that the Big Board and Nasdaq once enjoyed.

Both Mr. Ratterman and Mr. O’Brien said in interviews that they had long believed in more consolidation within their industry to harness greater scale and better compete against their older rivals.

BATS and Direct Edge were both formed to take advantage of the seismic changes in the world of stock trading. BATS was founded in 2005 by a programmer at a high-speed trading firm looking to offer lower prices than the Big Board and Nasdaq. Direct Edge’s predecessor was created in 1998, but the company rose to prominence after being sold in 2005 to the big trading firm Knight Capital, which later sold big stakes to Wall Street firms like Goldman Sachs in 2007.

Both companies are profitable on a stand-alone basis, their chief executives said. Last year, BATS reported $101 million in earnings before interest, taxes, depreciation and amortization, and its Ebitda margin was 65 percent.

“Our competitors have lost the ability to be as efficient as we are,” Mr. Ratterman said.

Combining the two will vault the new company past Nasdaq to become the second-largest exchange operator in the United States. Over the last month, exchanges run by NYSE Euronext hosted about 22.5 percent of all stock trading, while Nasdaq’s markets serviced 17.5 percent. BATS and Direct Edge together had 20.5 percent, according to figures from the data arm of BATS, which the rest of the industry also uses.

The combined market operator will keep all four of its parents’ exchanges, which offer slightly different prices and trading systems aimed at different types of customers. Mr. Ratterman will remain chief executive, and the company will stay based in BATS’s home in the suburbs of Kansas City, Kan. Mr. O’Brien will become president, while Bryan Harkins, Direct Edge’s chief operating officer, will take on an unspecified senior position.

While both Nasdaq and the Big Board’s parent companies are publicly traded, the newly enlarged BATS is expected to remain private for some time.

The combined company’s primary shareholders will include some of Wall Street’s biggest trading firms, including Goldman Sachs, Morgan Stanley and the hedge fund Citadel, as well as the private equity firms Spectrum Equity and TA Associates.

Though BATS had tried to go public last year before withdrawing its stock sale amid technical issues, the new BATS is expected to remain privately held by its members for some time, according to Mr. O’Brien.

“You never say never on those things, but right now an I.P.O. is not on the horizon,” Mr. O’Brien said.

The merger deal will also help shore up the two exchanges against the steady disappearance of trading volume as investors have soured on stocks. Other markets have sought to combat the problem by looking for trading opportunities in assets like bonds and derivatives, and moving into new markets around the world.

BATS already runs the largest Pan-European stock exchange, and Direct Edge has been making plans to expand to Brazil. The leaders of both firms said that together they would be looking for chances to expand into bond and currency trading, and to build stock exchanges in places like Japan and Canada.

“The Canadian market is one where we’ve had our eye for quite a while,” Mr. Ratterman said.

The men also say they see opportunities to take existing business from Nasdaq and the New York Stock Exchange. The older companies make a lot of money from selling data to customers, which is possible because of the amount of trading they host. The combined trading volume of BATS and Direct Edge should allow them to come up with their own data offering.

“The choices that customers have, have remained pretty narrow and pretty high cost,” Mr. O’Brien said.

He added that the new company could also move toward opening a business of listing stocks, something that currently only the two older companies do. Because the shareholders in the new company will be the large banks and trading firms that are responsible for a large portion of all stock trading, the new exchange may be a more attractive place for them to send their orders.

“When you have that number of firms around the table, it creates the potential for this combined company to be a part of a lot of change in any part of the market,” Mr. O’Brien said.

Getting to the deal took time. Though Mr. Ratterman and Mr. O’Brien have regularly spoken over the last three years, it was not until April that the two seriously began discussing combining their companies.

Over a meal in May at Acappella, an Italian restaurant in Manhattan’s TriBeCa neighborhood, the two men agreed on many of the important points of any merger, including preserving all four of their exchange platforms.

Several months of negotiations ensued, with BATS receiving advice from Broadhaven Capital Partners and Direct Edge working with Bank of America Merrill Lynch and Evercore Partners. To clear his head, Mr. Ratterman took to a local pool in Kansas City and swam laps.

The end of the merger process happened to coincide with a spate of bad news for one of BATS’s and Direct Edge’s older rivals. On Thursday, a day before the boards of both companies were scheduled to vote on their deal, Nasdaq halted trading for all of its listed stocks because of technical problems.

The breakdown again raised questions about the health of modern stock markets, which are highly dependent on computers to carry out buy and sell orders. Still, a rival’s technical glitch did not daunt BATS’s and Direct Edge’s boards and shareholders, which approved the deal on Friday as planned.

Both Mr. Ratterman and Mr. O’Brien say more work needs to be done, postponing any celebration until the deal’s close, which is expected in the first half of next year.

“We haven’t opened any champagne bottles yet,” Mr. O’Brien said.

Telefonica Improves Offer for E-Plus

Telefónica Improves Offer for E-Plus

The Spanish telecommunications giant Telefónica on Monday improved its offer for E-Plus, the German unit of KPN, winning support from KPN’s biggest shareholder, América Móvil.

KPN, Telefónica and América Móvil said that Telefónica had agreed to pay the equivalent of 8.55 billion euros, or $11.46 billion, for E-Plus, up from an earlier offer of $10.8 billion.

América Móvil, which is controlled by the Mexican billionaire Carlos Slim Helú, also said it still planned to go ahead with its separate $9.6 billion bid in cash for the remaining shares in KPN that it does not already own. The Mexican company now owns 29.77 percent of KPN, a Dutch telecommunications group.

Under the terms of Telefónica’s improved offer, KPN will receive $6.7 billion in cash for E-Plus and will get a bigger stake in Telefónica’s German business â€" 20.5 percent, compared with the 17.6 percent previously agreed to. Telefónica will sign an option to buy back 2.9 percent of its subsidiary after a year, at a price of $682 million.

In a note to clients on Monday, Banco Sabadell, a Spanish bank, described Mr. Slim’s support as “positive news” that would reduce “the uncertainty for the operation following the takeover bid for KPN by América Móvil.”

Shares in Telefónica rose 0.9 percent at the opening of the Madrid stock exchange, while KPN shares were up 2.4 percent in Amsterdam.

Pedro Oliveira, an analyst at BPI, also said Mr. Slim’s support increased the odds of the deal getting past regulators.

“We continue to stress that the operation is subject to regulators’ approval and despite the support of América Móvil there are still risks for the operation and to the value of the operation,” he wrote in a note.

KPN has so far resisted Mr. Slim’s move to increase his control, and an independent foundation that has the power to block KPN’s takeover has expressed concern over the proposed bid.

In a statement on Monday, América Móvil said it believed that by acquiring a majority stake in KPN, both companies could benefit from greater operational cooperation and coordination “in a rapidly changing European environment.”

Antitrust experts have said that Telefònica was likely to persuade regulators to clear its bid for E-Plus by giving up some spectrum and easing the entry of new competitors, a move that could also trigger a phase of consolidation in Europe’s packed telecom sector.

Telecommunications operators have lobbied heavily in recent months for Brussels to take a softer line on mergers, arguing that Europe has too many operators laboring under heavy regulation that saps their ability to invest in networks.

A Blockbuster Biotech Deal

Amgen, the world’s biggest biotechnology company, is gaining access to three anticancer treatments with a deal on Sunday to buy Onyx Pharmaceuticals for about $10.4 billion in cash, Andrew Pollack and Michael J. de la Merced report in DealBook. Amgen is offering $125 a share in cash through a tender offer for Onyx’s shares. The deal is expected to close at the beginning of the fourth quarter, subject to regulatory approval.

The takeover is the latest within the health care industry, one of the busiest sectors for deal makers. And Amgen’s purchase ranks among the five biggest takeovers of a biotechnology company, according to data from Standard & Poor’s Capital IQ. In addition, it is one of the two biggest takeovers in Amgen’s history, trailing only the company’s $17 billion deal for Immunex in 2002.

MURIEL SIEBERT, WALL STREET TRAILBLAZER, DIES AT 80  | Muriel Siebert, who was the first woman to buy a seat on the New York Stock Exchange and the first woman to lead one of the exchange’s member firms, died on Saturday in Manhattan, The New York Times reports. She was 80.

“Ms. Siebert, known to all as Mickie, cultivated the same brash attitude that characterized Wall Street’s most successful men,” Enid Nemy writes in The Times. “She bought her seat on the exchange in 1967, but to her immense anger, she remained the only woman admitted to membership for almost a decade.” She was a pioneer in the discount brokerage field, and she also was the first woman to be superintendent of banking for New York State, appointed by Gov. Hugh Carey in 1977.

SHOESHINES KEEP WALL ST. IN THE BLACK  | Inside New York’s investment houses, a vestige of old Wall Street lives on. Gone are the days when offices were filled with smoke and secretaries were the only women in sight. But in-house shoeshine service has proved remarkably resilient, surviving the rise of technology and even the turmoil of the 2008 financial crisis, which snuffed out many of Wall Street’s quirks.

But the modern shoeshine business has changed since the old days, reflecting the evolution of Wall Street firms from private partnerships to large, public corporations. At JPMorgan Chase, Goldman Sachs and Morgan Stanley, teams of workers now collect shoes and take them elsewhere to be shined, leaving traders to work in stocking feet. Though many bank employees appreciate the efficiency of that updated method â€" harried traders sometimes claim they do not even have time to use the restroom â€" some longtime employees see it as an affront.

“They’ve turned it into a sterile thing,” said James J. Dunne III, the senior managing principal of the investment bank Sandler O’Neill & Partners. “That’s where Wall Street has gotten more like a department store.”

One shoeshine parlor in Manhattan, Eddie’s Shoe Repair, aims to capitalize on this shift by offering a classic experience that has become increasingly rare inside banks. A DealBook reporter goes to Eddie’s to experience a Wall Street-style shoeshine firsthand.

ON THE AGENDA  | Data on durable goods orders for July is out at 8:30 a.m. The Burning Man festival kicks off in the Black Rock Desert in Nevada, an event that historically has attracted a Silicon Valley crowd. Jeffrey Gundlach, chief executive of DoubleLine Capital, is on CNBC at 12 p.m.

BANKING SERVICES FROM A PAWNSHOP  | “As banks zero in on more affluent customers who promise twice the revenue of their lower-income counterparts, close branches in poor areas and remain stingy with credit, pawnshops are revamping their image and stepping into the void to offer financial services,” Stephanie Clifford and Jessica Silver-Greenberg report in DealBook.

“There are, however, plenty of potential drawbacks, consumer advocates say. Some loans from pawnshops can come with interest rates as high as 25 percent. And fringe financial operations, the consumer advocates say, can imperil lower-income customers’ ability to save for the future. Without a traditional checking or savings account, borrowers often pay more for basic financial transactions like cashing checks, paying bills and wiring money, financial counselors say.”

Mergers & Acquisitions »

Telefonica’s Bid for KPN Unit Gains Support of Major Shareholder  |  Telefónica, the Spanish telecommunications giant, increased its offer for E-Plus, the German unit of KPN, on Monday, securing the support of América Móvil, KPN’s biggest shareholder. REUTERS

Indian Firm to Pay $2.6 Billion to Build Its Stake in African Gas Project  |  ONGC Videsh, a unit of the India’s state-run Oil and Natural Gas Corporation, says it will acquire a 10 percent stake in a natural gas project in Mozambique from Anadarko Petroleum in an all-cash deal. DealBook »

Pritzker Organization Said to Be Buying TMS  |  An investment firm run by Thomas Pritzker is buying TMS International, a provider of services to steel mills, for about $1 billion, including debt, The Wall Street Journal reports, citing unidentified people familiar with the matter. WALL STREET JOURNAL

Market Operators BATS and Direct Edge Are Said to Be in Merger Talks  |  BATS Global Markets and Direct Edge are in talks to merge, potentially creating one of the biggest stock market operators in the country, a person briefed on the matter told DealBook on Friday. DealBook »

Constant Acquisition at Microsoft, and One Deal That Didn’t Close  |  Steven A. Ballmer, as the chief of Microsoft, led one of the most prolific deal-making streaks in technology over the past two decades. But his record is as notable for its misses as its hits. DealBook »

With Ballmer’s Exit, a Chance for Reinvention at Microsoft  |  The departure of Steven A. Ballmer as chief executive of Microsoft, announced on Friday, is “paving the way for a generational change at the once-dominant technology company and giving it an opportunity to reinvent itself for a world dominated by mobile devices, social media and other technologies that have eluded its influence,” Nick Wingfield writes in The New York Times. NEW YORK TIMES

Microsoft Needs a Catch-Up Artist  |  “Being the next chief executive of Microsoft isn’t going to be an easy task for anyone,” Michael A. Cusumano, a professor at the Sloan School of Management at the Massachusetts Institute of Technology, told The New York Times. NEW YORK TIMES

Next Microsoft Chief Should Pare the Menu  |  Whoever becomes the next chief executive of Microsoft should narrow the company’s focus, Robert Cyran of Reuters Breakingviews writes. REUTERS BREAKINGVIEWS

INVESTMENT BANKING »

Goldman Said to Put Employees on Leave After Glitch  |  The Financial Times reports: “Goldman Sachs has put four senior technology specialists on leave after an embarrassing trading glitch that is likely to cost the bank tens of millions of dollars.” FINANCIAL TIMES

How to Make the Financial System Safer  |  “We will never have a safe and healthy global financial system until banks are forced to rely much more on money from their owners and shareholders to finance their loans and investments,” Anat R. Admati, a professor of finance and economics at the Stanford Graduate School of Business, writes in an opinion essay in The New York Times. NEW YORK TIMES

Financial Shenanigans on the Big Screen  |  Leonardo DiCaprio, who portrays Jordan Belfort in the upcoming movie “The Wolf of Wall Street” (directed by Martin Scorsese), tells New York magazine that the memoir on which the film is based “personified America’s addiction to obtaining wealth at all costs, and that hasn’t changed.” NEW YORK

Bank of America to Review Intern Working Conditions  |  Bank of America announced on Friday that it was reviewing the working conditions of its junior employees after a 21-year-old intern died recently in London. DealBook »

Wall Street Turns Out to Support the Apollo Theater  |  “Of all the boards I’ve been on, I’d say this is the one I’m doing for fun. I grew up on soul music, and I got sucked in by Dick Parsons,” the hedge fund manager Paul Tudor Jones said, referring to Richard D. Parsons, a former chairman of Citigroup. BLOOMBERG NEWS

French Bank Said to Plan Islamic Bond Program in Malaysia  |  Société Générale would become the second major European bank to issue Islamic bonds, known as sukuk, and the first to do so in Asia, according to Reuters. REUTERS

PRIVATE EQUITY »

ING to Sell South Korean Insurance Unit for $1.7 Billion  |  The deal is the latest in a string of divestments in Asia for the ING Group, which is trying to raise money to repay a 2008 bailout by the Dutch government. DealBook »

Clayton Dubilier Said to Raise $3 Billion for Latest Fund  | 
BLOOMBERG NEWS

HEDGE FUNDS »

U.S. Short-Seller Takes Aim at Chinese Vegetable Producer  |  The Glaucus Research Group has accused the China Minzhong Food Corporation of fabricating sales and doctoring financial statements, leading to a 48 percent fall in Minzhong’s stock before trading was suspended on Monday. DealBook »

Hedge Funds Win Ruling in Argentina Bond Case  |  A group of hedge funds secured a victory in a federal appeals court in a case that could affect international bond markets, parts of the banking system and the nation of Argentina. DealBook »

I.P.O./OFFERINGS »

Goldman Plays Two Roles in a Planned I.P.O.  |  Goldman Sachs, one of the lead underwriters of the planned initial public offering of FireEye, has also made a $10 million loan to the company’s founder that is secured by his stake in the company, The Wall Street Journal reports. WALL STREET JOURNAL

A Lack of Technology I.P.O.’s  |  “There have been just 22 tech and Internet listings this year, raising $3.2 billion, the slowest annual pace in four years,” The Wall Street Journal writes. WALL STREET JOURNAL

Dutch Bank ABN Amro Takes Step Toward an I.P.O.  |  The announcement comes five years after the Dutch government bailed out ABN Amro after a consortium of European banks acquired the firm for around 72.2 billion euros, or $99 billion. DealBook »

VENTURE CAPITAL »

Computer Security Company HyTrust Raises $18.5 Million  |  HyTrust, which provides security products for cloud computing, announced on Monday that it had raised $18.5 million in financing from investors including Intel Capital and Fortinet. NEWS RELEASE

A Prospective Buyer Tries to Justify a Tesla  |  “It’s not yet practical as an only car,” Adam Jonas, a managing director and the leader of Morgan Stanley’s global auto research team, told James B. Stewart, a columnist for The New York Times. “You have to treat it as a toy and be completely cool if it doesn’t work. But there’s still tremendous potential.” NEW YORK TIMES

LEGAL/REGULATORY »

After Mishaps, Nasdaq Loses Standing to Rivals  |  The reputation of the market operator has suffered from recent technical problems and poor communication with other members of the industry. DealBook »

Nasdaq Chief Defends Handling of Trading Halt  |  As the Nasdaq opened without a hitch on Friday, Robert Greifeld said the market operator needed to work on its “defensive driving” to deal better with mistakes by others. DealBook »

JPMorgan Said to Limit Business With Foreign Banks  |  JPMorgan Chase “is looking to scale back its dealings with banks outside the U.S., according to a memo and people close to the situation, as it tries to reduce risk and shore up controls in a period of heightened regulatory scrutiny,” The Wall Street Journal reports. WALL STREET JOURNAL

Obama Says Law School Should Be Two Years, Not Three  |  President Obama urged law schools to consider cutting a year of classroom instruction, wading into a hotly debated issue inside the beleaguered legal academy. DEALBOOK

Trump University Made False Claims, Lawsuit Says  |  The New York State attorney general’s office filed a civil lawsuit on Saturday accusing Trump University, Donald J. Trump’s for-profit investment school, of engaging in illegal business practices. DealBook »