Mr. George Pugh

GLG News^SM Analyses by George Pugh

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Paying Banker Bonuses: Good Business?

February 3, 2009

Analysis of:'Idiots' Indeed | online.wsj.com

In the Wall Street Journal opinion, paying off the $18 billion in bonus pool is just good sense. The only real problem was that some bankers exercised poor timing.  “John Thain's year-end bonuses to Merrill Lynch executives, whatever their rationale, reflected an acute case of political tin ear.” The Journal also feels that the compensation is mislabel: it is not bonuses at all, but rather like tips, constituting the majority of the employees compensations and it has the bonus pool in way has fallen to the insignificant level of about $112,000 person, and paying them will help the NYC. The Opinion Page opposes any limits on employee compensation for fear of harm to the business motivation.

Wal-Mart Banking on the Unbanked

June 28, 2007

Analysis of:At Wal-Mart, a Back Door Into Banking | www.nytimes.com

Jane J. Thompson, called prepaid cards and money center services “foundational products” and ““Our concept is to go up the credit ladder of financial services,” The new products, like the prepaid debit card, will be offered through third-party partners, allowing Wal-Mart to sell bank like services without a government license, very important in view of the previous failures and current regulatory climate. .“The logic behind a lot of these services is to increase traffic and do it in a way that puts money in people’s hands,” said Andrew Dresner, a payments industry consultant at Oliver Wyman Financial Services. “You give them a couple hundred dollars,” when they cash their paycheck, “and they will buy other things.” Combine the logic of proximity with the fact that 20 percent of customers, 27 million people do not have checking accounts, and you have a truly potent combination.

Fair Value Is Not a Just or Proper Price

June 20, 2007

Analysis of:PCAOB ponders how to audit fair value | www.cfo.com

PCAOB’s chairman Mark Olson has said of SFAS No.159: "The increased use of fair value accounting poses a challenge for auditors and the PCAOB." Time is short as this SFAS goes into effect for most companies for financial years beginning after November 15, 2007, except for early adopters. The new standards cover valuations of stocks, bonds, loans, warranty obligations, and interest rate hedges when the Fair Value option is elected. Under existing PCAOB standards, the auditors need to understand how such estimates are derived and may have to develop independent estimates when independent data is available. Both SFAS No.159, “The Fair Value Option for Financial Assets and Financial Liabilities” and No.157 “Fair Value Measurements”, are going to have a great impact on how financial information is presented and the additional testing, both factual and procedural to properly audit it.

In Fraud, Many Hands Make Light Work

June 18, 2007

Analysis of:Financial-Statement Fraud not a Solo Job, According to Study of Pre-Sox Years | www.acfe.com

This article is based on “Control Overrides in Financial Statement Fraud” by Robert Tillman and Michael Indergaard of St. John’s University, available at http://www.theifp.org/research%20grants/tillman_final_report.pdf The study examines 834 companies that filed financial restatements between 1997 and 2002. Of those 374 (45 percent) were accused of securities fraud and subject to shareholder suits, SEC enforcement action or both. Of those resulting in legal action seven individuals on average were implicated holding a variety of senior positions, including board members. management and auditors  

Finding Better Arguments for Amending Sarbox

June 5, 2007

Analysis of:Dealing With Sarbox | online.wsj.com

Kenneth Wilcox, President of SVB Financial, believes that Sarbox has made the US economy less competitive. He disputes claims by a Big Four accounting firms that the costs are declining, with second year costs only 40% of the first year. In 2006 SVB paid over $20 million to the Big Four, for an average of about $17,000 per employee. This is more than five times as much as we paid them only three years ago. The new rules have contributed to a shortage of trained personnel while PCAOB under SEC guidance discourages the auditors from either offering advice or exercising judgment. As a result, almost 10% of all publicly traded companies announced restatements in 2006. SARBOX has greatly increased the cost of doing business, and in the author’s view to no good purpose.

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