I was in Winnipeg yesterday for the annual shareholders meeting of the Canadian Imperial Bank of Commerce. The bank
has done pretty well by its shareholders. It posted some good numbers this
quarter and, compared to its peers in Canada, its
stock has done very nicely. But, as bank CEO
John Hunkin said at the meeting, while 2003 should go down in the bank's
history as a very good year, it won't. The bank, he said, stumbled when it
comes to maintaining its reputation.
I think Hunkin is being kind to himself. CIBC didn't stumble — it fell flat
on its face.
Consider this: In September, CIBC was ordered to pay $52-million (U.S.) to
investors who convinced a judge that CIBC tricked them into buying bonds in
a cosmetics company even those CIBC new the company was on the verge of
collapse. (CIBC is appealing this ruling).
Several weeks later, the bank paid $80-million
(U.S.) to settle allegations made by U.S. And Canadian investigators
that it aided and abetted the executives who perpetrated the Enron
scandal.
As soon as that cheque cleared, CIBC was back in the middle of another
scandal. This time it was the mutual fund scandal in the U.S. CIBC is
accused of lending $1-billion to the hedge funds which allegedly engaged in
the illegal mutual fund trades. Not only that, but New York State Attorney
General Eliot Spitzer says he has a memo from a CIBC executive which
described to others at the bank how to break the law and engage in this
illegal trading! The executive who wrote that memo was fired by the bank in
December and
now faces 27 counts of grand larceny and
fraud. Spitzer isn't done with the CIBC yet and the bank has put aside
another $50-million U.S. For fines it will likely have to pay.
Almost unbelievably, Hunkin, in his
speech to shareholders, suggested that the ethical breaches that led to
these fines was a result of being “encouraged” by shareholders and the media
to be aggressive. I suggest it was neither. It was nothing but greedy
investment bankers with not enough supervision who got the bank in trouble.
In the press conference after the meeting, Hunkin said that, as CEO, he had
to take responsibility for the harm to CIBC's reputation last year. What
Hunkin actually took last year wasn't responsibility but a $3.3-million
bonus, part of an overall pay packet worth $10.7-million. The guy who
actually took responsibility it seems was David Kassie, Hunkin's good friend
and number two at the bank. Hunkin fired him a few days after that other
exec was charged by Spitzer.
So, with all this background, I figured for sure Hunkin or his board would
face at least one angry shareholder at the annual meeting. Heavens to bets,
I've sat through dozens of annual shareholder meetings in Toronto for
companies large and small and, invariably, there's some retired pensioner
who gets up and gives it to the CEO for one thing or another.
Amazingly, though, not a single person put a question to Hunkin or his board
at the shareholders meeting.
And on a completely unrelated note, if you're travelling to Winnipeg I
highly recommend the Fairmont Winnipeg. The bank held their meeting there
and I stayed overnight there. The prices are very reasonable and the service
I had was top-notch. You'll also be surprised at the food. Very nice.