WEDNESDAY NOVEMBER 22 2006 THE DAILY DEAL 5

JUDGMENT CALL Bad credit for charity MasterCard’s foundation may be good-hearted, but not good for business by Eric Grover anteed to remain in not be spent developing additional pay- shareholders. Individual employees and hands friendly to man- ments business, not spent trying to win shareholders who want to contribute asterCard Inc.’s agement for decades. interbank processing business in na- to charity should feel good about them- establishment The charitable founda- tional markets such as France, South selves, and be lauded, for doing so, on Mof a charitable tion holds 17% of Mas- Korea, Spain and Turkey, and not spent their own nickel. MasterCard manage- foundation as part of its terCard’s voting shares. enriching its credit, debit and prepay ment’s desire to help the needy should initial public offering is It will hold its shares for products. be applauded. They should act on that an egregious and public 10 years, at which point The charitable foundation also pro- intention by pulling out their personal example of bad corporate it will have to disburse vides psychological compensation to check books or better yet, charging a governance practice. It re- roughly 35% of them. management. donation on their personal MasterCard ceived scant criticism from Twenty years hence, the MasterCard management undoubt- credit or debit cards. the press and analysts, and charitable foundation edly feels good about setting up the If management believes microlend- it appears not to have con- will still hold 30% of the charitable foundation, whose purpose is ing has promise, the global payment cerned investors. It was nonetheless shares MasterCard donated as part of its “to support programs and initiatives that network could tailor credit products to a blemish on an otherwise successful, IPO. help children and youth to access educa- facilitate microlending, enabling com- indeed a transformational, IPO. The charitable foundation, created tion, understand and utilize technology merce in developing markets, and gen- MasterCard, however, cannot be by MasterCard, granted stock by Mas- and develop the skills necessary to suc- erating MasterCard revenue. faulted for inadequate disclosure. The terCard and heavily subsidized by Mas- ceed in a diverse and global work force.” The charitable foundation is bad cor- payment network made its plan abun- terCard, is likely to vote its shares with It will also support microlending activi- porate governance incarnate. dantly clear in its S1 Securities and Ex- management, diluting independent ties in emerging markets. This is moth- Hard-nosed investors’, analysts’ and change Commission filing. shareholders’ influence. erhood and apple pie. One could hardly the press’ reluctance to criticize Master- In their seminal 1932 work “The Additionally, the charitable founda- design a system insulating management Card establishing a charitable founda- Modern Corporation and Private Prop- tion siphons off after-tax money, which from activist shareholders engender- tion and granting it considerable equity erty,” A.A. Berle and Gardiner Means otherwise could be spent pretax grow- ing, by its nature, greater reluctance to and subsidies testifies to a certain guilt noted professional management and ing MasterCard’s business, or disbursed criticize than MasterCard’s charitable about the morality of companies pur- owners in the modern public corpora- to shareholders via dividends. foundation. suing profit. Public corporation man- tion may have different interests. Given MasterCard initially plans to give the People feel good about helping chil- agement should be measured on their often significant expertise and informa- foundation $40 million and is prepared dren and about their professional and ability to ethically compete, grow their tion asymmetries, control and gover- to make further donations to support personal networks knowing they helped businesses, improve margins and deliver nance systems aligning their interests its operating costs and, perhaps, more children. However, the purpose of pub- compelling earnings growth. Period. ■ are crucial. MasterCard’s charitable charitable activity. This will keep the lic corporations is to pursue profits and foundation illustrates the problem. charitable foundation beholden to Mas- maximize shareholder value, not chari- Eric Grover is a principal at Intrepid It insulates management from inde- terCard management for the foreseeable table undertaking. Ventures, a consultancy based in Silicon pendent shareholders’ influence. future. Corporations do good by serving Valley focusing on financial services, A significant block of shares is guar- The donations are funds that will customers, and creating value for their technology and processing.

MidOcean acquired Thompson along- Avista buys out partner in Thompson Publishing side DLJ Merchant Banking Partners, the private equity arm of Credit Suisse by Kelly Holman ucts. Its 110,000 subscribers are in such industry partner, said in a statement he Group, in May 2004 for $40 million. In sectors as banking, human resources, was “excited about the opportunities for 2005, Thompson bought Austin, Texas- PRIVATE EQUITY MidOcean Partners LLP education and government grants. internal growth and acquisitions avail- based banking and insurance publisher said it has agreed to sell its interest in MidOcean, a private investment firm able to Thompson.” Sheshunoff Information Services Inc. Thompson Publishing Group Inc. to based in New York and London, an- Kwon said Thompson’s strong, sub- for an undisclosed sum and renamed the co-owner Avista Capital Partners. nounced the deal late Monday. scription-based business model pro- company Alex eSolutions Inc. Terms were undisclosed, but a source Avista is a New York buyout firm that tects it against economic downturns. Then, in July, Avista bought out said Avista is paying about $50 million specializes in energy, healthcare and Although he declined to disclose the Credit Suisse’s 50% stake in the com- for the 50% stake of the Washington- media investments. company’s financial figures, citing its pany for $130 million. based business-to-business publisher “This is a business we know quite privately held nature, he said it gener- One month later, Thompson acquired that it doesn’t already own. Thompson well. It’s a well-proven acquisition ates strong recurring revenue. healthcare newsletter publisher Ameri- has an enterprise value of $200 million, platform and there’s a lot of potential Tyler Zachem, a MidOcean managing can Health Consultants from Stamford, the source said. to build the business through strategic director, said the firm’s decision to exit Conn.-based Thomson Corp. for an un- The company specializes in regula- acquisitions that we can bolt on,” said Thompson was predicated on a price disclosed sum through an auction run by tory compliance information for busi- OhSang Kwon, a partner at Avista. and terms that were simply too attrac- Berkery Noyes & Co. LLC. ■ ness and government, putting out books, James Finkelstein, chairman of tive to pass up. He declined to specify (For more details, newsletters and Web subscription prod- Thompson Publishing and an Avista MidOcean’s return from the sale. see www.TheDeal.com)