So what changed? Two people who are likely influential in the trust’s deliberations are board members Robert Cavanaugh and LeRoy Zimmerman. The two men are the only ones who sit on the boards of both the trust and Hershey Co. In the past, these boards have been far apart in their thinking about whether to do a large M&A deal.

Hershey Trust is known for its colorful board members and infighting. (Who could forget the “Sunday night massacre” of 2008 when eight board members were axed) Still, Cavanaugh and Zimmerman stand out.

Cavanaugh attended the Milton Hershey School for underprivileged students that is at the heart of the trust’s mission. So when the trust’s board debates whether acquiring Cadbury would be good for the school, Cavanaugh actually knows a thing or two about what those students need.

He also knows about deals. From Milton Hersey School, he went to the University of Pennsylvania and then to Harvard Business School. He cut his teeth as an investment banker at Goldman Sachs Group and at Credit Suisse Group. Cavanaugh is now a managing director at DLJ Real Estate Capital Partners, a real-estate investment firm in Los Angeles.

Zimmerman is Pennsylvania’s first elected Attorney General, who served from 1981 to 1989. He was Chairman of Eckert Seamans Cherin & Mellot LLC, a Pennsylvania law firm, and now serves as Senior Counsel. Zimmerman was outspoken in opposing a sale to Cadbury in 2008.

Ironically, it was another former Pennsylvania AG, Mike Fisher, who blocked Hershey’s attempts to sell itself in 2002 out of concerns that it wasn’t in the best interests for the trust. The state’s AG oversees charitable trusts and asserted a right to intervene. Zimmerman was also against a sale in 2008, when Cadbury flirted with merging with the company. “Simply put: We will not sell the Hershey Co.”

But, he has never said publicly that Hershey would never be a buyer.

The complaint of Goldman shareholders is simple: Despite record net income, Goldman’s per-share earnings will be 22% lower this year than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial.

Goldman is, of course, the whipping boy of the moment. Whether the criticism is fair or not, Goldman has come to symbolize the perceived inequity between Wall Street and Main Street. And while the government bailed out Wall Street, unemployment stands above 10%, while Goldman’s per-employee compensation reaches $717,000.

Where the shareholder protests are concerned, Goldman makes the point that it manages its capital appropriately. And it has a point, at least in comparison to its rivals. While EPS might be down from 2007, the firm has generated a total return for shareholders of about 160% since going public in 1999, according to FactSet Research Systems. Goldman’s shares have more than doubled this year.

Now consider, say, Morgan Stanley. Since May 4, 1999–the day Goldman went public–Morgan Stanley has generated a total return for shareholders of -4.01%, according to FactSet. Morgan Stanley is expected to report a per-share loss of 50 cents this year. But as the WSJ reported last month according to regulatory filings, Morgan Stanley paid out or set aside about 64 cents of every $1 in net revenue for compensation and benefits this year, up from its historic rate of about 50%. The New York firm says the rate would have been below 50% if not for a couple of factors. For one, its revenue has been hurt by a rise in the prices of its bonds, which makes it more expensive for the firm to buy them back. The company added that its compensation to revenue levels have been pushed higher by the brokerage joint venture it introduced this year with Citigroup.

Or look at Blackstone Group. The private-equity firm’s shares closed above $35 on the first day of trading in the summer of 2007. The stock recently was around $15. Analysts expect earnings or 49 cents a share this year, compared to the $1.62 a share it earned in 2007. Meanwhile, the firm has paid out $3.86 billion and $2.26 billion in compensation in 2008 and 2007 respectively. 

And the same criticism could be leveled at J.P. Morgan, Bank of America and Citigroup.

The bigger question is where have institutional shareholders been all along. Such investors, historically, haven’t been inclined to raise a fuss in good times. That may be because the structure of Wall Street pay didn’t bother them or it may be because managers at mutual funds and endowments are themselves paid millions of dollars based on performance. But if compensation practices really were, in fact, to blame for the financial crisis, these very same investors deserve a portion of the blame. If shareholders had been pressuring boards about pay during the flush times, the risky practices wouldn’t have been encouraged, and the system wouldn’t have then collapsed and the government wouldn’t be trying to regulate pay now.

For the most part, institutional shareholders were instead happy to pocket their returns without questioning the pay, leverage ratios or other risky behavior at the banks they invested in. And “overpaid” CEOs and bankers are kind of like congressmen. Polls show that the general public hates Congress, but respondents always seem to give their own representative high grades. They hate pork, but love it when local Congressman Joe brings home the bacon to the district.

If things are to change in regard to Wall Street (and corporate) pay, the pressure should come from shareholders, not government. But alas, that might mean the spotlight gets turned on the pay of institutional investors, and they might not want that.

The Wall Street firm is set to report record profits and record compensation this year — about $717,000 per employee. Yet analysts expect its 2009 earnings per share to be 22% lower than in 2007 and roughly equal to its 2006 earnings, according to Thomson Financial. (To be fair, Goldman has generated a total return of 159% since going public in 1999)

Below WSJ’s Ken Brown and Evan Newmark discuss why anger over Goldman’s pay practices is spilling over to investors.

“Our relationship will continue to broaden and intensify,” Malone told Bloomberg in this interview. “It may lead to some more ownership-oriented relationship, or it may not.”

Talk and speculation about a tie up with either Verizon or AT&T has been swirling for months. Many analysts think a deal makes sense for the telecommunications companies, which are striving to boost their video fare to offset their dying fixed-line phone operations. Likewise, such a move could give DirecTV a competitive advantage against its rivals because it would enable the company to expand its ability to offer bundles of telephone, TV and Internet service together.

Back in September, this WSJ Heard on the Street column suggested Verizon may be the more willing suitor for DirecTV. It noted that Verizon CEO Ivan Seidenberg had “talked extensively about his desire to make video the “core product” for its fixed-line business, the phone operations of which are shrinking. The fastest way to do that is to buy an existing TV distributor, and DirecTV is probably the best bet….Buying DirecTV would catapult Verizon to the No. 2 spot behind Comcast. It would help with Mr. Seidenberg’s plan to bundle video with wireless phone service.”

Of course, AT&T faces similar pressures to boost its video offerings. It is even further behind in video than Verizon, which in the past two years has been rolling out its FIOS fiber-optic video network.

A big obstacle to any deal was lifted this year when DirecTV and Malone’s Liberty Entertainment, the largest shareholder in DirecTV, merged. That helped streamline a complicated ownership structure that was seen to be making potential acquirers wary.

Another development this week: DirecTV selected PepsiCo veteran Michael White as its new chief executive. Once considered a candidate for same position at Pepsi, White was an experience deal maker in the beverage industry.

As that Heard column linked to above pointed out, it will likely be race between Verizon and AT&T over which one gets to DirecTV first. Malone now seems to be signaling he is an equal opportunity seller.

The Journal’s Susanne Craig reports this morning that some of Goldman Sachs Group’s largest shareholders are urging the New York investment bank to reduce the size of its bonus pool in order to bolster per-share earnings. In short, the shareholders want a bigger slice of Goldman’s stellar earnings than the firm’s traders and bankers, who are on target for a record bonus season.

Regulators who have cracked down heavily on banker pay, both in the U.S. and Europe, have suggested that letting shareholders determine compensation policies is ideal. Speaking last week in Amsterdam, Nellie Kroes, the head of the European Commission urged investors to push for changes in bankers’ compensation. “Too often bankers think they are better, smarter people who deserve different rules and different pay to everyone else,” she said. “They can only think that if others let them.”

But how far are the largest institutional shareholders, which include AllianceBernstein, Vanguard Group, and Wellington Management, willing to push for change. After all, as Goldman points out in the Journal article, the company has had a total return of 159% since it went public in 1999. That compares with a total return of negative 2.1% for the Standard & Poor’s 500 stock index, during that same time period.

Would these large investors, which are managing pensions, college funds and investment accounts for millions of Americans, really be willing to pull out their money and risk losing that performance for their customers over bonuses?

Investors could agitate for a change in Goldman leadership at the company’s next annual meeting. But just as sitting presidents are almost always re-elected if the U.S. economy is strong, it would be difficult to see Goldman CEO Lloyd Blankfein or the company’s board members losing their jobs when the company is cranking out big profits.

One large shareholder, Warren Buffett, who took a big stake in Goldman at the height of the financial crisis, has taken a different approach. When asked about Wall Street compensation in a recent Charlie Rose interview, he talked about how the folks in his hometown of Omaha, Neb., are suffering economically while Wall Street collects its big checks. He said compensation limits at banks that acted recklessly leading up to and during the financial crisis should be “painful.” He was silent on the Goldman compensation conundrum.

Interestingly, this week, we learn that Buffett is helping Goldman set up a program to give away $500 million to small businesses, in a move widely seen as an effort to assuage public anger over bonuses. But Buffett hasn’t told Goldman to reduce its compensation, at least not publicly.

A lot of people are unhappy about Goldman bonuses. But the question remains for both the government, which can’t regulate the firm’s compensation policies because Goldman has paid back its bail out funds, and now for large Goldman investors: What are they prepared to do about it?

Mergers & Acquisitions

GE returns to its pre-Jack roots: By ceding control of NBC, General Electric Chief Executive Jeffrey Immelt would be refocusing GE on its industrial businesses and distancing himself from former initiatives. [WSJ]

NBCU: GE and Vivendi are at least $1 billion apart in their valuation of the French group’s stake in NBC Universal. [FT.com]

Oracle-Sun: Oracle asked European Commission to extend the deadline for approval of its $7.4 billion acquisition of Sun Microsystems. [FT.com]

Skype: EBay completed the sale of its Skype unit. [Reuters]

DirecTV: Could Verizon or AT&T end up taking over the satellite-TV provider? John Malone won’t rul it out? [Bloomberg]

Boots: Italian entrepreneur Stefano Pessina wants to transform British pharmacy chain Boots into a global health-and-beauty behemoth with two tools: big acquisitions and a small, white bottle of anti-wrinkle cream. [WSJ]

Birds Eye: Blackstone’s Pinnacle Brands agreed to pay $1.3 billion to acquire Birds Eye, the latest sign that private-equity firms are re-entering the deals arena. [WSJ]

Financial Institutions

Goldman: Some of Goldman Sachs’s largest shareholders have urged the firm to reduce its bonus pool, arguing the company should pass along more of its blockbuster earnings to investors. [WSJ]

Boiling over: Political frustration over Wall Street’s rescue and high unemployment erupted in Congress, with one panel threatening tighter scrutiny on the Fed and another excoriating Geithner. [WSJ]

Taxpayers lose again: U.S. authorities blocked Chinese bank Minsheng from acquiring a Californian lender — a deal that could have saved almost $300 million of taxpayers’ money and $1.4 billion from an industry insurance fund. [FT.com]

Jefferies & Co.: Brian Kennedy, an analysts at the firm, made the best call of his fledgling career when he slapped a “sell” rating on CardioNet Inc. earlier this year. Then he quit his job. [WSJ]

Bankruptcies & Restructurings

Barneys: Ronald Burkle has become a significant debtholder of Barneys, giving him a pivotal role in a potential restructuring of the upscale retailer. [WSJ]

General Growth Properties: The firm reached a deal to restructure $9 billion in mortgages on 77 malls in hopes of removing them from bankruptcy protection by the end of the year. [WSJ]

Buyside

The buyout shop will rebuild and run the state’s 23 facilities, in exchange for a cut of revenue. [WSJ]

New York Times: Harbinger Capital Partners has sold 2.5 million shares of New York Times Co., marking the hedge fund’s second large divestiture of the newspaper publisher’s stock in as many months. [WSJ]

Capital Markets

Gartmore: The U.K. fund manager said it plans to list on the London Stock Exchange, heading a widely expected wave of initial public offerings of businesses owned by private-equity companies. [WSJ]

People & Players

Roger Carr: The Cadbury chairman, who once thwarted Goldman’s Henry Paulson, is helping Cadbury fight the hostile approach from Kraft Foods. [Bloomberg]

At the top of the heap is Marvel CEO Issac Perlmutter, the company’s largest shareholder, who will receive a mix of cash and Disney stock worth nearly $1.6 billion.

Perlmutter’s pay out drew attention recently when the Journal revealed that he would reap $34 million from options he was granted in the weeks after a subordinate opened talks with Disney that ultimately led to the deal. Marvel has said some of the options were an annual grant and the rest were connected to a new employment agreement with Perlmutter.

Less known is the money that Marvel’s officers and directors — a mix of Hollywood big wigs, venture capitalists and the former chief executive of CompUSA Inc. — will pocket from the deal.

Here are what some of Marvel insiders’ stakes are worth in the deal, which involves a mix of cash and stock:

$20.4 million — David Maisel, executive vice president and Chairman of Marvel Studios, the company’s money - making film house

$10.1 million – James Halpin, a Marvel director and retired CEO of CompUSA Inc.

$8.7 million – James Breyer, a Marvel director and partner of VC firm Accel Partners

$8 million – John Turitzun, executive vice president and former general counsel

$5.1 million – Kenneth West, Chief Financial Officer

$4.8 million – Richard Solar, Marvel director and former consultant to Gerber Childrenswear Inc. and treasurer of Barrington Stage Company Inc. which produces plays and musicals for at - risk students in the Berkshires area of Massachusetts

$3.4 million – Sid Gains, Marvel director and president of the Academy of Motion Picture Arts and Sciences, which awards the Oscars

$1.1 million – Alan Fine, executive vice president and former chief marketing officer of Marvel Characters

Mike Mayo, a CLSA analyst who covers the banking industry, wrote in a recent research report about his experience observing a protest at a Bank of America branch in Manhattan’s Greenwich Village.

Ok, so Greenwich Village isn’t exactly the American heartland. But it isn’t often that you see a financial analyst incorporating his observations from a night out on the town with his wife into a research report. Ever the analyst, Mayo notes the “investment implication” of the banking protest, which featured an actor wearing a mask of BofA CEO Ken Lewis and people using lumps of coal to write “angry” sidewalk messages to BofA executives.

The protesters were criticizing Lewis’ lavish retirement package in light of BofA’s taxpayer-funded bail out.

[Update: Since we wrote this post yesterday. Deal Journal has learned that the Service Employees International Union organized the NYC protest and supplied us with a video of the event. Click here to watch the video.]

Mayo’s piece was sent to his clients a few weeks ago on the heels of a New York conference on financial regulation sponsored by The Economist. The note recently came to Deal Journal’s attention and we thought it was still worth highlighting given the roaring debate about Wall Street compensation.

So here is an excerpt from Mayo’s research note:

“My Saturday night bank protest:”

On Saturday night, looking to rest from a week of analyzing bank earnings, I unexpectedly encountered a debate about banks, but only this time from the bottoms-up view via a street protest in the heart of New York City, as opposed to the top-down approach from the forum hosted by The Economist.

The investment implication is that retail-oriented firms, ie, more traditional banks, may have more pressure than expected on their fees and that all financial firms will have greater scrutiny of their perception to the public.”

But as anyone who has been to an amusement park knows: To get the brass ring you have to be on the carousel. Deal Journal colleague Joe Bel Bruno reports that Goldman Sachs named the bankers offered managing-director positions, putting some of those 272 mid-career employees on a potential path to partnership.

Here is the list of the new managing directors: