Wednesday, January 31, 2007
Should Investors Outsource To Foreign Stock Markets?
Last week New York Mayor Michael Blumberg and Senator Charles Schumer released a report claiming that the Sarbanes-Oxley Act is chasing away foreign business. The main statistic they cite to support this claim is that the proportion of "global IPOs" initiated on American stock exchanges is only a third of it was in 2001, and that 24 out of the world's 25 largest IPOs in the last year were held overseas. This doesn't sound good, but - as the article at the link below points out - the reasons have little to do with regulation. They do include the following:
1) Most of the world's largest IPOs in the last few years have been "privatizations of state-owned companies in Europe and China, which for political reasons were never likely to happen in the U.S."
2) Executives to prefer to hold IPOs in bull markets - and, frankly, the stock markets overseas have generally been more bullish than those in the U.S.
3) It is cheaper to hold IPOs in overseas markets like London and Hong Kong. The local investment banks charge half of what their counterparts do in the U.S.
4) Globalization has forced foreign stock markets to become more competitive. As a consequence, although many of them also have tough regulations, they have become more "liquid and open" and can compete with U.S. stock markets far more readily than they once could.
The "lessons learned" from this bit of news should be sobering to all U.S. stockbrokers and investment bankers. Just as it has for the programmers of Bangalore or the endodontists of Bucharest, globalization has enabled foreigners to do your jobs a lot more cheaply than you can - and just as well. American stockbrokers and investment bankers have, not just willingly, but eagerly abetted the downsizing and outsourcing of millions of American workers for decades. Maybe it's time for them to be downsized and outsourced, too.
"Over There" from The New Yorker
Tuesday, January 30, 2007
Grumpy Workers Are More Creative
Does the guy in the next cubicle scowl and behave irascibly? Take heart. So did Beethoven. Your neighbor might have the wildest imagination in the company.
According to recent scientific research conducted at Houston's Rice University, workers who express the lowest level of job satisfaction tend to be more creative. At the same time, your typically agreeable, compliant, and smiling corporate drone may well be the least creative of all. Those with the power to detect the deficiencies in their environment will tend to be more dissatisfied, and their dissatisfaction can be a catalyst to change. Such individuals are forced to innovate to make their situation bearable, and some of these innovations can increase productivity, or otherwise change the corporate culture for the better. Non-creative but entirely cooperative workers can still serve a purpose in performing routine tasks that rarely require independent thinking, but managers should not overlook the potential value of the malcontents among them.
Check out the story at the link below, and be proud that you are dissatisfied. I know I am.
"When negative thinking is job 1: A new study finds a link between grumpy workers and creativity" from The Toronto Star
Monday, January 29, 2007
At the link below is an essentially non-confrontational article about personalizing the office. Some companies - like the Michigan ad firm, Structure Interactive - liven things up with a modern touch - "irregular shapes", "catnip-red walls" and the absence of assigned cubicles. That sounds a little too unstructured for me, quite frankly. Then other folks, like the office furniture company izzydesign, are trying to bring "a residential feel" to office furniture. Me, I can't say I want the office to feel like home. That would induce treacherous notions of security and comfort. I would prefer, frankly, to remain on guard.
There is resistance to changing the look of the American office. This is evident in the fact that, although there has been a movement to bring "greater comfort and visual appeal" to offices nationwide, the question still can be asked, "Then why do so many workspaces remain devastatingly ugly?" Creating an ergonomically correct environment contributes to worker productivity, but enhancing aesthetic appeal is tricky. Many executives see it as unnecessary, and aesthetic taste can be a highly personal and unpredicable thing even with the best of intentions. Attempts at beautification can easily backfire.
Nonetheless, the article attempts to list a few things you can do to make your workspace more livable. Among these are the following:
1) Change the lighting - If you can't do away with the fluorescent overheads, you can always counter their effect in your cubicle with portable area lamps.
2) Make your furniture multitask - Be creative. Put a carpet on the top of a movable file cabinet so that visitors can sit on it, and like that.
3) Add some life - This means plants...
4) Move the conference out of the board room - Hold meetings in interesting places, sort of the way your French class used to sit crosslegged on the library lawn in college.
5) Change something (anything) - Add something that makes your cubicle, no matter how intrinsically uniform, uniquely yours. Imagine an office like those neighborhoods that were put up in the 1920's or 1950's or whatever, but in which, over the years, the houses have been painted different colors, one guy puts stucco on his, while another tries brick facing, one variation on a theme after another playing out down the street. A row of cubicles has the potential to become a little like that.
"Latest Office Designs Offer Comforts of Home" from NPR
Sunday, January 28, 2007
The Pendulum Swings...
The British article at the link below summarizes the rapid gains of globalization at the expense of both blue and white collar workers - especially in the United States. Real income has increased at an average rate of only 1.4 percent over the past five years, less than half the average rate at which productivity has expanded - 3.1 percent per year. According to the article, "academic research indicates that only about 10 per cent of the American workforce realised gains in labour income that were in excess of underlying productivity growth - meaning that 90 per cent of the workforce has been on the outside looking in." Well-put, we say, with our noses pressed against the glass like Dickensian urchins.
"A backlash is at hand," the article warns. "The pendulum of economic power, which has swung to excess in favor of capital, is about to swing back in a pro-labour direction." Powerless to bargain with the corporations on their own behalf, workers have elected representatives to fight for their interests. "Led by Democrats for the first time since 1993, the new US Congress has already put down a pro-labout marker - a 41 per cent increase in the minimum wage. Look for further actions emanating from Washington along this same general theme - namely, increased taxes on the energy industry, scrutiny of executive compensation and intensified China-bashing." Other countries will no doubt follow suit in the years to come. Hallelujah!
The article continues to warn that financial markets are unprepared for this shift of the pendulum. Corporate profits and stock equity will suffer, the dollar will fall, and inflation could result. In short, "it is as if the film of the past 15 years is about to run in reverse." Too bad all the damage inflicted during that time on human lives and the public trust could be reversed as well, a la Martin Amis' Time's Arrow. But, oh well. At least the times, they are a-changin'...
"Pendulum swings towards new era of localisation" from TimesOnline (UK)
Friday, January 26, 2007
More On The Bush Health Care Plan
Writing for The American Prospect, Robert Reich gives qualified applause to President Bush's plan to provide tax deductions for health insurance. Bush proposes a tax deduction of up to $15,000 for families, and up to $7,500 for single people. Meanwhile, health coverage from employers would be included as taxable income, removing any tax advantage to getting one's health care benefits at work. Implicitly, this plan provides a green light to employers to stop offering health benefits altogether. Reich believes this would be in the end a good thing because the obligation to provide health care to all employees gives employers "perverse incentives" not to employ older people, or individuals with pre-existing health problems. Not only will the proposal make getting health care become more of a level playing field for all classes of employees, but it may also reduce employment discrimination.
Nonetheless, Reich gives only "one cheer" to Bush's proposal because millions of workers will not be able to afford health care even with the tax deductions. Reich believes that federally funded universal health care is the only solution. He also emphasizes that the preventive care available with universal health insurance could help nip the health problems of low income workers in the bud, before these manifest themselves as full blown conditions and flood the emergency rooms of America. Reich points out that Bush has more or less passed the responsibility for funding universal health insurance to the states, which are already overburdened by Medicaid costs. Reich insists that there should ultimately be a "single payer" for universal health insurance - and that it should be the federal government.
"Ending an Unhappy Marriage" from The American Prospect
Thursday, January 25, 2007
HR Surveys Take On Bad Bosses
Here are some more studies about bad bosses and the employees who hate them. The results of one survey, published in the British journal Personnel Today, suggest that office politics is the biggest cause of stress in the workplace - primarily because bosses tend to be better at playing their subordinates off one another than leading them straightforwardly. 90 percent of the survey's respondents indicated that their bosses habitually failed to act on or correct poor performance - thus forcing other employees to pick up the slack from non-performers - and 89 percent said that their bosses lacked the power to innovate. Methinks there are a lot of passive-aggressive personality types in those corner offices across the pond. Hypocritical ones as well.
Many employees complained of bosses who impose deadlines arbitrarily, pushing their employees to scramble at the last minute to get them something and then, once they get it, going off on a long weekend or not getting back to their subordinates for days at a time. White collar Britons register "disgust for phoney deadlines". They interpret these as yet another example of the "do as I say, not as I do" attitude of corporate managers, and of the lack of reciprocity among corporations in general when it comes to the sacrifices of their hard-working underlings. While the little people slave away, procrastination abounds even in corporate boardrooms, where the big guys drag their feet most egregiously when it comes to giving the ax to underperforming CEOs.
A recent American study, conducted by Florida State University and slated for publication this year in The Leadership Quarlerly, found that employees who stuck with abusive managers experienced "more exhaustion, job tension, nervousness, depressed mood and mistrust." Diminished morale affected their productivity and stifled their initiative, causing them not to volunteer for new assignments or work late at the office. Large percentages of the workers surveyed by the study cited the same managerial failings. For instance:
1) 39 percent said their bosses failed to keep their promises.
2) 37 percent said their bosses failed to give credit where it was due.
3) 27 percent said their bosses made negative remarks about them to other employees and managers.
4) 24 percent said their bosses repeatedly invaded their privacy.
5) 23 percent said their bosses blamed others for their own mistakes.
As you might infer from the above, American bosses are no less passive-aggressive than British ones.
The authors of the American study, however, cautioned workers not to run and hide from their bosses, but to remain "visible" and "optimistic". Bad bosses, after all, last just so long. Yeah, and then they get replaced by other bad bosses.
"Bad bosses--more than bad salaries--drive workers away" from Society for Human Resource Management
"Bad bosses cost companies in morale, turnover: survey" from Business Edge (Canada)
"Bad bosses put pressure on staff" from TimesOnline (UK)
Wednesday, January 24, 2007
Read All About It!
The article at the link below - written by a print journalist - takes a bemused approach to the recent efforts of several billionaires to buy, of all things, newspapers. What can one say anyway when Jack Welch wants to buy The Boston Globe? Other contenders for the role of press lord include Hank Greenberg, Ron Burkle and David Geffen. Why do they want to do a Citizen Kane gig in a medium where readership is declining faster than Orson Welles on a ski slope? One reason, according to Vanity Fair reporter Michael Wolff, is that they don't like what the papers are saying about the corporate world. They shake their heads in indignation over the "anti-business" press, and want to buy their own megaphone to broadcast their own highly biased view of things. But it's more than that.
During a vacation I took a few years ago in Canada, I visited the Beaverbrook Galley in Fredericton, New Brunswick. The art was great, but I happened to see a video about the life of Lord Beaverbrook, and that was indelible. Beaverbrook was a short, homely, womanizing scamp, a ne'er-do-well minister's son who could talk his way into your wallet and your knickers alike. He made a fortune helping run a financial pyramid scheme, was brought to trial, but bribed the witnesses against him and absconded with his ill-gotten millions to the UK. Here he bought a big house, partied by night, and by day established a tabloid empire that greatly increased the profitability of British journalism, if not its quality. He became a propagandist for the War Ministry during World War One, scoring major political points with shameless recruitment films that lured hundreds of thousands of impressionable boys into a bloody mess. Meanwhile, he cheated on his wife, bullied his sons, and in general left a slime trail of immorality across the broad landscape of his life. Evelyn Waugh once said that the Devil had to exist, for how else could one explain Lord Beaverbrook? Here was a man who entered the newspaper business for no other reason than to satisfy his own vanity and lust for power. Jack Welch and his confreres apparently wish to follow his example.
The trouble is that owning a newspaper in today's economy is beyond risky - it is simply a losing proposition. Newspapers are the preferred medium of an older generation that is rapidly disappearing, with an average age of 56. As Wolff points out, the average age of our would-be press lords is even older than that. So what we have here is an example of entrepreneurs deluded by their own senescence into embracing a product with an aging market. However, as Wolff also suggests, the very strength of their interest may have the power to rejuvenate an outmoded medium in unexpected ways. Most adults want some kind of news. As the network evening news dumbs itself down to the level of Parade magazine and newspaper subscriptions are plummeting, more and more people are getting their news on the Internet. And who are the biggest providers of news on the Internet? Why, the same newspapers whose print readership is declining. If newspapers and magazines can transform themselves from a print medium with a high overhead into an Internet medium with a much lower overhead, they may eventually be able to survive on, and even profit from, new revenue streams such as advertising pop-ups and online subscriptions.
The viability of the news media in general will never be extinguished. An appetite for news will always be with us. That is the saving grace of newspapers - and also the reason why the covetous attention of billionaires remains more dangerous than amusing. Do we really want a "free press" to be replaced by the private propaganda tools of rich men? But do we really have a choice? This is yet another danger of an executive compensation system that pays rich men far more money than they will ever need. They can afford to throw all that excess money at schemes to protect their efforts to make yet more money, regardless of the cost of those schemes themselves. If a Democratic Congress proves less amenable to corporate lobbying, the billionaires will simply shift their attention ever more urgently to The Fourth Estate, and guarantee their money-making futures by muzzling the truth.
"Billionaires And Broadsheets" from Vanity Fair
Tuesday, January 23, 2007
Equalizing Tax Deductions For Health Insurance
The Bush administration has made a proposal that could help equalize the burden of health care costs between those who get health care through their employer and those who purchase it privately. Currently, the cost of corporate health benefits is generally deducted from the employee's taxable income such that the employee is not taxed on their value. If you are in a 30 percent tax bracket, and the cost of your health insurance is worth $10,000 a year, that means the IRS is losing $3,000 in tax revenue. Bush's solution is to remove the tax exemption on corporate health benefits, and replace it with a general health care tax deduction that would be available to everyone, regardless of the source of their health insurance. I would like that, since I am a consultant and have my own health insurance. Maybe you would like it, too.
If corporate health insurance was taxed, many corporate employees might opt for less coverage. This might, in turn, decrease the demand for health care and at least slightly drive down the cost of health care for the privately insured. That's the theory anyway. The Washington Post warns that the plan has its weaknesses, and that Bush could have proposed something a little more robust. "Rather than embracing tax deductions, which are most valuable to people in high tax brackets, Mr. Bush could have made his proposal even more progressive by recommending a refundable tax credit that would be worth the same to everyone. Moreover, there's a danger that ending the tax privilege for employer-provided insurance will cause companies to discontinue coverage, driving more buyers into the individual market, where it's hard to buy insurance at a reasonable price, especially if you already have a medical problem."
The Bush plan undoubtedly has its potential flaws, but at least he's trying to think of something. Maybe he's started to listen to his Democratic Congress. On the other hand, what happens to your W2 if and when the cost of your corporate health care is no longer taken out before taxes? Will it suddenly appear as a bogus increase to your adjusted gross income? Would the Bush administration then spin the resulting false jump in income as a victory for wage earners in Republican America? I don't know, but I wouldn't put that past them.
"A Healthy Initiative" from The Washington Post
Monday, January 22, 2007
Even Scientific American Says Downsizing Is Bad For You
Yowza, boss! It's now official scientific fact. Downsizing is bad for you. The Scientific American has seen fit to publish a brief notice confirming that workers who merely survive a downsizing - much less succumb to one - are 50 percent more likely to be prescribed antidepressants or sedatives in the wake of a corporate decimation. Get that? Those who survive a downsizing are suffering!
Nonetheless, this is scarcely old news. What is new - at least to me - is seeing this kind of article in an esteemed publication like Scientific American. I would like some neo-con journalist of the type that scribbles for Tech Central Station - you know, the would-be libertarian, Atlas Shrugged-thumbing hack who yearns to nuzzle the crotches of billionaires while basking in deluded self-satisfaction over breaking 700 in his Math SAT circa 1986... I would like see some asshole like that rationalize them apples - you know what I'm saying? Up with scientific fact, for once, and down with smarmily sophistic apologias from the sycophants of the heedless rich.
"Downsizing harms employees' mental health" from Scientific American
Sunday, January 21, 2007
Billionaires Indignant Over Plight Of Middle Class
American hypocrisy knows no bounds. Followers of Jesus preach intolerance and exclusion. Our political leaders sing the praises of "the untamed flame of freedom" while they strip away our civil liberties. Now we have billionaire tycoons bellowing indignantly over the plight of the middle class. Tycoon Stephen Schwartzman, owner of a $30 million apartment once owned by John D. Rockefeller, laments, "The middle class in the US hasn't done as well over the last 20 years as people at the high end, and I think part of the compact in America is everybody has got to do better." Mega-greedster and "corporate restructuring" specialist Wilbur Ross booms, "It's an outrage that any American's life expectancy should be shortened simply because the company they worked for went bankrupt and abrogated health-care coverage." Well, duh. The twist here is not what is being said - which almost any person with ears and eyes would agree with, or even say themselves, if there was anyone to quote them - but who is saying it. Billionaires are decrying the depredations of billionaires.
Why? According to Slate magazine, "The very rich are just as trendy as you and I, and can be so when it comes to politics and policy." Compassion for the poor, suffering middle class is the newest social attitude du jour - a touch comparable to debutantes hosting parties in their penthouses for Black Panthers in the Sixties. The rich just want to show us that they care about the downtrodden even more - and, of course, more eloquently - than the downtrodden do, or can. But the article at the link below reminds us that there is more to it than that. The hidden motive of self-interest lurks within this patronizing pulpitry. The billionaires are more aware of their sins than anyone else, and this hyperawareness may foster guilt among some - even among many. And when a class as inherently sociopathic as the rapacious rich starts feeling guilty, you just know their sins have gone over the top. Do they fear reprisals? Certainly. But it is also something else.
There is a hard-headed practical concern behind all the high-falutin' mimicry of compassion. Slate suggests, "It's possible that plutocrats are expressing solidarity with the struggling middle class as part of an effort to insulate themselves from confiscatory tax policies," but adds, "But the prospect that income inequality will lead to higher taxes on the wealthy - before 2010, when the Bush tax cuts are supposed to expire - doesn't keep plutocrats up at night. They can live with that." What they fear is the ultimate collapse of the whole feedback loop that made them wealthy to begin with - the destruction of the worldwide consumer class on which they depend, and the imposition of protectionist policies, both here and abroad. The billionairies can sense that the political winds are changing, and are afraid that Congress will pass laws to curtail free trade and cripple of the pace of globalization that has enriched them. They fear above all the removal of the drug to which they have become addicted. And that drug is not just wealth, but the sheer acceleration of the growth of that wealth. They fear, not poverty or disfavor, but simply slowing down.
It remains to be seen, however, what Congress or anyone else can do to preserve the middle class without taking a bite out of the billionaires. Nor does it seem likely that the billionaires themselves will put their money where their mouth is. That makes the trendy indignation of our "compassionate capitalists" seem even more like the deluded shriek of self-centered desperation that it most likely is, deep down.
"Plutocrats of the People" from Slate
Saturday, January 20, 2007
Three Kings For The Road
When the CEO is paid exorbitant compensation while the stock price drags along the ground like an apeman's knuckles, you know it's time to give the king the boot. Sometimes corporate boards are sluggish to act on such underperformers and need a little reminding. That's why it's important to have "activist shareholders who will challenge boards and CEOs on those extravagant pay packages at annual meetings" - as well as concerned unions and research associations more than willing to give those shareholders a boost. Three CEOs who are likely to find themselves in the sights of corporate pay activists sometime soon are:
1) Edward Whitacre of AT&T - Mr. Whiteacre earned $85 million during the past five years. After he retires, he will continue as a "consultant" for more than $1 million a year. He gets lifetime access to a corporate jet, a car (I can imagine the make), an office and a support staff. Got that? Lifetime access... Sounds downright pharaonic, if you ask me. Not to mention an annual pension of $5.3 million. During the same period shareholders have gotten a return on their investment of just 8.2 percent - less than half of the 20 percent they would have earned from a Standard & Poor's 500 Index fund. According to a pay expert who would prefer to remain anonymous, "Whitacre deeply misunderstands the current attitudes toward executive compensation." A labor union has put forward a proposal to AT&T shareholders to confront the board at their annual meeting this year about Mr. Whiteacre's compensation, especially his obscene "retirement benefits".
2) Joseph Tucci of EMC Corp. - Mr. Tucci earned $57.3 in total compensation from 2003 to 2005. Meanwhile shareholders "have gotten the shaft", according to Michael Brush at MSN.com. EMC's stock has lost 18 percent of its value in the last five years. EMC shareholders will have the opportunity to pass judgment on this fiasco at their meeting this year. They will have allies in their quest for justice. The California Public Employees' Retirement System is pushing for EMC shareholders to have a vote on executive pay packages, and the United Brotherhood of Carpenters and Joiners of America have spearheaded a shareholder proposal to demand greater links between pay and performance.
3) Samuel Palmisano of IBM - Mr. Palmisan got $65.5 million in 2003 through 2005 in salary, bonuses, stock and stock options, long-term incentive pay and God knows what else. Plus a cool $1.2 million annual pension when he retires. Yet, over the past five years, the stock has sunk about 18 percent. Aided by a shareholder proposal from a union, IBM shareholders will have a say on bringing Palmisano's pay in line with his lukewarm performance.
"3 CEOs Who Ought To Go" from MSN.com
Friday, January 19, 2007
Senate Approves Limits On CEO Compensation
This Wednesday, the Senate Finance Committee unanimously approved an annual $1 million limit on what executives can put into a tax-free deferred compensation plan. They also approved legislation to prohibit executives from protecting deferred compensation from creditors in the wake of a corporate bankruptcy. These are among about a dozen other provisions aimed at closing corporate and executive loopholes. Since many executives currently abuse deferred compensation plans to enrich themselves tax-free, the new law could raise taxes on corporations and executives by hundreds of millions of dollars in the next decade.
Recent scandals, ranging from Enron and WorldCom to the $210 million payout package for failed Home Depot alpha dog Bob Nardelli, contributed directly to the drafting and approval of this new legislation. Senate Finance Committee member Chuck Grassley says, "This is a matter of fairness. Executives shouldn't get to hide compensation from creditors while rank-and-file employees lose their shirts."
"Senate Committee Approves Limit on Executive Compensation Plans" from Law.com
Thursday, January 18, 2007
White Collar Pet Peeves In China
Apparently, being a white collar worker in the People's Republic of China is no picnic either. Nonetheless, some artifacts of the white collar world annoy the Chinese more than others. Here is their list of the top four most despised "modern inventions":
1) Punch machines - Many white collar workers are required to punch time-clocks in China. During my early days in the working world as a retail worker and a card-carrying member of the RCIU, I used to insert my time card in the punch machine upon both arriving and leaving. That little thwonk would punctuate my day. I had never had to punch a time-clock during my days as a, ahem, "white collar worker" - but the Chinese apparently do. Perhaps it's because they're more straightforward over there, and don't pretend that white colar workers aren't wage slaves just like everybody else.
2) Noodles - Chinese white collar workers eat noodles for lunch, and most deplore it. The cheap but non-nutritious recourse to noodles should ring a bell with any American who - like my wife - has ever subsisted on a ramen diet. Supplement noodles with fast food or vending machine nacho chips, and you get the typical lunch hour fare of the Western corporate shill. I can't help but think that the noodles diet, consumed on the premises while one is at one's desk, is a by-product of the tyranny of the time-clock. Why bother to go out for a decent meal if you have to punch out and then punch in again?
3) Mattresses - This one threw me for a loop. Apparently, Chinese bosses allow white collar workers to keep mattresses in their cubicles or offices so that they can catch a few Z's during their long workdays. I wouldn't mind a mattress in my cubicle, to tell you the truth. I have mastered the art of falling asleep while seated on a swivel chair, sort of like Mr. Ed in his stable. The problem with a mattress is that it could be way too seductive, and no manager wants an office full of somnolent IT consultants getting paid by the hour, conscious or not. The Chinese seem to dislike having mattresses at the office because it gives their managers an excuse to work them around the clock to the detriment of their health. What puzzles me though is that, if Chinese white collar workers are so dependent on the time-clock, that implies that they, too, are paid by the hour - and why would their bosses want them to spend any of those hours snoozing? I guess you have to punch out when you get sleepy, and then punch back in again once you're awake...
4) Cellphones - The ubiquity of cellphones is a universal phenomenon, and kudoes to the Chinese for despising them. The twist here is that Chinese have identified something they call "mobile phone elbow", a repetitive motion injury that arises from holding a cellphone to one's ear for four hours at a time.
"White-collars' hated inventions" from China Daily
Wednesday, January 17, 2007
Fired CEOs Drown Their Sorrows At Company Expense
Slate magazine occasionally offers up the ridiculous material details of office life and corporate folly, and the article at the link below is no exception. Apparently, fired CEOs not only get to depart with the golden parachute of their choice - they get to abscond with other goodies as well. Imagine the psychosexual chutzpah of Richard Thalheimer, former head of Sharper Image, who insisted on taking a seven foot tall Superman statue with him - along with a smaller statue of Star Wars robot C3PO. The two items had apparently been posted in his office, and together were worth $20,000. Superman indeed! Who needs a golden parachute if you can fly out the window, for Chrissake?
More practical going away presents often include pricey getaway cars. John Dubose of South Financial Group and John Aldeborgh of Varian Semiconductor demanded a GMC Yukon and a Porsche SUV, respectively, when they got canned. The two vehicles are worth $39,000 and $111,000. Quite honestly, I didn't even know there was such a thing as a "Porsche SUV".
At least one departing CEO simply wanted enough suds to drown his sorrows - for life, apparently. August Busch of Anheuser Busch left in the foamy wake of an agreement that provided "draught beer services and packaged products" till the end of his days. You and I get fired, my friend, we'll be lucky if they let us take home our own coffee cups.
"Free Beer!? And other perks CEOs get when they lose their jobs." from Slate
Tuesday, January 16, 2007
The Boss Is The One With The Longest Tentacles
The boss may be paid what he is because of his tentacular connections with all those other bosses out there. The guys from his old frat house, his business school classmates, his golfing buddies - and especially the guys who sit on the board of the company he supposedly runs. As the article at the link below points out, having connections is generally beneficial. It keeps CEOs well-informed, for one thing. But connections become obstructive to the interest of shareholders when they result in the obligation to scratch the other guy's back so he'll scratch yours. The thing about corporate boards is that they're stacked to the gills with past, present and future CEOs, all of whom may have a direct or indirect relationship with the man whose compensation they must determine. The CEOs of two different companies could easily be on each other's boards, deciding on each other's pay. The mentor of the current CEO may be sitting on the board that decides the pay of his protege. One board member of Company X may eventually be appointed CEO of another company on whose board the CEO of Company X may preside, either now or later. The temptation of the board to overpay the CEO so that he too, at some point or other, will feel obligated to overpay each of them is surely irresistible.
Even if none of the past and present CEOs on the board know the current CEO from a hole in the wall, they are still CEOs - and the collective self-interest of their profession is frequently enough to prejudice them in favor of paying any one CEO too much. One must remember that the claim that talented CEOs are a rare commodity is made exclusively by other CEOs, and therefore cannot possibly be objective. In fact, CEOs are generally paid based on what other CEOs are paid, such that the more any one CEO is compensated, the more other CEOs are likely to be compensated as well. For the board members of corporations, overpaying the CEO is "win-win" situation. They pay him more, so that he will pay them more, and on and on it goes, in a neverending spiral of unearned wealth derived not from what you know, but who you know.
"The Sky-High Club" from The New Yorker
Monday, January 15, 2007
Trends Swami Prognosticates About U.S. Workers
The coming of the New Year is a time for assessing the future, such as it is. In this spirit, trends research guru Gerard Celente weighs in on the future of the American worker. He has gleaned the following glimmers from his crystal ball:
1) The most growth will be seen in the physical, mental and spiritual health professions, the boom in which will be driven by the aging of the Baby Boomers and others. I.e., if a fortune teller hands you a tarot card with a skeleton on it, it just means you might have a bright afterlife as a death counselor.
2) College, obscenely expensive as it is, will diminish in importance and the old idea of the apprenticeship will be increasingly revived. Just don't count on getting chosen for The Apprentice.
3) Learn Chinese.
4) It will become harder than ever before to start your own business, what with the soaring cost of health insurance and other expenses. You may be doomed to stay a slave like the rest of us.
5) Outsourcing will grow, especially in medicine. You may end up becoming a "medical tourist", and getting your heart bypass in Slovenia. The good news is that snooty MDs will get the same kick in the rear the rest of us have been getting for years.
6) The coming recession, whenever it does finally come, will further whittle away pay increases and job benefits, pinning the average American worker against the wall. As Celente says, "It's a plantation economy. The workplace is not a happy place these days, mostly because while the average worker is putting in more hours and is more productive, the average commute time is longer and the financial debt hole is deeper."
7) On the bright side, if our savings accounts will remain skimpy, the informational riches of the Internet will expand, allowing anyone to learn anything just by getting online. Maybe then we can become trends gurus, too.
"Reality smacks high hopes in business" from the Des Moines Register
Sunday, January 14, 2007
The Popularity Of Globalization Wanes
Globalization is rapidly losing favor both here and abroad, and free trade no longer seems so liberating to many. According to Harvard Business School professor Rawi Abdelal, "The idea of globalization and continued societal embrace of openness seems to be in a very deep sense of crisis." This is happening despite low unemployment and increased productivity and profits. As Federal Reserve president Timothy Geithner says, "Despite the relatively favorable average income gains of the past few years, a common feature of the political context in economies around the world is the fragility or weakness of public support for openness and economic integration." Much of the growing resistance to globalization in places such as Venezuela can be attributed to anti-Americanism, but that doesn't explain such resistance in the United States. However, other factors do. While Americans make more money now - at least according to deeply skewed average figures - their economic future is less secure than ever. The risk of a 50 percent drop in income has doubled in the last 30 years. 59 percent of Americans believe that free trade destroys more jobs than it creates, and repeated assertions that globalization is still in infancy only generate a sense of foreboding.
Outsourcing jobs to other countries threatens the financial security of millions of Americans, while mounting corporate profits - in which outsourced Americans do not share - accentuate income inequality. White collar professionals such as computer programmers, radiologists, accountants, copy editors and many others are rapidly losing jobs to offshore resources. Ultimately, 28 million of the 42 million jobs in the service sector of the American economy could be sacrificed to globalization. What we have seen so far, say experts, is just "the tip of the iceberg."
According to USA Today, "Key Democrats say further liberalization is possible only if trade deals are rewritten to include labor and environmental standards and if voters' financial anxieties are addressed." Protecting American workers from the collateral damage wrought by free trade remains a priority for the Democrats, but such "thickening of the social safety net" runs counter to the traditional aims of the Bush administration. The only solution is greater bipartisan cooperation on trade and investment issues. The President currently has the authority to "fast-track" trade promotion efforts by restricting congressional input on trade deals to yea-or-nay votes and disallowing line item changes. This authority will expire July 1st. If the Bush administration wants this authority renewed, it may be forced to grant concessions to Congress in its efforts to protect the welfare of American workers as well as the environment.
"Enthusiasm for globalization ebbs" from USA Today
Saturday, January 13, 2007
Depression Stalks White Collar Workers
According to a survey conducted by a Canadian university, workers in sales and service and the white collar occupations are more likely to be depressed than blue collar workers. The authors of the survey suggest that blue collar workers often have to deal only with machines or other physical objects, while sales personnel and white collar workers have to deal with people, who are far more unpredictable. The uncertainty over whether or not they are pleasing their clients and customers causes stress among such workers, and that stress eventually causes depression. White collar workers are also forced to make abstract decisions whose results can never be known in advance, while blue collar workers can fix concrete problems and see the results immediately. "You're never sure if you're doing the right thing or the wrong thing," says management professor Vish Baba. "It has to be judged by the consequences that come later."
Critics of the survey suggest that white collar workers simply have more time to reflect on their job dissatisfaction, due to the enforced passivity of the typical cubicle dweller's workday.
Other factors have an effect on depression. Working nights, for instance, causes more depression than working at day, largely because of its disruption of the sleep cycle. About 4 percent of the survey's respondents, all between the ages of 25 and 64, claimed to be depressed.
"White-Collar Workers The Most Sad" from The Hamilton Spectator
"Depressed about work? It's all about perspective" from The Toronto Gazette
Friday, January 12, 2007
Is The Happy Fool Today's Ideal Worker?
A frothy little squib from the BBC News asserts that "happiness" - not money or a lofty career trajectory - is what keeps workers working and, dare we say it, "happy". The article at the link below begins its saga of corporate happiness at Fruit Towers, the London headquarters of a manufacturer of smoothies called Innocent Drinks. It goes on to cite Google as well, along with Ben and Jerry's and Starbucks, as corporations that actively promote worker "happiness". The top 10 factors that keep workers happy are as follows:
1) Friendly supportive colleagues
2) Enjoyable work
3) Good boss or manager
4) Good work/life balance
5) Varied work
6) Doing something worthwhile
7) Making a difference
8) Being part of a successful team
9) Recognition of one's achievements
10) A competitive salary
Well, yeah - all those would make most of us happy, I'll wager. But they are perhaps too obvious to write about. Oh, and one other thing. Today's young workers - who are understandably choosier than their more readily downsizable elders - are especially keen on working for eco-friendly or "green" corporations. One can't put aside one's concern for Nature even while one is working for The Man, after all.
Our take on this, of course, is that frivolous feel-goodism works fine for new companies riding the crest of an expanding market, but let's just see how long The Man continues to care about "happiness" once the going gets tough. The reader comments appended at the end of the article help bring a welcome flavor of the cynical to this report on a trend whose inanity is otherwise a bit too much to swallow.
"You've got to laugh" from BBC News
Thursday, January 11, 2007
Batter Up - The "Star Athlete" Fallacy Of The Overpaid CEO
Salon takes a poke at the fallacy, promoted by "Neutron Jack" Welch and others, that good CEOs are as scarce as athletes, rock stars and Oscar winners, and should therefore be compensated for their scarcity. As Salon notes, bad CEOs often overstay their welcome far longer than bad ballplayers - much less movie stars who take a career misstep and end up in instant oblivion. "Unlike baseball players, who get tossed out on their rears when they louse up, the Nardellis of this world stay on and on, through one disaster after another. It is front-page news when CEOs drive the train wreck required to get fired, and even then they often pull themselves out of the wreckage and climb behind another throttle... Nardelli was signed for a Michael Jordan-size contract, but he did a poor job and still walked away with a fortune."
"The Scarce Athlete theory is predicated on another fallacy," Salon goes on to say, "which is that CEOs rise to their positions in a kind of Darwinian struggle, gnawing away at each other until the survivor emerges, a kind of King of Corporate Rat." In fact, the CEO very often hands over the reins to a relative or a crony, thereby awarding power to someone who never had to struggle for it, but was merely born in the right family or made the right friends.
"Greed on aisle 6" from Salon
Wednesday, January 10, 2007
Putting The Squeeze On Executive Pay
The article at the link below is a brief and impressionistic overview of emerging factors that might make it a little harder for CEOs to earn inflated incomes in the future. These factors include:
1) Laws passed in the wake of the Enron scandal that make corporate boards more likely to scrutinize the recommendations of CEOs.
2) The stated intention of many in the newly elected Democratic Congress to fight income inequality between the rich and the rest of us.
3) Rising opposition of investors to CEO pay that has become so large that it typically consumes more than 10 percent of the profits. The top five CEOs in 2000 through 2002, for example, consumed 12.8 percent, while their counterparts took home just 5 percent only a decade before.
4) Federal rules requiring complete and straighforward disclosure of executive compensation.
According to the article, compensation experts generally have one of two opinions about CEO pay, or something of both opinions combined. One group believes that CEO pay is just large, regardless of any possible mitigating factors, and that the gap in pay between executives and the vast majority of other workers has a potentially destabilizing effect on society. The other group criticizes CEO pay only if it is disproportionate to performance, as in the recent case of Bob Nardelli and his 210 million dollar severance package.
Many experts believe that simply disclosing the amount of CEO compensation is not enough. The sources and the terms of that compensation should be disclosed and examined as well, as these may provide CEOs with "perverse incentives to cook the books". They also agree that shareholders should be given greater power to replace corporate boards if they award compensation irresponsibly.
"America's CEO pay may soon face squeeze" from the Christian Science Monitor
Monday, January 08, 2007
210 Million Bucks For A Rotten Orange
In case anyone still believes that CEOs invariably deserve that vast sums of money they, ahem, "earn", here is the story of Bob Nardelli, who recently left Home Depot with a $210 million severance package after six years of abysmal failure. During his tenure, Home Depot's stock price fell 8 percent - even while the average stock price rose 17 percent - and the company was eclipsed by its rival, Lowe's, whose stock price tripled over the same time period. Nardelli also behaved arrogantly with shareholders, and under his incompetent leadership customer service - the hallmark of retail customer satisfaction - actively declined. Home Depot should have known better than to hire Nardelli to begin with, since his management experience was solely in the manufacturing sector, not in retail, which is a whole different animal. A GE alumnus and a protege of downsizer par excellence "Neutron Jack" Welch, Nardelli exhibited little imagination of the sort that drove the ascendancy of Lowe's, such as better store design and "female friendly" product lines. Instead he simply acquired (and gutted) smaller companies, and replaced experienced staff with low-paid part-timers. His cost-cutting mania alienated customers and employees alike.
Nardelli himself may have suspected he was an unsuitable candidate because he made sure that he would be paid a fortune regardless of his performance. As USA Today says, "Payouts such as Nardelli's dispel the argument that executive pay is rational or fair...Nardelli got so much largely because he negotiated a deal when first hired in 2000 that guaranteed him lavish pay if he got the boot. Such deals are all too common in corporate America and make a mockery of the notion that there is a functional labor market for senior executives...The perverse logic of these deals goes something like this: A CEO must be paid a fortune because that is what he is worth; yet, if he loses his job for any reason - poor performance or something more benign, like a merger - he has to be amply compensated because he is unlikely to make that kind of money anywhere else." Since Nardelli was regarded as a corporate superstar, he was a given a blank check. According to The Toronto Star, Nardelli is the beneficiary of a corporate culture that overvalues the worth of CEOs. Its features include "the cult of the celebrity CEO; the mistaken view that outside CEOs are ideal 'change agents' to revitalize tired enterprises; cronyism among board members, and the ease with which they succumb to the pitches made by executive-pay consultants for steadily more outlandish compensation packages; the conviction mistakenly held by boards that managers with CEO potential are as rare as Hope-sized diamonds; and autocratic, insular CEOs who grossly exaggerate their importance in overseeing organizations employing tens of thousands of people."
Let us hope that "Bob The Dud" Nardelli becomes the poster boy for a fresh look at the inflated value of chief executives.
"Our view on CEO compensation: When failure's worth $200M, something's out of whack" from USA Today
"Need a cart, Bob?" from The Cleveland Plain Dealer
"Win-win gifts for CEO losers" from The Albany Times-Union
"A $210 million parachute" from The Toronto Star
Thursday, January 04, 2007
UK Workers Lose 23 Billion Pounds In Overtime
Our Anglophone brothers and sisters overseas are nearly as exploited as American workers. According to a report published by the Trades Union Congress (TUC), workers in the UK lost 23 billion pounds (more than 44 billion dollars) in unpaid overtime in 2005, amounting to an average of 4,800 pounds (more than $9,200). In some parts of the UK, such as Northeast England, London, Eastern England, the West Midlands, Yorkshire and Northern Ireland, workers put in more than seven hours of unpaid overtime a week. The report "calculated that if employees did all their unpaid work at the start of the year, the first day they would be paid would be February 23."
TUC official Brendan Barber says, "We still work the longest hours in Europe and too many workplaces are gripped by a long hours culture." The average full-time worker in the UK works 43.5 hours, compared with 38.2 in France and 39.9 in Germany. Many employers in the UK strive to make their employees feel obligated to work longer hours, sometimes even ignoring the 48 hour weekly limit mandated by the British government. Interestingly, both France and Germany are more productive than the UK. The TUC blames overwork for "spiralling absence rates due to sickness, poor productivity and increased levels of stress, especially among white-collar workers." According to a TUC spokesman, "Long hours are a very real hazard. Working excessive hours increases the risk of injury and mortality, heart disease, stress, depression, diabetes mellitus, serious headaches and bowel problems." One in five male workers visit the doctor each year because of stress in the UK - one in four above the age of 40.
TUC urges workers to put in only their regular hours on February 23, then "take a decent lunch break and go home on time". The organization intends this to be a day of protest that they will call "Work Your Proper Hours Day".
"Britons lose billions in working overtime for no payment" from The Herald
"Britons work longest in Europe" from This is money.co.uk
"Northeast England's workers claim top spot in unpaid overtime league" from the The Guardian
Wednesday, January 03, 2007
Gambling With Your Livelihood
Writer Kurt Andersen compares the "new economy" to a casino where a handful of high-rollers make a fortune, while the vast majority lose out. The vast majority are, of course, the ordinary workers of America, both blue collar and white collar. As Andersen notes, this beleaguered class grows daily, creeping up the income scale, tax bracket by tax bracket. He relates his own experience overhearing airline pilots, heroic to look at, but nonetheless grousing about their CEO's obscene salary hike and how their own pensions were tanking. What, he wonders, could turn such erstwhile demigods into "disrespected, sputtering, whining losers"? The casino economy that's shafting the rest of us mortals, that's what. The American economic system, which in the mid-20th century had built-in restraints and mores that kept everything on an even keel for everybody, has mutated in the last quarter century in a world of unchecked extremes. While executive compensation is soaring, the median household income has risen just 15 percent - and for the last five years it has actually declined. Why do Americans put up with this inequity? He says it's "because it happened so quickly and for the same reason that the great mass of losers in casinos put up with odds that favor the house: The spectacle of a few ecstatic big winners encourages the losers to believe that they... might get lucky and win, too. We have, in effect, turned the U.S. into a winner-take-all casino economy, substituting the gambling hall for the factory floor as our governing economic metaphor, an assembly of individual strangers whose fortunes depend overwhelmingly on random luck rather than collective hard work..." Oy, vey! Ain't it the truth?
Casinos give Andersen himself the creeps, and he adds, "Risk-taking is fabulous, central to the American ethos - but not when it's involuntary. Too many Americans have been too suddenly herded into our new national economic casino, and without debate turned into the suckers whose losses become the elite's winnings." He goes on to recommend The Great Risk Shift by Jacob Hacker - which I got for Christmas and will soon read. Hacker succinctly quantifies the enhanced risk that most Americans now face - the chance of a family having its income drop 50 percent in any given year was 1-in-14 in 1970, but 1-in-6 today. 'Nough said.
Andersen contrasts the Republican nostalgia for the God-fearing, "family values" orderliness of the 1950's - which they have played to great effect since the 1980's - with what he thinks should be the nostalgia of the Democrats now in power. He envisions this as a yearning for the economic security, the social safety nets and the overall sense of fair play that pervaded U.S. culture during the Roosevelt era and perhaps even later, during the nascent days of The Great Society of the 1960's. What's wrong with sharing the wealth a little? he asks. After all, the rich will always be rich enough.
(Incidentally, although Kurt Andersen is a sharp guy, he has never been known for his love of the little people. His millennial satire Turn Of The Century sniped a little archly at ordinary folks, and he himself exhibited considerable entrepreneurial ambition when he founded the pay-to-read media weblog Inside.com. If even a dude like this is stumping for the man in the street, you know that something's in the wind.)
"American Roulette" from New York Magazine
Tuesday, January 02, 2007
Female Bosses Discriminate Against Women
According to a study conducted in Spain, female managers are less likely than men to promote women into supervisory positions. These managers rationalized their decisions by claiming that the female candidate might be more "controlling" in her management style, while the male candidate would assume a more laissez-faire role. They also tended to view female candidates as less qualified. Older managers exhibited a similar prejudice against female candidates, while younger managers were more open-minded in regard to gender. Some female commentators have attributed this bias to the internalization of sexist attitudes, while others blame a "queen-bee" phenomenon, whereby female managers consider other ambitious females a threat and feel more secure surrounded by male colleagues.
Having observed many, often implacable rivalries among female managers in my own work life, the results of this study ring true. However, the fact that the study was conducted in Spain suggest that the findings may have been influenced by cultural factors that are not present to the same degree in the United States. For more detail, consult the link below.
"Office queen bees hold back women's careers" from The London Times