Posted by: Nanette Byrnes on November 05
Recently Chip Conley, CEO of Joie de Vivre, a $230 million company with more than 3,000 employees, got enmeshed in a bit of a modern corporate culture snafu. Conley's not your average Harvard MBA pinstriped buttoned-down corporate chieftan. He's an entrepreneur. He writes his own rules. So to him, it wasn't so strange to post some pictures of himself at the Burning Man whatever-it-is in the desert on his Facebook fan page. Or to tweet on Twitter about the demise of his 8-year-long relationship.
Some of his employees, however, found it unseemly for a CEO to be shirtless on Facebook. And since he runs a company that's pretty open and has a whole system for making sure the CEO hears from the rank and file, well, he heard about it.
This is already a little unusual, but then he did something even more surpising. He wrote an article about his actions on BNET and asked people what they thought of his conundrum. Included as a topic for conversation: whether it's ok for him to post such shot and then turn around and put some limits on what his employees can do in the socially networked world. (For example, no employee tweets about the famous rock star in the hotel lobby.)
Deborah Schultz, a partner at Altimeter Group, a San Mateo based boutique consulting firm that advises on the social media landscape, says that while not every CEO will find themselves in this exact boat, all leaders (and followers) need to think about the changing modes of communication today and how they present themselves through them. "It used to be we had the 'luxury' of discreet roles," says Schultz. The new social media terrain "is forcing a much more integrated view of who we are as people...It's really about having a new set of etiquette, what is private and what is public."
Schultz suspects that the response of Conley's employees may well be an indicator of some broader issue, something this snafu might have helped surface but which predated the shots of him in a tutu. "Technology can be a lightning rod," says Schultz. She applauds Conley for embracing the chance to open up his internal debate to broad input through his BNET piece. And he's gotten a lot of comments, many very thoughtful. "He spoke to the horses mouth and asked people what they thought. Others would be meeting with their public relations staff behind closed doors."
Early discussions around social media often involved employee bloggers losing their jobs. Now it's the bosses who are hiking through uncharted terrain.
Posted by: Arlene Weintraub on November 05
What happens when pharmaceutical company ads urge TV views and magazine readers to "ask your doctor" about a particular drug? A new study from market researcher Verilogue suggests patients either aren't asking for the drug by name, or worse, they're asking about its scary side effects. Verilogue came to that conclusion from a unique and useful vantage point: It recorded 12,500 real conversations between patients and physicians.
Direct-to-consumer (DTC) drug advertising is one of the most controversial issues in pharmaceuticals. Critics say the ads promote the over-use of prescription drugs that are sometimes dangerous. In fact, the United States and New Zealand are the only two countries in the world that allow drug companies to pitch their products directly to consumers.
But drug companies just keep placing all those ads--to the tune of $5 billion a year. That may be because some research suggests they actually do work. According to market researcher Milward Brown, DTC is especially effective for raising awareness of new brands. Milward Brown surveys patients, and has found that 50% of respondents report requesting drugs they've seen on TV or read about in a magazine. "More often than not, after someone sees an ad, they go on the Internet to get more information, so they can have an intelligent conversation about it with their doctor," says Patrick Ryan, v.p. of Milward Brown's health care practice.
Maybe so, but Verilogue's researchers believe pharma companies could take several steps to make their ads more effective. They could provide doctors with materials that address patients' side-effect concerns, for example. Most importantly, they should find new ways to connect meaningfully with patients. The most frequently remembered campaign in Verilogue's study was for the osteoporosis drug Boniva, which actress Sally Field promotes. "Patients connect with Sally and see her as a trusted ally," says Verilogue CEO Jeff Kozloff. "It's the way she delivers the message. She gives examples of how she lives with the disease."
Verilogue even suggests tactics that go way beyond advertising, such as trying to place drugs into story lines of TV shows and films. He isn't aware of any companies that have tried that, but overall, he says, finding ways to connect emotionally with patients is important. "Don't just speak to the patient," he says. "Validate their experiences." Could the latest hot drug be coming soon to a theater near you?
Posted by: Nanette Byrnes on October 23
A new study finds that it’s not just the outsized pay packages executives at AIG, Citigroup and others receive that is a problem. Nor are the golden parachutes given those forced out the only thing that deserves scrutiny.
Regular run-of-the-mill CEO retirement has become a reason for CEOs to goose the numbers.
The study by Paul Kalyta of McGill University finds that a CEO whose retirement pay depends in part on the company’s performance in his final years at the helm, will manage earnings up as he approaches retirement. After he’s gone, the stocks tend to drop sharply.
By contrast, companies whose CEOs don’t have this type of provisions in their Supplemental Employee Retirement Plan, or SERP, don’t suffer similar spikes and drop offs.
SERPs have become popular as a way to get around regulations that limit the tax deduction of executive pay. About three fourths of the largest companies have such plans, the study notes. But not all depend on the performance of the company in the CEOs final years.
“There is significant room for discretion in accounting, and CEOs can use this for a variety of purposes,” notes Kalyta. “To use it for essentially selfish reasons, even when legal, certainly raises ethical questions, particularly when, as this research reveals, doing so destroys a considerable amount of shareholder value."
The full study, which has been published in The Accounting Review, a journal of the American Accounting Association, can be found here.
Posted by: Jena McGregor on October 21
In a striking display of government authority, pay czar Kenneth Feinberg is taking a knife to the pay packages of certain companies receiving U.S. funds. According to media reports, the government will slash the compensation of the 25 highest-paid employees at the seven firms receiving the most aid.
The biggest drop will be to salaries, which will plummet 90% on average for these firms, while total compensation will fall by an average of about 50%. (Those numbers could be skewed by agreements reached with executives like outgoing Bank of America CEO Kenneth D. Lewis, who is forgoing all of his 2009 salary.) The reports also say that no top executive at AIG's financial products unit, which bore the blame of the insurer's near-collapse last year, will make more than $200,000. And any perks packages that total more than $25,000 at these firms will have to be approved by Feinberg.
While the numbers may be most startling, what's also notable in Feinberg's moves are the corporate governance changes reportedly being demanded at these troubled firms. The positions of Chairman and CEO will be split, boards will have to create risk assessment committees, and "staggered" director elections will be eliminated. In boards that have such elections, not every director comes up for vote each year, making it harder for shareholders to make their voice heard on the performance of individual directors.
While the pay cuts are sure to get the most attention, especially following months of public furor over Wall Street bonuses, the governance moves matter, too. Far too little focus has been placed on directors' role in the crisis, and what their oversight might have done to prevent it. Names like Andrew Hall, Citigroup's $100 million man, may have become overnight fodder for water cooler chatter, but how many people angry over executive compensation levels can name members of Citigroup's pay committee?
It's unclear whether these governance changes will have much impact--several of these bailed out firms already have separate chairman and CEO posts, for instance--but they at least strike at the heart of the matter. It is directors, after all, who have been responsible for setting pay for executives. By slashing pay as deeply as he is, Feinberg is saying, in a sense, that he doesn't trust boards to make those decisions. Still, perhaps the moves now being put into effect could help shareholders trust them a little more.
Posted by: Emily Thornton on October 21
Here's a sobering prediction: A new study put out by The New Democratic Leadership Council predicts that American investment in research and development will experience its biggest decline in 30 years. R&D spending is expected to fall 2.4% in 2009- marking the third time in 30 years the nation has witnessed a pullback in research spending.
Continued R&D spending is considered a key to economic growth. And there are companies that have continued to keep up their research investments.
Nevertheless, the US overall now lags behind its competitors in terms of the percent of the nation's general economic output invested into research. Today, US research spending accounts for only 2.5% of its GDP. In Sweden, Finland, Japan and South Korea, research spending accounts for in excess of 3% of national economic output.
