Up Front
Edited by Sheridan Prasso
Talk Show
"It's less important to have unanimity than it is making the right decision and doing the right thing, even though at the onset it may seem lonesome." -- Defense Secretary Donald Rumsfeld, on whether to attack Iraq
HONCHOS
The (Fat) Wages of Scandal
The latest corporate scandals have revealed that a lot of top execs got very rich for doing very little for shareholders. Now we know just how rich.
A new study of CEO pay at 23 companies under investigation for accounting irregularities found this startling result: Their CEOs earned 70% more than the typical CEO at a large company. Specifically, an average of $62 million from 1999 to 2001, compared with $36 million for the remaining 300-some CEOs in the survey. Conducted by United for a Fair Economy, a Boston nonprofit group, and the Washington-based Institute for Policy Studies, the study used data from BusinessWeek's annual Executive Pay Scoreboard. Some of this compensation includes stock options exercises. To the extent the execs held on to their stock, they suffered along with other shareholders.
In all, the 23 CEOs took home $1.4 billion in a three-year period during which the value of their companies plunged by $530 billion and 162,000 of their employees lost their jobs. The highest-paid CEO was Tyco's (TYC
) Dennis Kozlowski, who took home $466.7 million for the period in pay and perks before he quit amid tax-evasion charges. He's followed by Qwest Communications' (Q
) Joseph Nacchio ($266 million), Enron's Kenneth Lay ($251 million), and AOL Time Warner's (AOL
) Gerald Levin ($178.4 million), all of whom have since left. What do the study's authors make of all this? It's in the title: Executive Excess 2002: CEOs Cook the Books, Skewer the Rest of Us.
By Louis Lavelle
CAR TALK
The Cadillac of Cadillacs?
Will people pay more than $150,000 for a Cadillac? General Motors' (GM
) luxury division wants to find out. GM will show an ostentatiously styled concept car at the Detroit auto show in January that hopes for the cachet of Rolls Royces and Bentleys. GM sources say the car's V-16 engine is brawnier than anything on the road, and at 18 feet, the Caddy rivals the length of Mercedes-Benz' $300,000 ultraluxe Mayback.
Cadillac execs say the concept is more an idea than a blueprint for a car, but they're eager to move into the super-lux category. They unveiled a V-12 engine sport coupe, the Cien, in January, but decided not to put it into production because it didn't suit Cadillac's image. Caddy General Manager Mark La-Neve says it makes more sense to chase wealthy buyers with a luxury sedan priced up to $200,000 than to follow Mercedes, BMW, and Audi into mass-market luxury cars priced in the mid-$20,000 range. When Caddy was king in the '50s, it sold a car priced like a Rolls. Now, a Rolls goes for $300,000, and Caddy's priciest is the $80,000 XLR roadster, due out next year. Says LaNeve: "If we want to be the standard of the world again, we have to go upmarket."
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Corrections and Clarifications
In ``The Cadillac of Cadillacs?'' (Up Front, Sept. 9), the correct spelling of the Mercedes-Benz ultra-luxury model is Maybach.
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By David Welch
JUST IN TIME
Excess Inventory? eBay to the Rescue
In these tough times, more big companies are boosting their balance sheets by using eBay to move excess inventory off the books rather than selling supercheap to liquidators. The reason: They can recoup 45 cents on the dollar instead of the 15 cents to 20 cents they would get otherwise.
At least 71 large companies, including Bloomingdales (FD
), Dell Computer (DELL
), Home Depot (HD
), IBM (IBM
), and Motorola (MOT
), now sell outdated merchandise, ranging from tractors to laptops, on eBay (EBAY
). That's up from a dozen big retailers a year ago. All told, eBay estimates that big companies now make up 5% of its sales--roughly $500 million a year--a figure eBay started tallying in April. "We're seeing a large increase," says Jordan Glazier, general manager of eBay's business and industrial sales.
EBay officials say Motorola started Net auctions in April and now unloads $1 million of outdated phones a month. Motorola won't comment, but its bulk sales of 100 phones per order fetch up to 45% more than what liquidators pay.
While many items are sold in lots, there are individual items, too. Ritz Interactive, a large online retailer of photo equipment, can get $340 on eBay for an unwrapped display model of a $799 Panasonic PV-DV100 Mini DV Camcorder, compared with about $200 from a liquidator, who would resell it to a discount store or ship it overseas. Not a bad deal all around.
By Brian Grow
THE BIG PICTURE
MEDIA MATTERS
For Cable Companies, a Tighter Noose
The gore on cable TV isn't confined to the screen. Accounting woes, investigations, and huge debt have slashed cable stock prices, though some larger players say they're selling more cable modems, digital TV, and phone service.
That could mean a shakeout. Adelphia Communications and Cablevision Systems (CVC
) are goners, figures Merrill Lynch analyst Jessica Reif Cohen, who thinks Charter Communications (CHTR
) and Cox Communications (COX
) could be acquired, too. "The cable industry [could] ultimately consolidate down to only a handful of players, including AT&T Comcast and Time Warner Cable," she writes in an Aug. 22 report. Adelphia is bankrupt, and Cablevision is selling off such assets as The Wiz electronics stores to avoid a cash crunch. Both are likely acquisition targets, analysts say. As for Charter, rating agencies worry about its $17.6 billion debt and a looming accounting investigation. Like other cable players, it's losing market share to satellite operators, who are adding 2 million subscribers a year at cable's expense.
With $60 billion in upgrades since 1997, cable operators' slowing customer base could make it difficult to show positive cash flow for a year or longer, says Sharon Armbrust of cable analysts Paul Kagan Associates.
Consolidation may speed up now that AOL Time Warner (AOL
) is spending $3.6 billion to buy back from AT&T (T
) its interest in a partnership that owned a chunk of Time Warner Cable, Warner Bros., and HBO. That deal's uncertainty had kept some buyers on the sidelines.
By Ronald Grover and Tom Lowry
MEDIA MATTERS
RANK AND FILE
Less Work, More Shopping?
South Korea is one of the world's only industrialized nations to still have a six-day workweek. Its offices and factories remain open on Saturdays for at least half a day. Yet government economists believe that the country can boost economic growth by making South Koreans stop working on Saturdays.
Some calculate an additional 1% of economic growth if Koreans went shopping and pursued leisure activities on weekends instead. So, after already pressuring banks to close on Saturdays this summer, the government of President Kim Dae Jung plans to introduce a law mandating a five-day workweek this fall.
But he may have to work six-day weeks himself to get it through. The opposition, the business-friendly Grand National Party, which controls more than half of the National Assembly, is sure to put up a fight. The GNP says it agrees in principle with a two-day weekend but that implementing it needs time.
That's because Big Business would like to see an end to other types of compensation, such as one day of paid monthly leave for all workers (in addition to regular vacation) and additional one-day-a-month leave for female workers during menstruation. It also would like fewer holidays--10 instead of the current 17--and a reduction in overtime pay. Big Labor opposes any loss of compensation, even if working hours are cut. As the two sides battle out a compromise, Korean workers will go on toiling six days a week.
By Moon Ihlwan
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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