Up Front
Edited by Sheridan Prasso
Talk Show
"I am one of the few people who is still not as yet convinced that stimulus is a desirable policy." -- Alan Greenspan, speaking to the Senate Committee on Banking, Housing & Urban Affairs
AFTER 9/11
Getting in on the Ground Floor
It's down to the wire for the two finalists vying to redevelop the World Trade Center. A winner will be declared by the end of February. But is Lower Manhattan ready for all that new office space? The market is already weak, and leases on 44 million square feet there will expire over the next four years, according to the Lower Manhattan Development Corp. So no matter how cool the new project is, if you build it, will they lease?
Yes, according to a survey of 85 major companies, prepared for BusinessWeek by CoreNet Global, an association of corporate real estate professionals. (A fifth of the companies were located downtown pre-September 11.) Only 10% of those surveyed would balk at moving in because of perceived risk or stigma. By contrast, 69% said they would rent if costs were on par with other New York office space. And 6% said they would even pay more to be in such a new, prestigious location.
Their biggest worries? Skittish employees: 51% are unsure how their people would feel working there. And lack of adequate transportation: 55% said improving transit would have "some" effect on a decision to lease there, while 28% said the effect would be "dramatic."
Rebuilding it will take years. But someday, the site may again teem with tenants.
By Robert McNatt
GUCCI GULCH
Did the GOP Lobby the Lobbyists?
With mutual funds in Congress' crosshairs, the top lobbying job at the industry's trade group is now a partisan target. Aides to House Financial Services Committee Chairman Michael Oxley (R-Ohio) have told the Investment Company Institute (ICI) that it spends too much time courting Democrats at the expense of Republicans, Hill staffers and lobbyists say.
First, the Oxley camp was leaning on ICI to replace its current top lobbyist, a Democrat, with a big-shot Republican. "I am convinced a message was sent," says Barney Frank of Massachusetts, top Democrat on the committee.
Now, though, the mutual fund group will keep the Democrat but also add a slot for a Republican, sources say. ICI says its search for a new lobbyist has nothing to do with pressure. An Oxley spokeswoman denies it as well, and Oxley's defenders say the new hire was ICI's idea. Either way, the fund industry's new face on the Hill will be stepping into a minefield.
By Mike McNamee
RETAIL DETAIL
Nike May Need an Heir Jordan
Michael Jordan didn't play his superhuman best during his last NBA All-Star Game on Feb. 9. But sales of the 18th edition of his shoe, released the same weekend at $175 a pair, definitely scored.
The new Air Jordans sold up to 55% of their stock in just two days, far exceeding the industry standard 10% for new launches, according to Jordan brand officials. Says Shawn Neville, CEO of Footstar Athletic, which runs 550 stores including Footaction: "We expected it to be good."
But Michael's planned retirement in April raises questions about just how good Nike's (NKE
) $350 million Jordan business will be in the future. Can the brand survive? Lack of court time could sink sales. "When a player's not playing, [he's] off the court, out of mind," says Bob McGee, editor of Sporting Goods Intelligence newsletter. "It means Nike will have to work harder through other athletes to keep the Jordan brand fresh and exciting."
The brand's officials aim to do just that, recruiting hot players from other sports--Derek Jeter of the Yankees, Philadelphia Eagles quarterback Donovan McNabb, and boxer Roy Jones Jr. --to wear Jordan-branded shoes. Jordan officials are confident that the brand transcends the man. The proof will be in how high next year's Air Jordans soar.
By Stanley Holmes
THE BIG PICTURE
EXECUTIVE SUITE
CEO Pay: Pain, but Still Plenty of Gain
For investors with bruised portfolios, the misery of others is small consolation--except when it's the misery of CEOs. In all likelihood, 2002 will be the first time in a decade that executive pay has had two consecutive years of double-digit decline.
Not every CEO will get clobbered, and some will make out like bandits. But overall, compensation consultants say, average pay for CEOs in BusinessWeek's Executive Pay Scoreboard will fall 10% to 15% in 2002. Added to the 16% decline in 2001, that will bring total compensation--salary, bonus, and exercised options--below $10 million for the first time since 1997. Says Deloitte & Touche ex-CEO Michael Cook, who sits on pay panels at HCA and Dow Chemical: "There's pain here for everybody."
The reasons are threefold: With revenues, profits, and stock prices down, many CEOs won't qualify for big bonuses. And many will be unable or unwilling to exercise options, which have plummeted in value. CEOs also are confronting a harsh new reality: the independent board. The post-Enron emphasis on independence is resulting in unwillingness to pay big bucks for so-so work. "The whole mind-set has changed," says Blackstone Group Vice-Chairman Hamilton James.
Take John Gifford of circuit-maker Maxim Integrated Products. With sales and profits down, Gifford got no bonus, and with the stock off 13% for the fiscal year, he cashed in fewer options than in 2001. The result: a pay package worth $16.3 million, vs. $58 million in 2000.
Some CEOs took home megabucks despite poor performance. By exercising options granted previously, Sun Microsystems' Scott McNealy was able to net $25.8 million. Plus, he received 3.5 million new options to compensate him for the diminished value of his stake in the company, where the stock is down 95%. For governance experts, that sounds like rewarding failure--and is a sign that real change may be a long time coming.
By Louis Lavelle
I-WAY PATROL
The New Hurry to Foil Hackers
Companies that do business in California are scrambling to secure their computer systems, spending hundreds of thousands of dollars on software to better encrypt data and prevent intrusions from hackers. Jerry Brady, chief technology officer at computer-security outfit Guardent, reports that businesses are in a tizzy over "what they need to do right now to protect themselves."
The concern is over a "cyber-disclosure" law set to go into effect in July. The law makes it illegal for companies to keep mum if their Web sites get hacked and sensitive data--such as Social Security numbers, bank accounts, motor vehicle records, etc.--get compromised or stolen. Companies must notify clients and customers via e-mail or other means if their data have been viewed without authorization. One exception: Companies won't have to disclose breaches still under investigation--a loophole some consumer advocates say is too big.
Companies also are anticipating lawsuits. "A statute like California's is going to give rise to an untold number of class actions," says tech-law expert Jeffrey Neuburger.
Because California is so big and tech-heavy, its laws are sometimes the model for national policy. Senator Dianne Feinstein (D-Calif.) has introduced bills imposing tougher penalties for identity theft. But her moves to make cyber-disclosure mandatory nationally face strong opposition from lobbyists for big banks and credit bureaus. Identity theft is on the rise--186,000 cases reported to the Federal Trade Commission in 2002, up 88% from 2001. So with consumer groups clamoring for more protection, count on at least some measure passing at the national level.
By Alex Salkever
THE LIST
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Copyright 2003, Bloomberg L.P.
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