Up Front
Edited by Sheridan Prasso
Talk Show
"Too often I was silent when management made proposals that I judged to be counter to the interests of shareholders...collegiality trumped independence." -- Warren Buffett on his role as an independent director
WHEELER-DEALERS
Wheat: CSFB's Teflon CEO
On Mar. 6, the NASD charged Credit Suisse First Boston's (CSR
) former tech banking czar, Frank Quattrone, with "overseeing a flawed organizational structure that undermined research analyst objectivity." In other words, they objected to the fief-like way in which Quattrone ran his tech group out of Silicon Valley. Analysts reported directly to Quattrone, the investment banker who did the deals, rather than to an independent head of research.
Curiously, regulators failed to mention the man who let Quattrone defy convention with the unusual setup. That man is Allen Wheat, CSFB's former CEO. Wheat recruited Quattrone from Deutsche Bank in 1998 with the promise that he could bring the structure he started setting up there with him. It flourished at CSFB and, according to regulators, crossed the line into bias. Even though Quattrone was in California and Wheat in New York, e-mails obtained by BusinessWeek suggest they stayed in close contact on matters big and small.
There's no sign, however, that regulators are considering slapping Wheat with a failure-to-supervise charge. NASD says it hasn't ruled out charging him, but won't comment on whether it's investigating him either.
During Wheat's four-year tenure, CSFB had run-ins with regulators for everything from misleading investors to shredding documents. Wheat's own record is so far clean. Wheat, who was replaced by John Mack in 2001 and no longer works in the industry, did not return repeated calls seeking comment.
By Emily Thornton, with David Fairlamb
CLASS NOTES
Lying? Save It for after B-School
Some would-be execs are just learning their lesson that honesty is the best policy. The University of California at Berkeley's Haas School of Business has rejected about 5% of the initial 100 candidates slated for admission into its fall 2003 MBA class after background checks revealed inaccuracies on their résumés. Applicants did such things as fudge work dates to conceal that they had been laid off. In every case, the fibbing was pointless: Admissions director Jett Pihakis says all the rejects would have been admitted had they not lied.
Most B-schools carry out spot checks of applicants, but rumors of cheaters slipping through the cracks was enough to compel Berkeley to begin vetting all admitted students this year. Other B-schools may soon follow suit: Chances are, the liars bounced from Berkeley applied elsewhere, too. The Wharton School also started background checks last fall but says it has not yet turned up any discrepancies.
Meantime, admissions officers stress that unemployment isn't necessarily a strike against an applicant. A layoff "isn't a reflection of you so much as of the economy," Pihakis says.
But lying about it, and getting caught? That's three strikes, and out.
By Brian Hindo
HONCHOS
Fewer Heads to Hunt
Times are tough for headhunters. So tough, in fact, that the combined revenues for the 25 largest search firms fell below the $1 billion mark last year for the first time since 1997, according to Hunt-Scanlon Advisors.
The no. 1 player, Heidrick & Struggles, saw revenues fall 25% last year, to $194.2 million, while no. 2 Korn/Ferry International suffered a 29% drop, to $172 million.
Overall, headhunting fees at the top 25 shops dropped 18%, following a 31% plunge in 2001, says the market research firm. "This downturn is like nothing I have ever seen," says 20-year-search veteran David Hoffman, Chairman of Chicago-based DHR International.
Not only is there less business, say headhunters, but it's also getting harder to lure executives. "No one wants to take a risk at anything if they're already in a secure environment," adds Hoffman. The upshot: Searches that used to take 75 days to 90 days now average 100 to 120 days.
By John Byrne
THE LIST
WINDOW SEATS
Kids Take Over the Corner Office
Time was, there was a natural order to the workplace: Newbies got interior offices or cubicles, while senior employees were rewarded with window offices.
No more. A number of companies, including American Express (AXP
), AT&T (T
), IBM (IBM
), and Deloitte & Touche, have reversed the old order, tossing top execs into interior offices and giving junior workers the coveted corner space. Workplace experts say this helps boost productivity and reduce absenteeism, since newbies given prime offices will be motivated to give their all, and veteran workers can be counted on to work hard no matter what. The switch also negates the problem of managers burrowing in their offices and leads to more "casual collisions" between managers and their workers, notes Nila Leiserowitz, vice-president of Gensler Architecture, Design & Planning Worldwide.
Not that this is being greeted with enthusiasm. One executive admits it's harder to recruit outside execs once they realize they'll be stuck mid-floor. "It is not so easy," he says, "to alter the old incentives of corner offices, country clubs, and sports cars."
By Cathy Schottenstein
MORTALITY
What's Killing the Undertakers
The good news: Americans are living longer, thanks to better health care and nutrition. The bad news: The funeral home industry is struggling. The number of Americans who died in the 12 months ended Jan. 31 fell 2%, or by 46,000 people, after a 5.3% drop the year before, according to the Centers for Disease Control.
Not only is the death rate declining but in tougher economic times fewer people are spending lavishly on funerals. Instead, they're turning to less expensive cremations, which start at about $2,000, vs. about $5,000 for a coffin and burial. "It's killing our margins," says Kenneth Budde, chief financial officer at Stewart Enterprises in Metairie, La., the nation's third-largest funeral-home and cemetery operator. Stewart has cut its 2003 earnings estimate to 30 cents to 35 cents a share, down from 40 cents to 43 cents. And the country's leading funeral conglomerate, Houston's Service Corp. International (SRV
), says sales at its funeral homes in 89 cities were down about 1% in 2002.
Worse for the industry, total U.S. deaths are expected to remain flat until about 2020, according to National Funeral Directors Assn. data from the Census Bureau.
God willing.
By Brian Grow
ODD COUTURE
That Touch of...Fish Skin?
So what if fish aren't warm and cozy? Eggert Johannsson, a well-known Icelandic furrier, is hoping the moneyed classes will soon chase away winter's chill by slipping into his jackets made of fish skin. It's similar to snakeskin but stronger and more supple, Johannsson says. (And the tanning process removes any fishy smell.) Believe it or not, fish skin has couture cachet: Christian Dior and Giorgio Armani have used it in recent collections.
Johannsson's jackets -- lined with mink and silk and starting at $8,000 -- are now becoming available in boutiques in California and New York. "People are just in awe," says Dana Carter, whose Carter Alexander Raintree Collections shows the jackets at trunk shows. She calls them her most successful launch this year.
Johannsson says he could make wallets and other accessories if he could just get more skins, which usually get discarded by fish processors. Despite Iceland's large fishing industry, he must import salmon, perch, and catfish skins for curing by a local tannery. "They know I'm a little strange here," he says. "But it is not often in life that you are able to be in the very forefront."
By Kimberly Weisul
THE BIG PICTURE
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Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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