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DECEMBER 18, 2006
Compared With Ball Players' Take, CEO Pay Looks Stingy Although I disagree with the absurd compensation packages that CEOs receive ("How Bill Clinton helped boost CEO pay" Government, Nov. 27), let's not forget that they are not alone. I consider a CEO to have a much greater impact on people's lives, including their careers, retirements, and health care, than any of today's athletes. Yet many CEO salaries are peanuts compared with the salaries of quarterbacks, pitchers, and point guards. Maybe fans need a quarterly justification for outrageous ticket prices just as shareholders do for CEO pay. Darin Kendrick St. Louis Your article really irked me. It was corporate policymakers, not Clinton, who helped boost CEO pay. The fact that Clinton tried to develop a plan to halt excessive compensation and was ultimately unsuccessful was not his fault. The title of your article should have been "How Bill Clinton tried to rein in corporate greed but was unsuccessful." Neil Safeer Pikesville, Md. Duane Reade Lays Out A Plan For Renewal "Duane Reade: An LBO on the critical list" (Finance, Dec. 4) was an interesting historical perspective of past challenges, yet it generally neglected to mention our more recent performance or our future possibilities. Indeed, the company did stumble, but that is last year's news. A new management team is now in place, executing against a clearly articulated six-point strategic plan called "Duane Reade Full Potential" designed to enhance the customer experience, quickly mend our relationship with the unions, improve our financial performance, and restore the Duane Reade brand to its rightful position as "New York's #1 Drugstore." I am fortunate to have a dedicated, loyal team that has worked incredibly hard to deliver on our mission. Since my team began executing on this mission earlier this year, we have meaningfully improved the customer experience by enhancing the merchandising, improving customer service, and significantly upgrading the look and feel of our stores. Indulge me as I mention only a few of the many milestones that my team has achieved this year: • Revenue growth is rising steadily, with third-quarter same-store sales up 4.4%, front-end same-store sales up 5.7%, and pharmacy same-store sales up 2.9%, putting us among the upper tier of our peers. • Gross margins have shown significant improvement in the first nine months of the year, up approximately 116 basis points. • Adjusted FIFO EBITDA for 2006 is on track with our initial projection for $60 million to $65 million this year, representing an increase of approximately 50% over last year's $42.2 million. Customer service metrics are improving rapidly. • We have successfully resolved the legal disputes with our unions. • Despite the minimum wage increases in early 2006, we have driven down costs—our SG&A margin for the third quarter declined by 56 basis points. Lastly, it is important to note that the article is about our bonds but fails to mention that our senior subordinated notes have traded to the mid-90s, up from the low 60s, and our senior notes trade above par. Clearly, the debt holders also believe in our future. There's no doubt that Duane Reade Full Potential requires continued hard work from our committed team. However, the current reality is our customers are buying more and more often, our employees are driving improved in-store service and standards, and bondholder investment has appreciated dramatically. We look forward to writing the next few chapters. Richard Dreiling President and CEO Duane Reade Holdings Inc. New York   Kudos From Harvard Business School Harvard Business School heartily agrees with the call by Dean Richard Schmalensee of Massachusetts Institute of Technology's Sloan School of Management to confront real world business problems in business schools ("Where's the "B" in B-schools?," Outside Shot, Nov. 27). Since its founding in 1908, the business school has had a strong focus on practice in both its research and its educational programs. During their two years at Harvard, our MBA students wrestle with more than 500 case studies that focus on "real-life management problems" in real organizations. Moreover, as authors of about 80% of the cases used in business schools around the world, our faculty are in direct contact with businesses worldwide on a regular basis, ensuring that the ideas and insights from their research will have relevance in the workplace. In addition, a corps of 15 professors of management practice speak from years of experience as former leaders of entrepreneurial ventures and major corporations. Dean Schmalensee's call to action should be heeded. I'm happy to report that we've been practicing what he prescribes for almost a century. Professor W. Carl Kester Deputy Dean Harvard Business School Boston Would You Buy A Car Without Knowing Its Price? "What the patient pays" (Personal Finance, Nov. 27) reminded me of my efforts to find out how much a cataract surgery would cost. After leaving the shelter of an employer and paying for my own insurance and medical expenses, I quickly saw that medical providers, with the help of insurance companies, are allowed to fix prices. And they fix them high. Since medical providers and insurance companies have agreed on the price for every procedure, I thought it would be simple to find out beforehand how much a cataract operation would cost, but when I called, my insurance company said the information was proprietary. In other words, I must incur the cost before I can find out what that cost will be! That blew me away. It flies in the face of capitalism. What if I went to an auto dealer and inquired about the price of a car? Would the dealer say: "After you buy the car, we will tell you how much you have to pay"? How could I compare prices that way? Even an auto repair facility will give you an estimate of charges before you have your car repaired. Why can you not get an estimate before you have your body repaired? The real answer to this problem is wider access to information. Your article on car salesmen losing commissions because buyers have so much more information than in the past pointed to the reason why medical costs are so high ("Death of the car salesman," News & Insights, Nov. 27). With autos—and almost everything else—pricing information is widely available on the Internet. But when it comes to medical costs, providers and insurance companies are completely in charge of the data. Technology and the Internet have made it possible to keep prices down in many industries. Why is the medical profession exempt from this process? Jared Bessert Fitchburg, Wis.
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