) has lost $4.5 billion. One contributor, says the aircraft engineers union: The airline's lead law firm is overbilling. The union filed objections with the bankruptcy judge about what it sees as out-of-control fees from Kirkland & Ellis -- a total of $54 million.
One Kirkland lawyer billed for 3,500 hours last year at $540 an hour -- the same as working 9.6 hours a day, 7 days a week, all year. Another senior partner bills at $950 an hour, while some legal assistants get $230 an hour.
Kirkland says the union "lacks any basis for its conclusion that K&E's fees and expenses are unreasonable." United says all fees have been approved. The judge rejected the union's complaint as not specific enough, but the union plans to refile with more detail.
United's overall bankruptcy fees so far total $195 million, making it the seventh most expensive on record. Executive pay is on the rise -- again. Compensation consultants say 2004 will be one of the best in recent memory, with CEO pay likely to rise as much as 20%. Strong profits boosted bonuses, while surging stocks increased option values. And a shift from options to restricted stock -- to reduce the impact of options expensing set to start in June -- resulted in some large stock grants. Says New York pay consultant James Reda: "It's another year of big increases."
To avoid distortions created by large option exercises, BusinessWeek's measure of exec pay excludes those windfalls but includes the Black-Scholes value of annual option grants. That's why Coach (COH
) CEO Lew Frankfort is at the top of our preliminary list of highest-paid execs. His $53 million options grant was the largest so far.
The change reveals that pay for performance is, for the most part, working. The CEOs on our list (below) all run companies that were strong performers last year. At homebuilder Toll Brothers, where profits soared 57%, the formula used to determine the annual bonus for co-founder Robert Toll would have given him nearly $50 million -- a sum so huge that Toll and the board agreed to cut it by $19 million, to $30.4 million. Says Chief Financial Officer Joel Rassman: "It was a fairness issue."
While BusinessWeek isn't counting option exercises, those, too, were up last year, pay experts say. Rising equity prices allowed many execs with large stockpiles of options from previous years to cash them in. Howard Solomon, CEO of Forest Laboratories (FRX
), collected a cool $90 million. Not a bad haul. Has William McDonough's ardor for bean-counting waned? Two years ago, when the former banker became chairman of the newly created Public Company Accounting Oversight Board, he crowed to reporters: "I adore accounting theory." But after getting the auditing industry's new regulator up and running, the former New York Federal Reserve president is in the running to be Fannie Mae's (FNM
) next CEO, Washington insiders say.
Gossip about his itchy feet has circulated for months at the SEC which must approve a successor. One source says McDonough, 70, is bored at PCAOB, and notes he's no longer seen as a successor to the Fed's Alan Greenspan. A PCAOB spokeswoman says McDonough isn't talking to Fannie Mae.
Steering Fannie through three ongoing federal probes and a push by Congress for tougher oversight would be a challenge, but lucrative: Former Fannie CEO Franklin Raines' pay averaged more than $2 million, vs. McDonough's $595,000 annual salary. Also said to be Fannie candidates: William Shea, former CEO of insurer Conseco (CNO
), and former Senator Phil Gramm (R-Tex.). The "Celtic Tiger" has joined a select group. Based on gross domestic product per person, Ireland is -- along with Luxembourg, the U.S., Norway, and Switzerland -- a "high income" country, says the Organization for Economic Co-operation & Development.
The OECD adjusts GDP for purchasing power to create a relative ranking. The study illuminates Ireland's recent economic surge since its entry into the European Union and investments in technology. GDP grew by nearly 10% a year from 1995 to 2000. So the Emerald Isle is in the green. It's a mission even Captain Kirk might balk at. Since Viacom's (VIA
) UPN network canceled in February what would have been the fifth season of Star Trek: Enterprise, Trekkies have been trying to save the show. Tim Brazeal, a 42-year-old tech worker, started TrekUnited.com to raise $30 million to fund another season. So far he has $3.1 million, including $3 million from unidentified backers of the commercial space-flight industry. "Star Trek has inspired a lot of people," he says. "It's not just a TV show." The finale is May 13. But like the original series, the latest version will live on: Viacom has sold the series into syndication beginning this fall. March has been a mad month for Michael Tranghese, the Big East's commissioner. Just two of six Big East teams made it to the NCAA Tournament's Sweet Sixteen. Next year may be better, when five more strong basketball programs join the conference.
The basketball programs were lured by Tranghese after football powers Boston College, Miami, and Virginia Tech bolted the Big East for the Atlantic Coast Conference in 2003. That loss could hurt. Football is a large part of Big East revenues -- $68 million in 2003, the most recent year available. If its football teams falter, the Big East could lose its spot in the Bowl Championship Series, the six-conference cartel that divvies up lucrative bowl games.
Tranghese, 61, insists the Big East will do just fine. "We don't feel we're going to lose revenue on the bowl side." Why so confident? The former English teacher has 26 years at the Big East and has seen plenty of come-from-behind wins in his time. The gates to Walt Disney's newest Magic Kingdom -- in Hong Kong -- don't officially open until September, but people are already lining up. Since Feb. 15, when the park began taking reservations, Hong Kong Disneyland has accepted 10,000 bookings.
The $1.8 billion park marks the kickoff of what CEO Robert Iger foresees as a new era for Disney in Asia. Talks are under way with the Chinese government about a second site, near Shanghai, by 2010. Seoul may also get a more modest Disney park.
With Disneyland Paris still in the red, why is Disney so confident about Asia? The park could benefit from the spread of family vacations among the Chinese as disposable incomes rise. Trips abroad or even to Hong Kong were once unheard of. Now, however, China expects to become the world's fourth-largest exporter of tourists by 2020, says the China National Tourism Administration. This trend, plus the country's 290 million children under 14 and its one-child policy, mean that "kids' vacations are where parents and grandparents are spending all their extra cash," says Zhang Shi, a marketing professor at the University of California at Los Angeles.
To reach these young people, Disney turned to the 70 million-strong Communist Youth League to create special programs for the group's "youth palaces" that include storytelling sessions and visits from Disney characters.
Disney also learned from past mistakes. At Disneyland Paris, the lack of wine and beer, central to European family culture, caused public outcry. In Hong Kong, builders consulted a master of feng shui before completing plans. As bookings mount, Disney's betting it's not such a small world after all. The Bureau of Labor Statistics has unleashed an uproar with plans to stop collecting women's employment data in its monthly survey of employers. After nearly 5,000 complaints, the BLS will ask for further public comment before substituting new questions about supervisor pay.
The BLS thought the data wouldn't be missed, since it gets similar info in its survey of households. But researchers at the Federal Reserve and elsewhere argue that the payroll data are more reliable.
The payroll survey measures the bottom 80% of the work force. Now the BLS wants to gather data on management jobs. With the new data it plans to publish an average pay figure for both groups. But that would paper over the widening gap between blue- and white-collar pay, says Heidi Hartmann, head of Washington's Institute for Women's Policy Research.