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"It would have potentially been a distraction to the current turnaround efforts." -- General Motors Chairman and CEO Rick Wagoner, commenting on the end of the discussions with Renault-Nissan on a proposed alliance

It doesn't pay to be nice, according to one of the first big surveys of hedge fund activism. The study found that hostile exchanges with a target company -- calls for the sale of a unit or for a new business strategy -- generate stock price increases of 5% to 7% in the first 20 days of the agitation campaign. By contrast, friendly exchanges about debt restructuring, dividends, or governance bring "no significant" rise.

When fund managers "just talk about more independence or board representation without specifying a business strategy, that's when the market is lukewarm," says Wei Jiang, associate finance professor at Columbia Business School, who co-authored the study with colleagues from Duke, University of San Diego, and Vanderbilt. The study focused on 2004-05 cases, 110 activist managers, 339 companies, and 374 events, about 40% of which involved a threat of a proxy contest, takeover, or lawsuit.

No evidence backed up CEO complaints that hedge fund activism destroys value or focuses only on the short term. The study found most of the fund managers to be "value investors targeting companies they believe are undervalued based on financial statement statistics" -- and companies with lots of cash, the most seductive draw for hedge funds.

A property dispute in Second Life, the online universe where more than 800,000 "residents" socialize and invest real money in virtual land, businesses, and products, has wound up in a bricks-and-mortar court in Pennsylvania.

In the first lawsuit against Linden Lab, which owns Second Life, Marc Bragg, a former SL denizen, filed a case in a county Court of Common Pleas, contending that Linden Lab wrongly canceled a virtual land purchase he made earlier this year, keeping $2,000 of his investment and expelling him from SL in a dispute over whether he violated auction rules. He wants his money back, his membership reinstated, and punitive damages.

The case raises broad questions about users' rights in such worlds, says Rebecca Nesson, a Harvard Law School instructor whose cyberlaw class periodically holds virtual meetings in Second Life. "I suspect if a court invalidates part of Linden Lab's user agreement, companies that run virtual worlds where residents have digital assets will take note," said Nesson, whose students are discussing the case. Second Life's terms of service say that the company can terminate accounts without cause and without refund. Linden Lab marketing director Catherine Smith declined to comment on the case, but added that the company "fully recognizes the legitimate rights of its residents to own, create, and sell property."

Only about 5,000 tigers live in the wild, despite strenuous international efforts to stop poachers, who sell tiger skins, whiskers, claws, penises, and other body parts for decoration, medicines, and aphrodisiacs.

Washington is amping up the pressure on India and China to stop this illicit business, saying that countries not doing enough to combat the trafficking in tiger parts should be barred from any legal commerce in controlled wildlife species. The U.S. proposal was on the agenda of the Oct. 2-6 Geneva meeting of the Convention on International Trade in Endangered Species.

But some free-market environmentalists advocate a radically different strategy: allowing people to raise the animals on farms, slaughtering some and selling their parts legally. The idea is endorsed by the nonprofit Property & Environment Research Center in Bozeman, Mont. "It's the species we want to save, not the individual animal, harsh as that may sound," says executive director Terry Anderson.

An article in the September issue of the group's magazine argues that such farms would lower prices for tiger parts and lessen the profit motive for poaching wild tigers. The article's author, Barun Mitra, director of the Liberty Institute, a research group in New Delhi, says that tiger farming in India and China could also produce tigers for release into the wild.

The strategy is fiercely opposed by some other groups, including the World Wildlife Fund. "No countries have regulatory systems in place that could effectively control a legal trade in tiger parts," says Crawford Allan, who monitors tiger trafficking. Poachers, he says, could use a legal market to launder parts harvested from wild tigers.

Call it gearing up with gospel. The Chrysler Group (DCX) is trying to get more African American customers by targeting churchgoers. The idea grew out of Chrysler's sponsorship of a gospel concert tour starring Patti LaBelle at megachurches in 12 cities. A few days before each concert (the first is Oct. 7 in Dallas), Chrysler will be at the church, giving free tickets to those who show up to test-drive some of its 2007 vehicles. Spokesman James Kenyon said the taste issues of marketing through churches didn't come up at Chrysler. And who knows? Perhaps the campaign will revisit the question the Evangelical Environmental Network asked in 2002: "What Would Jesus Drive?" Umm, a Chrysler minivan? "Plenty of room for the loaves and fishes," jokes Kenyon.

The inspiration for Geico's latest ad campaign, a droll take on customer testimonials, was Warren Buffett, says Ted Ward, the company's vice-president for marketing. Buffett, whose Berkshire Hathaway (BRK) owns the car insurer, wanted to use some of the laudatory letters Geico gets from customers who have filed claims.

"Then we asked: `How do we Geico-ize the testimonial concept?"'says Steve Bassett, the account's creative director at the Martin Agency, Geico's ad shop since 1994. The answer: to wink at it, using celebrities like Little Richard, Burt Bacharach, and Charo to "help" those real-life customers tell their tales in front of the camera.

The real Geico twist here, though, is that the celebrity ads are running on radio and TV at the same time as the insurer's other quirky campaigns -- the sensitive caveman ads and the commercials dominated by the Cockney-accented gecko. Overlapping ads are not the norm. But "Geico doesn't stick to one image," says Siva Vaidhyanathan, an associate professor of culture and communication at New York University. "It's trying to keep people off-balance, trying to start a variety of conversations."

Geico's Ward says the scattershot strategy is needed to lure customers in all demographic groups away from rivals. While competitors like Allstate use agents to sell their policies, Geico doesn't use middlemen. It relies entirely on its advertising, which directs people to the company Web site. "The spokesperson gecko or caveman is a decent substitute for an agent," Ward says. Besides, he notes, while the campaigns may differ, the insurer's 13-year-old tag line stays the same ("15 minutes could save you 15% or more..."). The company won't reveal its ad budget, but Ward says that at Buffett's urging Geico is "absolutely spending more on advertising now to increase market share." Vaidhyanathan of NYU says it's money well spent "if kids are quoting your ads in high school hallways." The buzz has reached NBC's Saturday Night Live, which recently spoofed the already tongue-in-cheek "real person" campaign.

Behind every overpaid CEO, there's likely to be a collection of overpaid CFOs, COOs, and other top managers. So says a study by a trio of professors from Stanford, Rutgers, and Penn State. "The argument out there has been: 'Maybe a CEO is paid $10 million or $20 million -- that's a drop in the bucket at most companies.' But if it's being multiplied out over many levels, it's more serious," says Tim Pollock, a co-author and an associate management professor at Penn State.

To define "overpaid," researchers compared CEO pay at 120 corporations, looking at averages for companies in similar industries with like revenues and returns on assets. Differences in CEO tenure were also factored in. At the company with the most bloated pay, the CEO was overpaid by 64%, and those reporting directly to him by 26%. Middle managers got only a 12% boost. And here's an unsurprising finding: If a CEO was also chairman of the board, he and his staff were more likely to be overpaid.

It took 62 years for Hewlett-Packard (HWP) to buy the Silicon Valley garage of its founders. By contrast, just eight years after Google's (GOOG) founding, the company has bought the ranch-style house in Menlo Park, Calif., where Sergey Brin and Larry Page first ran things in 1998, using three of four bedrooms and the garage. The search giant won't reveal the price, but real estate site estimates the value of the 42-year-old house at $1.2 million. Google says it has no firm plans for the house beyond preserving it.

In its space programs, the U.S. has had no shortage of partners, teaming up with more than a dozen countries. A notable exception: China, the third nation (after Russia and the U.S.) to launch a human into orbit. Guided by U.S. laws that forbid the transfer of advanced technology to a communist state, NASA officials have always rebuffed the idea of any tie-up with China's military-run space program.

Yet there are signs of warming. On Sept. 28 five top NASA officials returned from a five-day tour of China's space operations. The U.S. team visited research labs in Beijing and explored test facilities in Shanghai. The group declined an invitation to check out the Jiuquan Satellite Launch Center in the Gobi Desert, the center of China's manned space efforts, because they were barred from seeing anything but launch pads.

Awkward moments aside, the NASA team focused on the upside -- "a first date," NASA Administrator Michael Griffin called it. The two sides discussed plans to share data on future unmanned earth and lunar orbiters along with the possibility of placing a U.S. sensor on a future Chinese moon mission. Discussions about manned missions remain off limits.

Could China help the U.S. space effort? A manned moon mission was proposed by President George W. Bush last year, with the cost predicted to exceed $100 billion. But because of limited budgets, "the systems specific to going to the moon cannot be developed until after the shuttles are retired in 2010," says John Logsdon, director of the Space Policy Institute at George Washington University. The estimated $500 billion-plus cost of a manned mission to Mars, as called for by both Bush Presidents, would strain budgets even more.

A space program that includes China, along with today's partners in the International Space Station, could have payoffs for both countries. Beijing would like to crib from NASA's notes on the complex challenges of manned space flight. Washington would benefit from access to Beijing's deep pockets.

Meanwhile, China is already making some great leaps on its own. Its third manned Earth orbiter is slated for next year, and it is on track to send an observation satellite to the moon by 2008, followed by a robot rover in 2012. A manned moon shot would come next.

The networks have gotten some good press about their fall lineup-NBC's 30 Rock and Studio 60 (two shows about network TV), CBS's Jericho, and ABC's Ugly Betty, for instance. Is a strong lineup enough to lure viewers back from cable and other media options?

"Yes. They were trying for so long to do everything on the cheap. They realized they had to spend money. Network TV proves if you throw money at a problem, it works. You get better writers, actors, and ratings." -- Nikki Finke, L.A. Weekly columnist and blogger

"The superior content will be leveraged across multiple platforms. That's the right strategy for major media companies. But consumer viewing patterns are shifting rapidly. The question is, can the business models catch up fast enough?" -- Aryeh Bourkoff, managing director/media analyst, UBS

"While quality doesn't necessary translate into quantity, it often translates into more desirable audiences. Still, it doesn't change the underlying issues that threaten network TV's dominance in the media mix." -- Scott Donaton, associate publisher, Advertising Age

The Good Business Issue
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