There is no dearth of reasons for having a negative outlook these days, with a crisis around every corner. But there is one reason for this writer to have an optimistic outlook going forward.
I teach at a private liberal arts college, and once the spring term gets over I don't hear from students until classes start at the end of August. This summer I have had quite a few students email me and update me on their summer activities. I had taught a first year seminar course last Fall titled 'Local Choices, Global Effects' that dealt with sustainability before the word 'Green' entered the vocabulary of the media. Students who took that course have been regularly emailing me about products or services they have encountered that are 'green' or that promote sustainability. Others have emailed me to let me know about some economic developments and how they found relevance in what they learnt in my courses. Some have updated me on the wonderful stuff they have been learning in their internships and how that relates to their 'academic' knowledge of the world.
This is the first time in my teaching career that I am seeing this level of engagement, from freshmen to juniors and seniors. Clearly, with thinking and engagement, progress lies ahead.
Makes me 'green' in many ways- I wish I was a lot younger so that I could do new product development with these kids!
Monday, June 30, 2008
Turning Green - with Optimism
Sunday, June 29, 2008
War on Wages-Driving Teenagers Change
Natalie Merchant and 10,000 Maniacs were on the money in more ways than one when they sang
"these are days you'll remember
never before and never since, I promise
will the whole world be warm as this
and as you feel it, you'll know it's true..."
Though the album "Our Time in Eden" came out in 1992, the song exemplifies the glory days of the late 1990s. Some memories:
- Flying was FUN. I used to fly between ORD and San Jose (or San Francisco) every week for a long time, and it was enjoyable. Good food, friendly service, low fares, and a decent on-time arrival record.
- Bay area companies were offering perks like a new BMW to get people to join them.
- Decent wage increases, often exceeding 3%
- Regular bonuses
- Decent amount of snow in Chicago (thought the song is about warmth..)
- Minimal to no wage growth
- Dramatic surge in retail gasoline prices
- Food prices on a stomach-churning climb
- Continuing rise in health care expenses
- Housing related problems
An interesting article in the NYT, 'As Gas Prices Rise, Teenagers’ Cruising Declines' describes the changes in teenagers' activities because of high fuel prices. It appears as though no one in the past asked why anyone should cruise aimlessly wasting resources, as a 'rite of passage.' If the teenagers' parents and their predecessors had thought about the resources they were consuming when they were young, perhaps we would not be in the current oily mess.
Mr. Ben Stein, in his piece 'Why Oil and Wages Don’t Mix' in the NYT, describes the decline in average hourly wages for nongovernmental workers since 1994. He concludes with "Meanwhile, it’s all a bit discouraging — especially the trend for wages. But we will get through it, just as we get through everything else, one adaptive, smart American at a time."
The key is in figuring out what "getting through it" means, and how it is tied to "smartness."
I am rather pessimistic on this issue, because the public at large and the people in the media do not exhibit curiosity and ask questions- real questions, of our leaders in the pursuit of the elusive truth. When this changes and the public forces activities like the Fed bailouts of corporate chieftains and government bailouts of "not smart" mortgage holders to stop, I will turn optimistic.
Saturday, June 28, 2008
Threading the Ethics Line
Early in my career, I happened to discuss business ethics with the CEO of the company where I worked after a meeting got over. In that meeting we had talked about the CEO of one of our competitors who was being jailed for his company's unethical behavior- offering bribes. Our CEO was one of the founders of the company, and was highly revered by everyone in the industry for his contributions and ethics. His message to me was that we all know the line that separates right from wrong. His advice to me was not to come close to the line or try to push the envelope. Stay far away from it, was his advice.
I have come across some stories recently that illustrate the importance of this principle. Companies and people who run them are still doing 'funny' things to try to evade legal obligations, or are trying to push the envelope.
Story # 1: Amazon.com
Under current law, online retailers like Amazon need not collect state sales tax in states where they don't have any 'physical' presence. But they are required to do so in states where they have physical facilities. These facilities could include stores, warehouses, and distribution centers.
Amazon has not collected sales tax in states like Pennsylvania and Texas even though it has warehouses or distribution centers in those states. These facilities are technically not owned by Amazon, but by wholly-owned subsidiaries of Amazon. The company is arguing that 'it' does not have physical presence in those states.
More details here.
Story # 2: Pharmaceutical Industry Lobbying
The Center for Public Integrity published an ulcer-inducing article titled "A Record Year for the Pharmaceutical Lobby in '07 - Washington's largest lobby racks up another banner year on Capitol Hill" on June 24, 2008. In that report it states that "Washington's largest lobby, the pharmaceutical industry, racked up another banner year on Capitol Hill in 2007, backed by a record $168 million lobbying effort..... Among the industry's successes: getting two controversial laws extended and thwarting congressional efforts to restrict media ads for prescription drugs."
Apparently "among the industry's top achievements:
- blocking the importation of inexpensive drugs from other countries;
- protecting pharmaceutical patents both within the United States and abroad; and
- ensuring greater market access for pharmaceutical companies in international free trade agreements. "
Story # 3: Countrywide CEO Mazullo: What's a friend for? A friend in need is a friend in'deed.'
The WSJ, in an article titled "Countrywide CEO Helped Many Get Loans" reports that Mr. Angelo Mozilo, when he was the chief executive of Countrywide Financial Corp., helped his "Friends" get mortgage loans even when some of them would have been disqualified under standard company policies. These "friends" include the daughter of a casino manager and her fiancé, Indiana Pacers center Rik Smits, San Francisco 49ers offensive lineman Harris Barton, two senators and two former CEOs of mortgage buyer Fannie Mae. Hey, it is "someone else's money, isn't it?"
Friday, June 27, 2008
Sam Manekshaw passes away
Just read a report that Sam Manekshaw, former chief of the Indian army, and the general who led India to victory in 1971, passed away. He was the idol of all Indians in those days.
Our eternal thanks for your service to the country and to the world, Field Marshal. May your soul rest in peace.
Mother Nature, "Oil"y politicians, Bail-out Ben's Fed, Trichet's ECB
The Independent reports that "It seems unthinkable, but for the first time in human history, ice is on course to disappear entirely from the North Pole this year."
BBC reports that "Climate change has caused plants to seek cooler conditions at higher altitudes, scientists suggest. " It also reports that scientists have uncovered vast cracks in Arctic ice.
Now, to the Slick "oil" story...
Many reasons have been proposed for the steep increase in crude oil prices over the past one year. It is virtually impossible to diagnose the problem due to lack of data, which resulted in part from lack of oversight of the relevant trading exchanges. It is interesting to put together some of the dots that can be connected.
* Enron Loophole. This was part of the Commodity Futures Modernization Act of 2000. The loophole exempted private energy-trading markets, like the one operated by Enron, from regulatory oversight. Due credit has to be given to Congress for coming up with a brilliant name for the bill (see Core competency of Our Nation).
NYT elaborates further: "Related to that loophole is a broader one for a category called exempt commercial markets, envisioned in the 2000 law as innovative professional markets for nonfarm commodities that did not need as much scrutiny as public exchanges.
What lawmakers did not anticipate was that one of the exempt markets, the IntercontinentalExchange, known as the ICE and based in Atlanta, would become a hub for trading in a product that mirrors the natural gas futures contract trading on the regulated New York Mercantile Exchange.
In 2006, traders at a hedge fund used the ICE’s look-alike contract as part of what regulators later asserted was a scheme to manipulate natural gas prices, again at great cost to users. The fund denied the accusation, and civil litigation is pending."
Senator Barack Obama has proposed closing the Enron loophole and preventing traders of American crude oil from routing transactions through offshore markets. This appears to be a step in the right direction.
Jean-Claude Trichet, President of the European Central Bank (ECB) does not think that "speculation is the major culprit." He believes that supply and demand issuesare the primary drivers.
Helicopter Ben 'always find the silver lining' Bernanke, the Federal Reserve Chairman said the "silver lining" in high oil prices is that it provides "a powerful incentive for action," including conservation and other measures to become more energy efficient. (Economic Times, June 5, 2008).
Based on EIA's 2007 petroleum consumption data, for every gallon of petroleum consumed per person in India, China consumes 2.37 gallons and the U.S. consumes 25.36 gallons per person. No one
The U.S. currently produces approximately 5.12 million barrels of crude oil a day and imports 10.25 million barrels. Assuming no stockpiling, we are consuming more than 15 million barrels a day of crude, or more than barrels a person. This compares to about 0.6 to 0.7 for China and 0.25 for India. if we completely eliminated imports and used only our domestic production, we would be consuming 1.7 per person, still higher than the same numbers for China or for India.
Simply put, there is no reason why the United States should have first dibs on so much foreign oil. Except in the minds of the evangelists, there is no evidence that God has created the world's resources for consumption by the U.S. Serious steps need to be taken to reduce consumption dramatically and increase conservation. Major investments in infrastructure for public transportation need to be made. It is ironic that GM and Ford, the two companies who contributed the most to the demise of the public transportation system (streetcars/buses/rail), are themselves going downhill in the U.S. Meanwhile, Sen. Obama has talked about conservation while Sen. McCain has changed his tune and now wants to drill off the Florida shore today, and perhaps in ANWR tomorrow..
Conservation and reduction in usage efforts are paramount and urgent, in part because of the climate changes that our behavior is wreaking on nature. Let us hope that we act more responsibly than in the past and that people in the rest of the world don't emulate our past. It will be dastardly if we killed the Mother Earth that gave us our livelihood and our water and our oil.
Supreme Court Guns Down The Right to Life
The Supreme Court, supreme only in sheer arrogance, ruled yesterday that "there is a constitutional right to keep a loaded handgun at home for self-defense." (NYT, 6/26/2008).
The United States Declaration of Independence says that "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." Article 3 of the Universal Declaration of Human Rights states that "Everyone has the right to life, liberty and security of person. " These apparently do not matter to the above justices.
Last week I had written a piece in my blog called "What a tragedy!" that listed some of the deadly shootings in Chicago. Here are some more..
Off-duty cop wounded in shooting
Woman fatally shot at YMCA center in New Jersey
Man fatally shot in West Englewood
6 dead after plant rampageThese are just a few of the many shootings that have occurred in recent days.
When one person's right to bear arms infringes on another person's right to life, the Supreme Court is asserting that the right to life does not matter. It is tragic and abysmal that for all the 'Right-to-Life' advocates, supporting the right of a fetus is a far more worthy cause rather than trying to save the lives of people already outside the womb and living on the planet.
I personally cannot fathom why a person should not give up his or her right to own fire-arms even if it saves just ONE life. And at a minimum, fewer guns would mean a decrease in unintentional shootings. As far as owning a gun for hunting is concerned, no civilized person would have a need to shoot an animal for fun. There are plenty of other sports for a person to engage in that does not involve taking a life. Or is that the whole point- that some people should have the right to take the lives of others?
Mayor Daley of Chicago had a proper response to this Supreme Court ruling. Daley called the ruling "very frightening" and vowed to vigorously fight any attempt to invalidate the city's ban.
"Does this lead to everyone having a gun in our society?" Daley asked while speaking at a Navy Pier event. "If [the justices] think that's the answer, then they're greatly mistaken. Then why don't we do away with the court system and go back to the Old West, you have a gun and I have a gun and we'll settle it in the streets?" (Chicago Tribune, 6/26/2008).
The final word on this comes from Keith Olbermann of MSNBC who hosts the show "Countdown with Keith Olbermann." Yesterday, on his show he named Justice Scalia the "worst person in the world" and had this to say...
"And our winner, Justice Antonin Scalia of the Supreme Court. You‘ve got around 30,000 gun deaths in this country per year, another 75,000 non-fatal gun wounds, half the suicides are by gun; and this clown and his four colleagues decided that the 32-year-old ban on handguns in Washington, D.C., and the demand that firearms kept in the home be locked or disassembled was unconstitutional based on the Second Amendment. You remember the Second Amendment, “a well-regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.”
Despite years of fog created by the NRA and right-wing organizations, that isn‘t very complicated; for the purposes of forming a state militia, you‘re entitled to keep and bear arms. Obviously, those would have to be the kind of use in arms since 1791, when the Bill of Rights was passed, the musket, the wheel-lock, the flint lock, the 13th century Chinese hand canon. Stuff like that.
Scalia, of course, simply decided that the militia part of the Second Amendment is some sort of quaint anachronism that he could happily ignore. There‘s the beautiful thing about our country, they say anybody can grow up to be a Supreme Court justice. And in Antonin Scalia, there‘s your proof, and tonight‘s worst person in the world." (Italics mine).
Thursday, June 26, 2008
Core competency of Our Nation (CON)
It is quite common now to find commentators vilifying OPEC, India, China, and others for the oil crisis and stating that we can achieve energy independence by drilling off-shore and in ANWR. There is a lot of angst expressed regarding the trade deficit we have with other nations, particularly China.
One of our core competencies that we can leverage into a valuable export commodity (and achieve independence) is marketing of the political system and its actions. Some readers may question this competency when the approval ratings of the President (23%, according to LA Times/Bloomberg poll, 6/19/2008-6/23/2008) and of Congress ( 19%, according to FOX/Opinion Dynamics RV poll, 6/17/2008-6/18/2008) are lower than the water table in the California desert. The key is to comprehend what the ratings would be in the absence of the exceptional marketing skills deployed by the politicians.
As an example, in 2004, I had written about a new bill Congress had passed, the "American Jobs Creation Act of 2004" in an article titled "LEARNING FROM THE BEST- CREATIVE BRANDING CAMPAIGNS BY GOVERNMENT AND CONGRESS." In that piece I stated that "One of the items in this bill allows a U.S. corporation with a stake in certain foreign corporations may make a one-time election this year to shift foreign earnings to their U.S. headquarters at an effective 5.25% rate, instead of the typical 35% corporate rate. Another item reduces excise taxes on the sale of bows and arrows, fishing tackle boxes and sonar fish finders. While these initiatives might have been hard to sell on a stand-alone basis, the branding power of the JOBS bill enhances the marketing of them. This bill has been actively promoted by corporations and legislators alike as a key driver for job growth, since there are attractive elements for many constituencies."
The results of that bill are summarized in a New York Times article on 6/24/2008 titled "A One-Time Tax Break Saved 843 U.S. Corporations $265 Billion." There is no evidence that jobs were created due to this bill, primarily because this bill was directed towards multi-nationals. These firms never walked away from domestic investment opportunities because of lack of cash. Instead, they have been investing in emerging markets because that's where they are finding growth. Since money repatriated under the bill cannot be distinguished from money generated through operations, it is hard to identify how the money has been deployed. But large companies have been buying back stock in massive quantities, doing M&A, and giving massive dividends to shareholders. For example, in 2004, soon after the Bill was signed, Microsoft gave $32 billion in cash as a special dividend and announced a four year stock buyback of nearly the same amount.
The pharma companies saved healthy amounts of money, with Pfizer repatriating $37 billion and Merck $15 billion. IBM repatriated $9.5 billion. This was the American Jobs Creation Act of 2004.
Politicians of all stripes are reviled everywhere. But the players in other countries can pay us to learn our CON and portray themselves as PRO citizenry while getting their pockets lined with lobbyists' generosity. This should appeal to elected leaders and wanting-to-be-elected leaders in many countries including China, President Bush's Katrina-gate images not withstanding.
Wednesday, June 25, 2008
Capitalism for the C_Os, Socialism for the Rest of Us
*This article lost some formatting when I pasted it into this blog. Read the original version here*
In 2004 I had written some articles on financial engineering 101, accounting and accountability, official fudging of data, and why management needs to treat financial statements with respect, which were published on PrudentBear.com. I later followed up this theme with an article in July 2005 titled “Assessing the Demand for Residential Real Estate” that, in hindsight, was prescient. The present article reflects on the actions taken by public and private sector leaders to navigate the current financial maelstrom, and revisits the thesis put forth in the earlier articles that integrity is being tested - that of buyers, lenders, builders, investors, public officials, and the public at large.
Back in 2005 the CEOs of some residential construction companies were on television’s “financial news” programs taking about their companies and emphasizing the following two points.
1. This time, the housing market is not as sensitive to increases in interest rates as in the past, especially since the rates are at historically low levels. The point being emphasized is that the rates can go higher (another 200 basis points?) before having a significant impact on home sales.
2. The housing market is all about SUPPLY and DEMAND.
The fall-out in the financial sector and in the broader economy from the financial innovations of the past five years, especially in housing and associated financial industries is apparently far from over. I had written in 2005 that “…the magnitude of the unfulfilled demand for housing combined with financial new product development can keep the current housing boom going for a few more years. However these new financial products have yet to stand the test of the vagaries of the environment- an economic downturn or an interest rate spike or other events that may cause lenders to pull in the reins. To understand the magnitude of the impact of a constrained lending environment it is useful to look at the sharp decline in prices of telecommunications stocks in 2001-2002 as investors became more risk-averse. Some companies went bankrupt and those left holding the bag (like the author) did not receive any bailout from the government…..Part of the bet is that with the scale of liabilities of the mortgage industry, especially the GSEs, the Fed and the government will bail out the financial sector from any disasters, shifting the burden to the public. As alluded to by others, ‘character’ is being tested - that of buyers, lenders, builders, investors, and the public at large.”
Now, let us examine the actions by the Federal Reserve Bank (the Fed) to “grease” the liquidity wheel over the past year. Some of the steps taken by the Fed are listed blow.
1. It has lowered the Fed Funds Rate from 5.25% in Aug 2007 to 2% by the end of April 2008, the fastest ramp down in rates since 1990.
2. It has provided numerous offerings of $75 billion, $50 billion and $30 billion in 28-day credit through the Term Auction Facility, or TAF. According to the Fed, TAF auctions are very similar to open market operations, but conducted with depository institutions rather than primary dealers and against a much broader range of collateral than is accepted in standard open market operations (Italics are by the writer). With a wink and a nod, this shifts the risk to the public.
3. It has lowered the rate on discount-window loans to banks.
4. In March, it started a series of repurchase transactions with terms of roughly 28 days and cumulating to up to $100 billion. Primary dealers could deliver as collateral any securities eligible in conventional open market operations. Additionally, the Federal Reserve introduced the Term Securities Lending Facility (TSLF), which allows primary dealers to exchange less-liquid securities for Treasury securities for terms of 28 days at an auction-determined fee. Recently, the Federal Reserve expanded the list of securities eligible for such transactions to include all AAA/Aaa-rated asset-backed securities. Given the cloud hanging over the ratings agencies, this is again a blatant shift of the risk and the burden to the public.
5. It bailed out Bear Stearns by lending $29 Billion to JPMorgan Chase and taking on Bear Stearns assets. This was done, in the words of Chairman Ben Bernanke, “to prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences for market functioning and the broader economy.” The Fed can normally only lend through its discount window to banks. Under Section 13-3 of the Federal Reserve Act, added in 1932, it can lend to “individuals, partnerships, or corporations” with the approval of not less than five governors, provided “such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions.” Now investment banks can relax with the knowledge that the fed can bail them out anytime, anyplace.
6. It used its emergency power to create the Primary Dealer Credit Facility (PDCF) which allows primary dealers to borrow at the same rate at which depository institutions can access the discount window, with the borrowings able to be secured by a broad range of investment-grade securities.
As Dwight Cass and Jeffrey Goldfarb note in an article titled “Why is the ‘Discount’ Free?” in the Wall Street Journal (June 12, 2008), the option given by the Fed to the banks, investment banks and the brokers to access the discount window at the lowered rate has value. But the Fed is giving this option (or insurance) for free. Any ordinary person will not get any insurance without a premium. Some criticism has been leveled against the Fed for encouraging ‘moral hazard’ with these steps, implying that it will embolden banks and dealers to take greater risks with the assurance of a Fed bail-out. However it is instructive to look at how these companies were led to the current state by their allegedly hardworking officers, the C_Os, particularly the CEOs.
2003 to 2007
| Company | CEO(s) | Salary+Bonus 2003-2007 | Total Compensation 2003-2007 | Average per year 2003-2007 |
| Merrill Lynch | Mr. O'Neal and Mr. Thain | $ 64,341,923 | $ 226,474,013 | $45,294,803 |
| Countrywide Financial | Mr. Mozilo | $ 68,907,774 | $ 137,505,901 | $27,501,180 |
| Bear Stearns | Mr. Cayne | $ 51,932,623 | $ 128,056,532 | $25,611,306 |
| Citigroup | Mr. Prince and Mr. Pandit | $ 33,427,344 | $ 113,758,846 | $22,751,769 |
| Fannie Mae | Mr. Raines and Mr. Mudd | $ 14,347,931 | $ 63,357,081 | $12,671,416 |
| Freddie Mac | Mr. Syron | $ 15,054,231 | $ 59,565,891 | $11,913,178 |
Data from SEC filings and company reports
Notes:
• The salary plus bonus is the “direct cash” part of the compensation received by the CEOs.
• Upon his departure from Citigroup in November, Mr. Prince left with approximately $68 million, while Mr. O'Neal collected about $161 million after he stepped down in October at Merrill Lynch.
• Countrywide's Mozilo was to collect a windfall of $115 million dollars after his firm agreed in January to a sale to Bank of America. After facing criticism he generously offered to forfeit $37.5 million in payments tied to the deal.
• John Thain, who became the CEO of Merrill Lynch on Dec. 1, 2007, got a package of $83 million.
• Morgan Stanley CEO John Mack received a total of $41.7 million for 2007.
• Mr. Pandit, appointed as CEO of Citigroup in December 2007, received about $165.2 million in connection with the sale of Old Lane Partners to Citigroup. He received an additional $2.7 million in the roughly six months he served as head of Citigroup's investment bank and alternative investments group. In January, he was given a sign-on grant of stock and performance-based options worth over $48 million.
Each one of the above institutions has taken write-downs of billions of dollars and shrunk its balance sheet. According to Reuters, banks and other financial institutions globally have written down more than $400 billion of assets during this financial crisis. Recently, Lehman wrote off $3.7 billion in assets in its second quarter. Merrill Lynch has written off more than $30 billion in assets over the past year. Citigroup took $14 billion in write-downs in the first quarter of 2008, on top of $18.1 billion in the previous quarter. Despite these write-downs it is difficult to gauge the true extent of damage and the fair value of remaining assets. Some, if not all, of these institutions still have off-balance sheet investments and associated liabilities. It is also not clear if these institutions have determined the fair market value of the items remaining on the asset side, as the investment vehicles have become quite complex and difficult to assess, or are simply not marketable under current conditions. As an example, there is a difference of $1.1 billion between the value Lehman Brothers Holdings assigned to some assets in its first quarter conference call and what it reported in its subsequent quarterly SEC filings (Wall Street Journal, June 12, 2008). Additionally, the financial crisis wrought by these institutions has created major shocks throughout the economy and wreaked havoc on many people’s lives.
How did the ‘system’ reward this rather ‘capital’ performance? The CEOs cleaned up handsomely for driving and encouraging financial innovation, for deceptive and often fraudulent business practices, for exploitation of the ‘buyer beware’ maxim, and for other unsavory and unethical practices. In their world of capitalism, there is no ‘downside risk’ other than forfeiting some future potential earnings at that particular institution. Even the Government Sponsored Entities (GSEs) have become rotten to the core like their non-GSE peers. None of these leaders have paid back, or have been asked to pay back, their winnings from this rigged ‘heads I win tails I win some more’ coin tosses. The public is forced to bail out the institutions - socialism is thrust upon it.
Of course, the buck does not stop with the CEOs but goes right into the palms and pockets of the elected ‘lead’ers. Lawmakers up on Capitol Hill are finalizing the so-called 'Credit Suisse Plan' plan to bail out the banks and the borrowers, not with the politicians’ or the bankers’ money but with the hard-earned money of the taxpayers. The New York Times describes the bill and the Washington Post explains how this bill came about. Key aspects of the plan are listed below.
• It allows qualified mortgage holders to refinance into more affordable, 30-year fixed-rate loans with a federal guarantee.
• First-time buyers receive a refundable tax credit of up to $8,000, or 10 percent of the value of a home, on purchases of unoccupied housing.
• Fannie Mae and Freddie Mac, the government-sponsored mortgage finance giants, can purchase loans up to $625,000 from lenders. The previous limit was $417,000. This will allow lenders to make more reckless mortgages.
• The bill allocates $150 million towards counseling for borrowers to prevent foreclosure.
• In a foreclosure, lenders lose 40 to 60 percent of the loan. Under this bill the tax payers picks up the tab as long as the lenders agree to reduce the principal balance of loans to roughly 85 percent of each property’s current value.
• Nearly $4 billion in grants to communities with high foreclosure rates to buy and rehabilitate vacant properties.
The public should hold President Bush and his administration accountable for reckless encouragement of an “ownership society.” He stated in 2003 that "This Administration will constantly strive to promote an ownership society in America. We want more people owning their own home. It is in our national interest that more people own their own home. After all, if you own your own home, you have a vital stake in the future of our country." The White House website brags about home ownership in President Bush’s Record of Accomplishments. The very first highlight is that “The US homeownership rate reached a record 69.2 percent in the second quarter of 2004. The number of homeowners in the United States reached 73.4 million, the most ever.” It should be updated to reveal that in the first quarter of 2008, the homeownership rate was 67.8% and declining. In the fourth quarter of 2000, homeownership was 67.5%. By the time President Bush leaves office, the rate could well be below what he inherited. In the meantime he accomplished the wonderful feat of creating an ownership society – transferring wealth to the wealthy.
When leaders including C_Os and elected leaders combine this gross exhibition of looting with lavish posthumous paydays (see the Wall Street Journal article titled ‘Companies Promise CEOs Lavish Posthumous Paydays’) they define modern capitalism. The question is how long will the public continue to practice the socialism that supports this generosity towards the capitalists? As an educator, it is becoming almost impossible to impart ethical behavior to students in light of this behavior. However, even under these dark ominous clouds it is fascinating to listen to Muhammad Yunus, the Nobel Peace Prize winner and founder of Grameen Bank discuss micro-finance during his interview with Paul Solman (Online Newshour, PBS).
Paul Solman: “And so there will be enough investors in the world to invest in these funds to make them continue to operate, even though they're not as profitable as they could be?”
Muhammad Yunus: “It was not profitable at all, non-loss, non-dividend companies. That's what the social business is all about. So you came here to do good. It's a clean idea.”
Tuesday, June 24, 2008
Planes, Trains and Gas-mobiles
- Along with suspending Ted, United said it would remove 100 aircraft from its fleet, including six Boeing 747-400 long-range jets, and 94 Boeing 737 medium-range planes. (NYT 06/05/2008).
- American Airlines Inc.'s parent, AMR Corp., said it has begun the first round of reductions to its flight schedule and will retire up to 85 aircraft as part of its previously announced plans to reduce capacity. (Businessweek, 05/27/2008)
Continental said that it is accelerating the removal of its fleets of old Boeing 737-300 and 737-500 short-haul jets with the retirement of 73 aircraft including six previously announced. Of the total, 43 will be removed this year and 30 in 2009. The entire 737-300 fleet will be grounded by the end of next year.
From NYT, 06/21/2008 - "Amtrak set records in May, both for the number of passengers it carried and for ticket revenues — all the more remarkable because May is not usually a strong travel month.
But the railroad, and its suppliers, have shrunk so much, largely because of financial constraints, that they would have difficulty growing quickly to meet the demand."
Gasmobiles, aka automobiles
While airlines are parking their inefficient planes and Amtrak has already retired quite a few old cars, GM is pounding the pavement in trying to sell its and pick-ups.
GM offers deals to cut overstock The General Motors Corporation said on Monday that it would offer six-year, no-interest loans on slow-selling models for the rest of June as it closes out a dismal second quarter.
When Buying A Gas Guzzler Makes Sense
Buying a gas guzzler never makes sense when one takes a broader, societal point of view.
Monday, June 23, 2008
You are what you eat, so chow down cloned food and GMF
This morning, a news reporter on CNBC talked about initiatives by the government and the corporate sector to put an RFID tag on each and every food item, especially tomatoes, in light of the recent salmonella outbreak. This idea has been souped up every so often, but the price of the tags and the little problem of how to put it on food so that it does not become an RFID tag inside a person, have stymied efforts thus far.
At the same time, as Financial Times reports, cloned food is now appearing on our dinner table. While genetically modified foods, including milk and grains, have become a part of the mainstream food chain, cloned foods presents a a more colorful but unappetizing choice.
'Buyer beware' applies here. Readers are urged to exercise due diligence in their procurement of food. The author grows his own organic vegetables and buys certified organic foods as much as possible, preferring quality over quantity. Being a 'guinea pig' for these innovations might save the reader money, but might hasten his or her transformation into a 'steak' in the ground.
I am currently reading a book titled "The Organic Food Shopper's Guide" by Jeff Cox. It is an excellent resource for organic foods and also has some delicious recipes.
*
On a separate note, the author mourns the passing away of comedian George Carlin.
Sunday, June 22, 2008
Stupidity, on a "Lawn" scale
There was a feature article in the Wall Street Journal on June 5th titled "The Vegetable Patch Takes Root." Its main point was that home-owners are increasingly reducing their lawns and growing vegetables in those spaces.
The article does not question why lawns are so revered in the United States. Growing and maintaining a lawn is one of the stupidest things a person can do, for the following reasons:
- One has to pay for the grass seeds or sod.
- Lawns have to be watered regularly. Misuse of a scarce resource, and $$$ out of the pocket.
- Lawns have to be mowed regularly. Most home-owners use gas powered lawnmowers, which have inefficient engines. $$$ out of the pocket for the lawnmower.
- Lawns have to be mowed regularly. Misuse of a scarce resource, and $$$ out of the pocket for the gas or electricity for the lawnmower. Apparently, more people are now switching to manual mowers - see High gasoline prices changing lawn-mowing habits.
- Polluting the environment with the gas lawnmowers as there are no emissions control equipment installed on the lawnmowers.
- Opportunity cost of the time spent in mowing and watering the lawn.
- People with lawns apply fertilizer. $$$ out of the pocket.
- Chemicals leeching into the water supply, ultimately.
- Some folks use chemicals to kill weeds in their lawns. See 7 and 8.
- The valuable space can be used to grow food, or to grow plants that are much less stressful to the environment.
I am 'floored!'
A really neat idea.......
Article reproduced here (from FT.com) for easy reading...
Trendspotter: When is the floor a sofa?
By Lucy Warwick-Ching
Published: June 7 2008 02:20 | Last updated: June 7 2008 02:20
As the line between art and design continues to blur, the world of furniture is another shifting concept.
The Flying Carpet, a product created by Ana Mir and Emili Padrós from the Emiliana Design Studio in Spain, redefines what we think of as a carpet and a sofa, merging the two to create a new type of furniture that works at ground level.
As featured on www.thecoolhunter.co.uk, the piece can be used in the home or in a public space. It is made of 100 per cent wool with foam wedges.
Mir says: “Everyone likes to relax on the floor but as they get older it starts to get too uncomfortable to sit there for very long. Due to its topography, the Flying Carpet is a comfortable and amusing three-dimensional space in which to sit, stretch and relax.”
She says any of its corners can be lifted by moveable wedges covered in natural grey felt. It is available in three colours, two sizes, and with two different wedge heights. And, with inch-thick soft wool to sit on, it’s not as uncomfortable as ordinary carpets can be.
Its creators say it “encourages users to become creative participants in their surroundings while enriching their daily experiences through the use of the objects and spaces that surround them”.
It does look like it would be more comfortable to lie on than a conventional carpet but it probably is more at home in a child’s bedroom than the living room.
After an initial appreciation of its cutting-edge design, I would imagine a lengthy spell on it could make you feel more like you were lying down on the hills in the UK children’s programme The Teletubbies than relaxing elegantly on a sophisticated piece of furniture.
Sustainable Banking
On June 3, 2008, Financial Times ran a special report on Sustainable Banking. This report has a number of thought-provoking articles.
Retreat to bottom line not an option
Surviving the credit squeeze will not stop the drive to sustainability, says John Willman
Europe’s emerging economies: Investors blowing hot and cold on the Baltic
EU regulation is driving a renewable energy boom in the region, writes Jan Cienski
Lars Thunell: Poor farmers need level field
The IFC chief talks to Chris Bryant about the ethics of microfinance lending
Micro-insurance: Cover for those who cannot afford to lose
Companies stretch their reach to the very poor, writes Andrea Felsted
Innovation: Opportunity in a brave new world
Ben White explains how investors have become much more sophisticated
Case study: Iryan mine sparks green approach
Michael Steen looks at the Dutch bank’s approach to project finance
Overview: Microfinance unlocks potential of the poor
Large banks are realising the value of small savers, reports Sarah Murray
The basics: Mobile phone operators revolutionise cash transfers
The 3bn without bank accounts can send money at the press of a button, writes Ross Tieman
Savings accounts: African farmers sow more profitable seeds
Tom Burgis reports on the impact of new products for the ‘unbankable’
Microfinance: Bank welcomes India’s poor
Amy Yee on the city dwellers who are being offered a fighting chance
Saturday, June 21, 2008
Shrimp Factories instead of Rice Farms
The New York Times has an interesting article today on Indian agriculture and its current inability to produce enough rice. wheat and vegetable oil for its population. The article does highlight some of the systemic problems facing the country.
The article, however, omits one key fact- significant number of farmers in India (especially along the coast) have removed the good soil in their arable land, filled it with sea water and are growing various varieties of shrimp. The large government subsidies given to farmers in U.S. and in Europe for many years have kept the prices of rice and wheat in India at a level where the Indian farmers could not make enough return on their labors. Some of these farmers realized that growing shrimp and exporting to the West produced much better returns. Large areas of arable land that produced rice are converted to shrimp production. The coastal part of Andhra Pradesh was composed of rice paddy fields- now it is hard to find much green on the map, instead one finds a lot of blue. (Image thanks to Google Earth).
Now, even though grain prices are soaring, it is not easy to re-convert the shrimp farm to arable land for growing grains. As China has entered the shrimp export market in a big way as well, shrimp prices have fallen significantly, and this has created a sea of problems for the Indian farmer who is in a pickle. The tragedy is that 50% or more of the Indian population is primarily vegetarian- consequently the domestic market for shrimp is limited.
Indian business folks are notorious for gravitating rapidly towards any situation where they can make a quick buck. In this case, farmers who previously produced enough rice for themselves and some more for sale are now buying the grains in stores at very high prices, while seeing their incomes shrink.
A 'shrimp' of a tale, indeed!
Friday, June 20, 2008
Music therapy
There was an interesting interview with the singer Liz Phair in the WSJ. She talked about an experiment where she created an iTunes playlist of songs that popped into her head after a 'rough patch.'
Here are some songs that keep popping into my head....rough patches of hair and all...
Congratulations ....Traveling Wilburys
Jaoon Kahan Bataye Dil..Mukesh
Do Panchi do tinke...Kishore and Aarti
Badi Sooni Sooni Hai..Kishore Kumar
Touch of Grey...Grateful Dead
Ruk Jana Nahin..Kishore Kumar
These are days...Natalie M.
Ab ke sawan mein..Lata and Kishore.
Yaad Kiya Dil ne...Hemant and Lata
Aadmi jo kahta hai...Kishore.
Ode to my Family..Cranberries
Morning has Broken...Cat Stevens
Don't go breaking my heart...Elton John and Kiki Dee
Mere Naseeb Mein Aye Dost..Kishore Kumar
Khayalon Mein Kisi Ke.. Mukesh and Geeta Dutt
And I guess that's why they call it the Blues..Elton John
Na jaane kyon...Lata
In the shape of a heart..Jackson Browne
Hazaar Rahen Mudke Dekhi... Lata and Kishore
Sometimes when we touch..Dan Hill
Born to Run..Bruce
Old Time Rock and Roll..Bob Seger
Tu Kahe Agar Jeevan bhar..Mukesh
Hardest time..Los Lobos
Kahin Door Jab Din Dhal Jayee..Mukesh
Wonder...Natalie M.
Mausam Ayega Jayega...Manna Dey and Asha
Song Remains the Same ..Led Zep.
Gun Shy..Natalie M and 10K Maniacs
21...Cranberries
Is this all there is..Los Lobos
Main to tum sang...Lata
Tujhe kya sunaoon mein dilruba...Rafi
Manzil wahi hai pyar ki...Subir Sen
'Patent'ly corrupt!
Pfizer, the world's biggest drug company by sales, has been facing patent expirations on a number of its drugs. Ranbaxy, the Indian drug firm that makes generic drugs, had been challenging Pfizer's patents for Lipitor. There was a good possibility that Ranbaxy would have succeeded, in which case generic Lipitor would have been available in the first half of 2010. Lipitor currently generates nearly $13 billion a year for Pfizer.
In order to extend the patent-protected Branded Rx life of Lipitor, Pfizer has entered into an agreement with Ranbaxy. The latter will delay the introduction of generic Lipitor until November 30, 2011, giving an additional year and a half of patent life for Lipitor. In return, Pfizer is also allowing Ranbaxy to sell generic version of another drug, Caduet, in the United States on the same date.
Ian Read, president of Worldwide Pharmaceutical Operations for Pfizer, had the audacity to say that “This agreement is a win-win-win because it is pro-patient, pro-competition and pro-intellectual property.”
This is a rather simple case of 'quid pro quo.' It is depressing that corporations can get away with such blatant corruption- this is a hard 'pill' to swallow....especially if it's Zoloft, Pfizer's anti-depression drug. After Zoloft went off-patent in June 2006, its sales declined by nearly 84%, from $3.3 Billion in 2005 to $531 million in 2007.
Thursday, June 19, 2008
Music sure sounds sweet- to Apple and to Wal-Mart
Apple reported today that the number of songs purchased from iTunes exceeded 5 billion- yes FIVE billion. That is nearly $5 billion dollars at probably high gross margins for Apple. Industry reports place Apple in first place as a music retailer.
Wal-Mart is the one facing the most heat from this, as its CD sales are declining and its music download store is not exactly challenging iTunes. So, rather than doing what it did with its online DVD rentals business, i.e. closing down shop when the business floundered against Netflix, Wal-Mart is now getting into the music distribution business, trying to cut out the middle person and bring the artists' music directly to the consumer without the labels.
There was an article today in the press about people cutting down on $4 Starbucks lattes and becoming thriftier. Will this behavior have any effect on music purchases? Stay tuned!
Every silver lining has a touch of grey................The Grateful Dead.
Wednesday, June 18, 2008
What a tragedy!
2 more teens die in South Side shootingsBoy, 14, shot in head on Far South Side
Teen is shot for the 3rd time this year
It is profoundly tragic that young lives are being lost every day while the politicians are busy raising money to get re-elected and the so-called News folks are busy with the 'hot story of the week'- currently offshore drilling for oil and the end of Tiger Woods' 2008 golf season.
A society that does not take care of its very young and the aged has lost its moral compass, according to the great sages in history.
Tuesday, June 17, 2008
Great Stories on Going Green and Sustainability
The IHT has some interesting stories on sustainability and going green.
Definitely worth reading.
Monday, June 16, 2008
Presentation on my view of the world
I gave a presentation today on my view of the world of Logistics and Supply Chain Management and how it is evolving.
Sunday, June 15, 2008
Gross Behavior: Collecting the Loot even after death
And one more reason to stay away from COMCAST, DISNEY, and VERIZON...
I will write a longer article on the sheer audacity of current leaders to loot the public, but this headline should make everyone pause and reflect on the direction this country is headed.
Companies Promise CEOs Lavish Posthumous Paydays
Article is reproduced below, for ease of reading.
Companies Promise CEOs
Lavish Posthumous Paydays
Even Salaries May Continue
See Corrections & Amplifications below.
June 10, 2008; Page A1
You still can't take it with you. But some executives have arranged for the next best thing: huge corporate payouts to their heirs if they die in office.
![[Go to chart]](http://s.wsj.net/public/resources/images/it_moving-on09142004171604.gif){kind=small}
Take Eugene Isenberg, the 78-year-old chief executive of Nabors Industries Ltd. If Mr. Isenberg died tomorrow, Nabors would owe his estate a "severance" payment of at least $263.6 million, company filings show. That's more than the first-quarter earnings at the Houston oil-service company.
Dozens of other companies offer lush death-benefit packages to their top executives, according to a Wall Street Journal review of federal filings. Many companies accelerate unvested stock awards after a death, which by itself can amount to tens of millions of dollars. Some promise giant posthumous severance payouts, supercharged pensions or even a continuation of executives' salaries or bonuses for years after they're dead.
The CEO of Shaw Group Inc. is in line to be paid $17 million for not competing with the engineering and construction company after he dies.
Lockheed Martin Corp.'s top officer didn't even need to die to get a death benefit; Lockheed paid out the sum, about $1 million, in March while he was still very much alive.
Death benefits, sometimes called golden coffins, have been around for years, but until recently the amounts were often impossible to determine or were shrouded in the fog of proxy-statement language. A federal rule change 18 months ago required companies to be clearer about what they're obliged to pay if top executives end their employment, under various circumstances.
![[Deathpay]](http://s.wsj.net/public/resources/images/P1-AL883A_DEATH_20080609223614.gif)
A death of a CEO or chairman often is a traumatic event, both for the family and for the suddenly leaderless company. But compensation critics say that's no reason to lose sight of the pay-for-performance principle that many boards now espouse. And they call death benefits the ultimate in pay that isn't based on performance.
Companies defend the practice as an appropriate way to take care of an executive's family after an unexpected death. They also note that the benefits often are negotiated as part of a pay package that has many components. In many cases, compensation attorneys say, death benefits are really a form of deferred compensation, structured partly for estate-planning or tax reasons.
Companies often say one goal of their pay packages is to keep executives from leaving. But "if the executive is dead, you're certainly not retaining them," says Steven Hall, an executive-pay consultant in New York.
Mr. Hall says death benefits have become more controversial in recent years: "Shareholders say, 'Why should we write a big check to a CEO who's been quite well paid all along?' He should have bought life insurance."
At many companies, a top executive's death does trigger a big insurance payout to heirs -- on a policy the company paid for.
A $3 million life insurance policy is just a minor part of the death benefits that XTO Energy Inc. provides to its CEO, Bob R. Simpson.
Had Mr. Simpson died on Dec. 31, according to the natural-gas producer's latest proxy statement, XTO would have owed his heirs a $111 million "bonus." Stock options that the 59-year-old executive had been granted, but that weren't yet vested, would immediately vest, bringing his heirs an additional $20.5 million.
The Fort Worth, Texas, company also would have owed $4.4 million in salary for its deceased employee. And his death would trigger a $158,400 payment listed as a "car allowance."
A spokesman for XTO didn't return calls seeking comment.
A salary-after-death provision has just been scrapped at Comcast Corp. The board in late December had renewed a provision that gave Ralph J. Roberts, the 88-year-old chairman of its executive committee, his $2 million annual salary for five years after his death. But in February, Comcast canceled the deal amid criticism from a big shareholder, Chieftain Capital Management. David Cohen, a Comcast executive vice president, said Mr. Roberts voluntarily relinquished the benefit, in a move that had been under consideration for some time.
Still, as of Dec. 31, Mr. Roberts was entitled to an estimated $87 million in posthumous benefits from the Philadelphia-based cable-television company. Most of it consisted of continued company funding of joint life insurance covering him and his wife, filings show. The insurance would pay a total of $130 million to their estates after both are deceased.
Salary Keeps Coming
Comcast is still committed to paying the salary of Mr. Roberts's son, CEO Brian L. Roberts, for five years after his death in office, along with his bonus for five years. The potential payout was valued at more than $60 million on Dec. 31.
The 48-year-old CEO's heirs would also receive $223 million from his company-funded life insurance. And the heirs would be entitled to an acceleration of stock awards and other payments, which would have totaled $14 million had he died on the last day of 2007.
"We think the compensation has been grossly too high already" at Comcast, said Glenn Greenberg, a partner at Chieftain Capital. "There's no need to pay them more when they're dead." Chieftain has been seeking the ouster of the younger Mr. Roberts and the end of a two-tier stock arrangement that gives the Roberts family voting power beyond the number of shares it holds.
Comcast's Mr. Cohen called the five years of postmortem salary and bonus for the chief executive "fair and reasonable." He noted that many large companies offer death benefits.
As for the large company-funded life-insurance policies, Mr. Cohen said the burden of making the payout would fall on an insurer, not Comcast. He said part of the CEO's life insurance is term insurance Comcast bought at favorable rates, and that the company discloses this insurance's annual $415,000 cost to Comcast in yearly pay tables.
Pay consultants trace one of the earliest golden coffins to Armand Hammer of Occidental Petroleum Corp. His contract called for his salary to be paid until his 99th year, whether he was alive or dead. He died at 92 in 1990.
Another early beneficiary was Steven J. Ross, the late chairman and co-CEO of Time Warner Inc., who died in 1992 at age 65. His contract called for the company to pay his salary and bonus for three years after his death. It also gave his heirs nine years to exercise stock options on 7.2 million shares, a package estimated at the time of death to be worth between $75 million and $300 million.
Today, most public companies include death benefits with other types of termination-related pay due their CEOs, with variations for whether the person is fired, becomes disabled or dies in office. Death benefits are layered on top of pensions, vested stock awards and deferred compensation, which for most CEOs already amount to large sums.
Rupert Murdoch, the 77-year-old chairman and CEO of News Corp., parent of Dow Jones & Co., which publishes The Wall Street Journal, doesn't have an employment contract. News Corp. filings show that on June 30, his death would have triggered $1.37 million in payments to his beneficiaries. The beneficiaries of News Corp.'s 57-year-old president, Peter Chernin, would have been entitled to a $5 million payout of company-funded life insurance plus $31.9 million in acceleration of equity awards and other benefits had he died June 30. A spokeswoman for News Corp. confirmed the numbers and declined further comment.
A recent study of 93 big companies found that 17% offered severance-style death benefits to their chief executives in 2006, while 40% provided corporate-funded life insurance. Equilar Inc., a research firm in Redwood Shores, Calif., did the study.
CEO deaths, though uncommon, do happen. McDonald's Corp. faced two in nine months. James Cantalupo died suddenly in April 2004 at age 60. The board awarded him a $1.8 million "discretionary bonus" and waived other rules to give his estate an early $790,000 payout of a long-term award.
His 43-year-old successor, Charles Bell, had cancer surgery just two weeks after taking over and was gravely ill for part of his brief tenure. He stepped down after seven months and died two months after that. The company then gave his estate a $3.2 million bonus.
Vesting Upon Death
Though not all companies provide it, the most common posthumous benefit is acceleration of unvested stock options and grants of restricted stock. The rationale is that if the executive hadn't died, he or she would probably have stayed long enough for the awards to vest.
At Occidental Petroleum, the successor to Mr. Hammer, Ray R. Irani, would get immediate vesting of all of his options, restricted stock and performance-related awards if he died on the job. It's a benefit Occidental's filings said was worth $101.9 million as of Dec. 31.
A spokesman for the company said that amount "isn't a death benefit per se -- it's what his family would get upon his death." The spokesman, Richard Kline, added that the only reason the unvested awards are so valuable is the stock's superb performance under Dr. Irani's leadership.
The CEO is already wealthy. Dr. Irani has earned more than $700 million from Occidental since 1992, including profits on stock-option exercises, according to Standard & Poor's ExecuComp.
Multiple Stock Awards
An unusual death provision appears in the contract of the CEO of Plains Exploration & Production Co., James C. Flores. If he dies in office, his heirs get a giant payout from restricted-stock awards that Mr. Flores hasn't yet been granted.
The board of the Houston oil-and-gas concern has promised Mr. Flores annual grants of 300,000 shares of restricted stock through 2015, as part of a "long-term retention and deferral agreement." Had he died at the end of last year, company filings say, his estate would have been entitled to seven future years of stock awards -- 2.1 million shares then valued at $113 million -- all of which would be vested.
His death on Dec. 31 also would have triggered $53 million in additional benefits, mostly from acceleration of already granted awards that hadn't yet vested.
In an interview, Mr. Flores said he cut the restricted-stock deal when Plains stock was about one-eighth its current price, when "it wasn't that much money." He also said his years of promised restricted-share grants provide a continuing incentive for him to focus on the company's stock price. "It's a retention clause. It allows me to work and earn it every year," he said.
An Early Payment
At Lockheed Martin, the company recently eliminated a "post-retirement death benefit" for top executives but gave the executives the money anyhow. For its 56-year-old CEO, Robert J. Stevens, that meant an extra $1 million payment in March.
A spokesman for Lockheed Martin, Jeffery Adams, said the company canceled the plan as part of a broader effort to eliminate "nonperformance-based compensation programs." As to why it paid out the death benefit to a still-living executive, Mr. Adams said Lockheed "thought it was appropriate to compensate officers who would have otherwise expected to be eligible for the benefit following retirement."
As of the end of last year, the Lockheed CEO was eligible for an additional $48 million in death benefits, from acceleration of stock awards and long-term incentive plans, Lockheed filings show.
'Noncompete' Agreement
Companies often have "noncompete" agreements with top executives that bar them from joining a competitor after they leave. Shaw Group has one. The Baton Rouge, La., company would pay $17 million to CEO James M. Bernhard Jr. "not to compete with us for a two-year period following termination of employment," its latest proxy statement says.
The pay for not competing would still be due if Mr. Bernhard were dead, a footnote shows. Shaw officials didn't respond to requests for comment.
At Nabors, Mr. Isenberg, who is chairman as well as CEO, has long been one of the highest-paid executives in the U.S. His compensation from 1992 to the end of last year totaled more than $500 million, according to company filings and Standard & Poor's ExecuComp.
The oil-service company reported first-quarter net income of $230.5 million -- or less than the severance payment Mr. Isenberg would have been due had he died in office Dec. 31. Nabors, which is registered in Bermuda but has headquarters in Houston, has a market value of about $12.7 billion.
The death payout "is a great present to his estate, but it would be very costly to shareholders and it would be a big hit to the company's balance sheet," said Richard Ferlauto of the American Federation of State, County and Municipal Employees, where he is director of corporate governance and pension investment. Mr. Ferlauto's union backed a shareholder proposal to rein in another executive-pay benefit at Nabors, which was defeated at the company's annual meeting a week ago.
A spokesman for Nabors, Denny Smith, said the size of Mr. Isenberg's death benefit has grown because, under his employment contract, it is linked to the company's performance. Strong cash flow and earnings in 2006 resulted in a substantial increase in the benefit, he said.
The size of Mr. Isenberg's severance benefit has contributed to boardroom tensions in recent years, according to people familiar with the situation. They say directors have tried to renegotiate the package but haven't been able to come to an agreement with Mr. Isenberg.
The Nabors spokesman, Mr. Smith, denied there is any friction on the board. He said directors and executives are "actively working to restructure" the contract and hope to reach an accommodation that is in the best interests of shareholders.
![[Chart]](http://s.wsj.net/public/resources/images/P1-AL871B_DEATH_20080609223034.gif)
Write to Mark Maremont at mark.maremont@wsj.com1
Corrections & Amplifications
John M. Barth retired as chief executive of Johnson Controls Inc. on Sept. 30, 2007. A table accompanying a Tuesday page-one article about executive death benefits failed to note his retirement in some editions.
Saturday, June 14, 2008
R U "Prod"uctive Yet?
Came across two interesting articles
Lost in E-Mail, Tech Firms Face Self-Made Beast
Charging by the Byte to Curb Internet Traffic
Friday, June 13, 2008
One-way patriotism or jingoism should make everyone "Hop"ping Mad
AP reports that "U.S. politicians are already protesting Belgian brewer InBev's unsolicited $46 billion bid to buy Anheuser-Busch Cos. Inc. and absorb the iconic brewery to create the world's fourth largest consumer products company....Missouri's Republican Gov. Matt Blunt said he opposes the deal and has directed the state Department of Economic Development to see if it can stop it. Blunt's former chief of staff co-founded a Web site called SaveAB.com that has passed an electronic petition opposing the deal to federal lawmakers. The site promises to hold anti-InBev rallies in the downtown St. Louis Busch Stadium.
Political repercussions from InBev's offer even touch the presidential race. Republican presumptive nominee John McCain's wife Cindy shares roughly $1 million worth of Anheuser-Busch stock with the McCain children. Cindy McCain's father founded Hensley & Co., a Phoenix beer distributor that describes itself as the third-largest Anheuser-Busch wholesaler in the United States."
Lou Dobbs of CNN has been railing for sometime about Exporting America and America being for sale and has criticized this Bud deal as well as Pennsylvania's move to lease the turnpike to a U.S. Spanish consortium.
Earlier this year the joint deal by Huawei and Bain Capital to buy 3Com was derailed by the U.S. Government on security concerns.
Now, where were all these critics when:
- GM completed the purchase of Saab, the Swedish icon, in 2000 (GM had owned part of Saab for a few years)
- GM bought Daewoo, a South Korean icon, in 2002
- Ford bought Jaguar, the iconic British brand, in 1989
- Coca-Cola bought Limca, Thums Up, and Maaza in 1992, all iconic drink brands of India
- Wal-Mart Stores bought Trust-Mart, one of the biggest and well known retailers in China
- IBM bought Daksh, the third largest outsourcing firm in India, in 2004
Thursday, June 12, 2008
Wink, Wink; Nod, Nod- Lying or Signaling?
On May 30, I had written about plagiarism and falsification in an article titled "Does Education Matter?. In the broader scheme of things, the youth of today should not be held accountable for ethical lapses as they are trying to emulate their worthy elders in lying, obfuscation, corruption and other worthy traits.
Here is one example:
July 18, 2001: President George W. Bush, : "My only point is that I will assure my friends and our trading partners that we're doing our part to strengthen our economy, but we've got to work to make sure we reduce trade barriers in order for prosperity to continue; the strong dollar. The dollar is what it is based upon market. And the reason I say that is our government will not artificially enter markets. The market decides the strength of the dollar. And I would urge other countries, now, to do the same thing.
A strong dollar has got, obviously, benefits and problems for us. One, it's harder to export, but it also helps attract capital. And much of our economy relies upon investors investing in the U.S. because of the dollar. And so we understand the pluses and minuses and, therefore, let the market determine the float of the dollar."
March 5, 2002: Lawrence Lindsey, the president's economic adviser: "Our view is that we are pursuing policies that yield a strong U.S. economy, an attractive place in which to invest, and by doing so, produce a strong dollar," he said. "Those are things we aren't going to give up."
December 12, 2003.
Q Mr. President, the dollar fell again today, against the euro. Mr. Snow, your Treasury Secretary says that the decline has been orderly, boosting exports. Do you plan any intervention to stop the slide in the dollar?
THE PRESIDENT: My answer to that question about the dollar is that this government is for a strong dollar, and that the dollar's value ought to be set by the market and by the conditions inherent in our respective economies. And our economy is very strong and is getting stronger. But the policy, the stated policy -- and not only the stated policy, but the strong belief of this administration is that we have a strong dollar.
Nov. 22, 2004: President George W Bush has again said he is committed to a strong US dollar. Mr Bush said the best way to reassure those concerned about the dollar's decline was to deal with his country's large budget deficit. The US president was speaking in Chile at the end of the 21-nation Apec conference, which he attended.
Dec. 15, 2004. President Bush pledged Wednesday to work with Congress to reduce the United States' huge deficits to assure markets that his administration supports a strong dollar. "The policy of my government is a strong-dollar policy," Bush said during a meeting with Italian Prime Minister Silvio Berlusconi.
Jan. 13, 2005. President Bush.
Q: Are you concerned in the increase in foreign investment here and the fall of the dollar?
A: America is — first of all, we have a strong dollar policy in this administration. And I'm confident foreign investors will find America a good place to invest.Aug 1, 2006: Treasury Secretary Henry Paulson: "I believe that a strong dollar is in our nation's interest and that currency values should be determined in open and competitive markets in response to underlying fundamentals," Paulson said in a speech to students at Columbia University's School of Business in New York. Copies of his remarks were distributed in Washington.
June 9, 2008. Treasury Secretary Henry Paulson said he hasn't ruled out any policy option, including intervention in the foreign-exchange market, to prop up the dollar.
When the country's leaders, who are expected to be role models and are expected to set high ethical standards, behave in this manner it is no surprise that the young try to cut corners and make a buck any which way they can.
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