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Further adventures in cross-cultural understanding.
Walmart’s code of ethics says its perfectly OK for management to screw over workers. But it absolutely forbids workers from screwing one another. Germany law, apparently, sees it the other way around.
The FT reports:
Wal-Mart, the giant US retailer, has suffered another embarrassing setback in Germany, after a labour court in Wuppertal ruled that parts of the US retailer’s ethics code contravened German law.The company caused uproar earlier this year with the code of conduct, which includes a ban on relationships at work and a proposed hotline for employees to report on colleagues’ violations of the rules.
Although fairly standard in the US, the clauses infuriated workers’ councils in Germany, who quickly challenged the code.
Posted by dan at 03:22 PM
Could there be a China Price coming for Unocal?
Back in April, the big oil company agreed to be acquired by Chevron-Texaco in a deal that combined cash and stock. Given yesterday’s closing price of Chevron, that valued Unocal at about $62.25 per share.
But today, Unocal's stock opened at about $64, higher than the Chevron-Texaco and up more than 4 percent. The reason: continuing hopes for a bid from China National Offshore Oil Corp (CNOOC)
As the Financial Times notes:
“China National Offshore Oil Corporation will move a step closer to a $16bn-plus counterbid for its US rival Unocal next week, when independent advisers are set to deliver their evaluation of the most ambitious takeover attempt by a Chinese state company.The report, by a group of independent advisers led by the UK investment bank Rothschild, is likely to persuade CNOOC's non-executive directors to back the management's plan to trump a US$16bn cash-and-shares offer from ChevronTexaco, according to people close to the situation.
Posted by dan at 09:33 AM
My latest in Slate, on the pernicious/beneficial global savings glut.
Posted by dan at 04:23 PM
Alan Murray, the Wall Street Journal’s Washington grandee, is in danger of becoming the David Broder of financial journalism—an establishmentarian who relentlessly warns against any whiff of radicalism and supports the status quo, all without much in the way of reportage or evidence.
His latest "Business" column, which ran in yesterday's Journal, wondered whether this whole effort to rein in the behavior of CEOs hadn’t gone too far. Sure, he conceded, there have been a bunch of crooks, and, oh, yes, executive pay is obscene. Yet he seemed to lament the demise of many name-brand CEOs who used to appear on his air when he worked at CNBC:
“Philip Purcell, Robert O'Connell, Hank Greenberg, Harry Stonecipher, Carly Fiorina, Michael Eisner, Franklin Raines, Dick Grasso....Something big is going on here. An exclamation point may be more in order.
!
Murray doesn’t cite any real individual CEOs who are suffering as a result of the backlash. Nor does he provide names of bosses who have been unjustly fired. But he's concerned nonetheless. After all, if CEOs who preside over long-term declines in stock prices, engage in accounting shenanigans, have extramarital affairs with staffers, engineer disastrous mergers, and generally screw things up, are vulnerable, well then “CEOs will find it increasingly hard to lead.”
Next, Murray takes after hedge funds, “which, while lavishing their own managers with pay that's wildly excessive even by corporate standards, don't hesitate to take on an entrenched CEO when there's a buck to be made.” Hello! Hedge fund managers only get pay that appears to be wildly excessive to the extent their investors get paid—they split all profits with investors 80-20. When hedge fund managers don’t perform in any given year, they don’t get anything. One bad year, and they could be done. It’s pay for performance in its purest sense. By contrast, bigtime CEOs get paid massively even when their shareholders suffer, year after year after year. Oh, and they’re taking the cash from legions of individual shareholders and mutual fund investors—not from sophisticated rich people.
Nonetheless, the nation should be slow to rein in the captains of industry. For, as Murray notes, “Despite their now-all-too-obvious flaws, large corporations have been the great wealth generators of the past half-century. While corporate leaders need to be held more accountable -- and their pay brought into line -- they also need to be allowed to lead.”
Gee. How much wealth has a big company like Dow Jones generated lately? Not a whole lot. And yet its imperial CEO, Peter Kann, remains entrenched as ever, taking home loads of cash and other compensation every year while employees and shareholders generally suffer. Here’s a chart of Dow Jones’ stock vs. the S&P 500 over the last 20 years. And here’s one showing the same over the last five years.
Nope. The backlash hasn’t gone nearly far enough.
Posted by dan at 09:08 AM
The folks at the Weekly Standard generally don't waste too much time with prime-time network television. It's vulgar, morally unserious stuff, and rarely touches on the themes Kristol & Co. are obsessed with, like National Greatness and suppressing stem cell research. But Jonathan Last seems to have found a show he likes. Surprise, surprise, it's on Fox, which, like the Weekly Standard, is a fellow member of Rupert Murdoch's happy media family. Guess he forgot the disclosure.
Posted by dan at 04:12 PM
For the owners and workers of manufacturers and suppliers of all kinds, the China Price is something to be feared and is almost guaranteed to hit profits. The China Price refers to the price for which a good or service can be had in China. Needless to say, given the vast differential in labor costs, the China Price is always significantly lower than the U.S. Price. And increasingly, U.S. companies are being asked by long-time customers to meet the China Price. Or else. Late last year, Business Week dubbed The China Price “the three scariest words in U.S. industry.”
But as Americans export more and more capital to China in exchange for all those imports, a new and more beneficial China Price might be emerging. And that’s the price that a Chinese company, flush with cash thanks to massive exports, might be willing to pay for an American company. That price may frequently be higher than the price other American or European companies would be willing to pay. After all, in buying an American company, the Chinese acquirer gets hard assets like factories. But it also gets the more elusive soft assets that American companies have in abundance but Chinese firms generally lack: management, brand, reputation, etc.
So, for example, when IBM wanted to sell its ailing PC business, the U.S. Price would have been pretty low. Dell and H-P weren’t all that interested. But the Chinese computer maker Lenovo was. And it paid up: $1.75 billion.
Now, investors in Maytag, the ailing U.S. appliance maker, seem to be hoping for a China Price as well. The company in May struck a deal to be acquired by U.S. private equity firm Ripplewood Holdings for $14 per share in cash.
But today the stock closed at above $15.34. Why? Apparently, Haier, the Chinese appliance company, is mulling a bid.
If a higher Haier bid comes through, we may have to rethink the definition of the China Price.
Posted by dan at 05:52 PM
My usual journalistic rule of thumb is that something has to happen three times for it to become a trend. Twice is just a coincidence.
But in the case of credit card debt, I’m willing to make an exception. And in seems we may have a trend of consumers responding to sharp increases in interest rates on credit cards by paying down their debt.
The Federal Reserve’s latest report shows that revolving debt fell by 0.6 percent in May, after a revised 0.9 percent drop in April. It doesn’t sound like much, but that’s a lot of money. The total revolving debt outstanding fell from $796.9 billion in March to $796.4 billion in April, to $795.9 billion in May—that’s about $1 billion of debt paid down in two months. Again, not much. And it could be that people are using lower-interest home-equity loans to pay down higher-interest credit card debt. Even so, it’s good news for consumers and bad news for credit card companies.
Posted by dan at 05:49 PM
Here's a sure sign that your career has taken a turn for the worse. For years, you've been a big shot media executive, a household name in the better restaurants in midtown Manhattan and west L.A. But when you resign your post as the CEO of a hot technology company, the Wall Street Journal doesn’t even bother to put it in the print edition.
Few executives had a better run that Scott Sassa in the 1990s. After helping start the Fox network, he was a bigshot at TBS, where he helped launch TNT, Cartoon Network, and Turner Classic Movies. In 1997, he joined NBC, again holding senior posts in the network’s Seinfeld- and Friends-inspired glory years, and developing the "The West Wing" and "Fear Factor."
When Sassa joined the social-networking site Friendster as president and CEO a year ago, it was seen as a major validation for the peer-to-peer play, a neat corollary to the Terry Semel helming Yahoo! story.
But since then, nary a peep. I never quite got Friendster. More importantly, advertisers and investors haven't quite got it either. By its nature, social networking is trendy and somewhat exclusionary. As soon as the dorks pile in, the cool kids start hanging out elsewhere. And even amid a rapidly expanding on-line ad market, Friendster has found revenues and profits difficult to come by. The hoped-for IPO remains a mirage in the distance.
And so less than a year after joining up, Sassa was out. When he resigned on May 25, the news rippled gently through the media pond, a pebble in a vast sea. The Journal dutifully ran an unsigned squib on the move in an online news roundup. But the news didn’t even make the big paper.
Posted by dan at 11:22 AM