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Rick Brooks reports in the Wall Street Journal on the ways in which high energy costs are translating into higher prices for services.
A wide array of businesses are using extra fees and fuel surcharges to shift some of their rising energy costs to consumers, who already pay an average of nearly $3 a gallon at the pump.A 36% rise in retail gas prices since early December is causing delivery companies, cruise lines, taxis, electric utilities, garbage collectors, landscapers, pizza chains and numerous other businesses nationwide to either tack on extra fees to the basic consumer price or to increase existing fuel surcharges.
United Parcel Service Inc. and FedEx Corp. this week boosted add-on fees for packages delivered by ground to 3.75% of the shipping rate from the previous 3.5%. FedEx also raised its U.S. air-shipment fuel surcharge to 13.5% of the shipping rate, up from 12%. The increases affect roughly 19 million shipments a day, and consumers now pay an extra $2 on each air delivery and about 25 cents on ground items because of fuel surcharges by UPS and FedEx. Yesterday, the U.S. Postal Service proposed a three-cent increase in the price of a 39-cent stamp, partly because of rising fuel costs. The post office doesn't use fuel surcharges. A-1 Limousine Inc. in Princeton, N.J., lifted its fuel surcharge to 12% from 10% a week sooner than planned after gas prices jumped more than 20 cents a gallon in a week. Wedding, prom and airport customers don't like paying more, says Frank Foy, A-1's finance chief, but "I'm not making any money here." . . .
"You'll just run yourself into the ground," says John Bunch, a fishing guide in St. James City, Fla., whose 24-foot-long boat called GiddyUp covers only about three miles in the Gulf of Mexico for every gallon of fuel it burns.
Mr. Bunch added a $50 fuel surcharge last July to his charter-fishing rates, which start at $375 for four hours, and says the surcharge could double to $100 if gasoline hits $4 a gallon. . . .
More fees and surcharges are widely expected in the transportation industry. But since gas prices surged last spring and summer, less-obvious businesses, such as pizza parlors, florists and even exercise-equipment maker Nautilus Inc., have adopted fuel-surcharge strategies used by transportation providers.
Richard Kost, a personal chef in Bremerton, Wash., who calls himself the "Roaming Gourmet," is now charging clients $10 for his fuel costs, including food-storage containers made out of petroleum-based plastic. "There's not much chance to get around it," he says.
Schwan's Home Service Inc., a Marshall, Minn., company specializing in "restaurant-quality frozen foods," has imposed a $1 fuel fee on most home-delivery orders. About 90% of pizza chain Papa John's International Inc.'s 2,600 locations in the U.S. now charge a delivery fee, typically $1.25 to $2, to cope with rising fuel, food, labor and insurance costs. The surcharge was about $1 when it was implemented at a smaller number of company-owned locations in May 2005.
Posted by dan at 08:00 AM
It now turns out that Raytheon CEO William Swanson cribbed some of his management rules from Donald Rumsfeld. And it's bad form to plagiarize from one of your biggest clients. Accordingly, as Leslie Wayne reports in the New York Times, Raytheon has docked Swanson $1 million in pay.
Raytheon directors punished the chief executive, William H. Swanson, by taking away almost $1 million from his 2006 compensation yesterday because he failed to give credit for material that was in a management book he wrote.Mr. Swanson's pay cut will come in two ways. His 2006 salary will be frozen at its 2005 level and his 2006 restricted stock award will be reduced 20 percent, Raytheon said. The cuts would come to nearly $1 million according to a person close to the board, who was granted anonymity because he was disclosing proprietary information. . . .
The punishment also comes as Raytheon has stopped circulating the book, "Swanson's Unwritten Rules of Management," a folksy book that turned Mr. Swanson into a management sage and earned him praise from business leaders like Jack Welch and Warren E. Buffett. . . .
But many of the rules were later found to have been taken from a 1944 engineering classic, "The Unwritten Laws of Engineering," written by W. J. King, an engineering professor at the University of California, Los Angeles. Of Mr. Swanson's 33 rules, 17 were in the 1944 book, often word for word.
In addition, The Boston Herald reported yesterday on its Web site that Mr. Swanson had lifted four rules — 1 through 4 — from a list of maxims collected by Defense Secretary Donald H. Rumsfeld and published in The Wall Street Journal in 2001 as Rumsfeld's Rules. The first rule in both Mr. Swanson's and Mr. Rumsfeld's list is the same: "Learn to say 'I don't know.' If used when appropriate, it will be used often."
The Herald also found that Mr. Swanson's rule No. 32 was similar to a life lesson about rude treatment of waiters that was in the book "Dave Barry Turns 50," written by Mr. Barry, the humor columnist.
Posted by dan at 07:52 AM
What does Ernst & Young know that the top executives at giant U.S. banks don't know about China's banks? Or vice versa? Richard McGregor reports in the Financial Times
China’s total liabilities for non-performing loans may be as high as $900bn, dwarfing official estimates and outstripping the country’s massive foreign exchange reserves, according to a study of Beijing’s bad debt problem.The study, part of Ernst & Young’s annual global survey of NPLs, says China’s big four state banks alone have bad loans worth $358bn, or more than twice official estimates.
The firm’s estimate of NPLs in the big four banks will be of interest to foreign investors, who have put billions of dollars into three of the lenders as part of overseas initial public offerings.
China Construction Bank successfully listed in Hong Kong in late 2005, while both the Bank of China and the Industrial and Commercial Bank of China, the country’s largest lender, are due to float overseas this year.
The latest estimate of China’s total liabilities compares with the firm’s 2002 estimates of NPLs, which was calculated at $480bn.
The survey says the higher estimate results from better access to information, a tide of potential new NPLs arising from China’s rapid loan growth and the realisation that the problem was not confined to large banks and the distressed debt companies attached to them.
Aside from the large banks, the new estimate includes bad loans in state investment companies, credit co-operatives – many of them in rural areas – and other vehicles set by the government to dispose of bad loans.
China’s build-up of bad debt, even as the economy has been growing at rates of 9 to 10 per cent, is at odds with the survey’s broader finding that the global NPL position had improved.
“With the exception of China, every market covered [by Ernst & Young] in the 2004 report has witnessed a reduction in its level of NPLs written before 1997,” the report says. “China’s banks are at a crossroads in addressing their NPL problems.”
Posted by dan at 09:04 AM
According to Holman Jenkins, all CEOs--even those under investigation for insider trading and those whose stocks have underperformed--have richly earned their obscene compensation. He writes in today's Wall Street Journal:
It must be (insert time of day, season or year here) because the air is filled with complaints about CEO pay. To wit, CEOs are paid too much because they are "greedy." They are paid too much because their wages are the product of a corrupt bargain with crony boards. Sacred norms are violated: The average CEO makes 300 times an average worker's salary. What is the "right" number and where does it come from? The Bible? We'll get back to you.You could do worse than revisit the case of one Joseph Nacchio, former CEO of Qwest Communications, one of those shamelessly overpaid CEOs of the '90s. It shows, in the end, that very large CEO compensation is awarded in a logical and deliberate manner because it serves the legitimate interests of those awarding it.
Mr. Nacchio, an executive at AT&T, was recruited to Qwest by the company's founder, Denver billionaire Philip Anschutz. Mr. Anschutz, a famously shrewd dealmaker, dangled an offer of three million stock options, the explicit temptation being: Sign away five years of your life and I will give you the chance to become extraordinarily wealthy.
This is the basic transaction behind most "outrageous" CEO pay. And Mr. Nacchio had the good sense to go where Mr. Anschutz was leading him. Qwest's stock price soared and Mr. Nacchio eventually exercised options for a pre-tax gain of $250 million.
Now we come to the reason for focusing on Mr. Nacchio. In 2001, Mr. Anschutz prevailed on him to stay, offering essentially the same deal over again, and Mr. Nacchio sat down with the Rocky Mountain News to explain his compensation. What followed was a rare exercise in realism about CEO pay.
He noted that several Qwest executives with large stock-option windfalls had already left. "Look, it's very hard to keep guys and gals who work in the normal corporate structure and then all of a sudden over the period of two or three years, make $50 to $70 million. . . . Most people who make that kind of money will immediately say: 'seen it, done it in the corporate world, I'm going to do something else.'"
"I was faced with the choice: I either got to leave at the end of five [years], or I have to stay for a substantive period of time. . . . Look, I could go sit on the beach right now and never have to do another day's work." . ..
There's a lot here, but suffice it to say, when you hear Pfizer's board being criticized for having guaranteed Hank McKinnell an $83 million retirement payout despite a crummy decade for drug stocks, remember Mr. McKinnell is a rich man and could be on a beach too.
Notice we don't use the language of "deserve" or "worth" or "reward," common in complaints about CEO pay. These are after-the-fact judgments, and any board that dishes up large pay for performance that's already in the books isn't doing shareholders any favor. "Pay for performance" is paying for the past, not the future, which is what stock prices care about.
That's why CEO pay is about incentives -- the incentive to commit to the job in the first place, the incentive to make decisions that benefit shareholders. Should a company go for broke on a new investment project or play it safe? Should it conserve cash or spend lavishly on customer service and advertising? Should it pay bonuses to employees or direct the same cash to the bottom line?
A shareholder is hardpressed to make these calls from the sidelines. Meanwhile, tugging at a CEO's elbow all the time are competing constituents who also want something at the company's expense. Hence the use of stock options, unabated by controversy and fully supported by valuations in the stock market, to put CEOs in the place of owners when making these choices. In turn, the market sits in judgment on a CEO's every move, adding or subtracting in a nanosecond a sum from the company's market value that dwarfs even the CEO's pay package.
What a load of bull! Jenkins has surely spent plenty of time with his longtime boss, overpaid, undperforming Dow Jones ex-CEO Peter Kann. But he clearly hasn't spent a great deal of time with CEOs, or with ex-CEOs. The notion that Prifzer had to offer Hank McKinnell such a gigantic $83 million pension to get him to stay is just absurd. (Oh, and note the exculpatory "despite a crummy decade for drug stocks." Not all drug stocks have tanked since McKinnell took the reins of Pfizer.)
As with everything else, there's a market for executive talent. And if boards of directors were shrewd, they'd pay market rates. Lets say, McKinnell had been offered a pension that amounted to $60 million, or $40 million. Would he have quit in a fit of pique? If there was another firm willing to hire him for an equivalent amount, maybe. Or, if he found it so insulting to his dignity to work for such a pittance, he surely could have retired. But that likely wouldn't have happened.
What Jenkins doesn't get, and what most boards don't get, is that the excessive pay and compensation is only one reason CEOs love being CEO. It's a huge ego boost, it's exciting, it's fun. Publicly held companies are frequently cults of personality surrounding the maximum leader. You have a whole team tending to your needs. You never have to pay for anything. You're a player in public policy and politics. You don't have to fly commercial. You're a big shot. The pay is just icing on the cake. And that's why there's something sad and poignant about CEOs who are forced to retire. Do you think Jack Welch prefers being a writer and speaker to running GE? Do you think Sandy Weill prefers being a consultant to running the world's largest financial institution? Do you think President Clinton prefers being a globetrotting do-gooder to being the CEO of the most powerful nation on earth. Please. Something tells me each of these guys would gladly pay a lot of money in order to return to their old CEO jobs.
Yes, everybody needs to be incentivized to perform, to commit, and to stay. But most humans--and CEOs are surely in that category--would be incentivized to perform, to commit, and to stay by smaller amounts of cash than those huge piles offered to CEOs.
Posted by dan at 08:50 AM
According to Holman Jenkins, all CEOs--even those under investigation for insider trading and those whose stocks have underperformed--have richly earned their obscene compensation. He writes in today's Wall Street Journal:
It must be (insert time of day, season or year here) because the air is filled with complaints about CEO pay. To wit, CEOs are paid too much because they are "greedy." They are paid too much because their wages are the product of a corrupt bargain with crony boards. Sacred norms are violated: The average CEO makes 300 times an average worker's salary. What is the "right" number and where does it come from? The Bible? We'll get back to you.You could do worse than revisit the case of one Joseph Nacchio, former CEO of Qwest Communications, one of those shamelessly overpaid CEOs of the '90s. It shows, in the end, that very large CEO compensation is awarded in a logical and deliberate manner because it serves the legitimate interests of those awarding it.
Mr. Nacchio, an executive at AT&T, was recruited to Qwest by the company's founder, Denver billionaire Philip Anschutz. Mr. Anschutz, a famously shrewd dealmaker, dangled an offer of three million stock options, the explicit temptation being: Sign away five years of your life and I will give you the chance to become extraordinarily wealthy.
This is the basic transaction behind most "outrageous" CEO pay. And Mr. Nacchio had the good sense to go where Mr. Anschutz was leading him. Qwest's stock price soared and Mr. Nacchio eventually exercised options for a pre-tax gain of $250 million.
Now we come to the reason for focusing on Mr. Nacchio. In 2001, Mr. Anschutz prevailed on him to stay, offering essentially the same deal over again, and Mr. Nacchio sat down with the Rocky Mountain News to explain his compensation. What followed was a rare exercise in realism about CEO pay.
He noted that several Qwest executives with large stock-option windfalls had already left. "Look, it's very hard to keep guys and gals who work in the normal corporate structure and then all of a sudden over the period of two or three years, make $50 to $70 million. . . . Most people who make that kind of money will immediately say: 'seen it, done it in the corporate world, I'm going to do something else.'"
"I was faced with the choice: I either got to leave at the end of five [years], or I have to stay for a substantive period of time. . . . Look, I could go sit on the beach right now and never have to do another day's work." . ..
There's a lot here, but suffice it to say, when you hear Pfizer's board being criticized for having guaranteed Hank McKinnell an $83 million retirement payout despite a crummy decade for drug stocks, remember Mr. McKinnell is a rich man and could be on a beach too.
Notice we don't use the language of "deserve" or "worth" or "reward," common in complaints about CEO pay. These are after-the-fact judgments, and any board that dishes up large pay for performance that's already in the books isn't doing shareholders any favor. "Pay for performance" is paying for the past, not the future, which is what stock prices care about.
That's why CEO pay is about incentives -- the incentive to commit to the job in the first place, the incentive to make decisions that benefit shareholders. Should a company go for broke on a new investment project or play it safe? Should it conserve cash or spend lavishly on customer service and advertising? Should it pay bonuses to employees or direct the same cash to the bottom line?
A shareholder is hardpressed to make these calls from the sidelines. Meanwhile, tugging at a CEO's elbow all the time are competing constituents who also want something at the company's expense. Hence the use of stock options, unabated by controversy and fully supported by valuations in the stock market, to put CEOs in the place of owners when making these choices. In turn, the market sits in judgment on a CEO's every move, adding or subtracting in a nanosecond a sum from the company's market value that dwarfs even the CEO's pay package.
What a load of bull! Jenkins has surely spent plenty of time with his longtime boss, overpaid, undperforming Dow Jones ex-CEO Peter Kann. But he clearly hasn't spent a great deal of time with CEOs, or with ex-CEOs. The notion that Prifzer had to offer Hank McKinnell such a gigantic $83 million pension to get him to stay is just absurd. (Oh, and note the exculpatory "despite a crummy decade for drug stocks." Not all drug stocks have tanked since McKinnell took the reins of Pfizer.)
As with everything else, there's a market for executive talent. And if boards of directors were shrewd, they'd pay market rates. Lets say, McKinnell had been offered a pension that amounted to $60 million, or $40 million. Would he have quit in a fit of pique? If there was another firm willing to hire him for an equivalent amount, maybe. Or, if he found it so insulting to his dignity to work for such a pittance, he surely could have retired. But that likely wouldn't have happened.
What Jenkins doesn't get, and what most boards don't get, is that the excessive pay and compensation is only one reason CEOs love being CEO. It's a huge ego boost, it's exciting, it's fun. Publicly held companies are frequently cults of personality surrounding the maximum leader. You have a whole team tending to your needs. You never have to pay for anything. You're a player in public policy and politics. You don't have to fly commercial. You're a big shot. The pay is just icing on the cake. And that's why there's something sad and poignant about CEOs who are forced to retire. Do you think Jack Welch prefers being a writer and speaker to running GE? Do you think Sandy Weill prefers being a consultant to running the world's largest financial institution? Do you think President Clinton prefers being a globetrotting do-gooder to being the CEO of the most powerful nation on earth. Please. Something tells me each of these guys would gladly pay a lot of money in order to return to their old CEO jobs.
Yes, everybody needs to be incentivized to perform, to commit, and to stay. But most humans--and CEOs are surely in that category--would be incentivized to perform, to commit, and to stay by smaller amounts of cash than those huge piles offered to CEOs.
Posted by dan at 08:50 AM
David Rogers reports in the Wall Street Journal on the absurd spectacle of populist Southern Republicans pushing for--and getting--a huge appropriation for Northrop Grumman, which is bickering with its insurers over hurricane damage reimbursement.
WASHINGTON -- The Senate neared passage of a $108 billion spending bill after voting to increase Navy contract payments to Northrop Grumman Corp. to help the shipbuilder recover from storm damage at its Gulf Coast operations. . .The Northrop Grumman fight is but one in a series of skirmishes over so-called spending earmarks -- ranging from Hawaiian sugar growers to Gulf fisheries -- attached to the giant appropriations bill.
The final 51-48 vote split the Senate and both parties in remarkably even fashion, and the Los Angeles defense company faces more opposition in coming negotiations with the House. But with former Senate Republican Leader Trent Lott of Mississippi lobbying colleagues, the victory melded the power of the modern defense establishment with old-fashioned Southern populist politics.
Shipbuilding alliances along the East Coast helped deliver the Virginia and Maine delegations for the provision. Mr. Lott painted the insurance industry as the villain in the piece by not stepping forward to cover more of Northrop Grumman's storm losses.
"The insurance companies are slow paying or no paying ... we are in a great state of angst over the cavalier and insensitive conduct of the insurance industry," said Mr. Lott, who lost his house in Pascagoula, Miss., in the hurricane and has filed suit against his insurer. "We're really aggravated and angry and confused ... I am so worried about the insensitivity and corporate greed in America. If corporate executives don't get a grip on the situation, it's going to begin to undermine our whole free-enterprise system."
Opponents led by Sen. Tom Coburn (R., Okla.) made the opposite case: That the provision itself endangered free enterprise by bringing the government into a fight between Northrop Grumman and its insurer, Factory Mutual Insurance Co., of Johnston, R.I. "This is just a step too far," Mr. Coburn said. Northrop Grumman must reimburse the government for what it recovers in its suit against Factory Mutual, but the Navy's short-term exposure could be at least $140 million to $200 million.
The vote testifies to Northrop Grumman's power as one of the last U.S. shipbuilders and as a major employer along the Gulf Coast, not just in Mississippi and Louisiana. "They treated their people well," said Sen. Jeff Sessions (R., Ala.), a fiscal conservative. No fewer than 11 ships are under construction in yards in New Orleans and Pascagoula.
A great piece. But it begs a question. Given that Jeff Sessions has pretty much supported every budget and every tax cut, why does David Roger persist in referring to him as a fiscal conservative. Saying you're a budget hawk and then repeatedly voting for measures that create enormous deficits--as Sessions, and my Congressman, Rep. Chris Shays continually do--doesn't make you a fiscal conservative. It makes you a fiscal hypocrite.
Posted by dan at 08:43 AM
Jesse Eisinger writes in the Wall Street Journal about the bargains U.S. tech companies make with China's regime.
Here's another do-gooder campaign shareholders might be tempted to ignore: Amnesty International next week plans to use Google's annual meeting to call on it and Microsoft to stop cooperating with censors in China.Shareholders should take heed, and not just because it's morally repugnant to collaborate with repression. In the short term, it's obviously good business to be in China, but there are longer-term consequences that should be considered. . .
American tech companies say they are simply complying with the laws of the land to avoid getting kicked out. But they could resist more forcefully, as they do when protesting China's failure to protect intellectual property. They are willing to cave on human rights for a simple and understandable reason: They feel they can't afford not to be in China.
Yahoo has condemned governmental punishment of free expression and says it is discussing with other tech companies voluntary guidelines for doing business in China. Microsoft says it only follows legally binding censorship orders. Cisco says it merely sold China off-the-shelf products that could be used for numerous purposes.
Google says it agonized over launching a censored, local search engine early this year. But the company decided that offering is better than its older offshore service, which was slower than services of Chinese competitors and vulnerable to wholesale government shutdowns.
It had a choice: Either have no operations and employees in China and face an "ever grinding of market share to zero," says Andrew McLaughlin, the company's head of public policy. Or get "the greatest amount of information into the greatest number of hands ... to contribute to an overall expansion of the range and type and quality and access to information." Inevitably, that led to "making the ugly compromises." . . . .
Let's not pretend that this controversy is a key issue for American tech companies' share prices. Clearly, China is a huge and growing market for American tech companies. But right now it's only a modest contributor to profits, with an Internet market that is smaller than some European countries'. There's no reason to rush in without fighting for the right to market the best possible product. . . .
There is also a slippery-slope potential. Emboldened by tech companies' eagerness to play in China, why wouldn't the government try to use its might to give favored local companies a competitive edge? Or perhaps it might censor information that is vital to conducting business there. "What if the government doesn't want to let people know the banking system is weak?" says Arvind Ganesan of Human Rights Watch. "Today it's political censorship. Tomorrow, it's central-bank reserves." . . .
Finally, there's the inconsistency of lobbying for intellectual-property rights while not standing up for other rights. American companies are acting as if they think that if they give a little on liberty, they can make progress on issues of lucre. But this actually could undermine their case. If the Chinese government sees how compliant they are in one arena, perhaps it will find it that much easier to blow off concerns about patents and piracy.
Posted by dan at 08:31 AM
Ameriquest Mortgage Company, one of the fastest growing mortgage companies, is shutting all its branch offices and laying off 3,800 people. Not a very soft landing for those folks.
Posted by dan at 08:28 AM
David Leonhardt has a good column in the New York Times today about Raytheon CEO William Swanson, who apparently plagiarized a large number of his "Swanson's Unwritten Rules for Common-Sense Management."
Rule #36: Being a CEO means never having to say you're sorry.
Rule #37: When things get heavy, blame subordinates.
"Last week's other plagiarist doesn't have this excuse. He is William H. Swanson, the 57-year-old chief executive of Raytheon, the big military contractor, and a board member at Sprint Nextel. Yet his sins have gotten just a smidgeon of the attention that Ms. Viswanathan's have. That is too bad, because in the scheme of things his character matters a lot more than hers does.The whole situation is enough to make you wonder whether we now have lower expectations for chief executives than we do for teenagers.
FOR years, Mr. Swanson has been peddling a list of common-sense maxims called "Swanson's Unwritten Rules of Management," which became something of a cult hit in corporate America. Raytheon published them as a small book and has given away 300,000 copies. . .
Mr. Swanson was happy to accept credit, often in an aw-shucks way that fit with his homespun ideas. If you follow the rules, he wrote at the end of the book, "maybe you too can become a leader of a company and maybe it won't take you as long as it took me to get there."
Last month, however, an engineer in San Diego named Carl Durrenberger read the rules and realized they were neither unwritten nor Mr. Swanson's. In 1944, another engineer, W. J. King, published, "The Unwritten Laws of Engineering," which contain 17 of Mr. Swanson's 33 rules, often down to the very word. . . .
So on April 20, Mr. Durrenberger posted an item on his blog titled, "Bill Swanson of Raytheon is a Plagiarist!" . . .
The day after the blog posting, Raytheon was fielding questions from the news media about "Swanson's Unwritten Rules," and Mr. Durrenberger noticed that Raytheon employees were visiting the blog. But the company's Web site continued to list the rules and promote the book.
It wasn't until news articles appeared that Mr. Swanson released a statement. In it, he pointed out that the book was free and that its introduction noted that he had learned many of the lessons from others. He said he regretted that "any reference to Professor King's work was not properly credited."
Indeed, at the end of his statement, Mr. Swanson seemed to laugh off the whole thing. "This experience has taught me a valuable lesson," he concluded. "New rule #34: 'Regarding the truisms of human behavior, there are no original rules.' "
Like Ms. Viswanathan — in fact, like a lot of teenagers trying to worm their way out of a rough spot — Mr. Swanson came up with an unsatisfying explanation that avoided the real issue. Unlike Ms. Viswanathan, he never used the word "sorry" or "apologize."
I pointed this out to Raytheon's top spokeswoman this week, and last night she called me to read a new statement from Mr. Swanson. This time, he did apologize — twice — and he blamed a staff member for the problem.
In 2001, Mr. Swanson gave the staff member a file of material to help prepare a presentation, and the file included Mr. King's book. Mr. Swanson didn't realize that so much of the finished product came from the book, rather than his own notes. This may well be true, but it certainly isn't consistent with Mr. Swanson's previous boasts about how he came up with the rules. In the book, he wrote that they had come from advice from others and his own thoughts. In any event, he has failed his own integrity test. " 'Integrity,' to me," he writes, "is having the fortitude to do what is right when no one is watching."
The most disappointing part of the episode is that Raytheon's board has evidently decided that loyalty trumps principle — as people all too often do during an ethics scandal — and is giving Mr. Swanson a pass.
"We're not happy with it, and Mr. Swanson knows that," Warren B. Rudman, the former senator who is the company's lead director, told me this week. But Mr. Rudman said Mr. Swanson had persuaded him that the copying was unintentional.
Posted by dan at 08:21 AM
Gee, non-profit investment giant TIAA-CREF must be paying some pretty good salaries these days. As my hometown blog reports, TIAA-CREF CEO Herb Allison, who made his pile at Merrill, Lynch has just bought Phil Donahue & Marlo Thomas's waterfront spread in Westport, Ct., for $25 million.
The purchaser of the three adjoining lots at 112, 114, and 116 Beachside Avenue was listed as Evergreen East LLC, Evergreen West, LLC, and Evergreen North, LLC. State records show the principal is Herbert M. Allison Jr., chairman, president and CEO of TIAA-CREF, one of the nation’s largest financial services firms.Donahue told reporters last summer that he and his actress wife were not leaving Westport but would stay in the neighborhood. (See WestportNow Aug. 16, 2005)
The listing for the property described the home as a 7,379-sq.ft. 1911 wood and stucco Tudor with 17 rooms, including nine bedrooms, nine baths and powder rooms, and five fireplaces. There is also a guest house.
Donahue, whose syndicated television talk show ran for 27 years, bought the adjoining property some years ago and caused a controversy when he demolished a home to improve his water views.
The couple live on a stretch of mansion-lined Beachside Avenue that is also home to radio personality Don Imus and film producer Harvey Weinstein.
The most shocking bit of information in the piece isn't the price of the property, it's the age of Marlo Thomas. That Girl is 68?
Posted by dan at 10:26 AM
Tyson Foods, reporting a disappointing quarter, warns of an "oversupply of protein." We've long known there's too much beef, too much pork, and too much poultry available out there for our own good. Now there's too much out there available for Tyson's own good.
Posted by dan at 10:21 AM
Steven Roach of Morgan Stanley, a charter member of the Gloom and Doom Caucus, has defected! Jennifer Hughes reports in the Financial Times:
The world economy may be able to unwind its current imbalances without serious disruption, Stephen Roach, Morgan Stanley’s famously bearish chief economist, predicted on Monday, in a remarkable revision to several years of gloomy prognosis.Mr Roach had long warned that the US current account deficit and Asian central banks’ ballooning currency reserves risked destabilising the global financial system.
But on Monday, in a note to clients, he said: “I must confess that I am now feeling better about the prognosis for the world economy for the first time in ages.” His comments came as the dollar hit a one-year low against the euro and seven-month low against the yen, as investors remained confident the US Federal Reserve was nearing the end of its interest-rate-tightening cycle.
Mr Roach said the tipping point had been last month’s decision to mandate the International Monetary Fund to begin multilateral discussions with the aim of resolving the largest trade imbalances. At the same series of meetings, the Group of Seven highlighted the need to address the imbalances, underlining policymakers’ apparent resolve.
I’ve been wringing my hands over the mounting global imbalances for longer than I care to remember,” said Mr Roach. “The world is finally taking its medicine - or at least considering the possibility of doing so. The risk is that this is so far only on paper, but it’s a critically important first step.”
Mr Roach also highlighted the orderly progression of currency adjustments.
“The dollar is not collapsing, there’s not a run going on here.” said Mr Roach. “This is a gradual decline and while we’re talking year-lows, these levels are not sharp breaks from the levels we saw a month or two ago.” . . .
Posted by dan at 10:17 AM
Canute James reports in the Financial Times on the trend of Caribbean sugar growers starting to make ethanol for exports to the U.S. and European markets.
Caribbean sugar cane growers are repositioning their industries in the hope of getting a bigger share of the growing market for ethanol, particularly in the US and Europe. At least two factors are driving this move.First, Caribbean cane sugar production is becoming increasingly uneconomic.
Several of Europe's former Caribbean colonies that export sugar have been producing at a cost about three times the world market price. Their industries have been made viable only because of the high and guaranteed prices paid by the European Union for the shipments under an agreed quota. The producers get the same price the EU pays its domestic sugar producers.
But the EU is changing its policies after complaints from big sugar producing countries, led by Brazil, Thailand and Australia, that argued that European subsidies were unfair. The World Trade Organisation agreed with some of these complaints.
The EU says it will cut guaranteed sugar prices by 36 per cent over four years, starting this year. The reduction will cost the exporters significantly. The loss of foreign earnings being faced by some governments will be compounded by higher jobless rates if industries are unable to survive without the crutch of high artificial prices from Europe. Under the new EU sugar regime, Caribbean sugar producers will receive about 16 cents a pound, compared with a cost of production of between 35 and 40 cents for some of the region's costly operators.
Second, the US is phasing out the use of Methyl tert-butyl ether (MTBE) as a water polluting additive to petrol - on the grounds that it is dangerous to the environment and to animal and human health - and turning to ethanol.
The US is one of the markets where Caribbean producers have an advantage. As part of a trade agreement, Caribbean ethanol can enter the US duty free.
Also, ethanol produced by former European colonies in the Caribbean can enter the EU free of quotas and duties.
"We have seen opportunities to expand our sugar cane industry to produce ethanol and to market it in the two areas to which we have duty-free access," says Ronald Alli, chairman of the state-owned Guyana Sugar Corporation that plans to produce 120m litres of ethanol per year.
"This is part of our strategy to compensate for and make good on the loss of revenue from the EU sugar price cuts."
The change of direction in Caribbean sugar cane is attracting foreign interest.
Jamaica's ethanol output will increase by two thirds when Coimex of Brazil completes a 230m litre per year plant in two years, says Phillip Paulwell, the island's technology minister.
Aracatu of Brazil, which has interests in sugar and ethanol, has offered to buy the five sugar mills and cane farms owned by the Jamaican government for $300m.
The Dominican Republic will start producing 120m litres next year from a $58m distillery to be built and operated by a consortiumled by AlcoGroup, anethanol producer and distr-ibutor based in Belgium.
The Dominican Republic's State Sugar Council is talking with Ethanol Dominicana, a group of British investors, about leasing three indebted sugar mills and converting them to ethanol distilleries.
Ethanol is also being considered in Cuba, where the sugar industry is faltering.
Wouldn't it be ironic if our inability to keep gas prices down wound up providing Fidel Castro's regime with a new source of hard currency?
Posted by dan at 10:13 AM
Old Fed method of signalling intentions on interest rates: subtle shifts in wording in Federal Open Market Committee Announcements, strong statements in speeches to trade groups; key phrases inserted in Congressional testimony.
New Fed method of signalling intentions on interest rates: jawboning Maria Bartiromo of CNBC over drinks.
As Scott Patterson reported on WSJ.com:
Indications that Federal Reserve Chairman Ben Bernanke is potentially more hawkish toward inflation than previously thought triggered a sudden selloff of stocks and bonds in the final hour of trading Monday.The downturn came after Maria Bartiromo, a commentator on financial news network CNBC, said Federal Reserve Chairman Ben Bernanke told her over the weekend at a White House correspondents' dinner that the media misinterpreted his comments in congressional testimony last week as too lenient toward inflation.
Last week, stocks rallied after Mr. Bernanke, while addressing a congressional committee, said policy makers may pause in their two-year interest-rate-raising campaign, even if inflation still remains a concern.
The market did a quick turnaround Monday after Ms. Bartiromo said the market had gotten ahead of itself.
"I asked him whether the markets got it right after his congressional testimony, and he said, flatly, no," Ms. Bartiromo said, according to a transcript of her comments provided by CNBC. "He said he and his Federal Open Market Committee members were trying to basically create some flexibility for the Federal Reserve, saying the Fed may pause but the data will really dictate whether more rate hikes will occur at future meetings."
Posted by dan at 09:48 AM
Bill Carter reports in the New York Times on the network formed by the merger of WB and UPN. It's called the CW Network.
I got an advance look at the CW Network's evening schedule:
8:00-9:00 P.M. The Centrist Watch with David Broder
9:00-10:00 P.M. Howard Fineman Reports. . . on Chris Matthews
10:00-11:00 P.M. The Chin-Scratching Room, with Wolf Blitzer
11:00-11:30 P.M. Not-so-late Night with David Gergen
Posted by dan at 08:23 AM
Rudy Giuliani is going to have to do better than this if he wants to be a serious candidate. From Patrick Healy's article in today's New York Times:
At a fund-raiser in Davenport on Monday night, Mr. Giuliani offered a stout defense of President Bush's leadership, arguing that the economy was growing and that Mr. Bush would go down in history as "a great president.""I don't know what we're all so upset about," he said, referring to concerns about the economy and rising costs, such as gas prices.
Posted by dan at 08:20 AM
Carl Hulse reports in the New York Times on Bill Frist's utter incompetence as Senate Majority leader--he tried to raise taxes on business without giving the business lobby so much as a heads up!
Posted by dan at 08:18 AM
In the name of the father, the son, and the Holy Cram Down. Mary Wiliams Walsh reports in the New York Times on cram downs at church-connected pensions.
Posted by dan at 08:16 AM
My latest in Slate, on commodity arbitrage and the salvage/recycling industry.
Posted by dan at 07:44 AM
Here's one reason the housing bubble may deflate gently--lenders are rolling out products that allow investors to put off the day of reckoning (and the day of building equity). Behold the 50-year mortgage.
Posted by dan at 11:49 AM