What were we thinking? .Things we learned in 2002 that we should have known all along: * If you have to offer 0 percent financing for your product, you're probably not generating new demand with innovations or customer value. More likely, you're stealing demand from the future and setting your sector up for a recession. Cheap money for customers is like heroin; once they're hooked, it takes a long, painful withdrawal before they're over it. Let's hope the auto industry recovers from its free-money binge sometime before 2005. * Greed isn't good, markets don't always go up and CEOs with large stock-option grants will be tempted to try all kinds of tricks to maximize their haul. Fortunately, few yield to criminal temptation. Unfortunately, most will be enticed into managing for the next quarter rather than the long term. Boards need to re-think how CEOs are paid to eliminate this moral hazard Moral Hazard The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the . * When you give money to an employee for doing a job, it's compensation and it ought to be expensed in the current period. A recent analysis of stock-option programs in the '90s shows that at some companies, as much as 100 percent of their profits went out the back door to employee stock-option exercises never accounted for on an income statement. Yes, talent must be paid, but investors need to know the truth about what that talent costs. * When CEOs retire, they should really leave. Take the pension, bank the stock and just go. No more private jets or corporate apartments, no more hanging around the board as executive chairman or chairman emeritus or eminence grise ém·i·nence grise n. pl. ém·i·nence grises A powerful adviser or decision-maker who operates secretly or unofficially. Also called gray eminence. . Just go, and let the new blood have its day in the sun (and rain). * Accounting firms can't rake in rake in Verb Informal to acquire (money) in large amounts Verb 1. rake in - earn large sums of money; "Since she accepted the new position, she has been raking it in" shovel in huge fees for consulting and still give unbiased opinions about their clients' business. Firewalls between departments don't work as well as separate ownership structures and competition. * Investment banks The following is a list of investment banks Financial conglomerates Large financial-services conglomerates combine commercial banking and investment banking, and sometimes insurance. can't tout Tout To promote a security in order to attract buyers. tout To foster interest in a particular company or security. For example, a broker might tout a security to a client in the hope that the client will purchase the security. your stock with one hand and publish unbiased research about its potential with the other. Only a crook will tell you different and only a fool will listen. * Being a corporate director isn't a paid vacation Noun 1. paid vacation - a vacation from work by an employee with pay granted holiday, vacation - leisure time away from work devoted to rest or pleasure; "we get two weeks of vacation every summer"; "we took a short holiday in Puerto Rico" , a part-time retirement job or an invitation to a country club. It's a demanding position that requires tough, relentless questioning of management and aggressive, up-to-the-minute oversight. If you don't have the stamina for it, get out. If you do, insist that you get paid fairly (that is, more) for it--maybe by cutting a CEO'S outsized out·size n. 1. An unusual size, especially a very large size. 2. A garment of unusual size. adj. also out·sized Unusually large, weighty, or extensive. Adj. 1. compensation accordingly. * Being a chief executive isn't all rock-star salaries and limo rides to merger talks. The CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. position is a lightning rod lightning rod, a rod made of materials, especially metals, that are good conductors of electricity, which is mounted on top of a building or other structure and attached to the ground by a cable. for all that's good, bad or ugly about your company or capitalism in general. If you want a friend, buy a dog. If you want sympathy for how hard your job is, call your mother. But if you want to be a CEO, accept that occasional vilification is part of modern culture's love/hate cycle with celebrity of all kinds, and quit whining. You'll be a hero again in 2003. Unless, of course, you offered 0 percent financing in 2002... John R. Brandt President & Editorial Director |
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