A Consultant's Chronicles

Corporate Belt-tightening: Fact or Fiction

Reflecting on the current state of pay for CEOs in publicly owned companies, among other crucial information offered recently CNBC financial analyst Erin Burnett provided the following analysis of CEO pay accross the globe involving comparative compensation of CEO's to their employees:

• In America, it's 400:1
• In Britain, it's 22:1
• In Canada, it's 20:1
• In Japan, it's 11:1

According to the reportage, while we have an opportunity to change this trend, it seems unlikely. Companies are simply "re-arranging the deck chairs" by changing eligibility status for bonuses & stock options arguing for that old cliche about "the more things change, the more they stay the same."

Sophia Loren, Your Child, & The Recession

After reading a piece about children growing up in the recession  by Susan Berfield, an associate editor for BusinessWeek recently, I was reminded of a Charlie Rose interview I saw with the venerable Academy Award winning actress Sophia Loren a few years ago. What does Sophia Loren have to do with children growing up in the recession?

When asked by Rose about her fame & wealth, Loren replied that as a child of the Great Depression she doesn't see herself as someone who is rich & never will. Moreover money will always be a concern for her. She said her sons can & do see themselves as wealthy because they have no memory of dire financial struggles since they've grown up basking in their parents' collective success [Loren is married to Italian director Carlo Ponti]. Given the global dramatic effects of our current financial predicament, how the recession will likely effect today's children holds some interesting parallels to what Loren experienced herself.

Age Related Effects Of the Recession On Children

According to Berfield, a child's age group will likely influence how they are effected by our recession. Accordingly:

-Young children will likely be most deeply impacted because they will have no memory of "better times." Furthermore since they are likely to pick up on their parents' anxiety, the world will seem like an anxious & uncertain place. She indicates that their own career & financial decisions may be far more cautious as a result. This outcome is borne out by Loren's current feelings & views about money as a child of the Great Depression. Therefore the hypothesis that the recession may have a deep impact on today's small children seems very real.

-Teens & tweens reportedly are more likely to experience a sense of loss, which may make them attend to business issues more carefully in the future. For children at this age, the loss of material things may feel profound  & personal. They also are likely not to assume that they will be higher achievers than their parents.

-Young adults represent the favored & cosseted millennial generation who are entering the workplace at an unfortunate point in time when jobs are tougher to come by. Additionally, this may influence career decisions, which may have long-lasting consequences. They may also resent their parents for promising them a brighter future than what presently seems possible.

What Can Parents Do

How parents deal with their children's reactions seems to be largely dependent on the family's financial circumstances. If their finances [& therefore their lifestyles] are simply "dinged," many parents seem to opt for keeping the burdens & worries to themselves in order to maintain their children's lifestyle before the crash. To do this, they are tapping into 401k's & scrimping on themselves. If however, parents have taken a significant financial hit that leaves them with little or no resources, they are drastically changing their lifestyle & doing it as a family where sacrifices are shared & nothing is hidden. It seems that in this, there is no "one-size-fits-all" solution. 

Line of the Week 3-15-09

Given that this week was St. Patrick's Day, the line of the week belongs to the famed Irish-American Pulitzer Prize winning columnist Maureen Dowd.  Reflecting on Barack Obama's "generally less than authoritative manner," especially most recently when it came to handling the latest installment of the bonus debacles with AIG [re: needing to be cued by teleprompter to be angry], she had this to say:

"...he should keep in mind one of my dad’s favorite Gaelic sayings: 'Never bolt the door with a boiled carrot'...”

Words to live by.

Liddy Speaks: Why AIG Spent Money On 'Women & Grog'

Today Edward Liddy, the current CEO of AIG will be grilled by Congress today although truth be told, they along with the president are [in my view] "a day late & a dollar short" when it comes to their suddenly found outrage over the obscene amount of money spent on bonuses to a company in desperate need of taxpayer largesse.

Money Spent On 'Women & Grog' 

Nonetheless Liddy has written a cogent opinion piece summarizing the problem which apparently began in 1987...1987!!!! That's a span of 3 presidents who potentially could have caught & fixed this before it became a multi-headed monster so there is more than enough blame to spread around to all political parties. The best that can be said is that he [Liddy] didn't structure this insane compensation & is working for just $1 having taken over as CEO in September of 2008. I encourage everyone to take the time & read the piece because it does succeed in tamping down some of the anger because it reveals a real plan. Whether AIG will be able to keep the promises he is implicitly making is another story. However, in describing these insane bonuses, I think legal scholar Jonathan Turley summarized it best in an interview when he said:

"...When you give millions to the 'Pirates of Penzance,' you can hardly be surprised when they spend it on women & grog..!"

Sadly, his comment feels far too close to the truth!

Corporate Tax Cuts & Job Creation: 'Who's Zooming Who'

There is absolutely no shortage of things to write about today but since jobs [or lack thereof] are on the minds of so many, I've decided to write a post about something I just read in Business Week about the drug company Pfizer. Apparently in an attempt to make the best use of their high value employees' time, they have developed a subsidiary company called Pfizer Works where they can outsource specific & mundane chores like number-crunching, creating PowerPoint presentations, etc. The essence of the plan is to outsource specific tasks. It's all done very methodically because employees document via work order each assignment, i.e., what they want, need, and the deadline for the job. Conceptually it actually sounds pretty good. After all, why pay employees who receive large compensation to do what is rote production work. This is the kind of thing that is the small business person's dream. If you are getting the impression that I am setting you up for some kind of "but" in this, you'd be right.

Why Not Reward Companies That Create Jobs Here At Home

Pfizer Works has 2 outlets: one is in Chicago & the other is in India. Excuse me? There are lots of competent unemployed folks here who would love those jobs so why send them to India? I happen to know of 2 small businesses in san Jose that specialize in making elegant PowerPoint presentations.  Why not keep all of Pfizer Works here? Increasingly I have a hard time seeing large corporations get big tax breaks for sending jobs overseas particularly since part of the argument for those cuts is that the companies create jobs. Right now we have a surplus of people who would happily take those jobs. Why should big business be rewarded for creating jobs in another country? Although it's a less extreme version [compared to a comapny like AIG], it strikes me as yet another example of rewarding corporate bad behavior when those very same "carrots" could be used in a more positive way here at home. That my view...   

In 2009 'It's the Economy Stupid" All Over Again

Immediately after Bill Clinton was elected to his first term, he gave an in depth interview to Ted Koppel on Nightline. The one & only thing I remember from that interview was when he said, "I'm going to focus like a lasar beam on the economy." Whether you are the president of a country, the CEO of a large corporation, or own a small business, it is always all about the economy. Clinton's campaign mantra of the 90's "it's the economy stupid" is back with a vengeance.

A Political Chef's Salad When We Want An Entree

Unfortunately, our current president is not communicating this message well. He has many big initiatives out on the table: the economy, healthcare, energy, education; it's a chef's salad when the nation is hungering for an entree. I understand that they are all critical issues but the net result is a diffuse message which is doing nothing to calm the frazzled nerves of the nation [& the markets] right now. With the singular exception of healthcare, perhaps all of the other issues need to be handed off to their respective cabinet members because we need the president's focus on the economy.  Why is healthcare the lone caveat? That's because healthcare costs are crippling business & their abilities to compete in the interbational marketplace so while it's a colossal issue, it is also related. We need lasar-like focus from this president & so does the rest of the world. It's called leadership in a crisis. That's my opinion, what's yours? 

Dead End: When Father Greed Meets Mother Nature

At some point on either Sunday or Monday, each week I think about how I will kick off the week's blog post. Usually I have a few ideas "marinating" & this morning was no different until I read an article by New York Times columnist Tom Friedman who is clearly one of the most thoughtful writers of our time. He suggests that maybe; just maybe, we are asking ourselves all the wrong questions about our current economic state of play. As usual he has a much bigger idea in mind.

Is Our Current Blueprint For Building Wealth Unsustainable

He suggests that perhaps the meltdown of 2008 is something far greater than a severe recession. Friedman speculates that over the last several decades it is quite possible that we have constructed a blueprint for growth that is economically & ecologically unsustainable and like the once badly defeated boxer Roberto Duran, our system has finally declared "no mas [no more]." Basically he posits that as a spend/replace society we have reached the nexus point of "Mother Nature & Father Greed" only to find one gigantic sign that reads "dead end." In terms of our worldwide assets, the wealth model we have used to date has been depletion based while we have not renewed or protected much so simply put, things now have to change. Friedman cites an Australian environmentalist  Paul Gilding who has coined a name for this point in time: "the great disruption." I've got to admit that it's at least an interesting concept worthy of our consideration. Let's talk about it...

Line of the week 2-8-09

This week's line of the week goes to Senator Arlen Specter (R-Pa) in an editorial he wrote explaining why he voted for the controversial economic stimulus plan. Essentially he felt that his reasoning was best expressed by a quote from President Kennedy, which said:

"...In politics,... nobody gets everything, nobody gets nothing and everybody gets something..."

This is the essence of compromise at its core; true in politics, business & life. The big problem is too many people want 'everything' & simply can't be happy with 'something.'

Line of the Week 2-1-09

This week's Line of the Week references that huge gorilla on the taxpayer's back otherwise known as the stimulus plan. In it's original inception it was supposed to be the engine to drive our economy back from the living dead. Unfortunately it has morphed into a Democratic "wish list" & fodder for the GOP thus becoming difficult-to-pass legislation. In a discussion column with fellow NY Times pundit David Brooks, Gail Collins observed that given all the problems the administration is having, perhaps the Obama "[presidential] honeymoon" is over. About the current legislative process itself she said:

"...Urging legislators to do the right thing is like trying to housebreak a difficult puppy. You begin the day with great hopes and they always let you down — and don’t even look embarrassed about it..."

So true on both counts!

Women's Rights: The Politics of 'Priorities'

A lawyer friend just sent me two photos that speak volumes for themselves. They reflect the politics of priorities when it comes to life & work [especially for women]:

George W. Bush when signing the Partial Birth Abortion Ban Act of 2003

                                                                                                                                    

                                  

                        Barack Obama when signing  the Lily Ledbetter Fair Pay Act of 2009

                                                                                                                       

Although not always, sometimes politics can be really sweet.