Tuesday, September 30, 2008

Executive Compensation

Well with all the yelling and screaming in both Washington and New York, it appears that the "emergency" requiring "immediate" action will have to take at least a little more time. The measure did not pass. Although I say "good" it is tempered by the knowledge that something will get done. I hope the markets and the financial industry figures it out on their own without the "help" from the government. One of the provisions that needs to be in whatever they finally do relates to Executive Compensation.

Having been around, mostly, small and family owned businesses all my business life, what some of these people get paid and the Golden Parachutes" they negotiate is pure greed. I am a free market person, but this is crazy. What can you do with $30 million that you cannot do with $15 million, or $5 million, etc.Can you imagine a company that is doing say $20 million in annual sales paying its CEO $1,000,000. Probably not. At this level the President would have to live on say, $300,000 per year or $25,000 per month. I could make it on that. Let's say the company is doing $50 million in annual sales and the CEO is getting $1 million or a little over $80,000 per month. Can you live on that?

The bill Congress proposed would have limited executive compensation to $500,000 if they were a bailout company. I think that is to low and maybe the limit should be maybe $4 million per year (or so says my barber). I agree. Again the Congress went overboard. How are we to believe them. They react so irrationally. Perhaps because of the Treasury Secretary and the head of the Federal Reserve did so too? Could you imagine Alan Greenspan reacting like this?

If you own or are involved in a Small business (annual sales of less than $25 million) or a family owned business of any size, use reason not greed to determine executive pay. Sure there can be perks, and should be, but if you keep it within reason nobody will fault you for being excessive and then at the end of the year if you have a pile of money left after all accruals and saving for a rainy day, do what Lincoln Electric (largest maker of arc welding equipment in the world) divide it up among all your employees. You want loyalty and quality, try doing that and see what happens.

What do you think?

Friday, September 26, 2008

The Bailout

Since it is in the news so much, I decided to give you my opinion of what should be done relative to the "Bailout". I believe that the government should let them fail if they will. I do not think they will and I do not think it would be bad if they did. For years they made millions and evidently did not believe that the bubble would ever break. SURPRISE! Especially with Mortgage Backed Securities and Derivatives and default swaps(really unregulated, unloss reserved insurance); all of which are side-bets in my mind. I guess they did not "hedge" well enough. Based on the money that they made during this time, it seems that they would have amassed a large "loan loss reserve" in their own books and made arrangements for failure. Aren't these investment houses suppose to be able to help us plan for the future and increase real wealth? Huh, huh, huh?

So let them fail. I do not think that will happen. I think that they will find a legal and creative solution to the problem without government intervention and my $5000 dollar commitment. That is what it will take for each person in the US over 18 to pay for this Bailout. I am not sure of the details of the House Republicans plan submitted in contrast to the Treasury Secretary's plan, but it sounds pretty good. Granted I do not know all the nuances of this deal, but using fear tactics and moving so fast is also not good. In my business career there were very few situations where my senior managers came to me and said "We have to do this immediately" where I didn't say "well, then let's wait a day or two!"

The basic fear is that credit will dry up and businesses will not be able to do what they need to do credit-wise to meet payrolls, buy goods and services and purchase adequate inventories. Baloney!! If liquidity is the problem, and it is, they operate with less, sell off assets, reduce staff or in other words "hunker down" (Those are words being taught in finishing schools instead of the words cut back and spend less). Remember those words big, big investment banks! You have operated with such largess and lack of self control that you now want to be bailed out by small business and family owned businesses that operate day to day. Again, Baloney!

And finally. The word that describes the whole mess? GREED!

What do you think?

Tuesday, September 23, 2008

Here we go.

Well I have wanted to do this for some time. After having been a consultant, business owner and top management employee for over 40 years, I decided that the world needed to hear what I have to say. That is not to say that I am always right, but I almost always have an opinion that is either right or very close to right.


So who am I. What follows is my brief Functional Resume. This will give you some idea of the scope of my experience and the industries I have worked. What is does not show is all my consulting assignments. Some of those companies are confidentials but the situations/problems handled have provided (along with the experience) an extremely wide variety of solutions, answers, knowledge and practical ways of managing.




I am going to tackle various business situations and areas of ongoing concern for small (under $50 million in annual sales usually) and family owned (includines spouse, children, inlaw and outlaw participants) businesses. So, please ask me anything. Really, anything about problems, planning, accounting, finance, HR, sales, marketing, supply chain, infighting, poor performance, hiring, firing, anything. If I do not know the answer (highly unlikely), I will find out or direct you to the right place.