JimPinto.com - Connections for Growth & Success
No. 39 : April 9, 2001
Business, marketing & futures commentary.
New attitudes, no platitudes.
- GE - Hit the road, Jack !
- CEO Compensation - How much is enough?
- The Silicon Car
- The Future - minds & machine become one
- ABB - Mind the GAAP
- Insights on 'complaining'
- Cluetrain feedback
GE - Hit the road, Jack !
This is the title of a hard-hitting article in the March 19, 2001 issue of
Industry Week. It insists that Jack Welch (65) could uncharacteristically
be making a major management mistake by hanging onto the chairman and CEO's
job at GE until the end of this year, 13 months after designating Jeffrey
Inmelt (45) as his successor.
After announcing his own retirement-date (originally April 2001) and
Inmelt's appointment as CEO-designate, Jack Welch suddenly smelled what he
thought was an opportunity to buy $ 23b-sales Honeywell. So, he delayed
his retirement (until year-end) to supervise and coordinate the merger.
In the meantime, as discussed in our last eNews (No. 38, March 28, 2001)
the European Commission has delayed approval of the merger for several
months because of the avionics overlap (the very segment of Honeywell that
GE wanted) and the due diligence on some parts of Honeywell have turned out
to be ugly. So now, given the ugly-delay, will Jack Welch extend his
retirement still further? Or will be simply back off and allow Inmelt to
welch, uh squelch, the Honeywell deal?
Jack insists he's not "the old fool who can't leave his seat, who loves the
job so much he can't go home." But, if this Honeywell saga persists, he
might well be proving that he is exactly what he says he is not.
In my humble opinion, Jack Welch should step aside now, to validate
Inmelt's leadership and avoid confusion about who's really in charge.
Hit the Road Jack! Industry Week (March 19, 2001)
CEO compensation - how much is enough?
CEO pay is typically set by a board "compensation committee" which tracks
competitive practices but often ignores short-term performance and economic
downturns. At company expense, staffers provide data showing that the CEO
is paid less than peers. After the tough decision to lay off thousands of
employees, the CEO often gets a pay-raise. If the stock declines, the CEO
often sheds old higher-priced stock-options and is awarded new options at
a lower-price. Finally, when the decision to fire the failure is clear,
the CEO typically receives significant contractual severance payments - the
golden handshake. Meantime, the members of the board compensation
committee continue to collect their $ 1,000-per-meeting fees.
This problem excessive chief executive pay is getting worse - as expected
when the proverbial fox is left in charge of the hen house. In an era of
cost-cutting, downsizing, and performance-based compensation, many CEOs are
still getting a free ride, walking away with an increasing and undeserved
slice of the corporate profits.
Because many of the JimPinto.com eNews readers hail from industrial
automation, we thought we'd provide a CEO compensation list for the
automation majors. All numbers are from company annual reports or Yahoo
company-profiles. Listed in order of total compensation. The +$m items below
refer to stock-options exercised, plus bonus and incentives paid.
CEO Compensation - Industrial Automation Majors
||$ 26m + $ 100m
||Jack Welch (Retiring CEO)
Jeffrey Inmelt (CEO-designate)
|$ 16.8 + $ 57.1m
$ 3.6m + $6.4m
||Chuck Knight, Chairman
David Farr, CEO
|$ 10.8m + $1.7m
||$ 7.1m + $ 5.1m
||$ 2.4m + 1.2m
Note : Some of the numbers listed may be up to a year old - in the
meantime, some of these people may have had significant salary increases,
to offset the decline in their shareholdings and options.
Read these interesting articles on the web :
Chief Executive Magazine (Sept. 2000) CEO Compensation Review
Motley Fool article : The problem only gets worse
UK Independent News On CEO Salaries
The Silicon Car
Most of our time, effort and resources go into moving the solid, not the
virtual, things of life. And most of the moving is still orchestrated by
click-click, bang-bang mechanical and hydraulic systems. The intelligence,
such as it is, resides in valves, gears and complex contours painstakingly
machined into camshafts.
Silicon will soon take over, says Peter Huber in Forbes magazine (Dec. 25
2000). The combination of smart silicon and power silicon (microprocessors
and power switches) make control of heavy-duty electric motors
super-effective. It's happening now, says Huber. Electric drives are
lighter, smaller, faster and more responsive than any mechanical system.
A 130-horsepower automobile is really a 100-kilowatt (peak power) machine,
with only two kilowatts (peak) of its power electric and the rest being
shafts, belts and hydraulics. An electric cable an inch thick can convey as
much power as the engines of a jumbo jet.
Huber predicts that drive-by-wire electric power steering and all-electric
brakes will appear in some production vehicles within a couple of years.
Springs and shock absorbers will give way to powerful linear motors that
move wheels vertically as needed to maintain traction beneath and a smooth
ride above. Electric valves will replace mechanical ones on the cylinder
head. Electric drives will turn the wheels, knocking out the gearbox, drive
shaft and differential. Torque, traction, braking, skid control, fuel
economy and emissions all depend on the complex interaction of engine,
battery, suspension, steering and brakes; the magic lies in the intelligent
coordination of all the parts, which silicon makes possible. With the
conversion to electric, the car sheds bulk and weight.
Peter Huber's Forbes article
Mind & Machine will become one
Ray Kurzweil has predicted that by the second half of the next century,
there will be no clear distinction between human and machine intelligence.
Biological brains are already being enhanced by neural implants : for
example, to counteract symptoms of Parkinson's disease, and to allow stroke
victims to communicate via PCs. Soon, neural implants will be used to
improve our perception, memory and logical thinking. These implants will
allow a person to connect with the web and have sensory experiences as
realistic, detailed and subtle as physical reality.
While intrinsic human biological intelligence is essentially not growing,
non-biological intelligence is growing at an exponential rate. Synthetic
brains will be created which will extend human brains. By the end of the
21st century, non-biological thinking will be trillions of times more
powerful than that of its human progenitors.
Many new technologies waiting in the wings that will allow this to happen :
nanotubes, three-dimensional chips, optical computing, crystalline
computing, DNA, and quantum computing.
Ray Kurzweil's article in Business 2.0 (Dec. 99)
Review Ray Kurzweil's book : The Age of Spiritual Machines
ABB - Mind the GAAP
Following my eNews discussion of ABB (No. 34, 21 Feb. 2001) suggesting that
ABB would fall into "GAAP-goop", Deutsche Bank has just published a note
(dated 30 March 2001) entitled "Mind the GAAP".
Deutsche Bank downgrades ABB "courtesy of the greater transparency of US GAAP"
and cuts their 2001-2003 earnings forecasts by 30-34% to reflect "the considerable
non-operating gains which have been recorded by ABB over the last three
The DB report, written by Mark Cusack, "focuses primarily upon the results
of a detailed review of the 2000 accounts, drawn up for the first time in
accordance with US GAAP. During the 1998-2000 period, it now appears that
some 28% of reported net income came from non-operating sources (property
and business disposal gains). In 2000, operating net income was 43% lower
than the reported figure (although there was considerable restructuring
last year). We believe that investors will strip out such gains to arrive
at an estimate of sustainable operating earnings."
Deutsche Bank website
To get a copy of the Deutsche Bank report, contact :
- Mark Cusack
Tel : (UK)(44) 20 7545 9836
email : email@example.com
- Peter Reilly
Tel : (UK)(44) 20 7545 9835
email : firstname.lastname@example.org
Anthony Kerstens [email@example.com] provides this e-truth and insight :
"Regarding some of the "real-inside-story" you've been receiving, yes,
there is truth in there hidden between the lines.
Bob Holland [firstname.lastname@example.org] e-wrote on Cluetrain :
"In a recent post to control.com I said: "The only reason to bitch and complain about something is to seek
consolation. That consolation is obtained by soliciting a negative response
from others to justify your own negative feelings. That action drags down
the demeanor of others, is negative behavior, and is unacceptable at the
water cooler, meetings, or anywhere else people gather for discussions."
"In short these people that are sending you the "real-inside-story" are
attempting to make themselves feel better by poisoning the rest of the
"I assert that the truth this sort of behavior reveals is that companies
are not helping their people communicate effectively, and allowing a
festering mess to grow unchecked in their own house. If these people find
that nobody in their hierarchy is listening, then they need to speak up
rather than mutter in shadows. Easier said than done, I know, and
altogether necessary for corporate and personal survival."
"I bought Cluetrain last week and was very disappointed. Sure, something is
happening to us. Buckminster Fuller, Marshall McLuhan, Yeats, et. al.
convinced me of that in the '60s. And the thing that's happening is
complex, confusing and beyond our control - a global culture shift. So, a
group of authors gets together, presents some pretty generally accepted
ideas as a "manifesto" and spends a lot of time ranting and raving about
things about which they have only a shallow, adolescent perspective. They
repeatedly refer, for instance, to advertising is some sort of evil lie
that will soon go away. Advertising is simply information transfer. It
makes commerce possible. It has always been a part of human life. So is
commerce disappearing too? Cluetrain is what is going away, in a year we
won't even remember it."
Hey, I get regular lots of regular e-feedback that continues to motivate me to do what I'm doing:
"Thanks for publishing the JimPinto newsletter. It's the only news letter I
read. It's good to get the straight story from someone not afraid of
offending a potential sponsor. I especially liked your report of Honeywell/
GE and Allen Yurko. I ordered the Cluetrain Manifesto book but have not got
it yet. Keep up the good work. We're out here and were listening."
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