JimPinto.com - Connections for Growth & Success
No. 93 : July 30, 2002
Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.
- Corporate executives personal excesses
- Book: What's so great about America
- Automation Update - ABB reports Q2 loss & stock drops 23%
- 1984 'big brother' threat remains - only off schedule
- Human-embedded chips for ID and tracking
- Corporate Greed - Fairness to employees
- A long-time Foxboro employee points the finger at Invensys
- Yokogawa considers N.America a primary growth market
Corporate executives' personal greed
While the angry stock market drives a debilitating descent and
corporate cutbacks continue, stories of Enronesque excesses by
corporate executives continue to flood the news.
WorldCom CFO Scott Sullivan, responsible for improper accounting
to the tune of $3.9 billion, is continuing to build his $15m
Mediterranean-style palace in the exclusive Le Lac neighborhood
near Boca Raton, Florida, Mecca for America's financial royals.
The plans for Sullivan's sprawling home on 4.3 acres of lakefront
include a game room, 18-seat theater, BBQ and wet bar, domed exercise
room, library, art gallery, wine cellar and separate wine room,
8 bedrooms and eight bathrooms, with 17,000 sq.ft. of air-conditioned
space and another 7,000 or so in covered balconies, terraces and
walkways. The master bedroom is 34 ft. long, including a sitting area,
with a gas fireplaces and an 'art niche' in one corner. The courtyard
is flanked by 2 3-car garages, with maid's quarters above. The house
is wired for 9 refrigerators, 4 microwaves and 6 Jacuzzis. There are
3 reflecting pools and fountains. Past the entry fountain, the grand
hall opens onto a central staircase rising to the second level, with
an elevator for those who don't want to walk up the 30 stairs.
Global Crossing recently filed for bankruptcy with $12 billion of
debt. Chairman & CEO Gary Winnick had already sold $734m worth of his
shares and bought a $92m estate abutting the Bel-Air Country Club in
Los Angeles. The Georgian-style mansion has 64 rooms, include a
kitchen with 6 sinks and enough ovens to warm 100 plates at once.
The master suite boasts separate massage, sitting and shower rooms.
There are 12 bedrooms and 12 bathrooms - just for servants.
Hmmm... I'd better stop - this is getting too long, and it's too
similar to the previous paragraph anyway.)
Before we continue to list these excesses ad nauseum, let's bring
some sanity to the scenario. Corporate structure and Capitalism are
NOT at fault here. These are simply some of the egotistical,
unbalanced people who have succumbed to "the lure of the lifestyle".
The ones who are cheats don't have the decency, or the shame, to at
least moderate their excesses in the light of their recent failures.
One wonders how they rationalize these luxury to themselves after they
have been found out. Who are the 'friends' who will visit with
Sullivan and Winnick now, to breathe ooohs and aahhs at their
ostentatious opulence and licentious luxury?
Successful leaders are classic narcissists in the Freudian sense, says
Michael Maccoby, whose book "The Productive Narcissist" will be out
soon. These egotists are charmers and risk-takers, big personalities
and big visions. Maccoby's recent examples are Jack Welch, Steve Jobs,
Bill Gates. He notes that these types have 'feelings of grandiosity'
that success creates, pushing some to lose hold of reality, then crash
Corporate salaries and stock options have skyrocketed over the last
few years and three groups are trying hard to institute reform.
a/ Shareholders complain that even when companies are losing money,
executives seem to be earning plenty. So, buy companies with boards
that track and reward performance, and penalize lack of it.
b/ Workers complain that they work just as hard as executives for
far less money. They should recognize that pay comes with growth
and profit performance, not just "hard work". c/ Major investors
and board members who argue that profits are maximized by the
smartest executives who have incentives to improve share price.
They need to recognize propensity for ego-driven excess, and find
ways to monitor and control personal greed.
Wired (July 2002)- Egomania? We can rebuild it
Taking stock of corporate salary excess
JimPinto on Creeping Criminality
What's so great about America
Look again - this is not a question, but a statement.
In his latest book Dinesh D'Souza (like me, born in India) writes:
"America is the greatest, freest, and most decent society in
existence. American life as it is lived today is the best life
that our world has to offer."
Yes, there are those who hate it - from the radical Islamists,
to the right-wingers like Pat Buchanan and the left-wingers like
Jesse Jackson. But D'Souza insists that they are wrong to hate it,
and grapples with all of them in this compelling new book.
A former domestic policy analyst under Regan and a neo-conservative
thinker, Dinesh D'Souza describes his encounter with America from
the objective yet involved viewpoint of an immigrant, now a citizen.
Written in the months following the 9/11 terrorist strikes, this book
reviews the misconceptions about Islamic fundamentalism on the one
hand, and our own misconceptions regarding those who would sacrifice
their own lives to cause America damage.
In these difficult and trying times, with the budget for Homeland
Security increasing to $50b, while Corporate excesses and greed
escalate to even more enormous proportions, this is a good book to
read. You'll enjoy an objective and realistic assessment of America,
with a broad historic and cultural perspective.
Visit Dinesh D'Souza's website
Buy "What's so great about America" from Amazon.com
ABB surprised everyone last week by posting a loss of $13 million for
Q2, prompting a 23% fall in its stock price. Profits for 6-months fell
to $ 101m from $266m for the year-earlier period. First-half sales
declined to $10.9b from $11.1b and orders fell to $11.9b from $12.6b
a year earlier. Profit dropped 41% to $368m from $626m. Debt rose
sharply, to $5.2b, from $4.1b at the beginning of the year.
ABB reports Q2 loss & stock drops 23%
ABB averted a financial crisis earlier this year and has suffered a
series of embarrassments surrounding current and former top executives
and their pay. It said today that the loss was caused in part because
of cost overruns at two projects in its oil, gas and petrochemicals
division that it did not identify.
Much of the problem was traceable to asbestos-related litigation in
the US, stemming from industrial boilers made in the 1970's by
Combustion Engineering. ABB bought CE and then sold it, but retained
responsibility for the liabilities. Asbestos claims against the
company rose 10 percent in the quarter, raising concerns that ABB
will have to add to its reserves.
ABB CEO Jörgen Centerman has been struggling to restore confidence.
He insisted that if you look at the underlying performance, nearly
every single parameter is moving in the right direction. Positive
signs included 10% increase of new orders, and 8% rebound in sales
from Q1. Mr. Centerman said the second half of the year was looking
stronger; earlier this week, ABB landed a $1b Russian order.
Over the last year, ABB has eliminated 10,900 jobs, at a cost of
$106m. Like Invensys, ABB expects asset sales to help meet its target
for reducing debt. The financial unit has reportedly been sold.
The process control parts & pieces ABB acquired (Bailey, AccuRay)
continue to decline. ABB is still suffering from the legacy of
unsolved Elsag-Bailey problems, such as the acquisition of Hartman
& Braun. Rumors are rife about some product lines or segments of
Bailey and others being on the block - but it's too early to tell
whether this still only second-guessing.
Good luck, Jorgen Centermann! In these trying times, you'll need it!
ABB Posts 62% Drop in First-Half Earnings
ABB Net Debt To Improve In 3rd Quarter With Fin Unit Sale
Use the JimPinto.com weblogs to read the latest 'chat' and review
the breaking news on the automation majors.
If you have any comments, updates, news or views on this, or any
other topic in JimPinto.com eNews, please 'blog'.
JimPinto.com weblog index
1984 threat remains - only off schedule
Many people appreciated the article about George Orwell's 1984
prediction being defeated by widely available technology. However,
some have pointed out that the threat is far from being ended -
it is simply delayed. Big Brother (whether Big Government,
Big Business, or Big Fear) is still looming.
There is currently a major onslaught on privacy issues as part
of the Homeland Security plan. Maybe, we'll find that Orwell
was right about 'big brother' - the only thing wrong was the date.
Read Orwell's 1984 on-line
Happy New Year: It's 1984 (written on 22 Sept. 2001)
Big Brother Is monitoring us by databases
Review comments & feedback on the MIT-Tech Review article
Think about this: 'Big brother' monitoring is not suddenly enforced.
It is something that people gradually accept for a variety of
reasons. Take a look at the following item: the fear of kidnapping
and terrorism is causing many people to actually volunteer to be
Human-embedded chips for ID & tracking
Embedding chips in the human body seems like something that most
people would not accept, unless they were critically ill. However,
after the recent spate of child-kidnappings in the news, a TV
station poll asked people whether they would allow their child to
have a tracking chip inserted. They turned up this surprising result:
Yes 71%; No 26%; 3% not sure.
There are already many applications where tiny chips embedded in
the human body allow non-invasive access to information for medical
and other critical purposes. The use of this technology means that
the threat of theft, loss, duplication or counterfeiting of data
is substantially diminished or eliminated. Specific uses include:
foolproof ID (terrorist identification), search and rescue and
various law enforcement and defense uses.
Hundreds of thousands of medical devices are already surgically
implanted into patients every year. Examples are pacemakers,
artificial joints, orthopedic hardware, heart valves, medication
pumps. Chip-implants provide a new method for obtaining medically
critical information and full medical record archival/retrieval
for emergency medical care.
What would you think of a law which proposed that a chip be
implanted in every human as a foolproof ID device? The social,
ethical, legal, moral implications are significant. Thinkaboutit.
Human implants are already here
Verichip - miniature, implantable identification device
Greed and excess at the top of the corporate ladder is in the news
a lot recently. Roger Partington [RPartington@wescodist.com] came
up with an excellent suggestion:
"There is very little being done to protect employee rights.
Senior executives have golden parachutes and suck perks out
of under performing companies as they slide towards the brink,
while the rank and file face financial ruin on the downsizing
and short severances. Enron and Worldcomm are cases in point.
A former Invensys employee (name withheld) had this to say:
"As an investor there is little reporting information to indicate
the balance between short-term and long-term corporate objectives.
Financial statements and accounting standards need not stop short
at measuring the dollars. Why don't they measure employee turnover
and satisfaction? A standard audit procedure could be developed
that is highly valid for comparison purposes within an industry.
These are critical leading indicators of company performance.
They would impact the stock price and force senior managers
to move human resource issues higher up the agenda."
"As ex-employee of the Invensys, Foxboro Environmental Operations
(sold off to Thermo), I can tell you for certain that upper management
padded the books at the end of each and every quarter. This practice
was very common place from the mid 1990's to the day they were sold.
Our recent coverage of Japanese automation companies suggested that
they considered the US a low-priority market. Walter Rovira
"They would force their sales representatives to place orders before
the end of the quarter and then remove them from the books after the
quarter numbers were in. As I understand it, this resulted in some
big bonuses for the General Managers. Whereas this was great for the
GM's and Allen Yurko, it was very detrimental to the rest of the
group. The result of this practice led to lay-offs, reduced
inventories to the point of not being able to function in a productive
manner, and just general low morale throughout the division.
"This practice sucked the life and money out of a very good division
of Foxboro. At the very end, it was a horrible place to work. I still
have friends that are working for other Foxboro divisions of Invensys
and the tale is always the same.
"I'm am continually amazed that Invensys has survived this long.
I'm also surprised that some employee has not taken them to court
for some for their practices."
"As a former VP and GM for Yokogawa America (resigned March 02)
I read your article on Yokogawa with great interest. I felt that
the comments from Chris Carnavos (former VP of Yokogawa Systems)
were a bit outdated.
"Yokogawa HQ has US as their #1 growth market and requires Yokogawa
America to make profit (#1 priority is operating income). In the
past few years they have experienced flat to negative sales growth.
Yokogawa America has learned how to run a profitable business
in spite of lack of growth."
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