In Business This Week: Headliner
Allen Andreas: A Tough Row to Hoe
It's the end of an era. On Jan. 25, Dwayne Andreas, 80, the autocratic head of Archer Daniels Midland for 28 years, resigned as chairman. He handed the reins to nephew Allen, a law school graduate who was named CEO in 1997.
Wish him luck. Times have been tough for commodity producers. Earnings have fallen 38% in three years, and the stock is at 1995 levels. ADM's $3.5 billion in recent investment has not paid off. "It has been a Roach Motel," says Prudential's John M. McMillin. "Capital goes in, but returns don't come out."
Also galling to investors is that ADM is run like a private company--with limited disclosure. It's up to Allen Andreas to change that--and as CEO, he has started. Earnings news comes out faster, and he is also more accessible to big investors. "I think he's more apt to take advice," says Sarah Teslik of the Council of Institutional Investors.EDITED BY KELLEY HOLLANDReturn to top
Business Week Spots a Scandal
"IS SOMEONE SNEAKING A PEEK AT BUSINESS WEEK?" was the headline of a Feb. 5, 1996, BUSINESS WEEK article. On Jan. 27, the feds answered: Yes. The heavy trading BUSINESS WEEK observed in the magazine's "Inside Wall Street" column has resulted in criminal charges against four stockbrokers. The Feds allege that the brokers bought more than $6 million in stock mentioned in Inside Wall Street on days before publication by getting copies of the column faxed from Hudson News, which distributes the magazine. The scheme allegedly lasted from June, 1995, to January, 1996--when the article appeared. Larry Smath, a broker at Renaissance Financial Securities, pleaded guilty on Jan. 26 to one count of conspiracy to commit securities fraud. Three other brokers, Seth Glaser and Peter Cohen of Renaissance and Joseph Falcone, formerly of Prudential Securities, were also charged.EDITED BY KELLEY HOLLANDReturn to top
When Day Trading Is a Nightmare
ONLINE TRADERS, BE WARY. On Jan. 27, Securities & Exchange Commission Chairman Arthur Levitt warned investors that, because of delays in executing trades, online trading may not be instantaneous. The big danger, he adds, is in highly volatile stocks: "Take precautions to ensure that you do not end up paying much more for a stock than you intended." Levitt also cited day trading as "highly risky." State regulators are cracking down on firms promoting day trading and the National Association of Securities Dealers is urging brokers to warn online customers of risks.EDITED BY KELLEY HOLLANDReturn to top
Pricey Care Is In, HMOs Are Out
BUSINESSES PAID 6% MORE PER CAPITA FOR EMPLOYEE HEALTH CARE IN 1998, nearly twice the inflation rate of overall health-care costs, according to a new study by consultants William M. Mercer. Why? One factor is that more workers enrolled in higher-cost indemnity plans, and enrollment in health maintenance organizations and point-of-service plans fell. The shift away from HMOS "is a symptom of a tight labor market," says John Sheils, a vice-president at The Lewin Group, health-care consultants. "Employers can't afford to alienate workers by forcing them into an HMO."EDITED BY KELLEY HOLLANDReturn to top