"Should there be a divorce…we would be very happy." — Henning Gephardt, a fund manager at DWS Investment, on the possible sale of Chrysler, a comment that drew applause during DaimlerChrysler's annual shareholder meeting.
On the Web site for the Allied Pilots Assn., American Airlines pilots are counting down the days until Apr. 18. That's when parent AMR (AMR) is expected to award big bonuses to nearly 1,000 top managers. At noon the pilots plan to march a half-mile from their union office to the corporate headquarters in Fort Worth, shouting all the way about how management is reaping upwards of $180 million in bonuses while pilot pay has fallen during the past five years.
The good news is the airline industry is back in the black. The bad news—for airline execs and investors—is that workers want a bigger slice of those profits. Since the September 11, 2001, terrorist attacks, the airlines have done a tremendous job of cutting employee costs. Four of the nation's largest carriers declared bankruptcy, allowing them to break labor contracts and hand over pension liabilities to the federal government. Now passenger traffic and fares are up, and the industry netted more than $2 billion in 2006, its first profitable year since 2000.
Almost every major airline will deal with labor strife this year. On Mar. 27 five unions representing 30,000 employees at United Airlines (UAUA) announced they had formed a coalition to argue for better pay and working conditions. At Northwest Airlines, (NWACQ) which is still operating in Chapter 11, flight attendants have been seeking court permission to strike. A federal court struck down their suit on Mar. 29, and the union vows to appeal. Airline management says employees are benefiting from the industry updraft. American spokeswoman Susan Gordon notes that employees got 38 million shares of stock when they negotiated givebacks in 2003, a stake now worth more that $1 billion. United similarly granted nearly 35 million shares of UAL stock to more than 64,000 employees, an amount worth $1.5 billion, when the company came out of bankruptcy protection last year.
But James Little, head of the Transport Workers of America, says such grants were one-time events tied to worker concessions in bleaker times. Furthermore, airline employees have made huge strides in efficiency. "Because of all the productivity gains, employees should receive some return," he says.
The labor woes come at a still-difficult time for the industry. Although profits are climbing, the major carriers face high fuel costs and continued fierce competition from low-cost carriers.The trick for airline management will be finding a way to reward employees while keeping their companies competitive.
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Percentage of advertisers who have produced a YouTube video to promote their brand, according to a survey by BusinessWeek.com and the New York American Marketing Assn. The poll was of the 121 top marketers serving as judges for the ad industry's 2007 Effie Awards. To see the full results of the survey, visit www.businessweek.com/go/07/effie.
Want an avatar with that latte? Starbucks (SBUX) is serving up an earnest ecology-themed video game at planetgreengame.com, a Web site that was established to burnish the company's environmentalist image. Players create their own avatars, explore the fictional town of Evergreen, and receive grades based on their eco-savvy. Hint: Biking or skateboarding gets you a better score than driving around in an SUV.
Starbucks says the new game was inspired by so-called serious games such as the U.N.'s Food Force. It enlisted Global Green USA, a nonprofit environmental outfit, and Tree Media Group, a Santa Monica (Calif.) film and Web producer, for writing and creative help. It's promoting the game on its homepage, store receipts, and a sponsored group on Facebook.com. The single product placement is subtle enough: a sound track featuring songs from Starbucks' new employee-produced CD, Off the Clock.
Like chief executives of other beleaguered companies, Wal-Mart Stores head H. Lee Scott Jr. took the advice of his public-relations advisers and in late March met directly with some of his critics: the New York media.
But on his goodwill tour he encountered even more bad press. The first story to come out, in the Mar. 28 issue of The New York Times, proclaimed: "Wal-Mart Chief Writes Off New York." Scott, who told the paper, "I don't care if we are ever here...I don't think it's worth the effort," brought that misfortune upon himself.
Although Scott was more careful in other interviews, the negative stories continued. The next day, the Times published a front-page story, "Bare-Knuckle Enforcement for Wal-Mart's Rules." The Wall Street Journal followed with an Apr. 4 article, "Inside Wal-Mart's Threat Research' Operation."
On the newsstands, meantime, was a New Yorker piece, "Selling Wal-Mart: Can the Company Co-Opt Liberals?" Mona Williams, Wal-Mart's chief spokeswoman, had met the magazine's writer in her Bentonville (Ark.) office, where she has a framed 2003 BusinessWeek cover that asks: "Is Wal-Mart Too Powerful?" She told him: "I keep that there to remind me never to trust reporters." Nonetheless, she and Scott dropped by to see us, too.
Every industry has a trade show—even the folks who put on trade shows. At this year's Exhibitor2007 conference, held at the end of March in Las Vegas, the big pitch was helping companies boost returns on their trade-show investments.
Consultant Martin Smith places cameras over the booths of clients such as Toshiba (TOSBF) and Xerox (XRX) to monitor traffic flow and the performance of the booth operators. He tells customers not to design booths that have walls, platforms, or sharply contrasting carpet that discourage walk-in traffic.
"A big mistake people make is treating this like a one-on-one sales call," says Matthew Hill, who trains corporate salespeople. He tells them to invite others into a conversation, so they can pitch two or more potential customers at once.
A rising number of the 13,100 shows in the U.S. have turned to independent firms to audit their attendance. Skip Cox, president of Exhibit Surveys, analyzes such data. For instance, if most visitors are first-timers, he says, a company might not need to build a new booth.
Even providers of "booth babes" are getting into the act. Drae Collins, founder of GoodGirl Promotions, says she now puts her spokesmodels through three days of training on client products before hitting the show floor. "They're not only eye candy," she says. "They also write orders."
Trade show attendance in the U.S. peaked at 5.1 million visitors in 1996, according to TradeshowWeek. Many have folded or shrunk, as companies shift marketing to online ads and private events. The 19-year-old trade show for trade shows must be doing something right: Exhibitor2007 drew a record 7,200 attendees.
The Isle of Man, a tax-friendly dot in the Irish Sea, has long been a magnet for well-heeled performers such as actor John Rhys-Davies (The Lord of the Rings) and the Bee Gees' Robin Gibb. Now it's chasing another segment of the entertainment industry: film and music download businesses. The local government began its push last April after cutting its corporate tax rates to zero for businesses that move their headquarters to the island and capping personal tax liability at about $197,000 a year. Since then the island has attracted businesses numbering "well into double figures," says Tim Craine, director of e-business and space commerce for the Isle of Man Treasury. Continent 8 Technologies CEO Michael Tobin, who launched a business building and operating Internet data centers on the island last year, also cites the locale's strong technological infrastructure, such as its "good connectivity," as a primary selling point for new businesses. But there are other isles in the sea. The Channel Islands Guernsey and Jersey are mulling similar business-friendly tax breaks.
The seedier side of Second Life—the online world where users spend real money to shop as well as gamble and misbehave—is coming under federal scrutiny. Linden Lab, the company behind the virtual world, recently invited the FBI to visit its online casinos and clear up what's allowed under last year's Internet gambling bill. On Second Life, residents bet with Linden dollars, which are not real currency, Linden Lab argues. But virtual profits can be converted to hard cash, through PayPal. Is it offshore gambling? Depends on the scale. "The FBI needs to distinguish the professional gamblers from casual gamblers in Second Life," says Edward Castronova, a telecom prof at Indiana University and a virtual-economy expert.
The Mar. 31 departure of Steven Heyer from Starwood Hotels & Resorts Worldwide (HOT) is raising plenty of eyebrows. Investors have watched a string of departing CEOs collect fat payouts—even top execs who led their companies' share prices downhill. On Heyer's watch, Starwood's stock marched upward, and he is credited with a number of moves to diversify the owner of such hotel chains as Sheraton, Westin, and Le Méridien and position the $6 billion company for future growth. Yet he's leaving without a penny in severance. What gives?
The answer may be that directors are finally getting the message: The corporation is not a piggy bank to be plundered for payoffs. Exiting executives get what their contract calls for, nothing more.
Three years ago, Heyer walked away from the No. 2 position at Coca-Cola (KO) after directors there wouldn't promise him he could have the top job. After some hesitation, according to published reports, Coke's board decided that Heyer was departing for "good reason," a common provision in employment contracts that triggers severance payments. Heyer's $23 million going-away present was one of several at Coke that drew criticism and ultimately led the beverage giant to change its exit-payment practices.
Did Heyer do something bad to lose out on severance at Starwood? A for-cause firing under his September, 2004, contract would have denied him severance, but "cause" is defined specifically as such things as felony convictions and gross negligence. A Starwood spokeswoman says that Heyer "was not terminated for cause." Instead, he "resigned," she says, adding: "Steve and the board mutually agreed to the terms of the separation."
It is no secret that Heyer and the board clashed frequently over everything from strategy to his management style. Heyer's decision to base himself in Atlanta and commute to Starwood's White Plains (N.Y.) headquarters on a company jet, for example, was a sore point. From Heyer's vantage point, he too often had to fight to get the board to sign off on his plans. Heyer could not be reached for comment.
Until fairly recent times, even an acrimonious parting of the ways might have led a board to stretch to find "good reason" for the executive's departure and grease the exit slide with severance cash. Not anymore, says James Kim, a compensation consultant at Frederic W. Cook in San Francisco. With intense scrutiny of executive pay, he says, "boards are very reluctant to go beyond anything that wasn't specifically negotiated" in a contract. Now, he says, they "are going to try to part with as little as possible. The days of trying to do the guy a favor are pretty much gone."
You finally made it to the top. What's the first thing you did when you moved into the chief executive suite?
"I always keep a camera around. So I had someone take my picture against one window where you could see GM headquarters in the distance, and out another window where Chrysler's (DCX) headquarters is in the distance. And then I e-mailed them to my family." — Alan Mulally, who became CEO of Ford Motor (F) last October
"I promptly agreed to meet with everyone who has Outlook calendar capabilities—most of the free world, it seemed—but more to the point, I ate lunch in the cafeteria with employees and met with people in their offices instead of having them come to my office." — Jeffrey Kindler, who became CEO of Pfizer (PFE) last July