July 2006 Archive
Semiconductor industry executives could use some tips on dating. Not on going out to dinner and a movie, but on when they exercise their stock options.
The widespread practice of backdating stock options, where executives and board members timed their purchases and sales of stock options to take advantage of market run-ups in a stock’s price, is under scrutiny by the SEC and federal prosecutors on both coasts. The scheme goes like this: Company insiders took note of increases in their stock’s market value, and then amended the date the options were granted to predate the run-up and made a killing on selling the shares at the higher prices. Backdating itself may not be illegal – although it’s certainly a scumbag practice – but what’s driving the outrage is the failure to disclose these underhanded moves to shareholders – you know, those chumps that actually own the company.
Chip makers and their suppliers that have been subject to internal investigations, informal inquiries by the SEC, and subpoenas by federal grand juries include Altera, Brooks Automation, KLA-Tencor, Maxim Integrated Products, Power Integrations, Rambus, Vitesse Semiconductor, and Xilinx. And news of these probes usually drives another plague of the corporate world: the shareholder derivative lawsuit, filed by opportunistic law firms with professional plaintiffs, alleging malfeasance and other words you need to look up in a dictionary.
Some board members have actually grown a backbone and taken a stand. Lou Tomasetta, the veteran CEO of Vitesse Semi, was fired by his board, along with his CFO and another high-ranking exec. At Power Integrations, resignations were accepted from the CFO and the chairman (a former CEO of the company).
Will more heads roll? Likely. It’s a good start. Now, don’t get me going about CEO pay packages…
There’s a hot new couple steaming things up in the porn business: Hugh Hefner and Jenna Jameson. (Ooh, bad mental image. Bad.) Hef’s adult publishing and entertainment empire, Playboy, recently bought Club Jenna, the video production house owned by Jameson and her husband, porn director Jay Grdina. The deal marks the boldest move yet by Playboy CEO Christine Hefner in her assault on the lucrative hardcore smut business, netting the Bunny a storehouse of Jameson’s videos for distribution on its pay-per-view networks. Getting her hands on raunchy assets has been a cornerstone of daughter Hefner’s strategy to prop up the company against dwindling magazine readership, and it doesn’t come much more raunchy, or popular, than Jameson: She’s been dubbed the Queen of Porn and is said to be the most downloaded woman on the Internet.
In an interesting sub plot, Jameson is currently waging a battle in her hometown of Scottsdale, AZ, where she films many of her movies and owns a strip club. The city recently passed an ordinance banning full nudity and lap dances in “adult cabarets,” and the porn star has led a successful campaign to put the measure up for public referendum. The petition drive must have been quite a spectacle, though there’s been no word on if any “happy endings” were exchanged for signatures.
Pardon my French, but I think the three-way strategic alliance proposed by billionaire investor Kirk Kerkorian between Renault, Nissan, and General Motors makes about as much sense as a croissant stuffed with sushi and Funyuns.
But I seem to be in the minority. Renault and Nissan CEO Carlos Ghosn thinks a deal might have benefits. GM CEO Rick Wagoner seems to think so too. What the fudge!? When was the last time you saw a Renault on the road anywhere in North America? Doesn’t GM have enough troubles without jumping into bed with the swarthy mistress that dreamed up Le Car?
I know, I know. Who am I to question the wisdom of Carlos “Le Cost Killer” Ghosn? How many near-miraculous car company turnarounds have I developed and successfully implemented? Okay, none. But as I see it, Ghosn should keep his mind on fixing the emergent rockiness at Nissan and Renault to ensure the marriage remains healthy before he throws a morbidly obese, dysfunctional psycho like GM into the mix. If this deal goes down any time soon it will be because three massive egos are driving it.
Kirk Kerkorian is old — really, really old. I think Kirk is a full quarter century older than Ken Lay was when he “died.” If I owned 10% of GM and I had been born when car wheels were made out of wood, I too would be concerned about the short-term performance of my investment.
Rick Wagoner just wants to keep his job and do so with some class. Everyone knows he’s ultimately responsible for steering GM into the ditch, and he doesn’t want the embarrassment of someone else driving the wrecker that hauls it out. Ghosn has stated publicly he’s not interested in running GM, which has to come as both a relief to, and a slap in the face for, Wagoner. If I were Rick I’d be grateful for each day I showed up at 300 Renaissance Center and my security badge still worked.
Ghosn, understandably, would like to help fix GM. To do so would elevate him to heretofore unattained heights of automotive executive badassery. His efforts at Nissan have already enshrined him in a strange, almost god-like glow among average Japanese – if there is such a thing. He is even the subject of a Japanese comic book.
And let’s face it – fixing GM will take everything just this side of super-human powers. Pontiac’s on the mend, sort of, but Buick needs to be revitalized or put out of its misery. The cannibalistic GM dealer network needs very painful and complicated pruning. And while they’re at it, GM needs to design and build more passenger cars that someone born after The Great Depression would actually want to drive. If anyone can do all of this, it’s Ghosn. Unlike Kerkorian, I just think the timing is bad.
The merger of WPS Resources and Peoples Energy will create yet another utility monster. While the deal may be good for the utility companies, it could ultimately hurt the public. Why?
Bigger companies don’t necessarily provide better service. Customers could find themselves in a larger sea of consumers splashing about wildly for the utility’s attention. WPS/Peoples customers in Illinois could face bill confusion as well as longer waits for service calls.
Mergers often mean layoffs. In flowery PR statements these reductions in force are characterized as improving efficiency. In reality they often mean the loss of stable jobs for employees and reduced service levels for customers.
Mergers also can eliminate competition. Many utilities have subsidiaries that market energy in deregulated states. When merging companies have subsidiaries that operate in the same areas, as WPS and Peoples do, competition is lost.
WPS and Peoples say that customers’ contracts will not change, but what happens when the contracts are up and the two providers no longer have each other to compete against?
I’m willing to bet prices will rise.
The consolidation trend in the utility industry goes against the reason that deregulation was kicked off in the first place – to increase competition and ultimately decrease prices for the consumer. When a merger occurs it takes us one step closer to the monopolies of old.
When only a few players wield all the power, the chances that small players can stay afloat and play a role in the market burn off faster than fuel at a power plant.
Today, patients have more hope of getting better, not sicker, when they enter the hospital. Minnesota started the trend by instituting a law requiring hospitals and outpatient surgical centers to publicly report so-called adverse health events (injuries caused by medical management).
About 20 states already have some form of hospital reporting law, following findings from a 2000 presidential task force, but their criteria were discounted as lax and allowing for gross underreporting. Minnesota, however, requires hospitals to publish annual statistics based on 27 criteria. They include accidental deaths; rates of serious hospital-derived infections; surgery on the wrong body part or patient; foreign objects left in the patient after surgery; electric shocks, burns or falls; errors in medication; abduction and assaults on hospital grounds, and any negative outcomes of standard procedures.
Even the rate of bedsores was reported in the first study, published in 2005 [.pdf, 265KB].
Two elements of Minnesota’s bill are particularly interesting. First, the law was generated by the hospitals themselves: the Minnesota Hospital Association put forth the bill as a self-regulating measure. Second, the bill was passed without funding—but Blue Cross Blue Shield of Minnesota stepped in and donated the money to administer it.
New Jersey and Connecticut have since passed similar laws. And insurance companies such as Aetna, as well as individual hospitals nationwide, have adopted the new expanded reporting standards. Other services have also crept in, such as MedMined (recently acquired by Cardinal Health), a data mining company that tracks these specific types of events; even WebMD has gotten into the act with MedScape, an online subscription service that compares hospital facilities’ track records.
The trend toward disclosure has obvious benefits for the patient, but it is also good for competition. Ironically, hospitals soon might be clamoring over each other to provide the safest environment for healing patients.