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November 20 2009
SEC Road Map Released: Mandatory IFRS on Target Corporate Executive Board, 18 November 2008 After weeks of delay, the official release of the SEC’s International Financial Reporting Standards (IFRS) rule-making proposal marks the starting point for executives (especially CFOs, CIOs, and COOs) to begin coordinating, planning, and preparing for implementation. IFRS will replace U.S. GAAP as the standards governing accounting and preparation of publicly disclosed financial information. However, IFRS represents more than just an accounting change; it will affect IT systems, business processes, and operations. Related News:SEC estimates place the cost of implementation for early adopters—those who would begin reporting using IFRS in 2010—at more than $30 million in the first year, with subsequent years costing significantly less. |
UBS Revises Pay, Slashes Bonuses as Pressure on Executive Compensation Mounts Reuters, 17 November 2008 As UBS shares fell to an all-time low on Monday, the firm announced plans to revise its executive pay model for 2009 to be fairer and more transparent. Under the new system, executives will only receive performance-based variable pay and the chairman will receive a fixed salary. UBS also announced its chairman, CEO, and other board members will not receive bonuses this year. |
Our view: The UBS announcement comes on the heels of similar Goldman Sachs and Barclays announcements that top executives will forgo 2008 bonuses. While these moves are (so far) only in the banking industry, pressure on executive pay should continue to mount as economic conditions worsen. Managers and boards of directors had better prepare to defend compensation plans to investors because challenges from shareholders are becoming increasing likely. Investor-facing executives should formulate crisp and concise messages on the importance of competitive executive compensation to long-term viability. |
HP's Earnings Growth Driven by Consumers Outside the United States The Wall Street Journal, 18 November 2008 Not all is doom and gloom. Tech giant HP's fiscal fourth quarter revenue is up 19% despite the slowdown in consumer spending for computers. Strip out the boost from its deal with EDS back in May, and revenue is up a more modest 5%, which is still impressive in the current climate and attributed by HP to the fact that two-thirds of revenue comes from outside the United States. This also puts the company in a better position to win greater market share from shifts in medium- to long-term demand. |
Our view: The past decade has seen the world’s best-run companies design a tight-knit but geographically dispersed portfolio of business units, initiatives, and investments across the globe. This does more than diversify the risk of shifts in local demand and regional shocks. Despite the slowdown in emerging markets discussed by us and many others in recent months, their longer-term prospects for consumer demand are healthy, especially in the BRIC countries (Brazil, Russia, India, and China). Witness an example of what is probably the most expensive general consumer good from a leader in this week's Economist: In 2005 America bought 10 million more cars than the total of the BRICs; this year the BRICs will overtake the United States. America has nearly one car for every person of driving age; China has fewer than three cars for every 100, India even less. In the next 40 years, the world's car fleet is expected to increase from 700 million to 3 billion. |
U.S. Producer Prices Take Precipitous Drop Bloomberg.com, 18 November 2008 While a decline in commodity demand caused the largest U.S. producer price drop ever recorded (–2.8% in October), core producer prices rose at 0.4%, indicating that raw material cost declines have yet to feed through to product pricing. If consumer demand continues to drop, wholesale price deflation will become much more likely. |
Our view: Consumer demand changes, volatile commodity prices, and general market uncertainty are making the forecasting process nearly impossible this year. Rather than obsessing over perfect forecast accuracy (a distracting goal in this environment), executives should build more flexibility into their forecasting by setting realistic target ranges. |
Past Auto Bailouts: Not a Sterling Track Record The New York Times, 18 November 2008 As the U.S. government considers a multibillion-dollar bailout to the Big Three automobile companies, analysts are looking back at the experiences of British Leyland, a car company that received billions of pounds from the UK government but was unable to forestall collapse. Though the money was helpful in the short term, it was not able to prevent a steady degradation in market share or a significant shift in management direction. |
Past Auto Bailouts: Not a Sterling Track Record The New York Times, 18 November 2008 As the U.S. government considers a multibillion-dollar bailout to the Big Three automobile companies, analysts are looking back at the experiences of British Leyland, a car company that received billions of pounds from the UK government but was unable to forestall collapse. Though the money was helpful in the short term, it was not able to prevent a steady degradation in market share or a significant shift in management direction. |
Past Auto Bailouts: Not a Sterling Track Record The New York Times, 18 November 2008 As the U.S. government considers a multibillion-dollar bailout to the Big Three automobile companies, analysts are looking back at the experiences of British Leyland, a car company that received billions of pounds from the UK government but was unable to forestall collapse. Though the money was helpful in the short term, it was not able to prevent a steady degradation in market share or a significant shift in management direction. |
Daily Capital Markets Review: Wall Street Barrels Back in Late Rally This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (instead of the next morning), please click here. |
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