1. A Firm Grasso of the Obvious
We at the research lab spent a substantial amount of time this week sifting through documents and looking for insight.
Unfortunately, we didn't find it.
Some words of explanation. As you are probably aware,
New York Stock Exchange
Chairman Dick Grasso has come under much critical scrutiny of late, following disclosure that he's due to receive a $139.5 million payout from the NYSE. Some folks, it seems, wonder whether an executive with quasi-regulatory authority over the stock markets deserves the kind of money usually reserved for someone who can sink a 3-point jump shot with two seconds on the clock.
The critical scrutiny intensified this week, once H. Carl McCall, chairman of the NYSE's Human Resources and Compensation Committee, sent a letter of explanation about Grasso's pay to
Securities and Exchange Commission
Chairman Bill Donaldson -- a man who, when he was NYSE chairman, made nowhere near what Grasso is pulling down.
Perhaps McCall and Grasso hoped that the carping masses would be mollified by McCall's revelation that Grasso has nobly declined an additional $48 million he is due. Or by Grasso's comment that much of that $139.5 million will be eaten up by taxes.
No, the carping masses were not mollified.
Instead, with the ferocity of flies on you know what, reporters descended on the NYSE for the opportunity to pore over about 1,200 pages of supporting documents for McCall's letter to the SEC.
Among them was an employee of the Five Dumbest Things Research Lab, who spent part of one morning in an NYSE conference room leafing through the ephemera of Dick Grasso's compensation: employment agreements, NYSE board minutes, consultants' reports and PowerPoint presentations. We brought photocopies of some of those documents back to the research lab for more study.
And here's what we learned: Over the years, people have spent a lot more time debating, discussing, strategizing about, devising, measuring and negotiating Dick Grasso's salary than they have yours. Rest assured of that.
He's Flowin', Grasso
Yes. As we leafed through the paperwork, we marveled at all the time and hard work that people have expended to assure that Dick Grasso is well-compensated for his time and hard work.
It's like a whole subculture -- complete with its own private language -- has built up around the money going to Dick Grasso and other NYSE bigwigs. You've got his Supplemental Executive Retirement Plan (SERP). His Supplemental Executive Savings Plan (SESP). The Long Term Incentive Plan (LTIP). The Incentive Compensation Plan (ICP). A "Retention Payment" (no abbreviation given). Vested Capital Accumulation Plan Awards. The Executive Compensation Comparator Group. Not to mention the Rabbi Trust.
Compare all that to the research lab's compensation infrastructure -- namely, a sadist in the H.R. department who, when it's time to determine your annual raise, randomly shouts out a number, usually zero.
Yeah, for all the grisly detail, the 1,200 pages boil down to one thing: Grasso's rich. And you're not.
2. Say Hello to the NYSE Man
OK, OK. We admit it: There were some interesting little details we gleaned from our study of Dick Grasso's salary. We'll try to run through them as quickly as possible.
For all of the consultants, comparators and scientific-sounding abbreviations at work, one gets the distinct sense that one could have developed an equally fair compensation structure by judicious use of a monkey and a dartboard. Five years after the NYSE adopted its Long Term Incentive Plan, the HR Policy and Compensation Committee noted it "has had concerns about the impracticality of identifying meaningful long-term NYSE-wide performance metrics, and the absence of an individual performance component in the Long Term Incentive Plan." (By the way, the LTIP was first approved "to ensure pay competitiveness, enhance attraction and retention, and promote pay-for-performance" -- as if there were ever a compensation plan in the history of the universe that didn't promise the same thing.)
Part of executives' compensation appears to be based on how many top listings the NYSE could poach from the Nasdaq. We at the lab suspect this was always understood, but in some mid-1990s documents this is spelled out explicitly.
Back in 1999, after Grasso had earned an average of $5.6 million in the two prior years, a compensation consultant noted, with alarm, Grasso's underpayment, or "competitive shortfall."
Last October, when the HR and Compensation Committee apparently got its full real inkling of just how much money Grasso was making and could make, the committee's notes contain this entry: "During and following a consultants' presentation about Grasso's compensation, there was extended dialogue within the Committee, with the consultants, and with an NYSE executive. Discussion points included Mr. Grasso's motivation for making the proposal..., the past makeup of the Committee, the reasons for the level of past Incentive Awards, the overall level of Mr. Grasso's compensation, and the history of SERP and how it operates."
Ahh. That summary sounds all so genteel. But let's translate some of the language there into English. "Extended dialogue" no doubt means "raging argument." Discussion of "the past makeup of the Committee" is shorthand for "What idiots came up with this thing, anyway?" And "the history of SERP and how it operates?" Why, that means, "Could someone please explain to me how we ended up paying executives all this money? And why does it still make no sense?"
3. Three's a Crowd
So there we were this week, attending a lecture at an Interactive Advertising Bureau get-together about the effectiveness of online advertising.
What we learned from this particular presentation was that if you're an advertiser sponsoring content on a Web site, you want to be the sole sponsor of that content. If you're just one of several sponsors for that particular section, visitors to the site will just tune you out.
You can't read the slide this speaker is showing, but here is what it says, in part: "Because there are multiple advertisers, no one of them is seen as 'bringing the content to the audience.' The 'gift' psychology is not evoked."
Which struck us as pretty funny, considering that we were at an industry conference co-sponsored by three different sponsors:
AOL Time Warner's
We wondered which one of those we were tuning out, if not all of them.
The presenter -- Bill Harvey, general manager of
OpenTV Research -- thought the juxtaposition was pretty funny, too.
Think of all the signage struggling for attention at a baseball park, said Harvey. "How much effect can that really have?" It seems "pretty optimistic," said Harvey, that people at the ballpark, say, would remember more than one sponsor. "The people who sell sponsorships aren't going to like hearing that," he said.
Of course, he said, one could get around it at a trade show by, say, being sole sponsor of a particular event, like a cocktail party.
"Trade shows are a $7 billion business," responds IAB President Greg Stuart in a statement, "and smart marketers would not spend this kind of money repeatedly without return on investment."
4. SkyBridge to the 21st Century
And this week's Alan Greenspan Ribbon honoring clarity in financial communications goes to...
, a tiny Las Vegas-based company that hopes to offer wireless, high-speed access to the Internet.
That's the plan, at least. Judging from the company's press releases, the furthest that the company has gotten toward its goal is to establish a wireless link between the Las Vegas Hilton and the Rio All-Suite Hotel & Casino, about two miles away.
Of course, with this being a development stage company whose ability to continue as a going concern is subject to substantial doubt, the numbers aren't pretty. For the six months ended June 30, SkyBridge reported a loss of $1.1 million on revenue of $4,653.
Here's another set of numbers that isn't pretty: In April, SkyBridge issued 55 million fully vested stock options, with a strike price of 11 cents per share, mostly to insiders. Considering that SkyBridge's latest share count was 38.8 million shares, and that the stock was quoted at 70 cents per share on Thursday, that's a lot of dilution.
Or maybe it isn't. Last month, the company announced it canceled 55 million warrants previously granted to insiders. Maybe those 55 million August warrants were actually the same securities as the 55 million April options. Or maybe not. SkyBridge executives didn't return our call.
Anyway, back to our original point. Just this past Wednesday, SkyBridge issued a press release announcing a 10-for-1 stock split, effective Friday. Why? Apparently, despite the above red flags, SkyBridge executives perceived some interest in the stock.
"Limited trading in our company's stock has frequently been attributed to its very small trading supply, or 'float,'" CEO James Wheeler said in a press release. "By increasing the number of shares held by each of our shareholders by 10 times, we expect to facilitate the development of a more liquid secondary market for the company's shares."
Ah, yes. So instead of holding shares worth 70 cents apiece, grateful investors will now own stock priced at 7 cents apiece. We at the research lab wonder whether the benefits of liquidity will be more than offset by the psychological costs of holding a stock whose value asymptotically approaches zero cents.
We also wonder who has been making these frequent attributions about the limited trading in SkyBridge's stock. But, as we said, SkyBridge never responded.
5. Fair and Balanced, Yet Stern
As you've no doubt read, the Federal Communications Commission announced this week that radio shock jock Howard Stern --
most valuable franchise player, excluding SpongeBob SquarePants -- is indeed "a
news interview program."
That means that Stern and his gang are exempt from the "equal time" provision covering media appearances of candidates for public office. In other words, if Howard invites California gubernatorial candidate Arnold Schwarzenegger on his show to chat, he doesn't have to make room for Gary Coleman.
(Of course, maybe Stern already has had Schwarzenegger and/or Coleman on his show already. We don't know. The batteries for the research lab's only radio gave out during last month's blackout.)
Anyway, lots of people have been chortling over the FCC's description of Stern's weekday show as a news interview program. But we've got no problem with that. The FCC's ruling reflects how broadcast news interviews have morphed from a few boring guys with ties on Sunday morning to all sorts of variations on the theme. As the FCC pointed out in its declaration, the "news interview" exemption originally applied to only Meet the Press and Face the Nation; since then, shows like Sally Jessy Raphael,Jerry Springer and Politically Incorrect have all qualified.
No, what we found most remarkable about the whole
affair was Viacom's assertion, referred to in the FCC announcement, that Viacom's decisions about programming format, content and participants "are based on newsworthiness."
Newsworthiness? Is that Howard's criterion for asking all those centerfolds on the show? All we can say is, as far as Howard Stern goes, we hope that neither Howard Dean nor Joe Lieberman are newsworthy.