Tip of the Salary Cap
Mack gets what they get

1. Big Mack Attack

John Mack got more than just a

standing ovation for returning to

Morgan Stanley

( MWD). He got a cap, too -- a minimum salary cap.

Last week the big Wall Street firm rehired the longtime executive to replace the fallen Phil Purcell. This week Morgan detailed the five-year contract it used to lure Mack back.

Morgan Stanley says Mack's annual guaranteed minimum compensation for 2005 and 2006 will match the average pay of his counterparts at Bear Stearns( BSC), Merrill Lynch( MER), Lehman Brothers( LEH) and Goldman Sachs (GS) - Get Report.

That is, unless their pay exceeds $25 million. In that case, Mack's own minimum pay is fixed at $25 million.

Now, no one's going to mistake Mack (pictured above) for a wage slave. He'll make millions of dollars every year, in addition to hauling home a big hunk of restricted stock. He's getting a full year's salary for 2005 despite the fact that he didn't rejoin the firm until midyear. He's making much more than Purcell did last year, when he received a miserly $22 million. And the contract sets no minimum salary parameters beyond 2006. "The filing is what it is," a Morgan Stanley rep says.

That said, it's hardly unusual for Wall Street chiefs to make more. Last year, for instance, the big four made an average of more than $28 million,

The Wall Street Journal

reports. A person familiar with the situation says the board wanted to make sure that one huge paycheck in the comparison group wouldn't inflate Mack's pay.

Whatever the thinking, it's just another reason to tip your cap to John Mack.

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Dumb-o-Meter score: 80. Who says big companies aren't doing anything to keep CEO salaries from getting out of control?

To view Colin Barr's humorous video take on Mack's compensation cap, click here


2. London Calling

Thursday's terrorist atrocities shocked people around the world. But merger speculators didn't let that get in the way of some spirited rumor-mongering.

Shares in online broker

Charles Schwab

( SCH) ran up this week amid talk that the company would be sold. The fever peaked around midday Thursday, when Schwab halted trading in its shares.

The company made the move after traders sent the stock up 10% over two days, spurred in part by heavy action in the options market. The loudest rumor was that London-based financial giant



would acquire the San Francisco-based trader and asset manager.

As is so often the case, though, the rumor turned out to be wrong. Schwab halted trading briefly Thursday only to

reiterate its commitment to staying independent, not to announce a big deal.

"We have no interest in selling the company," CEO Charles Schwab said. "We remain firmly committed to our independence, and believe we serve stockholders best by continuing Schwab's strategy as an independent company, focused on providing clients with great service at great value."

To be sure, the HSBC-Schwab chatter didn't seem particularly outlandish earlier in the week, when options activity in Schwab first took off. After all, Schwab has been the subject of takeover rumors ever since rival


(AMTD) - Get Report

struck a $2.9 billion deal last month with T.D. Waterhouse. Schwab and HSBC had previously declined to discuss the merger rumors, and HSBC didn't comment Thursday.

But on Thursday morning, the Schwab run-up accelerated -- even after London mass transit was hit by a series of bombings that left more than 30 people dead and hundreds injured. HSBC said it had several branches near the areas affected by the blasts, but that none had suffered any damage and there had been no staff casualties, the

Financial Times


Call us crotchety, but we have a hard time imagining that anyone in London was thinking much about mergers or stock prices on Thursday.

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Dumb-o-Meter score: 78. Once in a while the market seems to lose touch with reality.

Taxing Down the Runway
Contest winner bumps self from prize

3. We Don't Love to Fly

The airline business may have hit a new low this week.

For years the big carriers have been buffeted by low-cost competition, skyrocketing fuel prices and confusing ticketing arrangements. Their shares have plunged as big names ranging from United to US Airways have taxied in and out of bankruptcy.

But on Wednesday, a passenger managed to add insult to the industry's many injuries. A New York man won a contest offering a dozen round-trip tickets -- and then celebrated by refusing to accept the prize.

The Wall Street Journal reported that a longtime customer of the American Airlines unit of AMR (AMR) won the tickets in a marketing contest called We Know Why You Fly. The airline offered free tickets to travelers submitting the best videos, essays or photographs about their flying experiences.

Jack McCall won the grand prize with a video of snapshots he and his wife collected on their travels. But he turned down American's ticket offer, saying the taxes could amount to $19,000 -- more than he would ever pay to fly. "I've never spent more than $1,000 for a plane ticket in my life," he told the



So now, despite their billions of dollars in recent losses, the airlines have a new nemesis: Taxes. Go figure.

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Dumb-o-Meter score: 72. Plane folk just can't catch a break.

4. Paper Tiger

They're closing down the paper mill at

Wausau Paper

(WPP) - Get Report

, but it's not because they don't care.

The Wisconsin-based paper company said Wednesday it would shutter a sulfite pulp plant in Brokaw, Wis., by year-end in a cost-cutting move.

The closing will accomplish any number of goals, Wausau says. Wausau will save $4 million in annual pretax cash operating costs and as much in reduced capital spending. Paper-making operations in central Wisconsin will be unaffected, as internally generated sulfite pulp will be replaced by market pulp.

Oh sure, there are downsides. Some 60 people will lose their jobs, even after what CEO Tom Howatt calls their "tireless efforts in reducing operating costs at the Brokaw mill." Wausau says Brokaw "employs approximately 490 employees, excluding the jobs affected by the pulp mill closure."

And that's when the really good news comes in, according to Howatt, who reeled in $1.16 million last year, according to Yahoo! Finance. "This decision not only improves the competitive position of the Brokaw mill but also enhances job security for remaining employees," says Howatt.

Easy for him to say.

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Dumb-o-Meter score: 68. Yes, you've got to stay competitive, but this is just too much spin.

Make Macher an offer

5. Match Macher

Bankrupt auto-parts maker

Collins & Aikman

( CKCRQ) solved a minor car-industry mystery this week.

The Troy, Mich., company's announcement of new executives to pilot its turnaround came as no great surprise. But Thursday's hirings did answer the question of what ever happened to Frank Macher (pictured at right).

In May, Ford (F) - Get Report rolled out a deal to get its struggling Visteon (VC) - Get Report affiliate back on its feet with a manufacturing transfer. Ford said Macher, a longtime auto-industry executive who once headed up bankrupt parts maker Federal Mogul, would head up the new venture.

Then in June, Ford made another announcement. In a switch it said Al Ver, another longtime executive at the Detroit giant, would lead the Visteon bailout.

What happened to Macher? "Previously, the Company had named Frank Macher the new business entity's CEO, and Ver as its president and chief operating officer," Ford said June 8. "However, the Company and Macher could not come to terms on a final employment agreement."

So come Thursday, lo and behold, who does Collins & Aikman name as its CEO? Why, Frank Macher. He'll team up with Chairman Stephen Cooper, best known as the turnaround CEO who headed up Enron after its 2002 demise. Cooper was also recently appointed interim chief at struggling

Krispy Kreme



A Collins & Aikman rep didn't immediately return calls seeking comment, but we assume it's safe to say that Macher and the firm have come to terms on a final agreement.

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Dumb-o-Meter score: 59. Time will tell who comes out looking better between Macher and Ford.

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