|Dough in Doughnuts |
Shares have their cake
1. Goodbye, Mr. DoughnutsSometimes it's tough to say, "So long." Other times -- well, you'd be surprised how easy it is.
That's what we noticed Tuesday when Scott Livengood, chairman and CEO of Krispy Kreme Doughnuts ( KKD), announced his departure from the company.
Not that the news was too surprising. The company's books are officially a mess: The company is in the midst of restating previously announced results and is unable to report the Oct. 31 quarter's numbers on a timely basis. The retail operations supposedly documented by those books are in terrible shape as well. As the company announced Tuesday, average weekly sales per factory store, in the eight weeks ended Dec. 26, fell 25% from the corresponding quarter a year earlier. So there was much virtual cheering Tuesday when KKD announced the appointment of a new chairman and, separately, a new CEO who's part of a turnaround crew. In fact, shares jumped 13.5% on the news. Now, that's got to hurt: You leave the company you've led for half a decade, and suddenly the company is worth $73 million more than it was when you were there. Yes, Krispy Kreme's shareholders held a CEO bake-off, and Livengood got torched.
2. Fighting For a Lost KozFormer Tyco CEO L. Dennis Kozlowski has a constitutional right to a presumption of innocence. But a right to sympathy? Fat chance. We say this in the wake of one of the most brazen attempts at cozying up to a jury pool that we've ever seen by an accused white-collar criminal (or any criminal, for that matter). We're referring, of course, to an interview with Kozlowski that ran in The New York Times this past Sunday, a mere three days before jury selection started in Kozlowski's retrial on criminal charges that he stole millions from Tyco in the form of unapproved compensation.
(Kozlowski's first trial, to refresh your memory, resulted in a mistrial after a nutty-sounding juror -- by several reports the only one on the panel who believed in Kozlowski's overall innocence -- received threatening communications from an equally nutty-sounding investor.) Anyway, in his precisely timed bid for potential jurors' pity, Kozlowski insists that the wretchedly excessive spending that Tyco made on his behalf really wasn't his idea. Really, it wasn't. Thus, Kozlowski disavows all knowledge of the $6,000 shower curtain in the New York City apartment that Tyco bought and furnished on his behalf. "If somebody had come to me and said, 'Do you want to spend $6,000 on a shower curtain in that apartment?' I would have said, 'Absolutely not. Absolutely not,'" Kozlowski told the Times. This is from the guy who showed no apparent remorse about having Tyco spend $1 million on a decline-and-fall-of-the-Roman Empire birthday party for his wife in Sardinia -- a decadent-looking bash that famously featured a humanoid ice sculpture peeing vodka. Something tells us that Kozlowski was not pinching Tyco's pennies on shareholders' behalf. Kozlowski also sputters with outrage about how the general public perception of him has been brought on by inaccurate reporting in the media -- for example, a TV news magazine show that broadcast pictures of a big mansion in Boca Raton, Fla., that was ostensibly Kozlowski's. "Well, they had the wrong house," he fumes. We're not fans of inaccurate reporting, but we're finding it hard to weep too loudly on Kozlowski's behalf. After all, Tyco accused Kozlowski of spending $29.8 million in unauthorized interest-free company loans -- loans that Kozlowski subsequently, again without authorization, allegedly arranged to be forgiven -- to build his own residence in Boca. Unless the TV show attempted to pass off Cape Canaveral as the Kozlowski homestead, we're willing to bet that the wrong Kozlowski mansion wasn't too far off the mark.
|Lunchpail Heavy Hitter |
Can board members unionize?
3. Hour of PowerUsually we're outraged by executive pay packages. But this week, we're downright puzzled.
What's striking us as fairly odd is the offer, disclosed Wednesday, that Qualcomm ( QCOM) has extended to board member Rich Sulpizio. The cell-phone supplier is giving Sulpizio the job of president of MediaFLO USA, a division devoted to delivering audio and video content over wireless networks.
Though Sulpizio's salary amounts to $480,000 a year, it's not the size of the pay package that strikes us as strange; it's how it's structured. See, according to our reading of Qualcomm's employment offer, it's an hourly job. As the company puts it in Sulpizio's offer letter, a key term of the job is "a starting salary at an hourly pay rate of $230.77." Wow. A company president as an hourly wage slave. What a concept! The arrangement, of course, raises plenty of questions. (We asked a few of them of a Qualcomm spokeswoman, but she never got back to us with any answers.) Will Sulpizio have to punch the clock each morning? Will he be docked any pay if he takes more than one hour for lunch? And will his supervisor pressure him into cleaning up, off the clock, the children's clothing department? (Oops -- sorry. That was Wal-Mart ( WMT), allegedly.)
4. Family and FortuneAs far as we're concerned, the message of the Godfather movies is universal: Once you go into business with family members, only bad things will happen. This week's reminder: On Wednesday, the Securities and Exchange Commission reached a final resolution of the insider trading case brought against Sam Waksal and his father, Jack. Sam, you may recall, is the former CEO of ImClone Systems ( IMCL), developer of the anticancer drug Erbitux. Back in December 2001, Waksal got advance word that the Food and Drug Administration was going to reject ImClone's application to market the drug.
So what did Sam do before word got out? As the SEC reported Wednesday, he tried to sell $5 million of ImClone stock, he directed his daughter to sell all of her ImClone stock, he bought put options on ImClone, and he tipped his father Jack, who sold his own ImClone stock and shares held by Sam's sister, Aliza. In a previously disclosed partial settlement, Sam already had agreed to pay $804,000. He also went to jail, where he is serving a seven-year sentence on related criminal charges. ( Martha Stewart Living Omnimedia's ( MSO) eponymous founder, as you may further recall, is doing time for obstructing an investigation of her ImClone sales at that time.) As the SEC announced Wednesday, Jack and Sam Waksal agreed to pay an additional $5 million to settle the SEC complaint. Man. Picture the sad scene a few years from now, when Sam gets sprung from jail and the family gathers for a Thanksgiving dinner. Among the Waksals gathered around the turkey will be Sam, Jack, Aliza and Harlan -- Sam's brother and ImClone's since-departed co-founder. Can you imagine the strange mixture of sympathy, anger, love, hatred, hope and despair that will be bubbling up around the table? Let's hope that after paying all those fines, the Waksals have another $100,000 left to pay for family therapy.
We heard it on the Toys R Us ( TOY) call in November, when CEO John Eyler referred to certain company activities as "sort of old-fashioned blocking and tackling taken to really a fine art this year." In fact, we've heard about blocking and tackling everywhere this year. As the accompanying chart indicates, old-fashioned blocking and tackling is gaining frightening momentum as the favored business metaphor for explaining to Wall Street how attentive a company is to its basic business processes. On transcripts of company conference calls and meetings, the ever-increasing mentions of blocking and tackling far surpass those of some choice alternatives, such as going back to basics, putting one's house in order, and sticking to one's knitting. Let's just hope after all the blocking and tackling, none of these folks drop the ball.
5. Sticking One's Football in One's MouthWhen the going gets rough in corporate America, what do CEOs reach for? Football metaphors, evidently. That's what we decided this week listening to the Charter Communications' ( CHTR) conference call, the one in which Bob May, the troubled cable operator's newly appointed interim CEO, talked about what was necessary to fix Charter. "Basic blocking and tackling," is what May offered. Blocking and tackling, blocking and tackling. Haven't we heard that before? Of course we have. We heard it on the Krispy Kreme conference call last August, when now-former-CEO Livengood announced, "The things that our stores have done since before I came here 27 years ago is just fundamental blocking and tackling and knowing how to look at the P&L, how to structure your staffing related to the sales levels you anticipate."
|Tackled Pink |
Frequency of certain conference call cliches