Many CEO’s Pursue the Four Ps – Pay, Power, Perks and Prestige Rather than Profits

Many chief executives pursue the four Ps – pay, power, perks and prestige rather
than profits for the company.

Recently, there are more and more CEOs falling from grace. In the United States, forced
exits accounted for 39% of CEO departures in 2002 up from 25 % in 2001, according to
Booz Allen Hamilton. In 2002, Enron Chairman Ken Lay, Tyco chief Dennis
Kozlowski, Qwest’s Joe Nacchio, Worldcom’s Bernie Ebbers. Year 2003 saw the
departure of CEOs from Raytheon, Kmart, Spiegel, Scherling Plough, Motorola, Freddie
Mac, Boeing, American, etc.

Agence France-Presse (AFP) in 13 April 2004 reported that Professor David Yermack of
New York University Stern School of Business found that the average shareholder gains
underperformed market benchmarks at companies where the chief flies by luxurious
corporate jets. In the study, “Flights of Fancy: Corporate Jets, CEO Perquisites and
Inferior Shareholder Returns”, Professor Yermack said: “The central result of this study
is that CEO’s personal use of company aircraft is associated with severe and significant
under-performance of their employers’ stock….Firms’ stock prices drop an average of 2
percent around the date of initial disclosure of corporate plane use.”

Some of the CEOs may not be justifiably fired as the economy turns bad through no
faults of theirs’ but they were held accountable. However, the days of fat cats running
corporations are over.

Uncontrolled and unnecessary costs destroy businesses. If your competitor has a limo and
you do not, you are already winning. He has a leaky bucket. There are six self-made
multi-billionaires. And all of them were paragons of simplicity and prudence in self-aggrandisement.

In 1991, Sam Walton founder of Wal-Mart drove an eight-year-old red Ford pickup. He
always fetched his own coffee. As President of EDS, Ross Perot paid himself $70,000 a
year. However, when Perot sold EDS to General Motors, the President of General
Motors, Perot’s new boss, made $2.4 million salary plus a bonus. Finally, he paid Perot
$2.5 billion to go away because GM executives were embarrassed by the folksy Perot,
who did not demand a fat salary or swanky office or specially tuned cars. David Packard
never had an enclosed office before he left Hewlett-Packard for government service. Bill
Gates of Microsoft often rode coach on planes, until they finally got so big they ran their
own fleet of aircraft. Warren Buffet manages Berkshire Hathaway’s billions and billions
with a staff of 24. When they lunch together, it is McDonald’s. Warren still stayed in the
same house that he bought thirty years ago and drew on a salary of US 100,000 per
annum. Ingvar Kamprad, the founder of Ikea takes the company bus to his stores.

Indeed examples of executive abuses dominated the news during 2002. Many Enron
employees were fired whilst Senior Executives used $200,000 to fund its luxury box at
the formerly named Enron Field. Though founded on the innovative idea of instant
photography, Polaroid’s management failed to save the company from the shift to digital
cameras. Polaroid reportedly cancelled health-care benefits for the company’s retirees in
the wake of its Chapter 11 filing. However, management reportedly petitioned the
bankruptcy court for permission to dole out roughly $19 million in bonuses to keep key
executives from leaving. Webvan is another example. It failed to compete against the
traditional supermarkets with its online shopping services and home delivery. Before it
ceased operations, the company reportedly agreed to pay its resigning CEO, George
Shaheen, $375,000 per year for life although the Webvan’s stock price plunged 99
percent during his tenure.

Kmart in bankruptcy authorised payments of $362,000 per month in retirement benefits
to some 242 of its executives. The Kmart’s creditors which K mart owed $6 billion
protested to a Chicago bankruptcy judge.

L A Times writer John Balzar observed that creditors and shareholders are not the only
ones enraged at the seemingly arrogant attitudes of America’s corporate giants.
“Consumers are mad, and some are declaring petty war against the mighty corporation,
against shenanigans, the double-dealing, the get-rich-quick schemes, the fraud, the selfserving
deals.” Those investors felt that they have been robbed as they saw their
retirement savings dwindled.

In America, CEOs compensation surged 1000% in three decades, making it to 500 times
the pay of the average worker. Yet, they are greedy for more. Martha Stewart of the
ImClone System expensed off the US 17,000 cost of a holiday to her company. Dennis
Kozlowski spent US$15,000 on a “dog umbrella stand” and US$6000 on shower curtain.
John Rigas spent US $20,000 of Adelphia’s shareholders’ funds on a Christmas tree. The
list of corporate excesses goes on and on.

CEOs who live “fat cat” lifestyles using corporate funds should be slaughtered and
skinned.

Property Investing – Am I Buying for Profit or Prestige?

All of us have emotional preconceptions and assumptions. They are reinforced and fine tuned by our experiences of life, be they traumatic, disciplined or consistent. Our brains are designed so that the emotional patterning centers mature while we are still in utero, whereas our rational centers begin to mature at about 4 years old and finish maturing through adolescence to early adulthood. Non- rational emotional patterning is therefore a design feature!!

Most of us have some common preconceived ideas, historically these were things like the earth was flat, and we couldn’t fly. Now they are more likely to be about how we structure our lives.

Why do over 3 million people in Sydney need to get up and go to work at the same time, every day and cause massive traffic congestion? Why do we think this is normal? Is it normal? Does it work for us? Why do we keep doing it?

As well as commonly held patterns we all have a few family specific ones and, a number of which are unique to our experiences of life. Because they are a design feature, they are supposed to be there. Most people seem to presume not and try to weed them out or ignore them and hope they will go away.
However, a big property purchase looms. Our money is involved. For most people our emotional patterns will be triggered and we will react. The issue isn’t that we have a reaction, the issue is the reaction becomes our focus and we try to fix our upset. In the process we forget to focus on the property transaction!

Property transactions are very complex procedures with finance, legal, vendor and purchaser coordinating to a finite window. Much expertise and sensitive negotiation can be involved. There are few opportunities we participate in with a more immediate effect on our bank balance, cash flow and, for many, sense of self. This is not a good time to be distracted!!

What are the sorts of things that distract us?

We could look at many behaviours, however we get simpler pictures if we examine motive, sometimes conscious, sometimes hidden a little deeper. A client might be worried about how they are perceived. Property becomes a tool to prop up their perception of themselves through others thinking more highly of them. These are often people who love to drop property reports into general conversation. Hoping to snare some self esteem through others’ reactions.

These people buy for prestige rather than wealth creation. They want an address and landmark that their mother-in-law, social set and the boss approves of and almost envies. Glossy prestige marketing lures them to overpriced deals that fail to capitalize to expectations. They may go sour on the concept of gaining wealth through property and find some other way to prop us their image. However, did they ever really look at property with open eyes to examine the business of creating wealth?

Other clients are more concerned about doing it the right way. Hence every detail must be managed. They find professionals who do things their way and then collude with them about the rightness of the way they do things – a very circular way to complement yourself! Because of the level of detail required, due diligence takes on gargantuan proportions. Many deals are missed. Costs rise as professional are paid for their expertise.

In their frustration, they may find a guru, suspend disbelief and follow their advice. Often this is more in line with their perception of the gurus qualities than the particulars of the property acquisition. Did they ever really go to find property or were they looking for the right way and property was just a thing to do to find it?

These two examples sound extreme and yet are very common. Money is one of our great human experiences. It draws out of us unknown or unrealized assumptions about who we think we are in relation to money. Some of this is great and some of it is self limiting. To be in the business of wealth creation, wealth management, asset retention and cash flow management we need to be willing to make our property business the priority and give up a few of our emotionally patterned preconceived ideas. This is not a job for the faint hearted.

Prestige Car Hire – Hire a Super Car

With a car rental, you can drive a super car. When most people see a Ferrari, Lotus, or a Porsche on the road, few of them stop to consider that they could hire one of those cars. Most of us might never get to own one, but that doesn’t mean we should feel that driving one is beyond the limits of possibility.

Prestige car hire are made strictly to impress. Imagine hiring a Bentley for your wedding day or a Lamborghini on your graduation. You hire one of these cars because they garner attention. Impress a beautiful woman with a ride in a Ferrari, or an important business client with a pick up in a Rolls Royce.

Sports cars offer us the combination of speed, luxury, and safety. People often debate the difference between a sports car and a “sporting” car, for our purposes they are all prestige cars.

A prestige car is anything that can impress. We have already run through some so far, but others might be Aston Martin, Audi, BMW, Mercedes, or a Range Rover. Any of these cars, and many others, have the inherit ability to pass as a status symbol.

There are many ways to find a prestige car hire. You can refer to the Yellow Pages, hotels, airports, auto enthusiasts, or you can look on the Internet. The Internet is probably your best source for finding where to hire a prestige car. You can sort your search in several ways. You can type in the name of the make or model auto that you are looking to hire. You can simply punch in “prestige car hire.” Either of these means should get you plenty of results. Next, sort your “hits” by the city you are in or the one you will be visiting. You should have accessibility to prestige cars at almost any population center, city, or urban area.

There was a time when finding a prestige car hire was a difficult thing, but not any longer. If you can dream of driving it, it is most likely that you can find it for hire.

Hiring these types of vehicles is going to cost you more than a practical car and van hire would. There will be extra insurance charges and additional fees. There will be age restrictions and, quite possibly, distance and destination restrictions, as well. Also, the mileage costs will be much higher. You will fill the car with fuel more often, as these prestige cars do not get high ratings for gas mileage.

Make sure to closely inspect the car before you drive away in it. You will be paying a very high excess (deductible) with this sort of hire and if it comes back with any dents or scratches, they will be your responsibility. Keep the car clean as well, or you will face an additional charge for the agency having to clean it.

Remember to have fun. A prestige car hire may be the only way you ever get to drive one of these cars in your life.