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Program: Tuesday, September 9, 2003
09/09/03: NYSE Chairman & CEO, Dick Grasso Comments On His Controversial Compensation SUSIE GHARIB: Dick Grasso says, I've been well compensated. The chairman and CEO of the New York Stock Exchange finally spoke out late today, following weeks of criticism of his $140 million pay package. At a news conference here at the NYSE, Grasso unveiled the Exchange's 12-page response to questions posed by the Securities and Exchange Commission about his controversial compensation. In a surprising revelation, the NYSE also said that Grasso was an entitled to an additional $48 million in future payments. Our New York bureau chief Scott Gurvey joins us now. Scott, it seems that that $48 million was the big surprise of the day, right? SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a big surprise of the day, and it was followed, Susie, almost immediately by another surprise, and that was that Grasso has elected not to receive that $48 million. Let's back up for just a minute because this has created such a firestorm, it's important to remember that the $140 million was accrued by Grasso over a career that lasted - that has been going on for nearly 36 years here at the Exchange. It represents a lot of deferred income. The additional $48 million represents future compensation and benefits to which Grasso was entitled under the terms of his existing compensation and employment agreement. Now his decision to give it up, he says, comes because the attention now has focused on his salary and not on the work of the Exchange. DICK GRASSO, CHAIRMAN, NEW YORK STOCK EXCHANGE: It is for me a philosophical determination about an institution that I love, about a job that I love and about a very special part of the American financial landscape. This institution should not be preoccupied with talking about the compensation of its leader, but rather the policie s and programs and initiatives of it leader and its team of managers designed to bring 85 million investors the highest quality market the world has ever know. GURVEY: And now in this letter of reply that was written to the SEC chairman, William Donaldson, who ironically preceded Grasso as head of the NYSE, it was written by Carl McCall, who is the head of the NYSE's compensation committee. The committee has defined Grasso's job was one-third regulatory and two-thirds competitive business. And McCall says it set the compensation levels accordingly. McCall says Grasso has met every business goal the board has set for him. CARL MCCALL, CHMN., NYSE COMPENSATION COMMITTEE: Dick's leadership of the New York Stock Exchange has exceeded any goal or expectation of the board that the board has ever set forth. Whether it's system reliability, new listings, market share, seed prices, or inspiring leadership in times of great competitive challenge, or during grave national tragedy, we believe that without Dick's leadership there is a strong likelihood that the success that the exchange has enjoyed in recent years might well have been significantly diminished. GURVEY: Now Susie, we know that the SEC has received this letter and McCall and Grasso would not speculate on whether or not the SEC chairman, Donaldson, would be satisfied. GHARIB: Scott, at the press conference Grasso said that he'd like to put all of this behind him. Do you think he can put it behind him? GURVEY: I don't think he can. I think that the critics who are looking at the size of this compensation are going to criticize, and his supporters who look at the works that he's done here at the Exchange, through very trying times and very competitive business challenges, they're going to continue to debate this in his favor. GHARIB: And I'm sure you'll keep us posted on all of it. Thank you very much, Scott. Scott Gurvey reporting from the New York Stock Exchange. Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/09/03: One On One With William McDonough Public Company Accounting Oversight Board
SUSIE GHARIB: Accountants got an earful today from their new regulator. Speaking in New York, William McDonough, the former president of the New York Federal Reserve, spelled out his plans to restore investor confidence. It was his first public address since he took the job this summer as chairman of the Public Company Accounting Oversight Board, established to overhaul the way accountants do business in the wake of numerous financial scandals. In my exclusive interview with McDonough earlier today, I asked him what's the message he's sending to the accounting profession. WILLIAM MCDONOUGH, CHMN., PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD: The American people have lost their faith in you because of the scandals of the late 1990s and early part of this century. You have to restore that faith in the American people. You have to do it largely through your own efforts. But the PCAOB and I, as its chairman, have the responsibility under the law, assigned by the American people represented by Congress, to make sure that you do it. I expect you to do it and I will make sure that you do it. GHARIB: As you know, Mr. McDonough, investors are still very skeptical about the integrity of financial statements. In your new job, what are you going to do to restore investor confidence? MCDONOUGH: I think my main task is to make sure that people understand in the accounting profession and in the business community in general just how angry the American people are and how much they insist that positive change take place. There's a tendency in all of us to think, well, maybe this will pass. It won't. The American people are so angry and the Sarbanes-Oxley Act is so strong it will be essential that not just the accounting industry, but business leadership in general understan d that they must do a lot to restore the confidence of our people. GHARIB: You told the group of accountants that if you break the rules, that there would be consequences. How tough are you going to be on individual accountants and accounting firms if they violate the rules? MCDONOUGH: I believe that when there is a really serious transgression in the public interest the punishment must be quite severe. The most serious thing that we could do is to say we will pull your registration. You may no longer be in the auditing business. That would mean that their livelihoods would be gone. And it is, I think, the existence of that possibility which makes them have to take us very seriously. GHARIB: As you described it, the oversight board is going to be responsible for setting audit standards, inspecting audits and enforcing them. How do you go about being the ethics police? MCDONOUGH: We will start by looking at the tone at the top. Are the people running the firm really getting the word to all the thousands of people who work for them that these high ethics are required or you're not part of our firm? In addition, I think our inspections have to be and will be sufficiently penetrating that if they're not doing the right thing, we'll catch them. GHARIB: How many inspections are you going to do this year and how fast are you going to ramp up so that the public feels comfortable that you're really going to be on top of these audits? MCDONOUGH: We are inspecting the four largest audit firms which have a huge market share this year, 2003, and then 2004 we will do the seven largest firms and begin the three-year cycle of the smaller audit firms. So this year we will have, I think, a very good feel of how well the big four audit firms have gotten the message of Sarbanes-Oxley, have gotten the message from the American people that they must improve their performance. GHARIB: You talk about looking at the tone at the top and also about making sure that doing the right thing rea ches the rank and file. How do you change a culture when almost every one of these accounting firms has somehow been tainted? MCDONOUGH: The main thing I think is that they realize they have to change themselves. The very senior people in the major firms and a lot of the firms are saying, this is horrible, we never wanted this to happen to our profession. We wanted to restore the faith of the American people. We want our kids to be proud of us. They get that message. What I'm concerned about, since I don't know the answer yet, is has that message penetrated the entire organization? That's the main thing we'll be looking for. GHARIB: How are you going to measure your success? How are you going to know that you've done your job? MCDONOUGH: I think we will know when the audit profession has restored the faith of the American people when they pass the test of getting very, very good graduates of good universities to say, I want to be an auditor. That will be the test. GHARIB: Mr. McDonough, thank you very much. MCDONOUGH: Thank you. Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/09/03: "BusinessWeek" CEO Conference With Nextel CEO Tim Donahue
SUSIE GHARIB: Leadership in uncertain times is easy to talk about but how do you achieve it and profit from it? That was the theme of the recent "BusinessWeek" CEO Conference where Darren Gersh spoke with Nextel CEO Tim Donahue. Donahue says the key is to focus on setting a strategy and sticking to it. TIMOTHY DONAHUE, CEO, NEXTEL COMMUNICATIONS: We want to make sure that we understand market segmentation, who are our customers? How do we attract them and how do we keep them? And who are the most profitable among those groups? And clearly it was the business customer. And so from day one we have stayed laser-like focused on the business customer, developing products and services that others can't provide or they can't provide the quality that we do. And as a result we have been very successful. And even in the downturn, even when we saw in the 2000-2001 time frame some very significant economic downturns in businesses, we did well. And we did well because we have a product that really adds to productivity, most especially Direct Connect, and its instantaneous nature. DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Verizon (NYSE:VZ) has just rolled out its version of Direct Connect two-way service, Sprint (NYSE:PCS) is not far behind. Everybody is getting into this game. So how much is that going to drive down the prices that Nextel can charge for its Direct Connect service? Mentioned Last Change DONAHUE: Well, I think we have to distinguish between the Nextel Direct Connect products and other look-alikes that are coming. The look-alikes that are coming really can't stand up to the Nextel product in one very, very important area and that's called latency. And the problem is that the problems is that the products that they're putting on the market today are extremely latent, meaning it takes a long time, once you put the button to get a connection and talk to the other party. And I can tell you we have 12 million customers across the country. And they need the instantaneous nature of Nextel. So we like to call the Verizon product "push to wait" versus "push to talk" because it takes so much time for it to get through and for the call to be completed. So we're not particularly concerned at this point in time about those products as it relates to our customer base, business customers. GERSH: Well, you mentioned the advantage that you have in terms of latency, but obviously your competitors aren't going to stand still. They're going to try to improve their service. How long will your advantage last? DONAHUE: From a technology perspective, it is very a difficult issue to fix. So we think for the foreseeable future we're going to have a significant advantage. The other thing is you have 12 million customers who all can talk to each other. One of the issues you have to think about with Direct Connect is who are you going to talk to? So we have this huge embedded base that is used to pushing the big button and talking to each other. The competitors of course have to start to build that base. And that's not an easy thing to do. GERSH: I'm just wondering, you know, an IT manager who is going to look out at all their costs is probably going to say, hey, I can save $5 a month if I go to one of these competitors. They wait a couple more seconds, big deal. DONAHUE: I think the IT manager could very well say that, but I think the response from his customers is going to be, you have to give me a product that's instantaneous, that performs the way the Nextel product performs. And there is no product on the market today that can meet that. So for the $5, trust me, the customer is not going to be particularly pleased. GERSH: Well, look ahead five years and you can kind of see a world where handset costs have come way down. They're very cheap. You have a lot of flat pricing plans. And I'm wondering, you know, isn't this - isn't wireless communications going to be a tough place to make a buck going forward? DONAHUE: Well, here's what I would say to you. I've never seen more momentum for wireless than I'm looking at today. This country has a long way to go in terms of penetration and so I believe that wireless is going to be the dominant service in telecommunications, in telecom. A more important point that you might want to make is can the industry survive with six national players? That's really the issue. And to me the answer is probably no. And I don't think this industry will have six players in five years. I think it might have three or four players because I do think consolidation will take place. And I think once that consolidation starts, and I don't see anything on today's horizon, but I would say in 12 to 18 months you'll see that. Then what happens is you take an enormous amount of pressure off the price side of the business because you don't have six people fighting for a single customer. GERSH: Tim Donahue, CEO, Nextel Communications, thank you. DONAHUE: Thank you, Darren.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/09/03:
Commentary: The World of Globalized Capitalism SUSIE GHARIB: In tonight's commentary, the world of globalized capitalism. Here's Lionel Barber, U.S. managing editor of the "Financial Times." LIONEL BARBER, COMMENTARY: Over the past 20 years, we have seen the golden age of liberalization. Trade barriers have come down, capital moves freely. Welcome to the world of globalized capitalism. This week, almost 150 trade ministers are meeting in Cancun, Mexico. Their challenge is to expand the virtuous circle of trade and economic growth which began in the 1980s. But will they rise to this challenge or succumb to "globalony"? The stakes are enormous. The World Bank estimates that a successful Doha round could boost global income between $290 billion and $520 billion a year. The signs are encouraging: a U.S.-brokered deal to ease supplies of vital medicines to poor countries; a joint U.S.-European initiative to unblock talks on farm reform. All this should reassure the poorer countries. But they cannot expect the richer ones to make all the hard political choices. Big gains could be made if, wait for it, poor countries actually made tariff cut. Trade flows, after all, between the developing countries are rising. So it's vital to raise everyone's sights this week, not just to bridge the gap between rich and poor, but also to restore confidence in the world economy. That's why Cancun is too big to fail. I'm Lionel Barber.
Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
9/09/03: "Paul Kangas' Stocks In The News"
PAUL KANGAS: Wall Street opened with a moderate profit-taking after yesterday's rally. Some of the weakness was also caused by brokerage downgrades on Home Depot (NYSE:HD), Albertson's (NYSE:ABS), and department store chains Federated (NYSE:FD) as well as May's (NYSE:MAY). A revenue warning from Nokia (NYSE:NOK) was another negative. After the first hour of trading, the Dow was down 60 points, and the NASDAQ Index down 18 points. The market gradually cut its losses with the help of brokerage upgrades on Motorola (NYSE:MOT) and Cisco (NASDAQ:CSCO). At noon, the Dow trimmed its loss to 21 points, while the NASDAQ Index was down only 5. Continuing weakness in the retail and airline stocks undermined the comeback this afternoon, while growing concern over the nation's burgeoning budget deficit appeared to be the major factor behind a surge in gold stocks. The Dow Jones Industrial Average ended with a loss of 79.09, at 9507.20. The NASDAQ Composite was down 15.19, at 1873.43. The Standard & Poor's 500 Index fell 8.47 points, closing at 1023.16. The Bond market was strong, the 10-year note climb ed 18/32 to 99 4/32, putting the yield at 4.36 percent. The most active issue on the New York Exchange, trading 48 million shares, NorTel Networks (NYSE:NT) down $0.46, giving back some of the nice gains it has had in the last four or five sessions. Lucent Technologies (NYSE:LU), second in volume, down $0.15. Followed by AOL Time Warner (NYSE:AOL), $0.25 drop there. Nokia (NYSE:NOK) fell $1.07, as I touched on earlier, the company sees third-quarter sales flat or maybe even down as much as 15 to 20 percent, mainly because of the weak dollar. But Nokia does expect third-quarter earnings to meet or beat previous guidance. Motorola (NYSE:MOT), an $0.08 loss. It was as high as $11.65 this morning after UBS financial brokerage upgraded it from neutral to buy, but then it faded late in the day. Fifth in volume on the big board. Pfizer (NYSE:PFE), a $0.21 gain. Home Depot (NYSE:HD) down $1.60. Goldman Sachs downgraded Home Depot from outperform to just in-line. General Electric (NYSE:GE) lost $0.22. Texas Instruments (NYSE:TXN), a $0.71 loss. Tenth in volume, EMC (NYSE:EMC) down a penny a share. McDonald's (NYSE:MCD), which, of course, is a Dow stock, moved up $0.24. It traded as high as $24.20. The company reported August same store sales up a very respectable 3.8 percent. And that was generally better than expected. Albertson's (NYSE:ABS) down $1.35. Merrill Lynch downgraded this stock from neutral to sell. And May Department Stores (NYSE:MAY), as I touched on earlier, losing $1.14. Goldman Sachs downgraded it from in-line to underperform. Then Schering-Plough (NYSE:SGP) moving $0.45. The company and its former chief executive officer, Richard Kogan, have agreed to pay the SEC $1 million and $50,000 respectively to settle charges they violated Fair Disclosure rules without admitting or denying any wrongdoing in that particular case. Newmont Mining (NYSE:NEM), the big gold stock, up $0.86. It traded as high as $40.38. December contract in New York gold up $6.60 to $382.80. And that is a seven-year high. Gold stocks very firm today. Pharmaceutical Resources (NYSE:PRX), look at that gainer, up $8.40. It traded as high as $71.35. The company has launched its generic version of Paxil, which, according to analysts, could do very well in sales for the firm. A.G. Edwards upgraded the stock from hold to buy for Pharmaceutical Resources. CryoLife (NYSE:CRY) moved up $0.65. It traded as high as $8.15. Pre-clinical trials of the company's AZ-CINN 310 product showed accelerated destruction of breast cancer tumors. The stock had a positive reaction, obviously. Alpharma (NYSE:ALO) down $4.21. The company issued a third-quarter warning, cutting its earlier estimated earnings from the $0.25 to $0.30 range, all the way down to $0.10 to $0.15. The company says a major customer may discontinue a product that uses Alpharma's Bacitracin product. Another on the big downside movers, Russell Corp. (NYSE:RML), which, of course, is in casual apparel. It cut its third-quarter earnings estimate from the $0.72 to $0.85 range, down to $0.47 to $0.53. On the upside, La-Z-Boy (NYSE:LZB) gaining $0.97. UBS financial upgraded it from reduce to neutral due to accelerating demand for low- to mid-priced furniture. Intel (NASDAQ:INTC) topped the active list on NASDAQ, down $0.39. Cisco (NASDAQ:CSCO) was down $0.08 even though Deutsche Bank upgraded it from hold to buy with a $25 a share target. Microsoft (NASDAQ:MSFT) down $0.47. eBay (NASDAQ:EBAY) fell $1.45. Yahoo! (NASDAQ:YHOO), fifth in volume, a $0.55 loss. Not a gainer on that board. And not a gainer on this board, Dell (NASDAQ:DELL) off $0.36. Applied Materials (NASDAQ:AMAT) off $0.15. Amgen (NASDAQ:AMGN) was down $0.78. Costco Wholesale (NASDAQ:COST) fell $0.75. And Oracle (NASDAQ:ORCL), a $0.12, tenth in volume. Research In Motion (NASDAQ:RIMM), in motion in the right direction today, up $6.31. The company upgraded its second-quarter guidance from a loss of as much as $0.04 to earnings of $0.07 to $0.11. Big move there. XM Satellite Radio (NASDAQ:XMSR) up $1.52. Honda Motorcar (NYSE:HMC) will make the company's satellite radio service standard equipment on many new models next year. And Nanometrics (NASDAQ:NANO) up $2.69. Needham Securities upgraded it from hold to buy. And finally on the downside, PEC Solutions (NASDAQ:PECS) losing $4 ½ a share. J.P. Morgan downgraded it from overweight to just neutral. Yesterday the company got its earnings guidance for the third quarter and the full year. And those are the "Stocks in the News." Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. Copyright (c) 2003 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
09/09/03:
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