Stock Options

Posted by PITHOCRATES - April 29th, 2013

Economics 101

It takes a Lot of Time to Design, Develop and Bring to Market a Radical New Aircraft

The number one cost airlines have is fuel.  So anything that can reduce fuel consumption can cut an airline’s costs.  Aircraft manufacturers are aware of this.  And want to incorporate new fuel-saving technology into their aircraft.  Because that’s what airlines want.  And if you can give the airlines what they want they will buy your aircraft.  But sometimes new technology can be a little temperamental.  Everything doesn’t work as expected.  And sometimes problems that come up can take a long time to engineer through.  Like it did for the Boeing 787 Dream liner.

Boeing did everything they could think of to squeeze every last ounce of weight from the 787.  One thing they did is well known.  Thanks to a problem with it that caused the grounding of the entire 787 fleet.  The lithium-ion battery.  But that’s not the only weight-saving innovation of the 787.  They added Dual Electronic Flight Bags in the cockpit.  So pilots don’t have to bring bulky and heavy books aboard.  They went from conventional pneumatic architecture to more-electric architecture.  Eliminating the engine bleed air system and associated pneumatic system components.  Reducing weight and improving efficiency.  Which reduced fuel consumption.  They used simple trailing edge flaps.  Not slotted flaps.  Letting them use smaller flap track fairings (those canoe-shaped things underneath the trailing edge of the wings that operated the flaps).  Reducing drag.  And fuel consumption.  They used bigger engines with higher bypass ratios (the amount of air pulled into the fan disk but NOT used for combustion).  Increasing engine efficiency.  Reducing fuel consumption.  The use of composite materials decreased weight.  And the use of one-piece barrel sections eliminated additional joints, fasteners and splice plates.  Reducing weight.  And fuel consumption.

These and other innovations result in a fuel savings of 20% over similarly sized aircraft.  This is huge.  Which is why airlines are ordering this airplane.  But such a radical change in aircraft design comes with a lot of risks.  As the problem with the lithium-ion battery has shown.  And it takes a lot of time to design, develop and bring to market a new aircraft.  Especially one that is radically different from other airplanes.  So the decision to put the aircraft company on this course was a very risky decision.  And one that took a lot of guts.  Because so many things can go wrong.  Leading to cost overruns.  Which can delay promised delivery dates.  And Boeing had their share of those bringing the 787 to market.  Which they have worked through.  Will it be worth it?  As long as airlines want to save on fuel costs, yes.  And no problems arise that they can’t overcome.

Stock Options get Risk-Averse and Cautious CEOs to be Bold and Take Risks

These are big decisions.  Decisions that lead to great successes.  Or great failures.  Some so bad that they can bankrupt a company.  Someone has to be responsible for these decisions.  That one person sitting at the top of the corporation.  The CEO.  It is the CEO who has the ultimate say on the direction of the corporation.  And with this one decision all the resources of the corporation are marshaled together to take the corporation in this new direction.  Incurring great costs that will be on the books for years.  Making it hard to change course until these great investments pay off.  If they pay off.

These are the things CEOs have to deal with.  Not just at Boeing.  But throughout corporate America.  CEOs have to make these singular decisions that can have consequences for years to come.  Where it may take years to see if that one decision actually pays off.  There are few CEOs in the labor force.  So few can imagine the stress these people work under.  And in that pool of CEOs there are only a few that have the Midas touch.   Who can consistently take great risks while making all the right decisions.  Board members desperately want these CEOs.  Offering very generous compensation packages to lure them in.  And to keep them once they have them.  This crème de la crème of CEOs may make the big bucks.  But in exchange for that fat paycheck they do something few others can.  They make shareholders rich.  And they love making these owners rich.  For they love the thrill of the job.  Relishing that high-stress environment.  Where every little decision has great consequences.  Thriving under the kind of pressure that would leave most others whimpering in their beds.  Curled up in the fetal position.  In a pool of their own tears.

But not every corporation can get one of the crème de la crème.  They may have a great CEO.  But one that suffers from a major CEO character flaw.  Being averse to taking big risks.  Who instead wants to be a little more conservative.  And a little more cautious.  Shareholders don’t like overly cautious CEOs.  Because the people getting rich are doing it by breaking away from the pack.  By doing something different.  Abandoning convention.  Trying something bold.  And new.  Bringing something brand new to market that no one knows anything about.  But once they learn about it they can’t live without it.  This is what shareholders want.  Not cautious and conservative.  So to light a fire under these CEOs they came up with a new way to compensate them.  To appeal to their greed.  By letting them get rich if they can make that next great thing that sends the stock price soaring.  And the key to their greed is the stock option.

Stock Options provide a Powerful Incentive to bring Great New Things to Market

The CEO that creates the next big thing everyone will want to buy will send sales revenue soaring.  And with great sales revenue comes great profits.  Increasing the value of the company.  Which, in turn, makes the stock price soar.  This is what shareholders want.  A soaring stock price.  So to encourage the CEO to give them what they want they tie the CEO’s interest to their interests.  By giving the CEO stock options.  Making the sky the limit.  For the more the CEO increases the stock price the greater the CEO’s compensation.  Thus encouraging the CEO to try something bold and new.

A stock option is a right to buy a share of stock at a fixed price in the future.  Say the current stock price is $70/share.  The board of directors gives the CEO the option to buy, say, 500,000 shares of stock at $80/share up until some date in the future.  Creating a strong incentive for the CEO to raise the stock price.  The greater the CEO raises the price above $80 the greater his or her compensation.   Let’s say the CEO was bold and took a great risk.  And it pays off.  Sending the stock price soaring to $110/share.  When the CEO exercises those options he or she will buy 500,000 shares of stock from the company at $80/share.  The company gets $40 million in new capital to help finance further growth.  And the CEO will sell those 500,000 shares at the current market price of $110/share.  Pocketing $15 million.  And the shareholders, of course, get what they want.  A higher stock price.  Everyone wins.

Now let’s say that nothing spectacular happens.  And the stock price only rises to $75/share.  Because it’s below the ‘strike price’ the CEO will let these options expire.  The CEO profits nothing from these options.  But doesn’t lose anything either.  But what happens when the stock price falls because of that bold, new direction?  Causing the corporation to lose value.  As well as the shareholders.  But the CEO?  Again, the CEO will let those options expire.  And will lose no money.  Which is one of the benefits of stock options.  It got those risk-averse and cautious CEOs to take those big risks that got shareholders rich.  As there is no downside risk for the CEO.  Which is both good and bad.  On the one hand it encourages risk taking.  But on the other it encourages risk-taking.  Some CEOs will take excessive risks as they have nothing to lose.  Some will even cook the books to boost the stock price so they can exercise those options.  So it’s not a perfect system.  But they do provide a powerful incentive to bring great new things to market.  Which is what shareholders want.  And will take great risks themselves to get it.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , ,

Female CEOs are lowering CEO Compensation just as the Left wants yet the Left Complains

Posted by PITHOCRATES - December 15th, 2012

Week in Review

President Obama won reelection in 2012 because, apparently, people hate the rich.  And they hate corporations.  When Mitt Romney said corporations are people the opposition pounced on that.  As the masses believe corporations are evil entities that serve only profits.  And Satan.  They hate corporations with a passion.  And the rich people that run them.  That’s why President Obama wants to raise tax rates.  Not to raise tax revenue.  For these proposed tax hikes may fund the government for maybe 8 days.  If we’re lucky.  No.  These tax rates are to punish the rich.  Who have raped and pillaged this country so they can live their caviar and champagne lifestyles.

According to President Obama the young should shun these corporations and do something better with their lives.  Like working for a nonprofit.  By doing something where we give.  Not get rich.  For that is being a good American in these Obama times.  We shouldn’t pursue meaningless high-paying jobs.  Instead we should get a low-paying social services job.  Or work in a food kitchen.  Anything is better than working for these most evil and vile corporations (see What Did Marissa Mayer Mean in a Year When 86% of Executives Were Still Men? by Rebecca Greenfield posted 12/11/2012 on The Atlantic Wire).

As of June, women held a mere 14.3 percent of executive positions at Fortune 500 companies, according to new data from Catalyst, reports Bloomberg’s Brooke Sutherland. That 1.4 percent increase from last year represents a “glacial pace,” the report states…

And it’s difficult to find signs of change elsewhere. Of the 71 leaders ranked in a new Forbes list of the world’s most powerful people, only four women made the cut…

As for the future of female CEOs, the gender pay-gap is still alive and well, even for fresh college graduates.

All right, I’m confused.  If corporations are so evil and serve Satan why is it so important for women to become rich CEOs at them?

This is the general consensus on the Left.  Who are not happy about glass ceilings.  Or gender pay-gaps.

If we pay CEOs too much why are they so concerned that female CEOs earn less than their male counterparts?  If we want to reduce CEO compensation we should applaud these women for doing just that.  These women may just be choosing not to rape and pillage the people with high prices.  With less profits (a good thing according to everyone on the Left) there’s less money to pay their CEO.  Or perhaps they aren’t drawing a large paycheck so their employees can have bigger paychecks.

Women are more nurturing and feeling.  We hear it all of the time.  It’s why we need more women in Congress.  Who will listen to the poor instead of the lobbyists.  Perhaps this is why there are so few female CEOs.  Because they are too nurturing and feeling to maximize profits for their shareholders.  Because profits are bad.  Or so the Left has told them all of their life from public school through college.  Institutions all controlled by the Left.  And more women did vote for President Obama than the rich CEO Mitt Romney.  Showing their disdain for corporate profits.  Perhaps shareholders noticed this general trend and prefer greedy, heartless, male sons of bitches to run their corporations so they will maximize their profits.  Someone who doesn’t favor birth control and abortion over profits, a driving factor in why women voted for President Obama according to exit polls.

So what are corporations?  Evil?  Or so good that we need more women running them?  They can’t be both.  They can’t be the source of everything that is wrong in this country while at the same time we criticize them for not having more women running them.  If they’re evil we should applaud the fact that few women run them and that we don’t pay those that do a lot.  If they’re not evil we need to stop attacking them.  And blaming our budget deficits on them.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , ,

Great CEOs make Great Companies that make the World a Better Place

Posted by PITHOCRATES - September 23rd, 2012

Week in Review

Steve Jobs is no longer with us.  God rest his soul.  But the company he built, Apple, that gave us great things carries on.  But has it lost a little of that magic spark?  The genius that was Steve Jobs?  Yes.  Based on the release of Apple Maps in iOS 6.  Which some have called a debacle.  And something that would not have happened under Jobs.  Which shows us how unique a CEO is.  And how this one person can make the difference between success and failure.  Between a great company.  And a good company.  Despite the attacks on CEOs and their compensation (see Tim Cook Continues to Slowly Kill Post-Steve Jobs Apple by Rocco Pendola posted 9/21/2012 on Forbes).

That said, so much of what matters in tech’s big picture has to do with what will happen tomorrow, not all that’s good about what’s happening today…

Former Intel (INTC) chief Andy Grove wrote a timeless book about leadership, Only the Paranoid Survive. He felt in good times, great leaders needed an attitude of “this too shall pass,” using the time to anticipate threats and prepare themselves to respond fast and effectively.

Grove discusses “Strategic Inflection Points,” where something happens — a shift in technology, new regulations, a competitive salvo — that changes a company’s business overnight. In a blurb on Grove’s book, Steve Jobs said, “You must learn about Strategic Inflection Points, because sooner or later you are going to live through one.”

Because it lacks credible competition, Apple faces few external threats that we know of. Of course, that’s the tricky part about external threats; you do not necessarily see them coming. Great CEOs have to act, in part, like Hollywood producers, dreaming up seemingly unthinkable alternative scenarios to the status quo.

It is a singular vision that defines a company.  From a small startup to a Fortune 500 corporation.  And at the helm is a CEO.  Providing that singular vision.  Someone who can see what others cannot.  Who can see what isn’t there.  Someone who makes change.  Who leads the way.  They don’t follow.  These are people that help us understand that the new thing they created is something that we can’t live without.  This was who Steve Jobs was.  And why the world has so few Steve Jobs.

It is the singular vision of a CEO that makes the world a better place.

www.PITHOCRATES.com

Share

Tags: , , , , ,

FT132: “To settle CEO pay once and for all we should peg it to the pay of athletes, the Hollywood elite, musicians and authors.” -Old Pithy

Posted by PITHOCRATES - August 24th, 2012

Fundamental Truth

Sports Stars only Work Part Time yet they Earn almost as Much as CEOs

It’s open season on rich CEOs.  From the Occupy Wall Street movement to the Obama Campaign attacks on Republican candidate Mitt Romney.  CEOs are too rich.  They don’t pay enough in taxes.  And they hate children.  Because they oppose higher tax rates on their income.  Which can only mean one thing.  They hate children.  At least if you listen to those on the Left.

So how well paid are they?  Well, they are paid well.  But not as well as some well-paid rich people.  Especially those typically associated with the Left.  High earning sports stars.  High earning Hollywood elites.  High earning superstars in music.  And high earning authors.  There are some conservatives in these fields.  But it’s hard to know who they are.  Because they tend to hide their politics to avoid undue attention on themselves.  Whereas liberals can be as outspoken and as critical of conservatives as they wish and never bring any undue scrutiny on their incredible high earnings.  Why?  It is the great unspoken rule in being filthy rich.  If you are an outspoken liberal you can be as filthy rich as you want and you will never hear an unkind word about your obscene wealth.  So let’s look at some filthy rich people.  Let’s look at the top 10 annual earners in the following sectors (see links above for source information):

Of the sectors shown CEOs are only richer than sports stars.  But not by much.  Which says a lot about the earnings of sports stars.  For sports are seasonal.  They have off-seasons.  And yet they make almost as much as CEOs.  Who work year round.  But other than the part-time sports stars the filthy rich CEOs are less filthy rich than the Hollywood elites, superstars in music and authors.

No One says that Musicians Earn too Much even though they Earn More than CEOs who Earn too Much

The median household income at the end of 2011 was $ 51,413.  Some may say this is rich.  If you’re making minimum wage perhaps it is rich.  But it’s a long way from those noted above.  Interestingly many of these people will say CEOs earn too much.  Some may even say these sports megastars earn too much.  But not many.  Few if any will criticize Hollywood elites, superstars in music and authors.  Even though they live a far better life than they could ever imagine.  Why?  Because these rich people say they care for the little guy.  And support Democrat candidates for office.  Which, of course, takes the spotlight off of their obscene wealth.  And they can insulate their lives from the policies of Democrats.  Which tend to be anti-business.  Including high taxes.  A complicated tax code.  And high regulatory compliance costs.  So CEOs tend to support Republican candidates.  Who tend to fight the anti-business policies of Democrats.  Because they hurt the businesses they’re responsible for.  Which, of course, makes them look greedy.  And like they hate children.

So how do these filthy rich people compare to the median household income?  Like this:

The sports megastars are the pauper of the group.  They only earn 780 times the median household income.  Musicians are the filthiest of the rich coming in at 1,701 times the median household income.  Meaning the average income of the top ten superstars in music equal the median income of 1,701 households added together.  Another 687 households more than the average income of the top ten CEOs.  Yet people say CEOs earn too much.  But no one says that musicians earn too much.  Even though they earn more than those who earn too much.

If CEOs are Overpaid then so Must Everyone who is Paid More than Them

People tend to pick on CEOs.  Because they are highly compensated.  Not as highly as musicians, the Hollywood elite or authors.  But highly.  They get those high compensations for a reason, though.  A few bad decisions at the top can ruin a successful business.  Whereas the CEO who consistently makes good decisions will make a business grow.  Creating wealth.  And jobs.  At the CEO’s business.  And all the businesses that feed into it.  Thanks to the stages of production.  So a good CEO can create a lot of economic activity.  Wealth.  And jobs.  Not to mention a whole lot of tax revenue.  Which fund all those Democrat programs.  Including the ones for children.

The other filthy rich create jobs, too.  And wealth.  But nowhere near what a good CEO can create.  For few of them are singularly responsible for building their industries.  Unlike a John D. Rockefeller.  An Andrew Carnegie.  A George Westinghouse.  Or a Steve Jobs.  These people changed the world.  And put hundreds of millions of people to work through the years.  Compared to the limited economic activity a pop star creates.  A movie star.  An author.  Or an athlete.

So a CEO creates more wealth and jobs for others than most filthy rich people.  And they create more tax revenue at all levels of government than most filthy rich people.  So one would think they would deserve higher compensation for all the good they do.  But no.  At least according to those on the Left.  So what would be fair?  Call them musicians?  Movie stars?  Authors?  If so then we could even pay them more.  For no one complains about their high compensation.  Or should we cut their pay?  As well as musicians, movie stars and authors?  And sports stars?  Pay them all less.  For if CEOs are overpaid then so must everyone who is paid more than them.  Of course that probably wouldn’t go over well with the athletes, the Hollywood elite, the musicians and the authors.  So perhaps to settle the CEO pay issue once and for all we should peg it to a weighted average of the pay of athletes, the Hollywood Elite, musicians and authors.  So the amount of compensation just doesn’t matter anymore.  Because they will be as filthy rich as the people the Left has no problem with being filthy rich.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , ,

If Corporations are Vile and Evil why do Democrats/Feminists want Women to Run Them?

Posted by PITHOCRATES - October 30th, 2011

Week in Review

The Occupy Wall Street movements linger on.  In their battle against capitalism.  Bankers.  And corporations.  The greatest scourge known to human kind.  President Obama has expressed some support for these protesters.  And the Democrats are on board with them.  To teach corporate America a lesson.  All the while trying to put more women into the CEO positions of these evil, vile corporations (see Number of female ‘Fortune’ 500 CEOs at record high by Laura Petrecca posted 10/26/2011 on USA Today).

If no women step down before the end of 2011, there will be 18 women running Fortune 500 companies in 2012. Previously, there haven’t been more than 16 female CEOs at Fortune 500 firms at the same time.

Yet, while the upcoming ascensions are notable, the gender gap between men and women in the workplace remains vast, with females struggling to get the mentors they need and the pay to equal their male counterparts.

If these are so evil and vile why is it so important to get more women running them?

The Democrats claim the feminists.  They are always fighting for the equality of the sexes.  Yet it is the Democrats throwing in with the Occupy Wall Street protesters.  Those people who hate these evil, vile corporations.  So are corporations bad?  And if so why do Democrats want women running them?

Anecdotally speaking, men are also more apt to quickly say “yes” to a career-enhancing assignment that could affect their personal life, while women tend to consider how the opportunity could affect home situations such as elder care or child care, Catalyst’s Soon says.

In turn, the next time a manager has a job to offer, he or she may remember that woman’s hesitation and consider going with another candidate, she says.

So I guess there are differences between the sexes.  One cares about children and parents.  The other doesn’t.  They’re just a bunch of selfish bastards.  So that’s why we pay men more.  Because they put career ahead of children and parents.  The selfish bastards they are.

Of course, in choosing a CEO for a corporation, being that kind of selfish bastard is definitely a plus.  Besides, corporations are vile and evil.  Better a selfish bastard run them than a selfless, good woman.

www.PITHOCRATES.com

Share

Tags: , , , , , , , ,

LESSONS LEARNED #72: “Moms are a lot like CEOs. Only with more responsibility, longer hours and less pay.” -Old Pithy

Posted by PITHOCRATES - June 30th, 2011

A Genius may have a Brilliant Idea, but it’s an Entrepreneur that brings it to Market

A CEO is a lot like an entrepreneur.  They’re both a cut above the rest.  And can do what few can do.  Bring two worlds together.  The theoretical world inhabited by great thinkers and inventors.  And the practical world inhabited by people who act.  Who take the things the great thinkers and inventors create and give them to us.   There is a difference between the people that inhabit these worlds.  And most can only live in one or the other.  But CEOs and entrepreneurs can live in both.  That’s what makes them special.  Thinkers and inventors possess a genius of theoretical creativity.  But they can do little with their idea.  The action people can build great things (cars, airplanes, buildings, power plants, cell phones, etc.) but only from a construction plan.  Someone else has to have an idea and think and create the construction plan before they can build.  These are the two worlds.  The genius.  And the builders.  And it is the CEO and entrepreneur that bring these two worlds together.

Nikola Tesla was a genius.  A brilliant theoretical thinker.  He created the world in which we live.  But do you know who he is?  What he created?  Probably not.  Unless you’re a Croat.  Because there are probably a lot of statues of him in Croatia. Because he was born there to Serbian parents.  He eventually moved to America.  Got a job with a guy name Thomas Edison.  Who didn’t appreciate his genius.  Or his one particular ‘crazy’ idea.  But George Westinghouse did. 

That ‘crazy’ idea is the AC power we use today.  Thomas Edison was building DC power plants and a DC electric grid.  Despite all the failings of DC distribution (DC power doesn’t travel far requiring lots of generating plants, different voltages have to have their own generating plant, large power loads require very thick and expensive copper wires, etc.).  There was already a DC electrical infrastructure.  And it was Edison’s.  Which he wanted to expand because it would pay him well.

But Tesla’s AC system was better.  Because it could use transformers.  One power generating plant could provide power at a variety of voltages.  You just needed a transformer to get the voltage you wanted.  Also, electrical power is the product of voltage and current.  High power, then, requires either a high voltage or a high current.  High currents require thick, expensive copper wires.  So high voltage was the way to go.  It allowed power to travel farther over thinner wires.  Therefore, it required fewer generating plants.  And a single electric grid (not one for each voltage).  AC power was much more economical than DC power.  And George Westinghouse saw that.  And took Tesla’s brilliant idea and built the AC power generation and distribution system we use today.

The Business of Beautiful, Estée Lauder

You see, Tesla was at home in the lab.  He was a scientist.  Not a salesman.  That’s why he wasn’t an entrepreneur.  Because, just like being a CEO, you need sales skills to be an entrepreneur.  Because you are the number one sales person in your business.  And Edison and Westinghouse were great salesmen.  That’s why they brought a lot of Tesla’s great inventions to market.  And why Tesla did not.  He was just not a sales person.

But Estée Lauder was.  She was always selling.  And creating.  She was the classical entrepreneur.  Her uncle was in the chemistry business making beauty products.  Which fascinated her from a young age.  He taught her the chemistry.  Taught her how to make the products.  How to use the products.  And she did.  Loved them.  And started selling them.  With a passion.

She started creating her own products.  Using her own kitchen as her laboratory.  When not tending to her two sons.  She demonstrated how to use her products.  Gave away free samples.  And sold.  She was always selling.  She started out small.  By herself.  From these humble beginnings she grew to dominate the industry.  She was relentless.  She worked herself to the premier counter space in department stores by redefining the way cosmetics were sold.  Starting with Saks Fifth Avenue in New York.  She visited each counter to ensure they were meeting her high standards.  She gave away free samples.  She demonstrated.  She touched.  Personally applying products on customers.  That’s why when you walk into a department store you’ll see the Estée Lauder counter first.  And you’ll see all the counters selling the same way.  Giving away free samples.  Demonstrating products.  Showing how to apply products.  The Estée Lauder way.

One Smart Cookie, that Mrs. Fields

Debbi Fields liked to bake cookies.  She married young at 19.  To a Stanford graduate.  And aspiring financial consultant.  And about a year later decided to go into the cookie business.  After an incident at a party with her husband and a lot of his snobby associates.  She apparently mispronounced a word.  Said ‘orientated’ instead of ‘oriented’.  A snob pointed out her faux pas.  Sending her home in tears.  Didn’t much like that experience.  And decided to be something more than a ‘just’ a housewife.  Not that there was anything wrong with that.  And she would love being a housewife.  She would raise 5 daughters.  And add another 5 stepchildren in a second marriage.  But the snobs in her husband’s circle did look down on that particular institution.  It was so old fashioned.  It wasn’t progressive.  It wasn’t what people in their circles did.  So they acted like real asses.

Yet they liked her cookies.  Loved them.  Her husband would take them to work.  Where they were a big hit.  Soft and chewy.  Gourmet.  They were different.  When she asked them if she should go into the cookie business, they said it was a bad idea.  The conventional wisdom said crispy cookies were the way to go.  People didn’t want to buy soft and chewy.  They said as they stuffed their mouths with soft and chewy cookies.  And there were others who told her not to do it.  Even her husband doubted her.  But he loved her.  And would support her. She had no business experience.  But she was a hard worker.  And believed in what she was doing.  She got a bank loan to open a cookie store.  Not so much because the banker believed in the business idea.  But because of the good character of her and her husband.  Whatever the outcome, the bank was willing to take a chance.  Because, success or fail, they knew they would repay the loan.

She opened her first store in a mall food court.  Did not sell a single cookie.  Until she used the Estée Lauder sales method.  She gave away free samples.  People tried.  And people liked.  Soft and chewy was a hit.  She grew the company.  Added more stores.  And made a lot of money.  She was very hands on to maintain the quality.  Again, like Estée Lauder.  She visited her stores.  To make sure they maintained her high standards.  Which is why she refused to franchise.  She was too worried about losing that quality.  Which is what made Mrs. Fields cookies better than the competition.  Her husband computerized her operation.  Adding a computer at each store.  All wired to the Internet and tied into her headquarters.  It was state of the art technology.  Allowing more growth.  While retaining full control.  The growth was fast.  Too fast.  The hands-on management didn’t work well with so many stores.  The debt started to pile up.  And then a recession hit.  Her expensive gourmet cookies became too expensive.  And people stopped buying them.  To save the company she had to sell 80% of it.  And the new owners changed the business model.  Franchised stores.  And bumped Debbie Fields from CEO.  But she remained chairman of the board.  And though only a minority shareholder, the business Debbie Fields created continues on.  Her only mistake was being so successful so fast.  And if you’re going to have a fault that’s not a bad one to have.  By the way, don’t forget that she did all of this while raising 5 daughters.  Which probably made the running of the multi-million dollar business the easy part of her life.

Entrepreneurs, CEOS and Moms

Entrepreneurs and CEOs.  They’re a different breed.  They can be both brilliant thinkers like Nikola Tesla.  And aggressive sales people like Thomas Edison and George Westinghouse.  Such as Estée Lauder.  And Debbie Fields.  These mothers dominated their industries.  And set the bar for everyone else.  Lauder built an empire that dominates still.  Fields use of technology to streamline operations is a model for business efficiency at Harvard Business School.  Two of America’s most successful entrepreneurs and CEOs.  And both were moms first.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FUNDAMENTAL TRUTH #72: “Moms are a lot like CEOs. Only with more responsibility, longer hours and less pay.” -Old Pithy

Posted by PITHOCRATES - June 28th, 2011

Thinking and Deciding

Boy, do people like to demonize CEOs.  I mean, they really hate them.  These chief executive officers.  Overpaid and underworked.  And then there are all those stock options.  Making them bazillionaires.  By increasing the value of the company to shareholders.  Without a whit of concern for the little guy on the factory floor doing the work.  It just isn’t fair.  Sitting in their plush offices.  Flying in their private planes.  Staying in 5-star hotels.  Living in mansions while vacationing on some island paradise that they might in fact own.  Living champagne and caviar lives.  For doing what?

Actually, for doing quite a lot.  Mostly thinking.  And deciding.  Making decisions that will impact every employee of the company.  Now.  And years into the future.  Decisions that will determine if there is even a future.  For a corporation is like a ship.  It is large.  Complex.  And has momentum.  It can’t turn on a dime.  One decision today could steer that ship into open waters for clear sailing.  Or into an iceberg. 

The world is a changing place.  Nothing is static.  Including the economy.  And consumer spending.  For the consumer can be a fickle person.  We know what they’re buying today.  But no one knows what they’ll be buying tomorrow.  And that’s the problem CEOs face.  The things they’re making today will sell tomorrow.  Or later.  In fact, factories they build today will make things that will sell years later.  So the decision to build that factory had better been a good one.  Based on some good market research.  Objective analysis.  With no personal prejudices involved.  Such as laughing at new innovation.  Saying there’s no way it will replace the current industry standard.  Such as a phone company not getting in to the cellular business because everyone will always have a landline into their house.  In fact, they’ll have a few.  One for their phone.  One for their fax machine.  And one for their dial-up modem.  “And what could ever change that?” said the fat-cat phone executive while chomping on a cigar.  Shortly before the board of directors fired him.

Pay not Commensurate with Responsibilities

Moms are lot like CEOs.  They, too, have to look long-term.  And it starts with choosing a husband.  When they are ready to settle down and raise a family.  And they’re not going to waste their time with men who don’t want to settle down.  Like Beyoncé says, “if you liked it then you shoulda put a ring on it” (Single Ladies).  It’s no longer about dating for fun.  It’s now about finding a life partner.  And women will choose carefully.  They’re looking for someone with a good job.  Someone who is responsible.  Someone they can trust.  Someone who is healthy and will sire healthy children.  Someone who is strong and self-confident.  Who can be both a provider and protector.  Perhaps someone who goes to church.  So they can bring their children up with strong morals.  They’ll start choosing their dates based on these criteria.  Then love can enter the equation.  Which it does.  And it’s often a deeper and more long-lasting love.  Because attraction is based on all of these things.  Not just physical appearance.

This decision is important to be a good mom.  Because it will affect the next 20+ years of her life.  And it will affect the lives of her children.  So she has to weigh a lot of things in making this decision.  Like a CEO’s vetting process choosing his or her officers.  Because it’s for the long haul.  She’ll work 7 days a week.  And must be available at all times of the day.  Even if she is sick.  Like a CEO.  Only NOT with pay commensurate with her responsibilities.  Unlike a CEO.  And those responsibilities include raising her children.  And managing the household.  While her husband works.  Old school.  Like Paula Cole says.  “I will raise the children if you pay all the bills” (Where have all the Cowboys Gone).

A CEO has a chief financial officer (CFO) to manage the finances.  Mom just wear another hat.  And manages the finances, too.  The husband works.  But he gives his wife the paycheck.  For although his earnings pay the bills, she writes the checks.  And balances the budget.  Which often take a little finesse.  Because there isn’t a lot of money in the beginning.  And raising children and owning a house can be very expensive.  So managing cash-flow becomes a fast learned skill.  Because groceries, school supplies, clothes, utilities, insurance, mortgage and taxes don’t all come due in pay periods equal to the amount of the paycheck.  Which means she has to put a little aside each pay period (like a sinking fund in corporate America) to pay the big things that come due at various times throughout the year.  Or tap her line of credit (i.e., credit card), making cuts in the monthly budget to service the new debt and pay down the high-interest loan as quickly as possible.  Oh, and she cooks and cleans, too.

“Are you wearing Clean Underwear?”

Some may belittle the classical housework of being a mom.  The cooking and cleaning.  But when raising children they can be the most important of her responsibilities.  Of all the animal kingdom, human offspring are the most helpless.  And they’re helpless for the longest time.  It takes 18 years before they leave the nest.  And they’re growing that whole time.  Fueling that growth with three meals a day.  Two if they buy lunch at school during the school year.  This is something a CEO doesn’t have to worry about with employees.  Being accountable for everything they eat or drink.  And not getting them sick in the process for food preparation is a dangerous business.  Especially when working with raw chicken.  So she’s health inspector.  And dietician.  Managing their growth with the family doctor.  Making sure they eat their vegetables.  Drink their milk.  Because it all matters.  To make sure their bones are strong and healthy.  And to have strong immune systems.  For the old maxim is true.  We are what we eat.  Which is a challenge for a mother.  Because kids don’t like eating healthy.  Or being clean, for that matter.

Yes, it’s true.  Mothers want their kids to wear clean underwear. But it’s not just to save them the embarrassment should their child be in an accident where someone may see his or her dirty underwear.  (Well, maybe a little.)  It’s because poor hygiene kills.  And there are few things more unhygienic than pooping.  These are some nasty germs.  They cause outbreaks of cholera when they contaminate drinking water supplies.  And cause E. coli food poisoning when transferred to our food supply (that’s why there are signs in restaurant bathrooms saying that all employees must wash their hands so they don’t kill anyone with their food).  Nasty stuff.  So mothers are fanatical about bathing their kids.  Making sure they wash their hands after using the bathroom.  And that they wear clean underwear.  Also not to pick up food that fell on the floor (that 5-second rule is a dad rule).  Or put things in their mouths that they shouldn’t.  And they’ll keep all their cleaning and plumbing supplies locked up and out of reach of their children.  Their medicines, too.  Because kids like to put things in their mouths.  And will eat or drink anything they find that isn’t a vegetable on a plate.

As protective as she may be, her child will most probably get sick.  Some other kid may sneeze in her child’s face.  Or some other kid may not wash his or her hands after using the bathroom.  Or use a door knob when they have a cold.  Or pass the measles to her child.  Then mother becomes nurse.  Carefully administering medicines.  Emptying barf buckets.  Cleaning her child and the bedding when he or she misses the barf bucket.  All the while cooking and cleaning.  And managing the household. 

Leading by Example

And the responsibilities never end.  There’re good manners to teach.  Honesty.  Morality.  Good behavior.  Inside the home.  And when out of the home.  The mother instructs constantly.  And sets a good example.  Dad, too.  When the kids are around they’ll watch their language.  Because they don’t want their kids to have potty mouths.  And Mom and Dad will treat each other with respect.  Because they want their children to grow up as ladies and gentlemen.  For boys to treat girls with respect.  Not to hit them.  Or objectify them.  And no matter what Mom may have done on spring break when she was in school, she will not do anything now that will set a bad example for her daughter.  Or give ideas to her son.  Like getting girls drunk so they make bad decisions is okay.

This is something moms share with CEOs.  Leading by example.  Because perception in the corporate world can make or break a company.  That’s why they have zero-tolerance policies for bad behavior.  Because a reputation of bad behavior (racist, sexist, hate speech, etc.) will give a corporation bad press that can take years to overcome.  Especially if it’s a high-level manager.  Or an officer.  In fact, it’s worse at that level because of the vetting process.  Like choosing a husband, these people are chosen for the long haul.  And bad behavior in these people reflects poorly on the CEO.  Because he or she chose them.   If your CFO is arrested for tax fraud it shows that you are a poor judge of character.  And have a poor handle on your business operations.  And if you’re CFO is committing tax fraud under your nose, you probably are doing a poor job.  And no doubt the board of directors will be looking for a new CEO.  As one of the best ways to get over a scandal is by cleaning house.

Being a CEO is hard.  So is being a mom.  There’s a lot of on the job training.  Which is more of just figuring things out as you go along.  You learn from your mistakes.  All the while being overworked.  And underpaid.  Working horrible hours.  With little sleep.  On call 24/7.  With no breaks or vacations.  Yes, there may be family vacations.  But Mom will still be working on those vacations.  Same responsibilities.  Just a different setting.  At least the CEO has a staff to handle things while on vacation.  At best a mom gets a quiet bubble bath while the kids are at school.  Or a quiet moment on the toilet.  Safe behind a closed door.  For a few quiet minutes. 

Moms and CEOs have their differences.  But their responsibilities are the same.  A corporation’s success depends on the good decisions of its CEO.  Just as the success of a family depends on the good decisions of Mom.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,