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September 6, 2006
CEO confidence is dropping, Wed, Sept. 6, 2006, 8:36 AM
This morning on BloombergTV, a representative of Vistage International was interviewed. VI states they are the world's largest CEO membership orgnization. The man's concern was borne by economic data just released a couple minutes ago.
In a survey of 2,000 CEO's, with a margin of error believed to be just 1.9 pct, the respondents stated they are less confident today in their company's future than at any time in the past three years.
The problem they state is rapid growth of cost, and an inability to pass it through to customers. They also state that it has become very difficult to recruit the required staff to meet future needs.
But that too is relevant to cost.
In any case there was an important economic report out this morning at 8:30am ET on U.S. non-farm worker Productivity and Costs.
This chart, which I'll update later in the morning (to reflect today's data) outlines a major concern by CEO's.
As the latest numbers for Unit Labor Cost (ULC), (the thin one) points toward +4.9 pct annual increase in labor cost, but the annual productivity increase falls to 1.6 pct, corporate CEO's experience profitability issues. In too many cases, the answer seems to be (i) offshore jobs to where ULC is so much less, and (ii) terminate or lay-off staff.
The problem of course is that as long as management are paying themselves exorbitant increases in compensation, and government is not doing the job at its end to control price inflation, there will be growing wage demands.
This inflation indicator is not good news to those bond traders I told you about recently " that is, the ones who figured inflation is dead. Not!
And if you look at the broad equity index charts lately, you'll see that as and when the bond market heads south, so too do equities.
Posted by Posted by Bill Cara on September 6, 2006 08:36:42 AM | Category: Economics
Discourse
CEO compensation is at obscene amounts. ABout two months ago there was a great peice in the WSJ that went over pension problems that US companies are facing. In summary it found that it was the pensions of CEOs that were jeopordizing the pension system and not that of the blue collar or even highly paid white collar worker as many would have you believe.
I think the trend of reducing promised pension amounts like what occured with the Delta pilots is terrible. If a company does not want to offer its employees a pensionb, don't. If they want to discontinue contributing and offering a pension that is okay too. However to negotiate a pennies on the dollar settlement on a pension that was promised years ago and was supposedly protected by the government and accounting regs is deplorable. All of these people factored in their pension benefit as they made their retirement fund allocation decisions and in turn saved less AND spent more on vacations, cars, etc that fuel the US economy.
Posted by: rick s ![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
September 6, 2006 9:33 AM [link]
Posted by: sergio at
September 6, 2006 12:46 PM [link]
Obscene isn't the word.
My wife has the proverbial "rich uncle" who is the CEO of a NYSE-listed retailer. He's a pretty good guy, but that's not the issue. He and his 5-man exec team (SVP, VP, etc) took home more last year in comp (salary + option payoffs) than the entire company did in profits.
That doesn't even include the hundreds of millions (yes, hundreds) that a variety of board members extracted.
When a handful of folks in a company can make more than the company itself (12,000 employees BTW), you know something stinks.
Posted by: leewhee at
September 6, 2006 5:16 PM [link]
In the FT (online) today, the IMF warns of increased risks of global slowdown. The Goldilocks stool is propped up on some tenuous legs. The overweighted market expectations sitting on it is bound to crack it.
Posted by: Leisa![[TypeKey Profile Page]](http://www.billcara.com/nav-commenters.gif)
at
September 6, 2006 8:43 AM [link]