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Most of us want to work for a boss that is kind and fair.  Paradoxically, however, when looking for a leader we also equate kindness with weakness, and selfish aggressive behavior with strength, according to a recent study conducted by researchers at the Kellogg School of Management, Stanford Graduate School of Business and Carnegie Mellon University's Tepper School of Business. 

The study said that being selfish makes "you seem more dominant and being dominant makes you seem more attractive as a leader."  And, "people who are generous or altruistic can appear weak or gullible."

This is an explanation, at least in part, of why we get corruption.  People who are more likely to be moral, kind and pro-social are least likely to be elected to leadership roles, and the likelihood of corruption and malfeasance increases because we have the wrong people in positions of leadership.

Indeed, these findings on how we perceive dominance and weakness (when it comes to leadership) are likely what is behind the frustration and anger of the "Occupy Wall Street" protesters.  The news of outrageous salaries and bonuses for CEOs and the government using taxpayer money to bailout big banks is all too familiar, while many average citizens cannot find work or have to work more for less pay. 

Joe Dear, chief investment officer of California Public Employees' Retirement System, said recently that people are waking up to the fact that the game appears to be rigged. A helpful first step for fairing up the game may be to begin viewing kindness, fairness and altruism as strengths in business leaders, and selfish behavior as reason to look for a new CEO.

-- Robert Jaffe, rjaffe@pondel.com

Image by tsevis via Flickr

This week Apple, Inc. founder Steve P. Jobs passed away from pancreatic cancer.  He was 56.

While Jobs' death sparked a global media frenzy, his passing did not go totally unexpected.   In fact, the former Pixar CEO had a couple of health scares in the past, even taking a leave of absence in 2009 when he underwent a liver transplant.   During that time, Apple shares dropped nearly three percent, slashing roughly $10 billion off the company's value.

Apple's stock fluctuated on Thursday after Job's death was announced but held positive at the close.  Apple's stock today closed down a little more than two percent.  News on the street, however, is that investors already factored in the fact that Steve Jobs wasn't going to be around at Apple for the long run.  

The trouble with iconic executives such as Steve Jobs, Warren Buffet, Richard Branson and Carly Fiorina is that they're connected too closely to the company's brand, putting the organization at risk if they abruptly leave or resign.  In addition to stock fluctuations, celebrity executives may affect business decisions as in the case with Fiorina who stepped down as HP's CEO in 2005 amid a firestorm of negative media coverage.

The consensus of business experts is that CEOs are best to avoid the spotlight and focus interviews on the company rather than themselves.  This may be true of Jobs, but his celebrity always took center stage and he was seen as the true heart and soul of the company.

The transition has begun as Tim Cook officially took the reins from Steve Jobs last month.  Maybe he was being groomed all along?  Who knows? The reality is that companies with rock star CEOs need to take heed and start planning some kind of legacy strategy to circumvent any potential future hiccups.

-- George Medici, gmedici@pondel.com

Just months after floundering financial institutions secured billions of dollars in bailout money from American taxpayers, they are getting plenty of heat for their dumbfounding misuse of the money.

The most recent case involves Wells Fargo & Co., which canceled a pricey Vegas trip after their itinerary was leaked to the media and created a storm of criticism. Wells Fargo, which collected $25 billion in bailout money, had booked 12 nights at the Wynn Las Vegas and sister hotel, the Encore.  Not exactly planning to slum it, were they?

This is just the latest transgression. Wall Street securities firms should send a thank you note to Wells Fargo for replacing them in the Audacity Hall of Fame and knocking them off the front pages. Wall Street was blasted by President Obama and pretty much everyone else with a conscience for its irresponsible behavior after reports of $18.4 billion in bonuses being paid out in 2008 as the industry collapsed, costing taxpayers billions of dollars and tens of thousands of job cuts.

The Wells Fargo incident also comes on the heels of an ABC report that accused Bank of America of allegedly spending $10 million on a week-long Super Bowl party and Morgan Stanley planning an "elegant gathering" at a five-star resort in Florida.

Instead of spending taxpayer bailout money on lavish Vegas junkets, bonuses in the billions and executive spa treatments, maybe these financial institutions should be using the cash to buy a clue. Or, at least, spend it on a good crisis communications firm like PondelWilkinson.

-- Ron Neal, Senior Associate, rneal@pondel.com

All is not doom and gloom for this coming holiday season.  While pundits and prognosticators are predicting less than robust (to put it mildly) retail sales through the rest of the year, one industry, at least, anticipates great holiday sales. 

Let’s here it for this country’s gamers, who are expected to help the sales of video games remain strong this year and in 2009.  A recent Yahoo! Tech article points out that industry executives said their optimism is fueled by “solid sales of advanced game consoles made by Nintendo, Sony and Microsoft.”  While this projection, which was made at the BMO Capital Markets interactive entertainment conference in New York, seems to defy common sentiment, we could all use a bit of good news today.

So, the next time you run into a video game freak or perhaps just an average 10 year old boy, thank them for shining a bit of a bright spot on the economy. 

Let’s hope those industry executives are right.

-- Laurie Berman, Senior Vice President, lberman@pondel.com

Following last week’s historic election, many investors are probably wondering if their obliterated 401(k)s will take a turn for the better under Barack Obama. Is your stock portfolio really better off with a Republican or Democrat in the White House? Well, frankly, trying to determine the differences between the parties using stock market data is folly … but let’s do it anyway.

According to a recent New York Times graphic, if you had to invest exclusively under either Democratic or Republican administrations, here’s what the results would have been.  For the sake of fairness, Herbert Hoover’s presidency under The Great Depression has been excluded.

In nearly four decades, a $10,000 investment in the S&P stock market index would have grown to $51,211 under Republicans. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent during the same time period.

Four Republicans with solid gains include George H.W. Bush, who wins out with the best average annualized return – excluding dividends – of 11%, followed by Dwight D. Eisenhower (10.9%), Gerald Ford (10.8%) and Ronald Reagan (10.2%). The Republican bell curve was weighed down by the Richard Nixon years (-3.9%) and, of course, President George W. Bush, whose number stood at -5.1% as of mid-October. Barring huge gains over the next few weeks, Bush’s number will be the worst since Hoover, a whopping -30.8%.

Bill Clinton’s term was the only double-digit gain among the Democrats, finishing with an average annualized return of 15.5%. The rest of the Democrats – Franklin D. Roosevelt, Harry Truman, John F. Kennedy, Lyndon B. Johnson and Jimmy Carter – ranged from 6.5% to 8.2%.

Whether you’re running with the Elephants or the Donkeys, I’m certain both parties would agree that a bull run would be nice during the next presidency.

-- Ron Neal, Senior Associate, rneal@pondel.com

On June 27, after the market close, Russell Investments will rebalance its entire family of indexes, including its 25 U.S. indexes.

Russell undertakes this Herculean task every year to “maintain true representation of global equity markets and avoid capitalization and style slippage.” 

There are a few important dates to watch for:

·       Friday, June 13 – Announcement of preliminary additions and deletions to the Russell Global Index and the Russell 3000^®.

·       Friday, June 20 and Friday, June 27 – Updates made to the list of preliminary additions and deletions.

·       Friday, June 27 after market close – Indexes are reconstituted.

·       Monday, June 30 – Final index membership lists posted.

Index memberships and rankings are determined using a company’s total market capitalization.  Although we won’t know the size of the largest and smallest companies in each newly reconstituted Russell index until June 30, here’s a look at some statistics for the current indexes:

·       Largest company in the Russell 3000^® Index: $468.5 billion market cap.

·       Smallest company in the Russell 3000^® Index: $261.8 million market cap.

·       Largest company in the Russell 2000 Index: $2.5 billion market cap.

·       Smallest company in the Russell 2000 Index: $261.8 million market cap.

What does this reconstitution mean for public companies?  According to Nasdaq, the day Russell’s indexes are reconstituted is generally one of the heaviest trading days in the U.S. equity markets, as index and other asset managers reconfigure their portfolios to reflect the new composition of Russell's indexes.  If your company is included in any of Russell’s indexes, be prepared for heavier than usual volumes at the end of this month.

 -- Laurie Berman, Senior Vice President, lberman@pondel.com

Effective with the start of trading on February 19, the Dow Jones Industrial Average will add Bank of America Corp. and Chevron Corp. and drop Altria Group Inc. and Honeywell International Inc.  Reuters said that this is the first change in the 111-year old Index since April 2004.

The composition of the index is determined by editors of the Wall Street Journal and while there are no set criteria for a stock to be added or deleted, the editors of the Journal intend that all of the components of the index be highly established U.S. companies that are leaders in their respective industries.

-- Laurie Berman, Senior Vice President, lberman@pondel.com

Nasdaq recently began placing its relationship managers in the field to keep them geographically closer to the listed companies they serve.  For example, Southern California (from San Diego to Santa Barbara) is now covered by two Nasdaq relationship managers who reside in the region.

Listed companies should maintain proactive relationships with their relationship managers as these folks can trouble shoot any issue from compliance to listing standards to bell-ringing ceremonies to renting out the Nasdaq MarketSite in New York City for your next analyst day.

We were reminded of a couple of interesting tid-bits when Nasdaq visited our offices recently:

·    Nasdaq’s 2008 Core Services for listed companies (which include free webcasts, a dynamic annual report and Board tools, among others) are valued at $25,000.

·    Participation in bell-ringing ceremonies, at the open and close, are market cap driven.  In general, a listed company must have a market cap of $500 million to open the market and $250 million to close the market.

·    Nasdaq’s European investor conference is open to companies with market caps of at least $1 billion.

·    Pre notification to Nasdaq for all press releases is now handled via an electronic disclosure form at https://www.nasdaq.net/ED/IssuerEntry.aspx.

·    Each listed company has a dedicated surveillance account manager called a market intelligence director (MID).  Your MID can provide you with information about large block trades or significant price swings in your stock.  You can work with your market intelligence director to initiate calls when your stock price moves by a pre-determined percentage or when a block of a pre-determined amount of shares changes hands.  You can also call your market intelligence director whenever you need more clarity on how and why your stock is moving.

Log on to your company’s Nasdaq home page at http://www.nasdaq.net/publicpages/NasdaqHomePage.aspx for more information.

-- Laurie Berman, Senior Vice President, lberman@pondel.com