are your smarter than a ceo? -...

Executive Masters of Business Administration AssignmentBaldwin Wallace College

Are You Smarter Than a CEO?Discussion Guide on How to Navigate Business Though Turbulent Times

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ChristinaThomasOnline.com

Are You Smarter Than a 5th

Grader? CEO?

CEO Ford

Former CEO NCC

FormerCEO AIG

FormerCEO

Lehman Bro’s

Former CEO GM

Hank Greenberg

AlanMulally

Peter Raskin

Dick Fuld

Rick Wagoner

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MIKE

A. Treat your executives to a $440,000 retreat at the luxurious St. Regis resort.

C. Take the corporate jet to the Super Bowl (of course with important clients)

B. Hunker down to revitalize the business.…And when you do travel, do so frugally!

D. Pay huge bonuses to staff in the division, which almost brought the

company down.

Your company just received a multi-

billion dollar govt. bailout. You should:

Edward LiddyAIG CEO

MIKE

A. Treat your executives to a $440,000 retreat at the luxurious St. Regis resort.

C. Take the corporate jet to the Super Bowl (of course with important clients)


D. Pay huge bonuses to staff in the division, which almost brought the

company down.

Your company just received a multi-

billion dollar govt. bailout. You should:


Edward LiddyAIG CEO

ALLEN

A. Purchase a subprime mortgage unit offering loans to risky borrowers. Keep these loans on the company’s portfolio.

C. Make a mess of a company then leave it for your successor to clean up.

B. Sell $1 billion of home equity loans per month through 3rd party brokers.

Bundle and sell these loans to investors.

D. Manage risk at all times – even during growth periods.

A sound business strategy for a financial institution is:

David DaberkoFormer NCC CEO

ALLEN

A. Purchase a subprime mortgage unit offering loans to risky borrowers. Keep these loans on the company’s portfolio.

C. Make a mess of a company then leave it for your successor to clean up.

B. Sell $1 billion of home equity loans per month through 3rd party brokers.

Bundle and sell these loans to investors.


A sound business strategy for a financial institution is:


David DaberkoFormer NCC CEO

How is Your Company Reducing Its Risk?

The bank sold its First Franklin, a subprime mortgage unit. (Dec. ’06)

The bank closed the National Home Equity Division, which sold Home Equity lines and loans through 3rd party brokers (Aug. ’07).

The bank tightened credit policies and froze tens of thousands of home equity lines (Spring ’08)

The bank refocused its strategy on deposits, only borrowing to existing customers (Spring ’08)

The bank implements a customer pricing program for loans. (Summer ’08)

The bank – for the first time – markets to credit card customers in or near default (Summer ’08)

Brian

A. It considers and manages both value preservation and value creation.

C. It understands that risk doesn’texist in isolation. Risk managers cannot operate in secluded silos.

B. It understands that risk management is a team effort.

D. Senior leaders should have nothing to do with designing, implementing and maintaining an effective risk program.

All of the following are true about a risk intelligent company EXCEPT…

Dick FuldFormer CEO Lehman Bro’s

Brian

A. It considers and manages both value preservation and value creation.

C. It understands that risk doesn’texist in isolation. Risk managers cannot operate in secluded silos.

B. It understands that risk management is a team effort.


All of the following are true about a risk intelligent company EXCEPT…


Dick FuldFormer CEO Lehman Bro’s

Risk Intelligence Tips

There are two sides to risk: one side deals with threats to your business; the other deals with risk-taking that leads to rewards. The risk intelligent organization considers and manages both value preservation and value creation.

Define and delineate key roles, responsibilities and authority related to risk management. Risk management is a team effort. But some people in the organization are unaware that they even have a role to play.

Source: Risk Management Magazine article, Becoming Risk Intelligent

Risk Intelligence Tips

Support the risk responsibilities of the business units and functions by employing a common risk management infrastructure. Risk does not exist in isolation; therefore, risk managers cannot operate in secluded silos.

Charge executive management with the primary responsibility of designing, implementing and maintaining an effective risk program. The executive team is tasked with establishing the tone, direction, design and metrics for managing risk.

Source: Risk Management Magazine article, Becoming Risk Intelligent

CHERRY

A. Realize that not all customers are good customers.

C. Start immediately to lay of 10% of your workforce. Last in, first out!

B. Think strategy first, cost cutting second.

D. Cut unnecessary complexity in how your company does business.

When evaluating cost cutting strategies, which one should you avoid?

Rick WagonerFormer GM CEO

CHERRY

A. Realize that not all customers are good customers.


B. Think strategy first, cost cutting second.

D. Cut unnecessary complexity in how your company does business.

When evaluating cost cutting strategies, which one should you avoid?



How is Your Company Reducing Costs?

Aug.’07: Laid off 10% of non-customer facing workforce, totaling 3,200

Sept.’08 Hired McKinsey & Co. to evaluate business processes and recommend cost saves.

ED

A. Puts the company at a disadvantage when the economy comes back to life.

C. Drags down the morale of those who managed to survive the job cuts but fear they could be next.

B. Creates a challenge:How do you replace skilled craftspeople

and their decades of experience? D. All of the above.

Finish this sentence:Downsizing. . .

Peter RaskinFormer CEO NCC

ED

A. Puts the company at a disadvantage when the economy comes back to life.

C. Drags down the morale of those who managed to survive the job cuts but fear they could be next.

B. Creates a challenge:How do you replace skilled craftspeople

and their decades of experience? D. All of the above.

Finish this sentence:Downsizing. . .

D. All of the above.


TERRY

A. Check for pre-existing employment agreements that will allow workers to claim

they were "legally promised" certain pay.

C. Tell Kiernozek he must check his work Blackberry for emails

during his furlough.

B. Be sure that the furlough structure doesn’t convert exempt workers into non-exempt

workers who could try to claim overtime pay.

D. Know that if an exempt employee performs any work at all during a furlough

he is owed his entire week's salary.

You should do all of the following regarding furloughs EXCEPT

Alexander CutlerEaton CEO

TERRY

A. Check for pre-existing employment agreements that will allow workers to claim

they were "legally promised" certain pay.



B. Be sure that the furlough structure doesn’t convert exempt workers into non-exempt

workers who could try to claim overtime pay.

D. Know that if an exempt employee performs any work at all during a furlough

he is owed his entire week's salary.

You should do all of the following regarding furloughs EXCEPT



Alexander CutlerEaton CEO

Other Cost Cutting Alternatives

Reduce contributions to pensions or matches to retirement plans

Raise employees’ contributions to health plans

Turn attrition to your advantage

Cut Traveling expenses

GEORGE

A. Talent Management strategies are pointless in a downturn.

C. In a downturn you should reward talent with strategic

employee recognition.

B. A downturn is an excellent time to become a talent predator and steal

superstars from competitors.

D. Educating job seekers about the company during a downturn will help make it easier to attract high-quality talent when the economy picks up.

The following statements about Talent Management Strategies are true EXCEPT

Alfred PolicyCFNA CEO

GEORGE


C. In a downturn you should reward talent with strategic

employee recognition.

B. A downturn is an excellent time to become a talent predator and steal

superstars from competitors.

D. Educating job seekers about the company during a downturn will help make it easier to attract high-quality talent when the economy picks up.

The following statements about Talent Management Strategies are true EXCEPT



How Does Your Company Retain Talent During Crisis?

PNC to cut 5,800 jobs, most of them at newly acquired

National City Corp.

“Many of the jobs cuts will come from attrition.”Jim Rohr, CEO and Chairman of PNC

JILL

A. Endings, Ambiguity, Creativity & New Beginnings

C. Konnect4Ed, Mark, Allen and Christina

B. New Beginnings, Creativity, Ambiguity & Endings

D. Beginnings, Clarity, Boredom & Endings

The 4 phases of change are. . .

James RohrPNC CEO

JILL


C. Konnect4Ed, Mark, Allen and Christina

B. New Beginnings, Creativity, Ambiguity & Endings

D. Beginnings, Clarity, Boredom & Endings

The 4 phases of change are. . .


James RohrPNC CEO

4 Phases of ChangePhase 1- Endings

Common feelingsConfusionBargainingSadness/depressionSearch for closureDenialAnxietyBlame ShockAnger

Common behaviorsDownplaying realityShort tempersDisorganized, missing deadlinesDefensive posturesComplaining/blamingNegotiating/bargainingLacking enthusiasm/exhaustion

4 Phases of ChangePhase 2- Ambiguity

Common feelingsConfusionAnxietyDetachmentUncertaintyTension

Common behaviorsWithdrawal and indifferenceGiving up easily, avoiding riskParalysis and/or difficulty making decisionsIllness and absenteeismInability to focusRefusing to listenIdealizing the past

4 Phases of ChangePhase 3- Creativity

Common feelingsCuriousCreativeWorriedUnsureExcitedInterestedIntegration

Common behaviorsBurst of creativityMaking decisionsBeginning to take risksExperimenting; testing new methodsExploring possibilities and new ideasChallenging decisionsReinventing yourself

4 Phases of ChangePhase 4- New Beginnings

Common feelingsIncreased levels of acceptanceCautious optimismIdentification with newIncreasing familiarityIncreased comfortExcitementRedefined purpose

Common behaviorsOrienting toward the futureFocusing on prioritiesOffering constructive ideasRecognizing what has been learnedOffering support to othersImpatience with those not yet committedHumor without cynicism

4 Phases of Change

Endings3%

Ambiguity26%

Creativity52%

Beginning19%

Marketing Department as of April 17, 2009

How Do You Lead or Deal with Change?

The 8-Step Process of Successful Change

SET THE STAGE 1. Create a Sense of Urgency.Help others see the need for change and the importance of acting immediately.2. Pull Together the Guiding Team. Make sure there is a powerful group guiding the change—one with leadership skills, bias for action, credibility, communications ability, authority, analytical skills.

DECIDE WHAT TO DO3. Develop the Change Vision and Strategy.Clarify how the future will be different from the past, and how you can make that future a reality.

Source: Our Iceberg is Melting http://www.ouricebergismelting.com/html/8step.html

http://www.ouricebergismelting.com/html/8step.html

The 8-Step Process of Successful Change

MAKE IT HAPPEN4. Communicate for Understanding and Buy-in. Make sure as many others as possible understand and accept the vision and the strategy.

5. Empower Others to Act. Remove as many barriers as possible so that those who want to make the vision a reality can do so.

6. Produce Short-Term Wins.Create some visible, unambiguous successes as soon as possible.

7. Don’t Let Up. Press harder and faster after the first successes. Be relentless with instituting change after change until the vision becomes a reality.

MAKE IT STICK8. Create a New Culture. Hold on to the new ways of behaving, and make sure they succeed, until they become a part of the very culture of the group.

Source: Our Iceberg is Melting http://www.ouricebergismelting.com/html/8step.html

http://www.ouricebergismelting.com/html/8step.html

ROSE

A. Firms with strong, positive reputations are perceived as providing more value

and can charge a premium.

C. Media coverage has no effect in determining a company’s reputation.

B. Firms with strong, positive reputations attract better employees.

D. It takes many good deeds to build a good reputation, and only one bad

one to lose it.

Which statement is NOT

true regarding

Company reputations?


ROSE

A. Firms with strong, positive reputations are perceived as providing more value

and can charge a premium.


B. Firms with strong, positive reputations attract better employees.

D. It takes many good deeds to build a good reputation, and only one bad

one to lose it.

Which statement is NOT

true regarding

Company reputations?



How Does Your Company Deal with Rumors and

Negative Media?

Manager

Specialist Specialist Specialist Specialist Specialist

Media Relations Team

Media Relations Policy

It is critical that National City’s interactions with the news media—both reactive and proactive—are consistent.

As such, Corporate Communications coordinates all media relations activities on behalf of the company and also provides guidance and counsel on managing issues that could result in media coverage that may impact the reputation of National City.

Ways to help control the media message. . .

“As you may know, news media reports today speculated that National City is seeking a buyer. These are difficult times in the financial services industry, and rumors and speculation occur almost daily. Consistent with our longstanding policy, like most public companies, we do not comment on such rumors.”

Peter Raskin, CEO National City

Companies typically hold their cards close to the vest because they are bound by laws and rules aimed at giving everyone from day traders to major money managers the same shot at information that could prompt them to buy or sell.

Congress first tried to level the playing field as far back as the Securities Act of 1933, which required companies to give investors financial information.

Under Securities and Exchange Commission rules, companies have four days to announce significant events that shareholders should know about, such as bankruptcy or a definitive agreement on a merger or partnership.

Source: The Baltimore Sun article, Legg, Citi wrestle with the rumors http://www.baltimoresun.com/business/bal-bz.rumor12jun12,0,5508454.story

http://www.baltimoresun.com/business/bal-bz.rumor12jun12,0,5508454.story

Handling Rumors?

Tips to Deal with Media in Crisis

1. Stay ahead of the game. Be aware of any problems that could turn into bad publicity.

2. Stay aware of what is happening in the media. Skim media outlets everyday, and keep on the lookout for any potential topics that could relate to your business.

3. If you know a bad story is about to break, bring it to the media first. When you break the story, you control the message.

4. Write a compelling but simple stand-by statement to bring to the media. Demonstrate clearly that your company is free of any wrong-doing, or, if it is apparent that they are implicated, detail your cooperation with the proper authorities.

Source: How to handle a media crisis, Ehow.com

Tips to Deal with Media in Crisis

5. Do not give away too much information. A good statement will be no longer than two short paragraphs. Do not volunteer any information that is not already public knowledge.

6. Do not say anything you may have to take back later.

7. After sharing your statement and a few days of vigilance and handling questions, stop talking about it. Move on. Do not immediately bring new stories to the media--even positive topics will be associated with your former crisis. Instead, lay low and allow the public time to forget.

8. After a suitable amount of time, go back to the press with a positive, proactive story that casts your company in a whole new light.

Source: How to handle a media crisis, Ehow.com

KEITH

A. Beg, Borrow or Steal C. Ponzi… Let’s Rob Peter to Pay Paul!

B. Prayer, Meditation or Séance D. Issuing Bonds,

Issuing Preferred Stock,Selling Common Stock

Name three common and legal ways to raise capital.

Jim Owens Caterpillar CEO

KEITH

A. Beg, Borrow or Steal C. Ponzi… Let’s Rob Peter to Pay Paul!

B. Prayer, Meditation or Séance D. Issuing Bonds,

Issuing Preferred Stock,Selling Common Stock

Name three common and legal ways to raise capital.

D. Issuing Bonds, Issuing Preferred Stock,Selling Common Stock

Jim Owens Caterpillar CEO

How Is Your Company Raising Capital?

In early 2008, corporate lending was heading for a record year, toward US $700 billion in high grade loans.

But then the market came to a grinding halt. . .

Cut dividend 49% in Jan. ’08

Sold a 70% stake to private investors for $7B.

Tried for TARP but. . .

National City was the only U.S. bank among the 25 largest that has been denied bailout money by the U.S. Treasury.

Hal

A. Ousting Rick Wagoner, GM CEO.C. Pressuring banks to lend and

Chrysler to work out its merger with Fiat.

B. Facilitating the PNC/National City acquisition by denying

NCC TARP funds.

D. Obama works out every day and has lean muscle mass.

Signs that the govt. is flexing its muscles

toward business include all the following EXCEPT:


Hal

A. Ousting Rick Wagoner, GM CEO.C. Pressuring banks to lend and

Chrysler to work out its merger with Fiat.

B. Facilitating the PNC/National City acquisition by denying

NCC TARP funds.

D. Obama works out every day and has lean muscle mass.

Signs that the govt. is flexing its muscles

toward business include all the following EXCEPT:

D. Obama works out every day and has built lean muscle mass.


How Do You Feel About the Government Flexing Its

Muscles On Your Business?

MARK

A. Mergers mean the purchased company ceases to exist or becomes

part of the buying company.

C. In a strategic acquisition, buyers purchase a target for access to its

distribution, customers and brand name.

B. Acquisitions mean the original companies cease to exist, and a new

company forms.

D. Acquisitions (and Integrations)

SUCK!

What statement is true about

M&A?

James RohrPNC CEO

MARK

A. Mergers mean the purchased company ceases to exist or becomes

part of the buying company.

C. In a strategic acquisition, buyers purchase a target for access to its


B. Acquisitions mean the original companies cease to exist, and a new

company forms.

D. Acquisitions (and Integrations)

SUCK!

What statement is true about

M&A?C. In a strategic acquisition, buyers purchase a target for access to its


James RohrPNC CEO

Mergers, Acquisition & Hostile Takeovers

When two companies merge, the boards of directors (or the owners, if it is a privately held company) come to an agreement. The original companies cease to exist, and a new company forms, combining the personnel and assets of the merging companies. Like any business deal, this can be straightforward, or incredibly complex. The key is that both companies have agreed to the merge.

In an acquisition, one company purchases another. The purchased company ceases to exist, or it becomes a part of the buying company. The buying company owns all assets, including the name of the company, their equipment, their personnel and even their patents and other intellectual property. However, just like a merger, the boards or owners of both companies have agreed to the transaction.

A hostile takeover is an acquisition in which the company being purchased doesn't want to be purchased, or doesn't want to be purchased by the particular buyer that is making a bid. How can someone buy something that's not for sale? Hostile takeovers only work with publicly traded companies. That is, they have issued stock that can be bought and sold on public stock markets.

Source: How Hostile Takeovers Work http://money.howstuffworks.com/hostile-takeover.htm/printable

http://money.howstuffworks.com/hostile-takeover.htm/printable

How Vulnerable is Your Company?

Mergers * Acquisitions * Hostile Takeover

Last Price: $1.8152 Week High

$18.1452 Week Low

$1.25

Price offer of $2.23 for each share, or a total of about 5.2 billion on PNC stock and another $384 million in cash

JON

A. Tender Offer and Proxy FightC. The Supermajority and

Golden Parachute

B. Tender Proxy and Offer Fight D. Flip-in and Crown Jewels Defense

What are the two primary methods of conducting a hostile takeover?

Carly FiorinaFormer CEO HP

JON

A. Tender Offer and Proxy FightC. The Supermajority and

Golden Parachute

B. Tender Proxy and Offer Fight D. Flip-in and Crown Jewels Defense

What are the two primary methods of conducting a hostile takeover?

A. Tender Offer and Proxy Fight

Carly FiorinaFormer CEO HP

Primary Methods of Conducting a Hostile TakeoverTender Offer

A public bid for a large chunk of the target's stock at a fixed price, usually higher than the current market value of the stock. The purchaser uses a premium price to encourage the shareholders to sell their shares. The offer has a time limit, and it may have other provisions that the target company must abide by if shareholders accept the offer. The bidding company must disclose their plans for the target company and file the proper documents with the Securities and Exchange Commission (SEC). The 1966 Williams Act put restrictions and provisions on tender offers.

Sometimes, a purchaser or group of purchasers will gradually buy up enough stock to gain a controlling interest (known as a creeping tender offer), without making a public tender offer. This bypasses the Williams Act, but is risky because the target company could discover the takeover and take steps to prevent it.



Primary Methods of Conducting a Hostile TakeoverProxy fight

The buyer doesn't attempt to buy stock. Instead, they try to convince the shareholders to vote out current management or the current board of directors in favor of a team that will approve the takeover. The term "proxy" refers to the shareholders' ability to let someone else make their vote for them -- the buyer votes for the new board by proxy.

Often, a proxy fight originates within the company itself. A group of disgruntled shareholders or even managers might seek a change inownership, so they try to convince other shareholders to band together. The proxy fight is popular because it bypasses many of the defenses that companies put into place to prevent takeovers. Most of those defenses are designed to prevent takeover by purchase of a controlling interest of stock, which the proxy fight sidesteps by changing the opinions of the people who already own it.



Defenses to Hostile Takeover

The Golden Parachute is a provision in a CEO's contract. It states that he will get a large bonus in cash or stock if the company is acquired. This makes the acquisition more expensive, and less attractive. Unfortunately, it also means that a CEO can do a terrible job of running a company, make it very attractive for someone who wants to acquire it, and receive a huge financial reward.

The supermajority is a defense that requires 70 or 80 percent of shareholders to approve of any acquisition. This makes it much more difficult for someone to conduct a takeover by buying enough stock for a controlling interest.

The crown jewels defense - Sometimes a specific aspect of a company is particularly valuable. For example, a telecommunications company might have a highly-regarded research and development (R&D) division. This division is the company's "crown jewels." It might respond to a hostile bid by selling off the R&D division to another company, or spinning it off into a separate corporation.

Flip-in - This common poison pill is a provision that allows current shareholders to buy more stocks at a steep discount in the event of a takeover attempt. The provision is often triggered whenever any one shareholder reaches a certain percentage of total shares (usually 20 to 40 percent). The flow of additional cheap shares into the total pool of shares for the company makes all previously existing shares worth less. The shareholders are also less powerful in terms of voting, because now each share is a smaller percentage of the total.



Kathryn

A. A downturn is an excellent time to shop for talent.

C. For stronger companies, now is thetime to sharpen marketing messages.

B. The reset in valuations of public and private companies creates a

buyers market.

D. There is absolutely no opportunity in a downturn.

What statement is NOT true regarding opportunity in a downturn


Kathryn

A. A downturn is an excellent time to shop for talent.

C. For stronger companies, now is thetime to sharpen marketing messages.

B. The reset in valuations of public and private companies creates a

buyers market.


What statement is NOT true regarding opportunity in a downturn



Opportunity during a Economic Downturn?

Dente

A. The Assembly Line: 1910C. The Internet: 1990s

(invented, of course, by Al Gore!)

B. Brand Management: 1931 D. Lean Manufacturing: 1950s

All of the following were powerful ideas launched during tough times EXCEPT. . .

Henry FordFounder Ford

Dente

A. The Assembly Line: 1910C. The Internet: 1990s

(invented, of course, by Al Gore!)

B. Brand Management: 1931 D. Lean Manufacturing: 1950s

All of the following were powerful ideas launched during tough times EXCEPT. . .

The Internet: 1990s(invented, of course, by Al Gore!)

Henry FordFounder Ford

History of Big Ideas in Tough TimesSource: BusinessWeek article, History of Big Ideas in Tough Times http://images.businessweek.com/ss/09/03/0312_game_changing_timeline/index.htm

http://images.businessweek.com/ss/09/03/0312_game_changing_timeline/index.htm

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