VideoWhat's the value of amenities? The first-year cost of a coffee bar is $50,000. It costs about $150,000 to replace one employee whose total compensation package is $100,000 annually, asserts Jac Fitz-enz, founder of the Santa Clara, Calif.-based Saratoga Institute. -- Joan Urdang
LATE SHIFT
So far this year, 30% of retooled Web companies changed revenue models; 47% shifted from B2C to B2B, according to Webmergers.com.
SEXUAL HARASSMENT
The Love Bug Bites
Legal departments would have a much easier time if the Love Bug virus were confined to computers. But with longer hours and fewer formalities at the office, love has been blooming among employees. According to a survey by Vault.com, a career Web site, nearly 50 percent of respondents have been romantically involved with a co-worker at some point during their career. More worrisome from a legal perspective, 27.6 percent of managers said they had dated at least one subordinate, and another 23 percent said they would be willing to.
"Workplace romances are dangerous for all involved--including the employer," says Ronald E. Richman, a partner at New Yorkbased Schulte Roth & Zabel LLP. Relationships that last can disrupt productivity and morale, he says, while those that go sour leave a company vulnerable to sexual harassment charges.
Legal experts point out that sexual harassment settlement payments are not uncommon. In fact, recent Supreme Court decisions that favor plaintiffs have caused many lower courts to scrutinize employers' demonstrated commitment to sexual harassment policies. One result of the legal crackdown: In tandem with well-defined policies, training programs, and complaint mechanisms, some companies are actually defining policies on office romances. Vault reports that 17.6 percent of employers claim to have such policies in place. While very few companies ban it altogether, some, like Wal-Mart Stores Inc., may prohibit dating between a manager and a subordinate. And well over 100 companies are using so-called love contracts, claims Jeff Tanenbaum, an attorney at Littler Mendelson, in San Francisco.
A contract sets ground rules about work behavior in light of an intraoffice relationship in order to help companies avoid suits. "It's generally used when a relationship is already in trouble and the fighting disrupts the office," says Tanenbaum. Alternatively, it might be used from the outset of a manager-subordinate relationship to prevent either party from feeling pressured to stay in the relationship.
So far, other attorneys say such contracts have not proven their worth in court, and may present thornier legal problems. "The more you try to control risk," says Richman, "the more you intrude on peoples' lives, which makes the workplace unappealing, and, in some cases, can be illegal." -- Alix Nyberg
BAD TIDINGS: 45% of U.S. firms will miss year-end revenue targets set during Q1, says the American Management Association.
SEC SCRUTINY
They'll Be Watching
You may be hearing from us," warns chief accountant Robert A. Bayless, of the Securities and Exchange Commission's division of corporation finance. Apparently, before the slowdown in initial public offerings this year, companies had a 1 in 15 chance of being reviewed. But with extra time on its hands, the SEC hopes to boost the ratio to 1 in 4. "The threat of facing an SEC investigation is real," explains Larry Rieger, worldwide managing partner of assurance services at Chicago-based Andersen. "The immediate impact is that all companies are being more careful and conservative."
Executives can expect the SEC to pay special attention to several key areas, including segment disclosure, market and credit risk, impairment losses, nonrefundable payments, derivatives and hedging activities, and intangible assets. Perhaps the biggest area under investigation is revenue recognition, specifically payment for delivery of products and services.
It's been more than 10 years since the SEC identified issuer financial statement and reporting abuses--including revenue recognition scams--as a core area of enforcement, says Paul Gerlach, a partner at Washington, D.C.-based law firm Sidley Austin Brown & Wood and former associate director of the SEC's division of enforcement. He estimates that 20 percent of the SEC's current enforcement cases are in this area. "And I don't think enforcement priorities will change because a new chairman is confirmed," he adds, referring to President Bush's appointment of Washington, D.C.- based attorney Harvey Pitt to head the SEC.
Pitt, who still needs Senate approval before taking the reins, is a partner at Fried Frank Harris Shriver & Jacobson. If confirmed, Pitt will be faced with managing an SEC investigation of Wall Street investment banks suspected of manipulating the distribution of hot dot- com IPOs in exchange for aftermarket consideration. Opponents say individual investors will lose with Pitt as the top watchdog, because he will be overseeing the industries he used to defend as a securities attorney. But associates disagree.
"Harvey is an independent thinker, and his strength is that he will use his leverage with the private sector to work out problems that cannot be solved through regulation alone," stresses Louis Thompson, president and CEO of the National Investor Relations Institute, in Washington, D.C. To further his point that Pitt is his "own man," Thompson notes that the Republican Administration's nominee was the SEC's general counsel under Democrat Jimmy Carter. --Jake Wengroff
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