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I enjoyed your piece on the National Hockey League labor dispute ("Hockey Fight," September). I am a former financial executive with the Anaheim Angels and the Mighty Ducks. I continually find it amusing that the players unions in each of the respective major sports are so blind to the financial realities happening in their sports. Hockey is the worst, followed by baseball. The problems in basketball and football are not as severe, for different reasons. Basketball has smaller rosters and therefore lower absolute payroll dollars, and football has managed to keep its union under control.
I hope the owners stand firm in this NHL dispute.
Jonathan M. Sullivan
Senior Vice President and Chief Financial Officer
The Behr Paint Co.
Via E-mail
Trust an investment banker to suggest this one, but clearly what's needed here is a public flotation of the NHL.
Transparent reporting, independent outside governance, broad-based usage of equity and equity-linked compensation, market discipline, and ready access to capital will bring both sides of this brawl out of the penalty box.
The tremendous talent on both sides must conspire to create a much larger pie, rather than bicker over shares in a shrinking one. A structure and incentives can be put in place to encourage this direction, versus the existing structure that promotes a recurring "win-lose" approach. Hockey is a great sport that deserves a better vision.
Justin Pettit
Head of Strategic Advisory
UBS Investment Bank
New York
Sad but True
The annual CFO magazine working capital survey (September) again proved to be interesting yet sad reading. Companies continue to have significant amounts of working capital. Add to the average level of 14.2 percent (5.7/365 x 100 percent) of sales the 5.7 percent of cash, and you have an amazing average level of working capital of 21.9 percent of sales. Only Dell and Apple appear to have working capital under strong control and have driven it below zero. Based on my years of experience in consulting with divisions of U.S. multinational manufacturers, I can only conclude that most manufacturers are just not interested in trying to improve customer service and increase shareholder value through strong working capital management. You can reduce working capital to zero, but it takes a significant effort, which most companies are unwilling to even attempt. What a great opportunity for those companies that make the effort to reduce working capital below 10 days to increase their competitive advantage.
Wayne H. Smith
President
Wayne H. Smith Consulting Inc.
Via E-mail
Ruling on the Rule
Your article entitled "Who's the Boss?" (September) is interesting, but misses several material issues. The Securities and Exchange Commission's proposed rule (14a-11) would result in a sham upon the investing public. There is no factual basis to the commission's assumption that institutional shareholders would have the intestinal fortitude to engage in proxy contests. The SEC also incorrectly assumes that institutional shareholders could unite to reach a 5 percent ownership level (the threshold that would trigger access to the director-nomination process). Just agreeing on director candidates and entering into indemnity agreements would be a nearly impossible task. Further, corporate targets can easily disunite such groups by catering to the desires of a few members.
The proposal also ignores the financial interests of individual investors. Even if some activist institutional shareholders utilized the proposed rule, individual investors would not benefit. Institutional shareholders do not have the interest or resources to seek accountability at any but a few high-profile companies.
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