business news in context, analysis with attitude

A number of MNB users reacted to Friday’s story about outgoing Kmart CEO Julian Day getting $94 million in stock options as a parting gift after just 10 months on the job.

One member of the MNB community wrote:

Pure old-fashioned greed and the stupidity of corporate America! How can someone in good conscience take the money where they already have abundance and leave other families devastated. This must be one miserable human being who puts personal gain ahead of others in need.; giving to others in need provides a much greater feeling than having more “material” things.

Contract or not, this is about right and wrong. Give the money to those who have been “outplaced”!

MNB user James F. Curley wrote:

I know, I know. This is America. Capitalism. The Free Market. I own my own business. I’m generally conservative about ‘regulating’ capital, or interfering in the processes of free markets. Still, I find $94 Million as a bonus for 300 days of work, high level though the work is, to be unconscionable.

What does this say to the store-level employees of Kmart Stores that sorely need to be remodeled so they can compete better and retain their jobs? What does this say to the truck drivers and warehouse workers who work with mediocre, outdated equipment? Why shouldn’t most of the $94 million be used to improve K-Mart’s infrastructure? Mr. Day’s bonus is an egregious example of ‘grave dancing’. Even if his services were worth $20 million dollars for 300 days (sounds fair), $74 million would go a long way to improving K-Mart’s unrealized potential, not to mention improving employee morale. Where are these people’s sense of perspective?

…This is true obscenity.

Another MNB user wrote:

Let's see.... Kmart CEO Julian Day gets a $94 million bonus= plus $3 million regular salary and bonus for a total of 10 months. Let's say the average Kmart management person makes $80k/year and works for 20 years (both are a stretch).. that would equal the salaries of 188 people who put in 20 years.
Who comes up with these decisions?? NOBODY, in 10 months, is worth the same value as 188 people who worked loyally for 20 years.

And Kmart is far from being alone in thinking they need to reward a top executive with a disgusting amount of money. How about those who worked for companies that a high paid executive took down the tubes, while the leader walked out with millions.... sort of like Kmart’s former supplier, who went chapter 11, and since they had grossly underfunded the pension fund, they defaulted on the plan which had to be taken over by the Pension Guaranty Fund, and the tax payer will probably get to pony up for the difference.

Yet another member of the MNB community wrote:

Unconscionable and it should be criminal. Elliott Spitzer where are you?

MNB user Chris Kuplack wrote:

That's insane! This will hit the major press with a terrible thud, and every working person ever associated with that company will shake their heads. When you set out to change a company as much as that one needs to change in order to survive, you cannot maintain all of the costly traditions you once enjoyed, unless they relate directly to customer service or quality assurance. These guys just destroyed any credibility they may have garnered in the last year with their employees, shoppers or Wall Street. The man may deserve some kind of parting gift, but not one that could instead be used to remodel dozens of stores and retrain thousands of associates into serving up some real professionalism and customer service.

I can already hear Michael Moore and John Kerry discussing the plight of the proletariat that carried that company on it's back so many years while the bourgeois executives gave one another huge bonuses for successful exploitation of the downtrodden workers! After all, Michigan is a swing state.

Maybe they could top it off by sending Martha a bonus for hazard pay, earned while sitting in the can.

MNB user Denise Remark-Lundell wrote:

This $94 M bonus for 10 month's work is patently shameful. I am not a proponent of litigation just because someone is unhappy with something. However, the stockholders should be repaid what they lost--& if they are not they should sue Kmart for restitution. If Kmart can pay out this kind of money to anyone at this point, it should be the folks who got screwed. There is nobody anywhere who's brainpower is worth this much cash--except perhaps Stephen Hawking & I dare say he would turn it down.

There will be those, by the way, who will suggest that this isn’t as big deal because it isn’t a cash award, but rather just vested stock options…but we would argue that those options would have been better awarded to people who have spent their lives at the company, as opposed to some dilettante who has been there less than a year.

And we’ll give the final word on the subject (today) to another MNB user:

This Board of Directors must be the former board for Enron.

On the subject of whether Coke’s C2 and PepsiEdge will be able to survive long-term, MNB user Teri Richman (who also happens to be Sr. VP, Research and Public Affairs, for the
National Association of Convenience Stores) wrote:

I’m betting (not my last dollar or the “farm” as they say), that these products appeal to a niche that is growing and that already love the product. My personal experience is with a bunch of college kids – my twins are 20 and in college in Boston. This summer, my son and a group of students had a marketing research project to do for a big part of their final grade. They did the usual stuff, taste tests, nutrition and diet analyses, and even discussed the peer pressure factor…i.e. why do I need to watch my calories or carbs? And, is it cool to be seen in public with this product?

Truth is this project team of a dozen or so bright kids (mostly guys) studied a variety of so-called low carb products. First, they dialed in on Bacardi’s silver line low carb drink called Black Cherry. They also looked and tasted two new wines: the One.9 Merlot, and the One.6 Chardonnay, both products from the marketing teams that work on the brand positioning of that wonderful elixir called Jack Daniels. So, they were essentially Monday morning quarterbacking the marketing experts of Bacardi/Anheuser Busch on Black Cherry and Jack Daniels on the wines. Notably this was the largest part of their original research design (hey what can I say, they are 20 and interested in adult beverages!)

In the six week project, however, they spent time and concluded with “props” for C2 because of its name, taste and perfect “their words” positioning in the Coke line up. The packaging looks like Coke, a big plus given the well documented strength of that brand, but the product differentiation of taking C and adding the 2 spoke to them quite directly. Approaching 50 myself, I had to think about the name for a minute or several, but they got it right away…it is a fraction to them. Coke simply divided by two… fewer calories, less sugar and of course, lower carbs…and it tastes great for kids who grew up on Coke Classic.

When I asked the why they even bought it the first time, guys, the answer was vanity. Most of this project team had all gained the freshman 15 pounds or so and are in a place in their lives where appearance matters and is more competitive than ever. So, they concluded in their paper that the product name was a winner…It was direct, simple and made the point… like the new One.6 Chardonnay and One.9 Merlot wines coming from the folks that market Jack Daniels. Those two names…tell it like it is, the carb count is the name…you don’t have to do any math or read the labels or fine print. So straight talk in product name seems, at least in this “be healthier” era we’re in, to matter to this generation.

In fact, when they initially talked about C2…I can still hear them saying “just tell me what’s special about this”. Almost immediately they knew, the name C2 implies it’s halfway between Coke and Diet Coke and the capper for them was it tastes good. They are drinking it regularly…and there’s a bunch more than just my own little focus group out there.

Demographers say that there are 70 million Gen Y members all with purchase power (they are defined loosely as 18-25) who care about their bodies and straight talk. That sales fell after the initial launch by 60 percent in supermarkets is not too surprising to me. I believe it’s faring better in the convenience format and frankly, college students don’t shop supermarkets that much, at least not yet… but we know they will and they’ll continue to buy what they like.

Mr. Isdell’s and the company’s support for C2, evidenced by his plan for it to find its niche like Cherry Coke is a smart way to go. In fact, I think it may be too conservative a goal for C2.

Now, I am no marketing expert, but in my humble but real life experience working with these students on their summer marketing class project and watching what they were talking and drinking during the short summer break we had this year, C2 could be another real thing. The company’s decision to drop the price is music to any student’s (and parent’s ears) and may well cement these thirsty 19 and 20 year old college juniors on C2 for the I’m thirsty occasion when what they want is a CSD cola or a mixer for their birthday drink when they all (millions of them) turn 21 by this time next year.

…I find that I’m still learning from my kids and on this one, I think the conclusions they reached are a blueprint on how to market to this transitioning generation…straight up…just tell them what it is and why it’s solves a problem they have.

However, not everyone shares Teri’s optimism, as one MNB user wrote:

I don't know how available these products are in your area, but here in Michigan it's a challenge to find Pepsi Edge anywhere. I can rarely find it at Meijer, Felpausch or Kroger; and when I do, it's only in cans--which I prefer not to buy. At a picnic this summer, we had an informal taste test and about 20 people said they'd drink the Pepsi Edge--they saw the benefits of cutting down on sugar and they thought the taste was fine.

However, only two of these people actually purchase the product on a regular basis now. The others say it's too hard to find.

On the issue of wines with screwcaps, one MNB user wrote:

I've tried a few screwcap wines and even though I can't discern any reduction in quality or flavor, I definitely find a lack of ambiance when it comes time to uncork the wine. I'd feel stupid smelling a screwcap if a waiter handed it to me. It's always been the immediate defining difference between a quality wine and a fortified fruit wine in past. I'll struggle to get past that, just as I've yet to consume my cans of Coppola…

And MNB user Frank S. Klisanich added:

Regarding the cork versus screw caps, this enables the brand to differentiate via this ‘packaging’ component (that’s what it is).The value priced offerings are and will continue to move to screw caps for margin enhancement (read survival). The premiums will stay with cork and I suspect move to composite corks (again for cost reduction, and reduce the potential for bad wine from bad cork) …. the removal of the cork, the use of a cork screw, the sound of the cork releasing that then allows the wine to breath …… it’s all part of the emotional relationship the consumer enjoys, which of course leads to sharing a great glass of wine with friends.

This is all part of the marketing mix. The challenge will be what the mid priced wines want to communicate … better wine at good price? They need to determine their brand positioning … and carefully review price, package costs, margins and what is gained or lost by making a packaging decision based solely on cost issues. There is a lot of supply and margins have tightened. Wineries need to dig deeper into consumer attitudes … back to basics.

Regarding the subject of the Curse of the Bambino, one MNB user observed:

After reading your comments about the supposed curse of the Bambino, I was glad many readers correctly noted that New York Times' George Vecsey created the curse of the Bambino to cover the Red Sox failure to capture the 1986 World Series. What? A NEW YAWKER created the curse?

Yes, Vecsey made up the curse. Before his column, no one had discussed, talked about, or ruminated about a curse made by a player.

There are two pieces of facts at work in the Curse of the Bambino. There was a player named Babe Ruth. Harry Fraaze, who owned the Red Sox, sold Ruth to the New York Yankees. Those are the only facts in the curse. The rest is myth.

You remind us of a wonderful line from John Ford's "The Man Who Shot Liberty Valance" (one of the best westerns...and maybe one of the best movies...ever made):

"When you have a choice between fact and legend, print the legend."

We also got a terrific email from MNB user and devout St. Louis fan (not to mention one of our favorite people) Jim Duban:

Greetings from the "Land of the Red October".

Last evening as I sat in Busch Stadium dressed in my basic outfit of red....singing "God Bless America and Take Me Out...etc." with over 50,000 unabashedly loyal fans....then clapping and stomping to the famous Budweiser cheer, "When you say Budweiser...You've Said it All".....I was lost in the battle between 2 great teams that included a future Hall of Fame pitcher against a young 24 year old hopeful Hall of Famer.....a pitcher who broke his left hand in an emotional outburst earlier in the week competing against an outstanding group of Killer B's.

With a victory celebrated in-part by Red Schoendienst, Lou Brock, and Stan Musial...with Jack Buck looking down from above....our beloved Cards are off to BeanTown to take on another great team anchored by a veteran pitcher who showed tremendous courage while pitching with a bleeding ankle and supported by a cast of young players who included a young man who you would question about his long-haired image if he dated your daughter.

I must admit that for the entire evening my thoughts did not once include Wal-Mart, Jon Stewart, Supreme Court Justices, slotting allowances, late deliveries, street monies, or green bananas.

I was lost in a world of heroes....emotional adults playing a kids game....biting my nails with every swing of the bat....and cheering wildly when the game went our way....and booing loudly when "The Rocket" kept throwing to first base to hold a runner on.

What a country.

You can’t get this kind of poetry everywhere, folks…

And we continue to get emails about the Wal-Mart vs. Jon Stewart issue.

MNB user Elizabeth Schreiter wrote:

All I can say in response to some of the views of the other readers is whoa…lighten up already. It’s 8 in the morning!

Though I don’t always agree with what Jon Stewart says regarding political matters, I still find him extremely entertaining, incisive, and witty. His public admonishing of unmitigated news channels that do present their biases (both liberal and conservative) was a very gutsy and admirable move, and it has increased my respect for him. To hear other 24-hour news channels say that Stewart “lost his cool” should be of no surprise—though he was on only one channel, he essentially attacked them all, so naturally defensive remarks will be made.

Do a search online for recent articles pertaining to the growing success of The Daily Show and more viewers’ reliance on it as a legitimate source of news, and perhaps there is a reason why the traditional media is on the defense.

As for Wal-Mart banning his book, it’s hardly shocking, considering its tendency to do such things (one in particular is the Sheryl Crow album from a few years ago with the lyric about kids buying guns at Wal-Mart stores). And that’s fine by me—they do have the choice to sell what they want to, and I have the choice as a consumer not to shop there (and I don’t).

However, I am at issue with those protesting the “salacious content” of the book and praising Wal-Mart for supposedly not peddling smut in an effort to shelter children from harsh reality (and satire!), yet it seems these are the same who complained about the so-called Gen-Yers being coddled and spoiled and sheltered as well. But perhaps I am jaded because I am on the= older cusp of that age demographic and, incidentally, a great fan of satire and folly.

You are right on with your last point made—it is rather hypocritical for a retailer to try and take the moral high road when they sell ammunition that could do much more harm than seeing a silly photograph of a Supreme Court justice.

On the matter of whether or not Jon Stewart lost his cool…we thin k there is a difference between losing your cool and demonstrating legitimate outrage.

Another MNB user wrote:

I believe that the issue of Wal-Mart's ban on Jon Stewart's book and your readers supportive response has nothing to do with retailing's responsibilities but with parenting responsibilities.

Parents have decided to completely ignore their own responsibility of raising and educating their children and "outsourced" it to schools, retailers and the media. The source of most issues in America regarding lack of values, respect, civility as well as teenagers' violence and crime, starts at home. It scares the hell out of me to think what would be of this country 2 or 3 generations down the road. Can you imagine the kind of values (or total lack thereof) that the grandchildren of these parents would have? There are clearly too many people that would not pass a basic responsibility and parenting test and should not have the right to have kids.

And there’s a still a bit of as discussion going on as to whether we should even be debating this issue.

MNB user Mark Boyer wrote:

We have 150,000 troops overseas defending our right to freedom. And countless other individuals here on our shores keeping us safe. All of this so we have, among other things, the right to choose how we live our lives, how we raise our families, how we choose to worship, a democratic society and an opportunity for prosperity.

All this bitching about whether a retailer chooses to sell a book or CD that they find offensive is maddening. If you don’t like the way someone runs their business, don‚t shop with them. We are a supply and demand economy. There will always be someone willing to meet your demand for goods. Give your business to the merchant that reflects the values most important to you. And respect the rights of a merchant to choose what they believe is best for their business.

With all respect, nobody that I can recall has suggested that Wal-Mart isn’t within its rights.

MNB user Phyllis Palmer, summed up our feelings about it:

It’s…very interesting to read what the MNB community has to say... it reminds me that all who read MNB are part of this diverse group that would be exciting to have at a party. What GRAND conversation! Thanks for being the conduit.

Our pleasure.

It would be a helluva party, wouldn’t it?
KC's View: