Friday, February 27, 2009


So, how does the world get out of the situation it is in? Leaders at all levels need to stand up and lead!! The world is suffering from a Crisis of Confidence. Everyone is worried and concerned about the uncertainty. And it doesn't help that we are bombarded with negative news from every communication advice we own.

It is time for leaders to LEAD! Leaders at all levels and all institutions, countries, companies, educational entities, divisions, units, families, etc. must step up, show confidence and lead.

Get all your people focused on a goal. Get them all working on a plan. Report the progress on the plan frequently. Celebrate small successes. Work the Process! Focusing on a plan is like a slap in the face. It wakes people up to getting things done. People will focus and start to feel better.

Call a moratorium on discussing how bad everything is all the time. Start at home. Refuse to allow any mention or discussion of how bad thing are at the dinner table and focus the discussion on what everyone accomplished today, what they will accomplish tomorrow and what fun they had today. And above all, stop mentioning what the Dow did today, up or down. I don't remember ever discussing what the Dow when I grew up. Do you think your 8 year old wants to hear about it every night? And see your long face?

Then bring it to work. No more depressing talk. Speak about overcoming the challenges. Get everyone into the same boat. Allow leaders at all levels to rise and lead. Stare the uncertainty in the face and admit, the future has always been uncertain, we just didn't think it was!

It is about rising above the problems of the day. Not wallowing in self-incrimination and fear. We need our leaders to be like Churchill. Exhibit confidence in the face of extraordinary adversity without any data to support such confidence.

People are looking to follow, so get out there and Lead!



I just read in the NY Times that the Treasury Department is going to give Citigroup more money and take a significant minority interest. Apparently the current CEO, Victor Pandit is staying in charge.

It is really Workout 101 to change the CEO when the lenders have to put more money into a troubled situation that has no collateral of value to give to the lenders. Clearly Citigroup has no current value to give in exchange for the serial capital injections it is receiving.

And while Pandit is relatively new to the CEO position, just over a year, he didn't follow Workout 101 either. How so? Here is how. It is also Workout 101 that a large troubled company like Citi must be pared down to its profitable core, down to its profitable products and services and down to its profitable customers.

An experienced workout person would have arrived at Citi over a year ago and said, "this will be a much smaller company in a year" and would have started selling pieces to shore up the remaining company. Instead Pandit studied the situation and decided to keep virtually everything. What a missed opportunity.

So with this as a background, how does the Treasury Department not follow Workout 101 and bring in a new CEO?

Cheers, Mike

Thursday, February 26, 2009


How crazy is this article from the NY Times. A group of wealthy Americans, who have allegedly been evading Federal income taxes with bank accounts at UBS in Switzerland, have sued UBS to prevent the bank to disclosing their names to the IRS. This is unbelievable!

Apparently the Swiss banking secrecy laws are pretty serious. UBS did disclose the names of a few hundred individuals pursuant to illegal tax shelters that UBS set up. But now the government wants the names of all US citizens with accounts at UBS. There may be as many as 50,000 people who have such accounts.

I don't know about you, but I don't know anyone who has admitted having a Swiss bank account. Are there really 50,000 Americans with such accounts? If so, these are presumably very wealthy people. And therefore, presumably in senior positions at various firms and institutions.

Oy, another massive fraud sitting out there??

Cheers, Mike

Wednesday, February 25, 2009


Most of the people I hang out with have no idea what Twitter is or how it works. Some may have heard of it. Some believe it is another internet social networking tool.

So, I decided to look into it. I first scoped out this article from CNBC. I then went to to check it out. Then I set up a test account. Well, guess what? There are many companies and serious individuals using Twitter as another means to get their message out. It is clear that Twitter is likely to be here for quite a while. It is quick concise combination of email, a blog, IM and texting.

The messages are limited to 140 characters. So the messages are brief. You can elect to follow thousands of different individuals and companies. I am currently following companies such as NY Times, Wall Street Journal, BBC, CNN and Whole Foods. I downloaded the Tweetie app on my iphone and I receive notices of Tweets (the name of the messages) from the companies I am following. The news organizations send tweets on links to breaking stories that have been posted on their websites. I just scroll down the tweets, select a story I find interesting and click the link. It is amazingly quick.

I can see where a closed system could make for incredibly quick promotion of new products, thoughts and ideas. Go check it out.

And yes, I can be reached via Twitter at @ExcuseMeLeaders.

Cheers, Mike

Tuesday, February 24, 2009


At dinner the other night with several friends, one of the people asked, "what do you think is the one most important quality of a leader?" I replied, a leader must have 'confidence'. One by one they offered other 'most important' qualities such as, competence, honesty, integrity, trustworthy, vision, good listener and others.

After listening to all the other entries and considering them, I am sticking with confidence. First, people want to follow someone who is confident, not arrogant, confident. People who are confident are also competent. If they aren't competent, they will not be confident.

Confident people are very often honest because their self-confidence is such they don't need to be dishonest. Dishonesty is in fact a product of a lack of confidence. Confident people most often have integrity because they feel good about themselves. The confidence also makes them trustworthy because they have no need to show off or misuse someone's trust. The confident people also are more often than not good listeners because they want to learn and have no driving need to always being the one to speak.

So, I am sticking with 'confident'. If a person is confident they will often have most of the other qualities of a good leader.

What quality do you think is the most important?

Cheers, Mike

DIP Financing for GM & Chrysler

The Government is out searching for lenders to join a Government-sponsored DIP financing facility according to the WSJ. DIP (which stands for Debtor-in-Possession) financing is essential for any company to reorganize in Chapter 11. An article I co-authored on DIP financing too many years ago can be found in the Journal of Applied Corporate Finance.

It is critical that the Government be publicly looking for this financing. It sends a message to the unions and the bondholders that the Government will seriously consider putting the automakers in bankruptcy if the right terms and conditions cannot be obtained in an out-of-court restructuring.

It also is prudent contingency planning in the event there is no choice but to have GM and Chrysler file for chapter 11. A deal to keep each of these companies out of bankruptcy will go right to the deadline. It is just the way the process works. Each party will test the resolve of the other parties. This can only be effectively done at the eve of a filing. It should get more testy with more public proclamations of unreasonable demands by various parties-in-interest. If it wasn't so serious, it would almost be entertaining.

By the way, our incredible scientific poll has GM filing for chapter 11 by a 70-30 vote. Stay tuned.

Cheers, Mike


Over the years, we have all heard any number of executives complain about an over supply situation. Over supply of widgets, office space, certain skill sets, etc. Balancing supply and demand is hard work and often is not perfect.

But have you ever heard anyone say, we have an over supply of good leaders? I have not. So it seems there is more demand then supply of good leaders. Most would agree that investing in a high potential leader is a good investment with a high ROI. The catch is you only get the return on your investment if you retain them. I will come back to this later.

Imagine how high the ROI would be if your investment in one good leader produced several good leaders? The ROI multiplies. Well, if your definition of a good leader includes that they create other leaders, you will always get that multiple. Also, your odds of retaining some, if not all, of those leaders is better then putting all your returns on retaining one individual.

So how do we accomplish this? Start with that as part of the definition of leadership. Next, create a culture that values leadership development. Fortune Magazine did a study in 2007 How Top Companies Breed Stars. The article conclusion is that no matter what industry you are in, you are in the business of making leaders.

A good friend is quoted in the article, Professor Jeff Sonnenfeld, Associate Dean of the Yale School of Management. He first coined the phrase "academy companies". He noted that these companies offer more internal training to their executives and their alumni populate the leadership of other firms. The article identifies firms that are serious about leadership development as "talent magnets". If your company is a talent magnet, you will not need to be as concerned about the loss of those in whom you invest. They will want to stay. Talent begets talent.

The article highlights the traits these companies have in common. There is a list of nine practices they believe combine to create world-class leadership development:

1) Invest Time and Money

2) Identify Promising Leaders Early
3) Choose Assignments Strategically
4) Develop Leaders Within Their Current Jobs
5) Be Passionate About Feedback and Support
6) Develop Teams, Not Just Individuals
7) Exert Leadership Through Inspiration
8) Encourage Leaders To Be Active In Their Communities
9) Make Leadership Development Part of the Culture

There are a few issues to consider in an environment in which great leadership talent is the scarcest resource. Leadership development efforts need to improve in several areas including:

1) Developing teams vs only individual development
2) How to lead global businesses
3) Virtual leadership- the days of walking down the hall are over
4) Candid and constructive feedback- Too often stars are told- you had a great year, keep it up. That is NOT development. This is particularly an issue for women. See a later post on this under Women Leaders.
5) Teaching leaders how to develop other leaders

Until next time,

Monday, February 23, 2009


My brother Charlie shared his thoughts with me on the post- Where Have All the Leaders Gone? As always, his comments made me think deeper on the subject. He questioned the term Crisis Management. Is there such a thing? Well, we do know you can lead in a crisis, or not. The key to being able to lead in a crisis, is do people trust you?

In a WSJ article there is a quote from a Booz & Co. study that nearly half of senior managers lack confidence in their CEO to lead their organizations through the current hardship. Wow! Clearly, someone was asleep at the switch during the good times.

But if you do have the trust of your team, you can accomplish amazing things. You need to build and earn the trust in good times. There are several stories about this in our book Excuse Me, Aren't You In Charge?

If you do not have their trust, I would suggest you start working now to gain it for the future. They will always remember what you did when the chips were down. If you do have their trust. Congratulations!

Here are a few things to remember as you make withdrawals from your trust bank:

1) Everyone is Afraid of Everything
But if they trust you, they will follow you anywhere. Remember, that mid-level leaders are also afraid and yet you need them to help you lead. Confidence, calm, candidness and yes trust; so be trustworthy.

2) Leverage the Talent
Now, more then ever, let your employees come up with ideas. Let their talent free! You can not do it all yourself anyway.

3) Action Over Analysis
Yes, we need to be thoughtful and make the best decisions. But take action. Let your team know that you are not only willing to make decisions and take action but also to change direction or approach if it doesn't work. Remember, they trust you.

Until next time,

Saturday, February 21, 2009


According to Irving Picard, the SIPC trustee handling the Madoff situation, Madoff purchased no securities for 13 years!! Irving, what does that mean?

Here is some speculation as to what it means. First, it means that for over a decade there were no profits. If there were no profits, then the distributions that investors have been receiving during that period came from new investors.

Second, the distributions that investors received then are subject to clawback. This means that investors have to give back some of the distributions they have received in excess of their original investment.

So imagine this nightmare scenario. A couple loses all their retirement monies in this scandal. They have nothing left except their two homes which they are selling. In the past couple of years, they took out distributions to buy their second home in Florida, pay for their daughter's medical school bills, her wedding, their two sons educations and so on. Now the SIPC sends them a notice that they have to return the distributions they received over the past six years. And they don't have the money anymore.

Third, if there were no investments over this time period, then others certainly knew of the fraud. The sons? Ruth, the wife? Peter, the brother? No wonder Ruthie took $10 million out the day before Madoff confessed to his sons.

Fourth, the tax implications of all of this for the investors is another nightmare. What is a loss? When did it occur? Do they file amended returns? Do they take the loss this year? On top of this the IRS has given no guidance at all yet.

What a mess.


Friday, February 20, 2009


Last week I posted about Women Leaders and Networks. We have received many calls about the post and thank Erin for her posted comments.

Catalyst Awards

Since then I read an amazing report from the Catalyst group. A census of the Fortune 500 Reveals Women Gained Little Ground Advancing to Business Leadership Positions. Bottom line the news is not good for women and even worse for women of color. The report covers boards of directors and executive positions.

There is also an article in Consultant News regarding an E&Y white paper issued during the World Economic Forum. E&Y: Women Bring Strength to Rebuilding the World Economy. At a time when fresh perspectives are needed and we need all the leadership strength we can muster, it is time to place renewed emphasis on the advancement of women.

So put these two articles together and here is the result- we need renewed emphasis on the advancement of women leaders just when the advancement has stagnated. Great!

To top it all off, I have had occasion over the last six months to speak to several groups of high performing business people in their early 30's. In EVERY case, after the speech several women came up to me to discuss the need for initiatives to help young women succeed in business.

At first, I was shocked and then dismayed. I responded that those were the issues of my generation and the ones before me. Certainly, they were working in a more receptive environment. Their response was a loud- no. The issues they raised were eerily familiar to me. Especially, that the old boys network was alive and well but that my generation had not created an "old girls club".

The "Old Girls Club". Ughhh, I hate the name! Ooops, I digress. Specifically, here are a few actions we (let's make this an equal opportunity initiative and include the men) can all take today.

1) Women on Boards of Directors
The Catalyst organization already has some programs focused on getting more women on boards. What can you do to support this effort? Recommend women for boards. Ask members of boards you know how many women they have on boards and in particular ask about women of color. Let's all push together!

2) Networking Our Networks
Erin made a great comment post to my original post- let's all agree to introduce one of our networks to someone else's network. We can expand our networks very quickly.

3) Ask Something Specific of Your Networks
This gets back to the original discussion that women don't like to "use" their networks. But that is why they exist. Ask for referrals, ask for business, ask for something. We all love to help but we don't like to ask. So think of it as enabling someone else to help.

4) Become the "Old Girls Network" for a High Potential Woman
This is mentoring on steroids. At the end of this year be able to say you provided the network for a deserving young woman.

Okay, so that is as far as I am on a plan. It needs more but it is a start.

Thoughts? Ideas? I need your help.

Until next time,


Saab, the Swedish automaker owned by GM, has had losses in 19 of the last 20 years. This qualifies for the moniker "profit-proof". Saab is obviously incapable of making a profit. It probably deserves to go away and the Swedish government recognizes this. Apparently, it took GM a long time to give up on Saab. And, it only did so when it ran out of cash.

You can't wish a company to profitability. I explained to Gail once, that financially troubled companies operate as business as usual until they run out of cash. It doesn't matter that they stopped making a profit for years. The only way to get a financially-troubled company to make the right decisions is to cut the cash spickot to a trickle. Hmmm, think GM and Chrysler should get as much cash as they requested?

Cheers, Mike

Thursday, February 19, 2009


A few people have asked me to comment on the article in yesterday's WSJ regarding the accounting firms that did work for the Madoff feeder firms. The article suggested that the feeder firms auditors may be liable for not uncovering the Madoff fraud.

I am not an expert on auditor liability. However, I have worked on several matters regarding failed audits. In my view, any liability may depend on the materiality of the Madoff investments to the particular fund being audited.

If a feeder fund had 100% of its investments with Madoff, as some did, it seems to me that the feeder fund auditor has to do more than send a year-end confirmation to Madoff confirming the securities held on behalf of the feeder fund. The auditor would have to do more verification of the investments controlled and held by Madoff. And if the auditor did such work, there would have to be a questions as to the lack of segregation of duties, quality of Madoff's audit firm and other items.

On the other hand, if the feeder fund had 5% of its investments with Madoff, it seems that sending a year-end confirmation with some post-year end testing would suffice. After all, if the same amount of investments was held by JP Morgan, no one would expect the feeder fund auditor to visit to JPM to do further audit work.

Oh, there is a the fund that is suing its own auditor for not uncovering the Madoff fraud. Really?? Let me get this straight. You charged your investors to invest their money. You invested it with Madoff. After you invested it with Madoff there wasn't much to do, other than attract more investors with more money. So, this must mean you did sufficient due diligence to decide to put a meaningful amount with Madoff. And now you are blaming the auditor?? Weak, very weak.

Cheers, Mike

Wednesday, February 18, 2009


In the post to President Obama, I mentioned that there needs to be a credible threat of a government supported bankruptcy filing by GM and Chrysler. The threat must be supported by a well thought-out bankruptcy filing plan.

I mentioned that there are two reasons for such a plan to be prepared. First, it is prudent contingency planning in case a filing is required because the parties can't agree to the compromises needed for a viable restructuring plan. Second, a bankruptcy filing plan is needed as a real threat to the stakeholders, such as the bondholders, to get them to accept the necessary concessions.

It doesn't help the process for GM and Chrysler to repeatedly say that a bankruptcy filing is a total non-starter. So, why should bondholders agree? They can wait, take a smaller haircut on their claims and let the Government make up the difference with more aid.

Get the bankruptcy plan done so you can implement the out-of-court workout!

Cheers, Mike


One of the characteristics of recessions is that they reveal frauds. This is very typical and over the past 25 years, every industry downturn has been accompanied with some spectacular frauds.

There was the Penn Square Bank in the 1980's that brought down Continental Illinois National Bank. There were all of the scandals of the Savings and Loan debacle in the late '80's and early '90's. There were real estate frauds in 1990's and of course, the new century was kicked off by Enron, Worldcom and others.

As long as companies underperform, there will be managers who feel backed into a corner and then resort to fraudulent activities. The continued underperformance gets them almost every time.

This Stanford fraud is following on the heels of Madoff, Drier, other hedge fund types and Peanut Corp. of America. We should all expect that there will be more frauds exposed over the next two years.

Once again, how do they think will end when they start?

Cheers, Mike

Tuesday, February 17, 2009


According to the WSJ and other sources, Ron Bloom, formerly of Lazard, has been retained by the Government. Some sources portray his role as an advisor. Reading between the lines of the WSJ article, one could conclude he may be negotiating on behalf of the Government.

Ron's biographical sketch was reported on by Forbes.

Along the lines of yesterday's post, let's hope he will play the role of negotiator. A more involved principal role will serve the Government's interests better than an advisory role.

Cheers, Mike

Monday, February 16, 2009


I just read a piece on MSNBC that President Obama has decided not to go with a Car Czar and instead go with an across-the-government panel that Tim Geither and Larry Summers will head to oversee a restructuring of the auto industry.

Mr. President, I heartily recommend that you reconsider. The Federal Government is a party to the negotiations at GM and at Chrysler. The Government must actively participate in the negotiations not oversee them.

These negotiations have reportedly stalled in the past few days. While there are probably several reasons for the lack of progress, the absence of a representative of the Government at the negotiating table must be a major stumbling block. I am sure that if you ask representatives of GM, Chrysler, the UAW and the respective bondholder committees, they will tell you the government must be there negotiating on its behalf. None of the parties will go to their bottom line until the government shows up. It is just the way it works.

So, my recommendation is a follows: The panel that you have set up should operate as a board of directors overseeing its negotiating team. Its negotiating team should be involved in the day-to-day negotiations on the government's behalf at GM and Chrysler. The panel should hire a "lead person" to head their negotiating team, who will report to the board on the ongoing negotiations. That "lead person" should hire two small teams to support him/her in the negotiations, one for GM and one for Chrysler.

The management should use the advisors your team has previously hired, Cadwalader and Rothschild. This negotiating team needs to be hired immediately and start work now!

By the way, my next auto post will be on "Why the Government and the auto companies need to have a credible bankruptcy plan to effect the restructure of GM and Chrysler." Here is a hint, it will serve as a contingency plan and will serve to as a stick to garner the required concessions from the other parties-in-interest.

Cheers, Mike

Sunday, February 15, 2009


In a few days GM will report on the status of its negotiations primarily with the UAW and the bondholders. It appears from various press reports that GM is having trouble getting the bondholders and the UAW to agree to government required concessions. Furthermore, in the absence of the 'car czar', there doesn't appear to be a government representative at the negotiating table. This is an odd way to go about such negotiations.

First of all, this is being done backwards. The first step in any financial restructuring is a stand alone business plan that shows that GM's restructured operations are viable with NO debt.

Second, after such an operating plan is agreed upon by the various parties in interest, the resulting operations are valued and the predictable cash flows determine how much debt can be serviced at market rates.

Third, the value is divided upon amongst the parties based upon their priorities with the most senior creditors getting debt until there is no more debt capacity left (other than for a working capital line) and the rest of the creditors getting equity until the value of their claims are satisfied with equity. Any equity leftover would go equity holders; highly unlikely in this situation unless as a tip.

Then you have a likely viable operating company with an appropriate capital structure. The methodology being followed is backwards. Requiring certain debt swaps without knowing the value or debt capacity is destined for failure. Although it could go either way, if this requirement was agreed to be the UAW and the bondholders, it would most likely leave GM still overlevered and delaying the inevitable next restructuring. Further, an overlevered GM will require more government funding to pay interest that shouldn't be incurred and shouldn't be paid.

It should follow the oversimplified steps I laid out above. So far all this ignores all the other stakeholders and the government's existing debt claims, its other contingent claims (e.g., PBGC claims) and future funding requiresments. It also ignores that the government is missing from the negotiating table the past six weeks which has probably chilled the bondholders from giving up too much in this go around.

During this week, I will touch on these other items concerning GM's continuing negotiations.

Cheers, Mike


This morning I watched a video clip on the WSJ online. Former Secretary of State Madeleine Albright discussing women and leadership, finding her voice and the current state of women leaders around the world.

In the interview she makes a point about women needing to support other women. She mentioned that when she was in the UN there were only 7 women as permanent members.

They started a network group and agreed to take each others calls before any others.

Last week, I had the opportunity to hear Mary O'Hara- Devereaux speak at a women in business leadership forum. She was outstanding. In her speech she mentioned that women needed to start "power networks". I really missed the boat here.

Throughout my career, I stayed away from women's networks completely. This was driven by the misguided notion that if I shunned these groups I would be a leader not a woman leader.

Earth to Gail- you are a woman!

When I did participate, I saw them as social networks. Fun to be with people with similar interests. And yes, at times, I even whined with my female friends. This is hard for me to admit as I have always had a "no whining rule".

But I never used these networks as power networks. The reason? Well, after much soul searching, I realize it is the word used that bothered me. I did not want to use my friends. I did not want to use the fact that I was a woman.

Now what is really shocking about this is that I realized very early in my career that business was all about relationships. I believe companies do not sell to other companies but rather people sell to other people. In fact, I believe my interpersonal skills- building and earning trust, building relationships- were key to whatever success I attained.

So why then did I shun a natural connection such as other women? I have also spent much of my career focused and committed to developing others, especially those who worked for me. Yet, I was very careful not to favor the women.

Well today all that changes. I am publicly declaring my new commitments.

I am committed to building power networks.
I am committed to leveraging my relationships with other women leaders.
I am committed to helping less experienced women succeed.

Now, this does not mean I will do any less then I have been doing for the men I know. There are great male leaders out there. Although these days we are hearing more about the leadership failures.

Bring it on! I am ready to go!

Oh, by the way, I do not have a plan so I do not know exactly where I am going with this yet. Thoughts? Ideas?

Until next time,

Friday, February 13, 2009


The president of Peanut Corp. of America had allegedly committed a deadly fraud. Apparently, president Stewart Parnell, according to an AP report posted on, knew that the peanut butter being sold was tainted. Allegedly this peanut butter has lead to numerous people falling ill and several deaths.

Parnell took the 5th in front of a House investigations committee. I read elsewhere that there was speculation that sales were low and Parnell could not risk scrapping the product and losing sales.
So, he sold a deadly product instead? This was the answer to lower sales???

Most of the frauds I have reviewed have one common item. How did the perpetrator of the fraud think it was going to end? How were they going to get out of the mess they were in?

In people contemplating fraud could stop to think of an exit strategy, they would not find one. And then, they might not commit the fraud in the first place. But hope springs eternal. They believe that something will happen that will make it all right.

Remember, during times of financial crisis, the frauds are exposed and more frauds occur. Some are out of greed and some are out of fear.

Cheers, Mike


Consulting Magazine has posted a review of our book in their February issue. For those of you who haven't bought multiple copies yet, and you know who you are, there are still copies left.

There is also a good article on the consulting industry. Remember that in these times, it is the people who ADD VALUE that are in demand. Those who sell LEADERSHIP services not commodity services will survive and thrive even in a distressed market.

Cheers, Mike


In Mike's post entitled Greenspan Doesn't Understand the Subprime Market, he referred to a show that aired last night House of Cards. I watched the show. There were many lessons to be learned but one really jumped out at me.

If you don't understand it, maybe it doesn't make sense!

There was a town mayor interviewed who invested all the town's funds in Collateralized Debt Obligations (CDO's). Needless to say, they lost most of it. She learned that if it sounds too good to be true, it probably is not true.

Throughout the show, they interviewed people who said it did not make sense to them but it seemed to make sense to everyone else. Why do we think we are the only one in the room that doesn't understand? Then we hesitate to ask questions.

Why do we assume it makes sense? Then if it doesn't make sense to us, we hesitate to ask questions.

Boom markets last until they bust. Remember the S&L's, LBO's, Internet bubble, and on and on. Things make sense until they don't.

The key for each of us is to make up our own minds. The only way to do that is to ask questions. Ask questions until it makes sense to you. But most importantly, if you don't ever understand it, it probably isn't you. Maybe it doesn't make sense.

Until Next Time,


GM and Chrysler have to report next week on the progress of their negotiations. The Detroit Press has a good piece on the status of the negotiations between GM and the bondholders. The government requires a 67% reduction in the bondholders claims in order to continue to support the GM. The bondholders are demanding only a 50% reduction in their debt according to the article.

Here is the problem. In any such negotiations it is key for the company, GM in this case to demonstrate to the bondholders that if they don't go along with the deal, the company will file for protection under Chapter 11 and the bondholders will get much less since the company itself will be worth less.

In this case, the bondholders are saying, 'hey GM, we don't believe it. We think the Government will do whatever is necessary to keep you out of Chapter 11. Therefore, you can threaten all you want. We don't believe you will do it.'

In addition, the bondholders don't like that the UAW is getting a better deal. Even if the Government steps in, what credible threat do they have?

Look for the bondholders to get a better deal than the Government wanted them to get. Maybe the cat in the picture above (courtesey of Hypno_Bedhead) is right in this case.

Cheers, Mike

Thursday, February 12, 2009


Is this for real? Check out CNBC tonight. David Faber hosts a two hour piece tonight airing at 8pm and 12am EST called 'House of Cards'. Apparently Greenspan admits that he didn't have a full understanding of the subprime mortgage market or of its derivatives.

In response to his critics, according to the DealBook blog, Greenspan said, "We could have basically clamped down on the American economy and generated a 10% unemployment rate. And I guarantee we would not have had a housing boom, a stock boom or indeed a particularly good economy either."

I have to watch this to see if this was out of context somehow. If not, Alan, we are well on the way to 10% unemployment and we will be lucky if it stops there. Also, no housing boom would mean not as big a problem now, right? No stock boom? Oh darn. And finally, indeed we don't have a particularly good economy now!

Perhaps if rates weren't artificially low from 2002-2007 we wouldn't be in the trouble we are now. Maybe institutions like Bear Stearns and Lehman Brothers which made it through the Depression would still be around today. Maybe the global economy wouldn't have fallen off the tracks. Maybe.......

I once sat next to Greenspan at a baseball game in the owner's box in Baltimore. He said he had been a baseball fan when he was younger, but didn't follow it much now. I figured, 'oh well, at least he is an expert on the economy'.

Cheers, Mike


Ruth Madoff, Bernie's wife, allegedly according to the WSJ, Bloomberg and other sources withdrew $10 million from a Madoff account on December 10, the day before Bernie confessed to his sons.

Hello!!!! I spent 25 years working on troubled companies and many financial frauds. This was all orchestrated. The question is how much, if at all, was Ruth involved?
Did Bernie just say,"Ruth, why don't you transfer $10 million today to a new account"? Or was Ruth involved and moved the money out of desperation knowing that the jig was up.

I have found that there is no such thing as a coincidence concerning a fraud and a related party. Bernie may have said, 'Ruthie, it is time to take the money out and put it somewhere safe.' She may said, 'What about the boys?' And he may have replied, 'I will tell them to call their attorney tomorrow to turn me in.' And so on. They may all need to go away. The brother Peter also.

But, this is just my conjecture.

Cheers, Mike

Tuesday, February 10, 2009


Gail and I have, from time to time, recommended that people consider forming a Personal Advisory Board. The Board is meant to be a few people that can support, advise and challenge you.

At first this might sound corny. However, you probably have the loose form of one already. There are probably a couple of people you speak with for counsel as issues arise. It may be a mentor where you are currently working. It may be a mentor from a prior job, or a college classmate, or a friend from some other walk in life.

Read this article on how to build and use a personal advisory board. Linda Gravett wrote this article answering some questions you might have on setting up your board.

Everyone I know who has done this, really enjoys speaking with their personal board members. And, this may surprise you, the members of the personal advisory boards consider it an honor to be asked and really enjoy helping out.

Try it and let us know how it works.

Cheers, Mike

Stimulus Plan- Let's Slow Down!

Yes, I know that just last night President Obama warned of the lost decade. I also agree with him that the situation is dire and time is of the essence.

However, it is precisely because we are in a crisis that I want to make sure we are disciplined in our approach.

We are now hearing all the things that were done wrong regarding the first half of the TARP funds. Clearly, everyone is blaming the old administration.

Don't worry, this is not going to be political. I blame the democrats and republicans.

Wasn't President Obama in the senate when TARP was passed? Didn't he vote for it? Didn't John McCain vote for it? Didn't Nancy Pelosi vote for it? Both republicans and democrats let $350 billion go out the door with little to no controls- let's not do it again.

The other night there was an interview of some of the house and senate members. When they were asked how they came to the numbers for certain items in their respective bills (the analysis that arrived at these numbers) no one could answer the question.

They said this was not scientific!! These were rough estimates.

Ladies and gentlemen, this is $800 plus BILLION dollars. Let's at least be a little scientific and disciplined.

There is a good Opinion piece in the WSJ today entitled- How Government Created the Financial Crisis. It is a good read.

What I am most impressed with about the article, is not John Taylor's conclusions but rather his analysis.

If I were on the board of a company and management was asking to spend over $800 billion due to a crisis, I would ask for the following at a minimum:
1- Diagnosis summary- what happened and why
2- Needs/opportunities analysis- given the diagnosis, what are the immediate and long term needs/opportunities
3- Return on investment- what measurements are we using and over what time frame
4- Risk analysis and mitigation plans- what are the likely things that could go wrong and what will we do then

Now, I realize we are in uncharted waters so many of the items above could change or prove wrong. But at least we would have a plan.

This is complex and not easy to summarize. However, we have a key asset- President Obama's communication skills. He is an excellent communicator.

If he told the American people a little bit more about why we need to spend this amount of money and how he would make sure it did not get wasted, people would feel more comfortable.

Am I the only one that feels like they just spun a wheel and picked a number? Am I alone in believing that we need to do this but that I want more discipline?

What do you think?

Until next time,

Monday, February 9, 2009


So, what do you think? Did the names and addresses of each Madoff investor have to be disclosed? What purpose did it serve? Some of these people have sinced suffered humiliation on top of the loss.

Are these people now going to be targets of other financial scams, contacts from other financial advisors or worse? Would you like to have you name and address out there for the world to see as someone who potentially had a lot to invest?

I think there was a better way to deal with this. The list could have been filed under seal with access subject to bankruptcy court approval. This may have been a better first step.

What do you say?

Cheers, Mike

Saturday, February 7, 2009


Back in December when I was test blogging, I wrote a piece that the US government should hire restructuring advisors and bankruptcy lawyers to advise it on how to deal with the automotive industry. I said this should have been done in conjunction with and as part of the extension of the loans.

Apparently according to this Bloomberg article, Obama has hired restructuring advisors and bankruptcy lawyers. Excellent!!!

Unfortunately, the Bush team didn't hire professionals apparently. The Obama advisors and lawyers are now going over the loan documents to see just where loans already extended to GM and Chrysler sit relative to both companies other debt.

So, why wasn't this debt put in senior to existing debt?

Why doesn't the loan provide that the auto companies that receive the loans, pay for the Governments advisors? This is how it works in the real world.

Back to the advisors, this is a great move by the Obama team and great for the taxpayers.

Cheers, Mike

Thursday, February 5, 2009


I am posting two links to articles on President Obama's proposed executive pay limits. One article from the WSJ and one from the Washington Wire.

I am sure there will be a firestorm of opinions one way or the other over the pay limits. Another government intrusion? The first step to more sweeping executive pay limits? Bigger government? Will the good executives and employees leave?

One way to look at this is like a lender to a financially troubled company. What the US Government is a lender in these cases? The recipients of the "exceptional assistance" are troubled companies?

Yes, the recipients ARE financially troubled companies and the Government IS the last chance lender! Guess what, in the old days, the lenders of last resort called the shots. Those shots typically included:

a. Limitations on the amount and timing of executive compensation

b. Prohibitions against certain non-essential expenditures

c. Limits on capital expenditures

d. Limits or prohibitions on related-party transactions

e. Spending in accordance with a budget approved by the lenders

f. Actual to budget reporting and accountability

Over the years, large bankruptcies and troubled company situations have gotten away from these former tenets of last resort lending. It would appear that Obama is leading us back there.

By the way, if YOU were the lender of last resort to some company that may not survive, wouldn't you make sure that the money wasn't spent on expenditures that you thought were excessive?

I haven't seen all the details yet, but I hope it doesn't go further than financially-troubled companies and that there is a provision for troubled company experts who are hired to be paid a market rate. If troubled company advisors are subject to such rules, I suspect the best of them won't work as executives on such situations and that would be bad answer. Also, the cap should just apply to executives at the very top and not reach too far down. Nor should the cap apply to performance based compensation of the star performers of any organization. You wouldn't want your stars to an "exceptional assistance" company to go to the "garden variety" assistance company or to a non-assistance company, whoever they are.

One last thought, has anyone heard anything from any board of directors of a large public company? Where are these people? Let me know if you have.

Cheers, Mike

Wednesday, February 4, 2009


This is the final installment of my commentary on the Fortune Magazine interview with author Jim Collins.

One item that I would add to his list of how companies turn crisis into opportunity, is communication. A leader's ability to be straight forward and direct in a crisis is critical.

I witnessed this first hand a few years ago.

When Arthur Andersen was engulfed in the Enron scandal and selling off most of its business, I was the global leader of Andersen Business Consulting. When I was preparing to leave my first voicemail to the employees regarding a potential way forward, many communication experts told me I should not say what I had planned.

Their advice was that there were too many unknowns which would upset and unnerve people. But that was the truth! There were many things I did not know at the time. Including, if a deal was even possible.

I followed my instincts and told them very directly what was happening, what I knew and did not know, and described the process we would follow to work through the issues.

It has been seven years since I sent that voicemail. To this day, I run into people from around the world that mention that first voicemail. They all comment that it was direct, honest, and personal.

In concluding this 5 part series, I ask you the following questions:

How many business or political "leaders" have you noticed that are leveraging Jim Collins' three points- enduring values, the best talent, or "zooming out" to see past the chaos?

How many business or political "leaders" are communicating in a straight forward and direct manner?

How many business or political "leaders" are communicating the process that will be followed to address the challenges?

This leads me to my initial question and the title of the blog series-


Until Next Time,


One of our followers commented on the Citi story that Wells Fargo's planned trips to Vegas was insulting. Whether it is Well's Vegas trip, Citi's private plane use, Bank of America's bonuses or Thain and his office, it is a sense of business as usual and a sense of entitlement.

It reminds me of a story. A number of years ago a venture capital guy with a pretty large office and numerous significant holdings had to hire me as an advisor because he owed $500 million more than he could pay back to his lenders.

This gentleman had leased two private airplanes. I told him day one that the planes had to go. He was not a fan of this advice. Finally I had to go to Boston for a meeting. He lived outside of Boston and after the meeting he asked me to meet him at Signature Aviation building at Logan. We boarded his plane and took the 25 minute trip to Teteboro Airport in North Jersey.

As we landed, he said, "So, what do you think of flying private?" I replied, "It is the only way to travel and you can't do it anymore." The next day I called the leasing company and asked them to take back their planes.

Cheers, Mike

Tuesday, February 3, 2009


Isn't cash fungible? How can Citi say it is not using TARP funds for the naming rights on the NY Mets new stadium? Those rights are currently slated to cost Citi $400 million per the WSJ.

Citi says, "We are not using TARP funds for the naming rights." Let me see if I get this straight. You took $45 billion from TARP presumably because you needed the funds. If you don't spend the $400 million on the new stadium, don't you need $400 million LESS of the TARP funds?

Really, can you say are not using TARP funds when cash is fungible???

Even though I posted twice already today, I could not let this go by. Victor please tell me you didn't endorse the "we aren't using TARP funds" spin.

Cheers, Mike


The last item covered by Jim Collins in his interview in Fortune Magazine is the ability to "zoom out" and see past the chaos in front of you.

He makes a great point about how worried people are right now. He then uses the example of a rock climber.

In the interview he states," As a rock climber, the one thing you learn is that those who panic, die on the mountain. You don't just sit on the mountain. You either go up or go down, but don't just sit and wait to get clobbered."

Unfortunately, I have been in too many meetings to count in my career in which no decision is made. They just keep asking for more data or another meeting is set.

Leaders are paid to make decisions. Go up the mountain or down, but go! You can always modify later but your employees need to know what you want them to do.

Now onto the issue of "zooming out" and seeing the big picture.

My brother is a retired fire department captain from Union City, NJ. Over the years as we have discussed leadership skills, he has always had great insights. In his profession bad leaders don't just lose money, they lose lives. So, I have tended to listen to him.

He has said the best leaders are those that can simultaneously be in the moment- fighting the flames right in front of them- but also be able to see the big picture and where it is going, what will happen next.

In my own experience dealing with crisis, I can tell you that it is overwhelming. There is so much to do, so many people that want your time, so many individual issues and challenges, and all items are urgent.

In addition to the leadership skill of being able to see the bigger picture, I strongly recommend getting a third party advisor.

Certainly, they bring an expertise on the issue you are facing. But I actually think they bring something even more valuable then their expertise on the topic.

They will be the only one not looking for answers from you as the leader. They are there to give you some answers and some help.

This is someone you, as the leader, can trust. They can be objective and they do not have a vested interest in the outcome.

Until next time,


Harry Markopolos tried to warn the SEC about Madoff. He tried to warn his friends and he tried to warn other investors. He feels badly that he wasn't successful in all cases to warn people off of Madoff. Publicly so far, he feels more sorry that the perpetrator, Bernie!

Check out this piece in the WSJ on Markopolos. Further, here is the copy of the report that Harry submitted to the SEC in 2005 entitled, The World's Largest Hedge Fund is a Fraud!

Catchy title that didn't catch much attention at the time.

Cheers, Mike


Denny's is offering a free grand slam breakfast to anyone who stops by any of their restaurants in the US on Tuesday. I am posting this early so you can grab a free breakfast this morning! (Grand Slam)

The CEO says this is a way to get people to experience how Denny's is operating these days. Check out this video from CNBC of the Denny's CEO interview.

So, how many of you are going out for the free breakfast? If any of you go, let us know what you think.

Cheers, Mike

Monday, February 2, 2009


Continuing with my commentary on the Fortune Magazine interview of author Jim Collins, this post is about his second point which is the need for the best talent.

This is like motherhood and apple pie- who does not want the best talent?

Although I was once in a meeting when a "leader" said he was only looking to hire people that were "good enough" as that was all he could afford and they were easier to find. Thank goodness he was only employed there for a short time after that insightful statement.

Yet even though we know this and pledge allegiance regularly to the concept, when times are good, many of us fall into the mediocrity trap. There are a million reasons why this happens.

To name just a few:

It takes time to weed out the poor performers and replace them with the best talent.

Top talent is demanding in every way- money, attention, freedom, perks, etc.

We convince ourselves we can/should develop the poor performers. But we know better. In our gut we know which ones will not get better.

But when a crisis occurs, you especially need the best talent and particularly in leadership positions. This is not a job for lightweights.

I have seen time and time again that an organization will break at its weakest link- the mediorce talent they have in leadership positions. We all think we will get to that issue one of these days. It is on your To Do list.

Well, that might be okay in good times, but it will not fly in times of challenge. Does anyone think the business climate is going to get easier anytime soon?

If not, what are you doing today to make sure you have the best talent?

Until next time,


So the word is out that GM is worried about the tax it will incur because of the US government mandated reduction in GM's debt. Check out this small piece from Bloomberg.

Here is how it works. Let's say GM exchanges $10 billion of stock for $27 billion of unsecured bonds. That results in a gain of $17 billion. This gain is taxable and in this example would result in taxes of around $7 billion.

So, by complying with the US government's requirement that GM reduce its debt and union obligations, GM will incur significant tax obligations that it can't pay. I don't know why this is a surprise. This is the way it works.

Years ago, there was a stock for debt exception in the IRS code that would have not taxed the gain on the stock for debt swap. However, that was changed and such a gain is currently taxable. I would have thought that this would have been dealt with at the time of the auto bailout loans.

It does not make sense for this tax treatment to be changed without proper consideration. It would seem that the answer here is for GM to pay the taxes on the gain and for Congress then to provide for the tax payment to be rebated back to GM. Obviously this is an issue for Chrysler also.

Stay tuned for more.

Cheers, Mike

Sunday, February 1, 2009


Can't get enough Bernie? The Harvard Club in NYC is holding a Conference on Bernie, courtesy of CNBC, covering topics such as the different causes of legal actions and the tax ramifications of Bernie's scheme. Still time to sign up. Off to the Super Bowl.
Cheers, Mike

(The Harvard Club, wikipedia)