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Monday, July 6, 2009

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Executive consolidation proves profitable By VERNON CLEMENT JONES ~ Guardian Business Editor ~ vernon@nasguard.com: Minimizing executive pay expense through consolidation of duties — instead of the more-often-reached-for cut to front-line staff — is responsible for a "significant" chunk of the net profits reported in RND's last quarterly statement, says its COO turned CEO/COO. Effected back in 2007, that corporate downsizing, specifically, the top executive's move over to the chairman's seat and the transfer of his duties to Kenneth Donathan — then the chief operations officer and now the company's CEO as well — allowed RND to eliminate a senior executive salary expense. That was without incurring any additional salary increases despite Donathan's extra duties at the holding company, with both a commercial rental property division and an electronic ticketing reservations unit. "It was by necessity that we were forced to be ahead of the curve," Kenneth Donathan told Guardian Business Tuesday. "And it is now being done by businesses across the U.S." The creative thinking is responsible for a "substantial" percentage of the $82k RND was able to lop off of its administrative costs for the nine months ended November 30, 2009, compared to the same 2007 period. Those results were released just this month in a statement highlighting a net income jump of $213k, again comparing year to year results. The gain is really a story about cost containment, given revenue actually slid by about $15,000. The gargantuan size of executive pay in the U.S. means that savings through the consolidation of executive teams has been even more rewarding, that according to an April issue of leading industry periodical BusinessWeek. It says an increasing number of companies are taking a serious look at their CEOs and the number of hours they log in a week. The examination suggests to some that those top execs are essentially operating more as consultants and final arbiters than taking on responsibility for the day to day stewardship of a company. While some companies have chosen the same course as the publicly-held RND, others have put their CEOs on the clock, paying them for the hours they actually work. The latter is most often with the assumption those execs are then contractually free to split their time between the company and their own private business. In RND's case, its former CEO returned to his legal practice. The scheme is not for everyone, or rather not every operation, but may work best with small and medium sized businesses as well as those focused on one or two divisions. It's also worth noting that Donathan stops short of recommending it to others in The Bahamas now struggling to get a handle on their costs. It's for each of them to decide for themselves, he says. "It is gratifying to know that the plan we came up with is consistent with plans being created in the U.S. as they put their own strategies in place to deal with the challenging economy," Donathan told Guardian Business. Wednesday, June 24, 2009