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I want to tell you a story of the Christmas season, but it needs a preface. So first, a few words about religion and me.

I don't see angels in the clouds or hear God speaking in the ocean's roar or the gurgle of the Mr. Coffee machine. I claim no special religious understanding or theological insight. Some see themselves as instruments of God's indignation about modern life, and devote a good deal of time to separating sheep from goats. I see myself simply as a beneficiary of God's grace.

I grew up with the certainties of the fundamentalist Baptist faith. As my list of questions grew to rival my list of answers, I experienced my share of internal tensions between belief and doubt. I am comforted by the knowledge that others also engage in that struggle.

In my younger days I focused on the uncertainties. As I age, I find myself more comfortable with the mystery, and I find in myself an inclination simply to trust.

I bring this up, as I said, because I want to tell you a Christmas story.

Last year in the weeks before Christmas I was attending an editors meeting in Miami.

I had forgotten how warm Miami can be in December, and had packed only long-sleeved shirts.

The downtown hotel where we met is connected to a shopping mall, so I strolled over the first evening to buy cooler clothing.

I went into J.C. Penney. The menswear area opened directly onto the large hallway near the escalators. As I looked at shirts I could feel the throng of shoppers bustling nearby.

I looked up to see a young man emerge from the crowd and zero in on me. I sensed he intended to ask for something. I braced myself for his pitch. But his question took me by surprise:

"Do you believe in Jesus?"

I looked him over. He was a thin, pleasant-looking man in his mid-30s, but his hair was tousled and he needed a shave. He had on a rumpled shirt, worn jeans and loafers with no socks.

And he had large sores, visible on his arms and neck, the telltale lesions - Kaposi's sarcoma, I'm told they are called - associated with AIDS.

"Why do you ask?" I said.

He told me this story.

He had come to Miami years ago from a nearby town. When he was diagnosed with HIV, his family told him not to come home. Over time his condition had developed into AIDS.

A few days earlier, he said, his family had called. For some reason they had a change of heart. They invited him home for Christmas.

He couldn't tell them, he said, that he was broke. He needed money for bus fare. Ten dollars would get him home for Christmas.

I'm in a Wednesday morning Bible study class at Myers Park Baptist Church. Not long before my Miami trip we had discussed the passage in Matthew where Jesus speaks to those who are to inherit the kingdom and reminds them of how they had helped him when he was down and out.

They ask, when did we do this? He responds, in the compelling language of the King James Version, "Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me.'' There's a problem with knowing these Bible stories: They keep calling you to account. This one is particularly troubling for prosperous people who usually manage to ignore the poverty around us.

People like me.

In my pocket I had a $20 bill that I intended to spend on a shirt. I didn't know whether to believe him. It didn't matter. He obviously needed the money more than I did.

I handed him the twenty.

"Here," I said. "Merry Christmas."

He was surprised. Apparently he hadn't expected it to be so easy.

He took the money and looked straight into my eyes.

"Thank you," he said, and it was as heartfelt a thanks as I have ever received. Then he put the money in his pocket and walked away.

Just before he melded into the crowd, he turned and raised his hand in a farewell salute. And he said, "I think you are Jesus."

I was stunned. Before I could respond, he vanished into the crowd of shoppers.

What I would have said to him was, "I thought you were Jesus."

Merry Christmas.

Leaders need loyal followers, especially in times of crisis. Yet what distinguishes great from merely competent leaders is the ability not just to tolerate but to seek out and encourage dissenting ideas from a diverse group of people.

Great leaders have always drawn on this talent to devise bold solutions to daunting new challenges. No colleague or subordinate ever helped them by holding back, or shielding them, from even the harshest criticism.

There is no way a leader can play the middle ground in accepting dissenting opinions, according to Richard Tedlow, a professor of business administration at Harvard Business School.

"Leaders can either encourage or discourage a divergence of opinion," he said. "And typically you only see how genuine a leader's commitment is to encouraging dissent in a crisis."

In one of the more dramatic cases of a business in crisis, Jim Burke, the former chief executive of Johnson & Johnson, led his company through the Tylenol tampering crisis by standing out as such an open-minded leader.

When several people died from poison that had been inserted into Tylenol capsules in 1982, Burke realized the survival of the brand and his entire company were at risk.

Burke immediately began soliciting advice from scores of people inside and outside Johnson & Johnson. Staff members were giving him conflicting advice about what to say to the public. He was asked to appear on "60 Minutes" to talk about how he was handling the crisis. Some said if he was straightforward and honest, consumers wouldn't blame the company. But his head of public relations told him that appearing on the television news show would be the worst decision anyone at the firm had ever made.

Burke agreed to be interviewed on television. After his appearance, his staff found that people who had watched the show were five times more apt to buy Johnson & Johnson products than those who didn't see it.

Yet Burke didn't turn against his public-relations director. "He was strong enough to tolerate conflict - and to use it to help shape his decision making - because he knew what he stood for," said Tedlow.

More recently, Jacques Nasser was less able to tolerate and overcome conflict at Ford Motor, where he was ousted as CEO.

Nasser's sometimes abrasive and insular style of management style alienated employees and dealers. In an effort to eliminate weak managers, for example, Nasser decided that following a Bell curve, about 5 percent of managers should get a "C" grade on performance reviews each year. Those who received two consecutive Cs would lose their jobs.

Had he consulted with managers and union officials - the most likely critics of this plan - he would have learned that this rating system was deeply resented and was making Ford vulnerable to employment-discrimination suits. After several C-rated managers charged Ford with age discrimination, the rating system was dropped.

"Leadership is always about advancing an agenda, and you aren't likely to achieve that without empathy for other viewpoints," said Nancy Koehn, a historian at Harvard Business School.

She points to examples of past political leaders who had to reach outside themselves and beyond a familiar circle of loyal advisers for answers. Franklin Roosevelt did this in World War II when he assembled a team of scientists for the Manhattan Project.

When Abraham Lincoln assembled his first cabinet, he chose a group that included his chief rivals in his own party, as well as those in the ranks of the opposition. The group was neither harmonious nor loyal to Lincoln - but he knew that to hold the Union together he needed a truly national team. Lincoln also spent considerable time listening to various groups of citizens - soldiers, freed slaves, people of all ranks of life. A secure leader will always be able to hear other opinions, Tedlow adds. "They can tolerate not just people's weaknesses but also their strengths."

You know about The Charlotte Observer, and their love/hate relationship with Duke Energy. They like to butter up Duke with a nice fluffy article, and then punch them hard in the nose.

Yesterday, The Observer published “Duke's rise as a global presence.” Articles just do not get much fluffier than this one.

The article stated that Duke's ascent has been tarnished only by California's deregulation disaster. Did the writer overlook the audit by the North and South Carolina Utility Commissions? This seems unlikely since the writer also wrote:

"Whistle-blower: Duke Misled Regulators",

"Duke probe could bring lower rates",

"Whistle-blower Call to Regulators Puzzles Exec", and

"Duke Power Executive Suspended".

“In the 1980s, Duke became part of a wrenching change sweeping Corporate America. Like IBM, AT&T and other mainstays, Duke cut thousands of jobs - the painful end of a long-cherished job-for-life security.”

Yes, Duke began to look for other companies to follow – companies with schemes for turning a quick buck.

"Bigness was key to get the critical mass to play in this game," said Rick Priory, who succeeded Grigg as top boss. "You need to be big enough to take risks."

Sure, if you are big enough, you can just stomp on everyone, employees included. But what about Enron? Enron was the biggest kid on the block. So, it seem that size alone will not make up for a lack of integrity.

“Priory is Duke's deal man.”

But the employees cannot stand any more of Mr. Priory’s deals. His deals always cost the employees plenty!

It was mentioned that Duke charged the highest known price in California: $3,880 per megawatt hour. But, there was sugarcoating before and after the statement. But hey, this was “fluff day” – no harsh statements allowed.

Maybe this is what is called “balanced reporting.” They pat Duke on the head, and give them an ice cream cone. Then they kick Duke in the shin. On balance, Duke is being treated evenhandedly!

December 3, 2001 (PLANSPONSOR.com) – Ford is expected to announce a series of cost-cutting initiatives this week, including elimination of matching 401(k) contributions for salaried workers, higher prescription co-pays and a reduction in health benefits, according to published reports.

The moves are expected to be announced later this week, alongside the announcement of a projected loss of 35 cents/share – the third quarterly loss in a row for the automaker, according to the Detroit News.

The report notes that Ford will eliminate matching contributions on 401(k) plans for its 45,000 U.S. salaried employees for an indefinite period. The company now adds 60 cents in Ford stock for every dollar employees contribute to 401(k) funds, up to 10% of pay. The move mirrors announcements already made by GM and Chrysler, which have also reduced matching contributions.

The benefit cuts were detailed in a draft of a company news release, dated for this Wednesday, according to the Detroit News. In that document, Ford Chairman and Chief Executive Officer William Clay Ford Jr. called the moves painful but necessary and said more actions are to come.

Other Cuts

In addition to the matching contributions, health care premiums and prescription drug co-payments will increase for U.S. salaried workers, and American salaried retirees will begin making monthly contributions to their health care plans next June.

No merit salary increases will be given to Ford's top 2,200 executives worldwide next year, as the firm plans to rely more heavily on stock options to compensate top managers.

Other cost cutting moves include:

• suspension of Ford leadership training programs
• merger of its car and truck engineering divisions
• a 7% cut in payments to contract labor firms
• elimination of bonuses for the company's top 6,000 executives

The automaker is also expected to eliminate one of two production shifts at its pickup truck plant in Edison, New Jersey, effective next February, laying off 600 hourly employees and an unspecified number of salaried workers.

Carly's doing it. John's doing it. So are Gordon, Don and Leo.

Even James E. Cayne, the chief executive of Bear Stearns, whose executives have been widely criticized as paying themselves well — no, very well — is doing it.

After years in which executive pay marched steadily, if controversially, upward, the trend seems to have begun to reverse course — in many cases at the behest of the executives themselves.

From Hewlett-Packard to Cisco Systems to Continental, American and Delta airlines, executives are forgoing bits and pieces of their compensation with hardly a squeak. Others are accepting severance packages, either willingly or under duress, that weigh in at far less than what departing executives, even poorly performing ones, received last year.

What gives? "The optimist in me would like to believe that pay for performance is actually working," said Cynthia L. Richson, director of corporate governance at the State of Wisconsin Investment Board. "The realistic side of me says that for now, it's probably more of a P.R. move than anything."

Shame, perhaps, is back in vogue. It is moot now, but the biggest example may be the Enron Corporation. A takeover offer by Dynegy in early November automatically entitled Kenneth L. Lay, Enron's chief executive, to a $60 million severance package.

But when employees, many of whom had lost most of their retirement savings in 401(k) plans after the company's stock nose-dived, became incensed, Mr. Lay walked away from the money. "How could Ken Lay possibly have withstood the public scrutiny if he had walked away with that $60 million severance package?" Ms. Richson said. "It would have been almost criminal to take a big fat payoff."

(The Dynegy deal collapsed last week, canceling the payoff anyway.)

It is hardly surprising that chief executives and members of compensation committees are not rushing to the phones to explain their behavior.

But some companies and pay experts would have you believe that executives and board members are insisting that pay match the altered performance of their companies, that as they lay off workers and cut costs to cope with the now-official recession, they are taking a hit themselves.

Last April, for example, John Chambers, the chief executive of Cisco Systems, gave up his right to $268,131 in salary. Cisco's stock dropped 70 percent in the last fiscal year and earnings plummeted as demand dried up for the company's switches and other products. "His request to the compensation committee was that his pay reflect the current state of the business," said Terry Anderson, a spokeswoman for Cisco.

But cynics — and after years of skyrocketing numbers it is easy to be cynical about executive pay in America — say that much of the sacrificing is more style than substance. In reality, they say, executives and boards are just finding creative ways to cut cash compensation while making up the loss in ways that take advantage of weak disclosure requirements.

Supplemental pension plans are rising in popularity, experts say. They ensure rich retirement pay for executives, and with limited disclosure, because companies can bundle all their pension liabilities, obscuring the increases aimed at senior managers. Companies like Motorola, McKesson and Hershey have all adopted such plans.

Gaining favor, too, are special trusts, like the one designed for John F. Welch Jr. when he left General Electric in September. It allows him to pass his wealth on to future generations with few or no tax penalties.

Ms. Richson of the Wisconsin agency, whose responsibilities include investing state pension money, said that at a recent conference on executive pay, some panelists — including corporate executives, compensation consultants and members of board compensation committees — were very concerned about making executives whole in a time when stock options and other noncash goodies had become worthless.

The real-life models are starting to stack up. "Look at Cisco," complained Graef S. Crystal, a compensation expert who is one of the biggest critics of compensation practices. "There was a case where, yes, Chambers did cut his pay and his bonus — but then he gave himself monstrously more options than the previous year, so his total pay actually went up."

Mr. Chambers received six million options in the last fiscal year. First, in November 2000, he got four million with a strike price of $50 under the company's regular stock option program. Then, in May, when Cisco's board decided to hand out additional options to keep employees motivated, he received an additional two million with a strike price of $18.50.

"The size of the second option grant was not recalibrated to make up for the reduction in his salary or the fact that he did not receive a bonus," said Ms. Anderson, Cisco's spokeswoman.

She said the options were disbursed at the board's discretion — not at Mr. Chambers's demand — and that there was no way to know what the options would be worth until they were cashed out. "All grants approved by the compensation committee are based on competitive norms and are applied to all Cisco employees, not just John," she said.

The motives of the airline chief executives — Gordon M. Bethune at Continental, Donald J. Carty at American and Leo F. Mullins at Delta, among others — also raise questions. After the attacks on the World Trade Center and the Pentagon, each gave up his salary for the remainder of the year. But their magnanimity coincided with the $15 billion government bailout for the industry and thus appeared to be a sort of quid pro quo.

Or consider Jacques A. Nasser, who was ousted as chief executive at Ford Motor in October. Although the details of his severance package will not be known until next spring, it is clear from initial regulatory filings that he will receive awards of stock for the next two or three years.

Moreover, he will receive "restricted stock units" this year as if he had met all his performance goals, which he did not: Ford's profits have dropped, the company became involved in a bitter and expensive fight over faulty tires with Bridgestone, and the acquisitions that were the hallmark of Mr. Nasser's reign depleted its cash surplus and have yet to pay off.

But 18 months after his retirement, Mr. Nasser will have the right to exchange those stock units for cash equal to the value of an equivalent number of Ford common shares. In other words, if his successor, William Clay Ford Jr., manages to fix the mistakes that Mr. Nasser made, Mr. Nasser will benefit.

If these were real pay cuts, they would prove that the compensation revolution of the 1990's actually worked.

A decade or so ago, shareholders started demanding that executive pay reflect corporate performance. Compensation committees responded by designing pay packages that relied increasingly on stock, options and other stock instruments in the name of more closely aligning a manager's interests with those of investors.

That worked fine while the economy was in overdrive. Big investors and critics grumbled about how huge pay packages had become, but their complaints carried little weight as stocks kept reaching new highs.

But when the Internet bubble popped last year and the economy then started running out of steam, companies did not seem willing to let the principle of pay for performance work in reverse. Boards scrambled to reprice options to mitigate the impact of sharply lower stock prices, and even executives who were blamed for major mistakes walked away with severance packages fit for royalty. Among them was Jill E. Barad at Mattel, who received roughly $50 million and other perks.

To be fair, some executives did take hits. A study released last spring by the William M. Mercer consulting firm showed that 13 percent of executives at 350 of the country's biggest companies received no bonus in 2000 and that 22 percent had their salaries cut, although by how much was unclear.

"There are now many more swings up and down in compensation," said Peter T. Chingos, head of Mercer's executive compensation consulting practice. "Those companies that continue to do well will pay well, and those that haven't will continue to see declines in pay."

But whether the cuts are real or just so much smoke and mirrors is a matter of debate. Compensation consultants say the question will not be answered until next spring, when most companies file their proxy statements.

"It is happening, but whether it's wholesale, I'm not sure," said Judith Fischer, head of Executive Compensation Advisory Services, a consulting firm. "Until companies start reporting their payouts in March, we won't know for sure if it was a movement that was universal or whether it is just industry-related."

Nonetheless, institutional investors and compensation consultants, as well as corporate boards, are watching the developments leading up to the proxy season with eagle eyes, because the outcome will perhaps settle, for now at least, the persistent question of whether the principle of pay for performance really works.

"I think you're going to find that this is a vindication of pay for performance," said Ira T. Kay, practice director for compensation consulting at Watson Wyatt Worldwide. "It isn't so much that the executives are being magnanimous or eleemosynary, it's that they're just getting ahead of what boards of directors would do anyway."

Or one-upping them. In Mr. Chambers's case, the board slashed his salary to $268,131 from $323,319, but he asked to take home only $1 until the company's performance turns around.

Then there is James L. Payne, the new chief executive at Nuevo Energy, an oil and gas company based in Houston. Mr. Payne stunned the compensation committee as a new recruit this fall when he asked to be paid entirely in company stock.

"Our jaws dropped when he came in and asked for that," said Prof. Charles Elson, head of the University of Delaware's Center for Corporate Governance and of Nuevo's compensation committee.

Mr. Payne's situation was somewhat unusual — he had headed the Santa Fe Snyder Corporation and received a nice severance package when it was sold to Devon Energy.

Nonetheless, his compensation package aligns his fate far more closely with that of Nuevo's shareholders than most executive compensation packages do.

At least a few boards seem determined to make pay for performance work in bad years as much as it did in good ones — mostly, perhaps, when the pain is spread, not concentrated in the boardroom. Ford rescinded bonuses this year for some 6,000 senior managers who collectively received $442 million in bonuses last year. In explaining the move, the company cited the deteriorating economy, market conditions and the costs of replacing Firestone tires on its cars.

The board of Campbell Soup came up with a novel way of dealing with options that were under water, or worthless, that involved neither repricing them nor issuing a slug of new options at a lower strike price — practices that incited cries of fury last year from shareholders at other companies.

In the fiscal year ended July 31, Campbell exchanged about 4.7 million options issued in 1997, 1998 and 1999 that were out of the money for a million restricted shares that vest over a period two to four years longer than the original options. In other words, executives who participated in the program will receive fewer shares and have to wait longer to get them.

Mr. Kay says he has attended board sessions at other companies where directors are playing hardball. "I've been in 10 board meetings over the last six months where clearly 70, 80, 90 percent of outstanding stock options were under water, and there was no intention to do anything about it," he said.

Cisco's board also eliminated cash bonuses for senior executives, as did the directors of Siebel Systems. Siebel also cut executive salaries by 20 percent and froze other salaries.

The Tribune Company plans to cut salaries for its top 140 executives 5 percent starting on Jan. 1, and they will get no bonuses this year. The company will also award merit-based raises for its other 18,000 nonunion employees in stock options, not cash.

Investors are continuing to be pushy, perhaps even pushier, although their activities are sometimes less than obvious. Earlier this month, Jeffrey Steiner, chief executive of the Fairchild Corporation, which makes nuts, bolts and other products used in airplane construction, was forced to defer part of his compensation after Mario J. Gabelli, head of Gabelli Asset Management, which controls about 11 percent of the stock, complained that Fairchild's pay packages did not match the company's performance. Mr. Steiner and four other Fairchild executives agreed to defer one-quarter of their cash compensation for the fiscal year ended in June. Mr. Gabelli did not return calls.

But some executives, perhaps aware of how they will look, are moving on their own, at least with cash.

Last year, Carleton S. Fiorina, chief executive of Hewlett-Packard, gave up her contractual rights to a minimum guaranteed bonus of $1.25 million. Because the company failed to meet its profit targets for the year, Ms. Fiorina asked the board not to pay her the $625,000 bonus she was promised for the second half of the year.

She did, however, still take home $2.1 million in cash.

The other seven members of the executive committee did the same, giving up a total of roughly $1 million. "If you miss your numbers, there are going to be consequences — and that means everyone," Ms. Fiorina told Business Week last December.

More recently, she said she would not take the $8 million bonus that would be hers if Hewlett-Packard's acquisition of Compaq Computer was completed. That pushed Michael D. Capellas, Compaq's chief executive, to say he would forgo the $14 million he would have received.

The members of the executive committee at Bear Stearns voluntarily gave up 50 percent of their bonuses this year, about a 70 percent reduction from last year. That made Bear Stearns the first big Wall Street firm to share the pain among executives as well as the rank and file.

Mr. Cayne, the firm's chairman and chief executive, will thus take home cash compensation of about $15 million, down from $33 million last year.

Thomas M. Siebel, chairman and chief executive of Siebel Systems, voluntarily gave up his $1 million salary in July.

At Cisco Systems, Mr. Chambers did the same. According to a person familiar with his decision, he asked the board to use his salary to retain two employees whose jobs were at risk, instead.

(11/28/01) A flurry of lawsuits filed against ailing energy giant Enron Corp. have highlighted potentially devastating consequences of employee retirement plans that lean heavily on investments in the employer's stock.

Enron workers, their jobs at risk after Dynegy Inc. pulled out of a deal to buy the company and keep it afloat, have also lost huge sums on Enron stock held in so-called 401 (k) accounts, wrecking their dreams of a comfortable retirement.

``Some of our pipeline employees who have been with the company a long time were millionaires and they were counting on that money. My heart really goes out to them,'' administrative assistant Linda Vargo said on Wednesday.

Vargo, 55, said she considered herself fortunate because she has been working at Enron for just over two years and had not yet joined the company's 401 (k) retirement savings plan.

Retiree advocacy groups and attorneys said the big losses caused by the dizzying decline in Enron's share price have exposed fatal flaws in the 20-year-old 401 (k) system on which Americans depend increasingly for their retirement income.

``Employees are often encouraged to put a great deal of money in their employers' stock and the result can be disastrous,'' said Karen Ferguson off the Pension Rights Center in Washington D.C.

LUCENT ALSO FACES PENSIONS SUIT

Seattle-based attorney Lynn Sargo, who is pursuing one of four employee lawsuits against Enron and a similar case against telecommunications equipment giant Lucent Technologies Inc., said the law governing 401 (k) plans must change.

``It is clear that additional regulations need to be put in place because Lucent and Enron are both typical examples of large American corporations and if such a disaster can happen to them, then you have to ask if the current laws are adequate,'' he said.

The suits filed against Enron and Lucent make similar allegations that executives failed in their fiduciary duty to employees by encouraging them to invest in company stock even when they knew their companies faced big problems.

Enron and Lucent both saw their share prices fall steeply amid similar scenarios involving a severe loss of investor confidence, allegations of murky accounting, over-optimistic projections and the sudden departures of top executives.

Enron's stock fell from a high of $90 in August 2000 to close at 61 cents on Wednesday. Lucent's stock fell from a December 1999 high of around $84 to a low in June 2001 of just over $5 and closed at $7.55 on Wednesday.

BREAKING A GOLDEN RULE OF INVESTMENT

The sharp fall in Enron's stock has hurt people like employee Roy Rinard who was heavily invested in Enron stock. ``I'm basically wiped out,'' said the 54-year-old Rinard, who lost over $400,000 as a result of investing all of the funds in his 401 (k) retirement account in Enron stock.

Rinard says he now realizes that he broke a golden rule of investment: don't put all your eggs in one basket; spread your risks by diversifying your holdings.

But he was not alone. According to one lawsuit, the Enron retirement savings plan had assets worth $2.1 billion at the end of last year and Enron stock made up $1.3 billion of that total.

Traditional ``defined benefit'' retirement plans are subject to a 10 percent limit on investments in employer stock, but there is no such limit for ``defined contribution'' plans like the 401 (k).

U.S. Senator Barbara Boxer tried a few years ago to have the same limit apply to 401 (k) plans, but the measure ran into vigorous opposition from employers who wanted to retain the right to make their matching contributions in their own stock.

As the rules stand companies are allowed to make all of their matching contributions in their own stock and workers may also put all of their own money into company stock too.

Diversification is thwarted in many cases by regulations that prevent employees from selling company stock before they reach a certain age -- 50 in Enron's case.

James Delaplane of the American Benefits Council, an employer group, said the 401 (k) system places great responsibility for retirement savings on individual workers.

``There are people who think that's the greatest thing since sliced bread and there are people who think that's the worst thing,'' he said.

Delaplane said his organization wants to preserve employers' right to contribute company stock to employee retirement plans but also supports efforts to educate workers so that they can make better informed investment decisions.

David Certner, a pensions specialist with the American Association of Retired Persons (AARP), said there is plenty of work to be done in that area.

``Many employees aren't aware of basic rules of investing, nor of the meaning of diversification. Some actually view employer stock as a less risky investment than a mutual fund,'' he said.