Total Pageviews

Tuesday, September 25, 2012

Advice on Starting a New Job

When one of my nephews recently completed college and found a terrific new job, I sent him an abbreviated version of what follows.  This is in line with other posts on this blog in the past, such as “How To Impress People In a Conversation” (see Related Posts below).  When I took my own first major job my father gave me three pieces of advice that I thought I'd pass on with the hope that it will help anyone trying to put a steady foot on the path to success. Here they are:
1. Be worth more than your paycheck. If your performance is clearly of a caliber that you're being underpaid for the great effort you're putting out, you're much more likely to be noticed and promoted. An employee who is clearly valuable is likely to be offered a better job if he/she is currently not being paid enough.  If other potential employers are sniffing around you, make that known to your bosses too, which can lead to a promotion and/or raise (unless you don't want to stay where you are, at which point, you accept the new position and, like Bugs Bunny with Elmer Fudd, you kiss the old boss on the forehead and zip out the door).
2. Blow your own trumpet. If you’re doing great things, make sure your bosses know about it and realize how very valuable your contribution is to the company. Unless you emphasize your worth it may get taken for granted. My father was a career Air Force officer for much of his life, and he was very, very good at taking over command of a major mess and straightening it out in short order.  His boss would be very impressed, but often transferred himself.  The new boss would come in, see how smoothly things were working, and assume that Bob Whaley had it easy and didn’t deserve much commendation.  Meantime higher up in the Air Force others would remember how good Whaley was, and he’d be transferred to straighten out yet another mess.  W.S. Gilbert once commented:
You must stir it, and stump it
And blow your own trumpet,
Or, trust me, you haven’t a chance!
3. Don't get your dick caught in the cash register. This colorful advice speaks for itself, but sex with fellow employees almost never ends well, and frequently means one of you must leave.  Sex is a great complicator of all endeavors, and its seductive charms can strike without warning.  One minute you’re contemplating making an important client phone call and the next your eyes go wide and your jaw drops open as the most beautiful man/woman you’ve ever seen steps into view.  If he/she finds you equally attractive, you two can slam together like magnets.  As exciting as these moments are they’re a disaster if they occur in the workplace.  They most definitely will cause trouble.  When the fling is over you must still interact with your former paramour, and that can be as minor a matter as a mere annoyance or as big a one as a lawsuit.
But it’s almost useless to give this advice to anyone because in the heat of the encounter, when your heart is pumping adrenaline into your system and the pheromones are colliding all over the room, it’s almost impossible to stop a train that’s quickly already at top speed.  Here’s another Whaley saying: when the cock goes up, the brains go down.  Perhaps it helps to just memorize the rule above about the cash register and make it one you never violate.
There is a famous joke that goes like this: a man comes home from his job at the pickle factory and tells his wife that he has this strange desire to stick his dick in the pickle slicer.  His wife is horrified, but he reassures her that he has the urge well under control.  However, a week later he comes home and sadly informs her that he succumbed, and in fact did stick the named appendage in the pickle slicer.  She is horrified, and asks him, “My goodness!  What happened?”  He replies, “I got fired.”  “But what about the pickle slicer?”  “Oh,” he tells her, “she got fired too.
My point in telling this joke is that workplace dalliances not only can lose you your job, but, of course, your happy family life.
In any event, congratulations on your new job!  Now do it well.
Related Posts:
“The Thunderbolt,” September 3, 2010
“How To Impress People in a Conversation,” October 1, 2010
“Men, Women, and Pornography,” December 10, 2010
Fear of Public Speaking and How To Overcome It,” January 4, 2011
“Life’s Little (But Important) Rules,” April 23, 2011
“The Thrill of a Touch,” August 13, 2012
“A Guide to the Best of My Blog,” April 29, 2013

Wednesday, September 12, 2012

Mitt Romney, Leveraged Buyouts, and Morality

This past summer I taught a course in Debtor-Creditor Law at The Ohio State University using the textbook I wrote on this topic with Professor Jeffrey Morris of the University of Dayton Law School.  The first chapter the book covers “fraudulent transfers,” which means various devices used by debtors or creditors to work fraud on others (such as competing creditors).  The chapter ends with a discussion of leveraged buyouts as fraudulent transfers.

A leveraged buyout (LBO) is a controversial method of acquiring a corporation. Suppose you are a savvy investor who comes across an ailing corporation. You believe that if you could take over the corporation you could provide sufficient clever leadership so as to restructure it and make it profitable. You decide to purchase controlling stock in the corporation, but there’s one difficulty: you’re unwilling to risk much money. Undaunted, you persuade the current owners of the stock and a local bank to cooperate in the following suspicious scheme: the bank will loan the corporation the money to buy the stock from its current owners (but the amount of this loan will be given to you so you can buy the stock), with the bank taking as collateral an interest in the assets of the corporation, which the current owners of the stock will vote to grant to the bank.  [The corporation, as the borrower, itself will have to pay off this debt to the bank.] Why would the current owners go along with this outrageous plan which loots their own company?  Because that way they can sell their stock before the company goes under, but if they wait they will get nothing in the bankruptcy that’s likely to follow.  You sweeten your offer by putting up a small amount of the purchase price yourself.

Thus is the property of the corporation “leveraged” (read “misappropriated”) to allow the buyout to occur. Such is a classic LBO.  The existing creditors of the corporation (and its employees too) will usually object vehemently to this new encumbrance on the corporate assets, and if the corporation itself had a voice other than the selling stockholders it would surely complain that it received no value in return for the transfer of an interest in its property to the bank.  When the smoke has cleared you, the savvy investor, have bought a majority interest in a corporation, but paid little money for your new asset.  It’s a strange “purchase” that costs the buyer almost nothing to buy something.  If your prediction proves right and you fire employees, cut costs, trim fat, and make the corporation profitable again, then you gain hugely—you’ll own the controlling stock in a profitable business.  If not, and the looted corporation fails, you walk away whistling, having lost nothing, and in fact gained whatever you paid yourself for running the company before it crashed.

When LBOs fail, and the corporation collapses because after leveraging it had insufficient assets to keep going, the courts have often found that the selling stockholders, the buying new stockholders, and the bank that took a loan using the assets of the corporation but then paid the loan amount to the new stock purchasers are all guilty parties to a fraudulent transfer of the corporate assets, and thus required them to cough up their ill-gotten gains (the remedy is civil, not criminal).  For a thorough analysis of all this see the splendid opinion of Bankruptcy Judge Samuel L. Bufford in Bay Plastics, Inc. v. BT Commercial Corp., 187 B.R. 315 (Bankr. C.D.Cal. 1995), which I use as a central case explaining leveraged buyout fraud in my textbook.  Judge Bufford explains that a LBO that is
leveraged beyond the net worth of the business is a gamble. A highly leveraged business is much less able to weather temporary financial storms, because debt demands are less flexible than equity interest. The risks of this gamble should rest on the shoulders of the shareholders (old and new), not those of the creditors: the shareholders enjoy the benefits if the gamble is successful, and they should bear the burdens if it is not. This, after all, is the role of equity owners of a corporation. The application of fraudulent transfer law to LBOs shifts the risks of an LBO transaction from the creditors, who are not parties to the transaction, back to the old and new shareholders who bring about such transactions.
Mitt Romney took over Bain Capital when he was in his 30s and in the beginning the firm concentrated on venture capitalism, meaning that it invested in companies and helped them grow.  Staples is one of its major success stories.  But Romney then decided that there were much greater profits and less risk involved in leveraged buyouts, and in his fifteen years of running the company he made Bain the king of LBOs.  In a Time Magazine cover story on this called “The Mind of Mitt” (September 9, 2012), the writer Barton Gellman first compares an LBO to buying a farm by making the farmer take out a mortgage to finance your purchase, and then describes in detail how Bain operated:

As the new owner, Bain Capital will demand that the company squeeze costs, close money-losing divisions and shift resources to more profitable lines of business. Sometimes—more often than its peers—Bain Capital will buy a company and stay with it for years, improving management and restoring it to health. Other times it will shutter factories, lay off workers and leave a company loaded with debts it cannot pay. In either case, Romney's firm will boost its own profit or cushion its risk by charging the company special dividends for its services and by structuring the deal to take advantage of tax and regulatory rules. These transaction features, known as tax arbitrage, can easily reap enough profit to let Romney come out ahead even if a company fails. . . .

In his management-consulting years, Romney and his team used the starkest of images to persuade corporate executives to cut loose unproductive assets. They compared the benefits to "a forest fire—it clears out the detritus even if you lose some animals in the short run," one colleague explained. "We would say to CEOs that all of their different divisions and businesses are like the little hatchlings in a nest," says McCurry, another Bain & Co. colleague. "When the momma bird shows up with a worm, all those little open beaks are down there sending the signal 'Give the worm to me!'" He added, "Where the CEO needs help is to know you can't give everybody what they want." . . . 

There have been times when Romney acknowledged the ruthlessness of the marketplace. Twelve times in [Romney’s book] No Apology, he embraces "creative destruction." 

The Bain Boys Celebrate (click to enlarge)
There’s nothing wrong with taking over an ailing company and ruthlessly taking steps to restore it to financial health.  That’s good business and laudable.  But what is wrong is to do so by gutting the company of its unencumbered assets—assets that the other creditors were counting on to pay debts owed to them, as were the employees for the stability of their paychecks—setting things up so that by gambling with the company’s assets and not your own money you are in a win-win situation even where everyone else suffers (except the selling stockholders, who also escaped unharmed).  Where the buyer of stock risks little because the sale is financed by looting the company to pay for the purchase (a practice hurting innocent parties right and left), that’s despicable.   

In a recent article Rolling Stone article called “Greed and Debt: The True Story of Mitt Romney and Bain Capital,” August 29, 2012, which calls an LBO “financial piracy” and explains all of this in much more detail [see], we are given many examples like this one:

Take a typical Bain transaction involving an Indiana-based company called American Pad and Paper. Bain bought Ampad in 1992 for just $5 million, financing the rest of the deal with borrowed cash [$35 million]. Within three years, Ampad was paying $60 million in annual debt payments, plus an additional $7 million in management fees. A year later, Bain led Ampad to go public, cashed out about $50 million in stock for itself and its investors, charged the firm $2 million for arranging the IPO and pocketed another $5 million in "management" fees. Ampad wound up going bankrupt, and hundreds of workers lost their jobs, but Bain and Romney weren't crying: They'd made more than $100 million on a $5 million investment. . . .

Romney has always kept his distance from the real-life consequences of his profiteering. At one point during Bain's looting of Ampad, a worker named Randy Johnson sent a handwritten letter to Romney, asking him to intervene to save an Ampad factory in Marion, Indiana. In a sterling demonstration of manliness and willingness to face a difficult conversation, Romney, who had just lost his race for the Senate in Massachusetts, wrote Johnson that he was "sorry," but his lawyers had advised him not to get involved. (So much for the candidate who insists that his way is always to "fight to save every job.")  

In his private life Mitt Romney is a kind, compassionate, and deeply religious man, and all the available evidence shows this to be true.  As a Mormon he’s devoted much of his time selflessly to the care and comfort of other Mormons in distress, a fact he has not publicized and for which he deserves much credit and approbation.  I applaud him for it. 

But in business he’s made a fortune out of a slimy practice that, while not criminal, is a moral sewer.
Related Posts:
“President Mitt Romney?” April 21, 2012
“Ohio To Put Guns in Baby Strollers,” June 17, 2012
“Obamacare, John Roberts, and the Supreme Court,” July 3, 2012
“Supreme Court Overturns Roe v. Wade!” August 27, 2012
“Mitt Romney: A Mormon President?” October 17, 2012
“A Guide to the Best of My Blog,” April 29, 2013

Thursday, September 6, 2012

Doug Update: Health, Acting, Book Readings, and Snowbirding

Just a general report on current activities and plans: 

Health:  Many people have kindly enquired about my health, given that last year I nearly died and there were a number of posts about that (see below).  Since July of 2011, however, my health has been perfect, and I have no complaints at all.  I’m back to a steady workout, the biopsies on my heart have all been terrific, and for a man about to turn 69 (yikes!) this month (September 25), I’m in great shape.  Thanks for your concern.  I plan to be around for decades.


Acting:  I’ve accepted the part of Max, the crazy head of the household in Harold Pinter’s famous play “The Homecoming,” which will open at Columbus Civic Theater on October 18th and run for four weeks (Thursday, Friday, Saturday nights at 8 pm, with a 2 p.m. matinee on Sundays).  Tickets can be reserved by calling the theater at (614) 447-7529 or on CCT’s website:  The picture below is from CCT’s production of “Hamlet” last year in which Ben Gorman had the title role, and Britt Kline and I played the Queen and King.


Book readings:  I’ve been doing one or more readings from my atheist thriller “Imaginary Friend”—available on Amazon and Kindle—at various venues since last March (twice in Columbus, and once each in Cleveland, Mansfield, and Toledo), and have one scheduled in Columbus at Ohio Wesleyan University Freethinkers meeting on Thursday, September 20 [!/owufreethinkers], in Akron on October 1st for the  Akron/Canton Chapter of the Center for Inquiry of Northeast Ohio [6:45 p.m. at the Stow - Munroe Falls Library, 3512 Darrow Road (Route 91), Stow, OH 44224], and on November 18th I will make my first foray out of state to do a reading for the Michigan Atheists monthly meeting, 3-7 p.m., at the China Star Place, 270 S. Wayne Rd., Westland MI 48186 (phone 734- 326-1210).  These have all been huge fun, and I’ve sold a lot of books at these events at $10 a pop.  They’re all open to anyone who wants to attend, so feel free to come by and see my dog and pony show.


Snowbirding:  For the past two springs I’d gone to Wilton Manors FL (just north of Fort Lauderdale) to visit my old friends Wayne Pawlowski and Ted Heath, a gay married couple who will have been together thirty years this coming January.  I discussed and put photos of their lovely home, fittingly named Flamingo Court, in a post entitled “Long Lost Cousin at Flamingo Court.”  In the winter Wilton Manors is obviously a paradise (though I suspect the summers are hot, humid, and filled with mosquitoes so large they have names).  Ohio in the winter (except for this past glorious one) is cold and dangerous, so I began to think about going to Florida for early 2013.  Wilton Manors is 40% gay according to the last census (!), and since most of the gays are male and—because it’s not cheap to live there—older, it also occurred to me that if I’m going to find Mr. Right at my advancing age, perhaps Wilton Manors is the very place to do it.  So I made some inquiries and the next thing you know I rented half a duplex from January 1 until the end of March of this coming year.  I have a niece that I barely know who lives near there, and also  my cousin Judy, who’s a bridge expert and has promised to help me get enough points to become a Life Master (a bridge rank that I’m very near to obtaining).  So the cats and I will have a temporary Florida home in our immediate future. 


Maybe I can do some theater and/or book readings in the Sunshine State, and it will certainly be better for my health than slipping on my icy driveway as I go out to get the mail every day.

Related Posts:
“My Atheist Thriller: Another Book Reading,” May 17, 2012
“Book Reading Next Week of My Novel ‘Imaginary Friend,” April 7, 2012
“Long Lost Cousin at Flamingo Court,” March 31, 2012
“Mama Cat Saves My Life,” October 23, 2011
“Walking Away From Death,” February 29, 2012
Speed-Dating Agents As I Pitch My Novel at ThrillerFest 2012,” July 17, 2012
“Another Opening, Another Show: Doug is in ‘Hamlet,’” April 29, 2011
"Barney Cat and the Big Mammal Nightmare," January 7, 2013