Thanks to technology, fewer senior executives and managers are getting away from the office while on vacation.
Fifty-eight percent of business leaders make themselves available to their employees and clients daily, regardless of whether they’re on vacation, according to a survey conducted by NFI Research.
Out of the 235 senior executives and managers polled, 11 percent say they are extremely available and 47 percent are somewhat available.
When business leaders are supposed to be taking time off, 74 percent say they check their e-mail, 57 percent use a computer, 55 percent use the Internet while 54 percent use a Smartphone or PDA, the study showed.
With this available technology, 42 percent of senior executives and 13 percent of managers are likely to be communicating with the office, making them more available to work even while on break.
Employees and managers of smaller companies are more likely to stay in touch with the office than those in medium or larger companies.
Standard & Poor’s downgraded the debt of some of the nation’s largest carriers on Friday, saying high fuel prices are likely to cause heavy losses this year at American, United and Northwest Airlines.
S&P airline analyst Philip Baggaley said that in general, carriers face "perhaps a bit greater risk of liquidation" although he quickly added, "We think the airlines we’ve reviewed here are large and viable airlines."
He said the airlines have enough cash for the next several quarters. But he is more concerned about later next year because some of that cash is likely to be gone, and because the relief on lending covenants won by American, United and Northwest will be expiring.
"If we’re still in this weak environment a year from now, it could begin to get more uncomfortable," he said on a conference call.
Airlines have been reducing capacity and raising prices to pay for more expensive fuel, which is now the single largest expense at most carriers. But Baggaley pointed out that they’re in their best cash-generating months right now with the busy summer travel season.
He lowered the long-term corporate credit ratings on American, the nation’s largest carrier and its parent, AMR Corp., further into junk — to ‘B-’ from ‘B’ — and did the same for United and its parent UAL Corp. The outlook for both is negative. Northwest Airlines Corp. also went one notch further into junk, to ‘B’ from ‘B+’ with a negative outlook.
Baggaley said AMR could lose $2 billion or more this year, not including accounting charges. He wrote that American is modernizing its fleet "to replace fuel-thirsty MD80s with new B737-800s, but this will take a long time, as its fleet includes more than 300 MD80s."
Baggaley wrote that United parent UAL Corp (UAUA, Fortune 500).’s $2.9 billion in cash and short-term investments at the end of June will be adequate in the short run. But he expects losses of more than $1 billion for 2008 not including accounting charges, with further losses (possibly smaller) in 2009.
He said Northwest’s loss for the year could be more than $500 million before accounting charges. It had a second-quarter operating profit of $170 million — the best of the hub-and-spoke carriers. But it also benefited from a $250 million gain on hedges that will help pay for future purchases of expensive fuel.
He called Northwest’s performance "relatively good" but said its profit and cash flow outlook is still weak, and said he expects Northwest’s unrestricted cash of $3.3 billion to erode as the year goes on.
In afternoon trading, AMR (AMR, Fortune 500) shares rose 33 cents, or 4%, to $8.48. United shares rose 42 cents, or 5.6 percent, to $7.87 and Northwest (NWA, Fortune 500) shares rose 17 cents, or 2 percent, to $8.46.
New York State Attorney General Andrew Cuomo Thursday brought a multi-billion dollar civil lawsuit against the Swiss banking giant UBS for allegedly pushing everyday investors into buying troubled auction-rate securities.
The lawsuit charges UBS (UBS) with falsely marketing and selling auction-rate securities as safe, cash-equivalent investments at a time when the market for these securities was under severe strain.
"Today we bring the first nationwide lawsuit against UBS, seeking to recover billions of dollars for customers and sending a resounding message to the rest of the industry that this type of deceptive behavior will not be tolerated," Cuomo said.
The state’s investigation also revealed that top UBS executives sold off approximately $21 million of their personal holdings of auction-rate securities, after they learned of troubles in this segment of the market.
"You can’t have two sets of rules - one set of rules for customers and one for senior officials," said Cuomo.
New York’s top law enforcement official noted, however, that no charges had been filed against any individuals.
He added that his office was looking at a number of other financial institutions, but declined to provide any further details citing the ongoing nature of the investigation.
UBS issued a statement Thursday, saying it would vigorously defend itself against the complaint.
The company said that it believed that no employee had engaged in illegal conduct and rejected the claim that the firm was involved in a widespread effort to move its inventory of auction-rate securities from its own books.
"It is frustrating that the New York Attorney General has filed this complaint while we have been fully engaged in good faith negotiations with his office to bring liquidity to our clients holding auction-rate securities," said Karina Byrne, a spokesperson for UBS.
Auction-rate securities are long-term bonds that hospitals, cities and corporations sell at weekly or monthly auctions, which many investors, until now, had treated like cash investments. The market for these investments is worth about $330 billion.
The auction-rate security market began to fail in February as the credit crisis took a turn for the worse, effectively locking up the market for these securities.
Instead of purchasing them, banks allegedly sold those investments to average individual investors so as not to have to take them onto their books. Financial institutions like UBS have denied such claims, saying that their brokers fully disclosed the risks associated with these investments.
As of February, UBS had more than 50,000 customer accounts holding about $25 billion in auction rate securities
Cuomo said the lawsuit seeks to get UBS to buy back the securities at their face value.
"They [customers] want their money back," he said. "My job is to get their money back."
Cuomo’s involvement may not bode particularly well for UBS, said James D. Cox, a professor in corporate and securities law at Duke University. But he noted that the suit could also eliminate some of UBS’ other legal auction-rate security headaches.
"UBS could use this as a basis for getting a global settlement and barring all other related suits," said Cox.
In June, Massachusetts state securities regulators filed a civil suit against the firm. And that’s not to mention the numerous individual and class-action suits that have been filed against UBS.
Thursday’s announcement also marks the latest development in the ever-widening auction rate security scandal. A number of Missouri state securities regulators inspected the offices of Wachovia Securities in St. Louis last week, seeking documents related to the sales of auction-rate securities. Wachovia Securities is a subsidiary of Wachovia (WB, Fortune 500), the nation’s fourth-largest bank.
Shares of UBS fell more than 7% on the New York Stock Exchange Thursday.
Apollo Gold Corp. raised $20,401,375 as it completed its previously announced offering of units, the company reported Thursday.
Denver-based Apollo Gold (AMEX: AGT) sold 40,806,500 units, with each one representing one share of stock plus one-half of one common share purchase warrant, for 49.5 cents each (50 cents Canadian).
The company will use the proceeds to fund its proposed acquisition of the St. Andrew Goldfields mill complex in Timmins, Ontario, the development of the Black Fox project, and for working capital and general corporate purposes.
Apollo is a gold mining and exploration company.
Indonesia's economic growth, which accelerated to an 11-year high in 2007, is “insufficient'' to reduce poverty and add jobs, the Organization for Economic Cooperation and Development said.
The OECD in its first report on Indonesia also said the government needs to reduce subsidies for fuel and electricity and ease labor rules to attract investment and boost growth. Southeast Asia's biggest economy expanded 6.3 percent last year, the most since a financial crisis hit the region in 1997-98.
The Paris-based organization said gross domestic product growth of about 8 percent is needed to pull some 35 million people out of poverty in Asia's third-most populous nation. Labor laws make it tougher to employ workers in Indonesia than in civil-war stricken Sudan, restricting investment.
Economic growth of about 8 percent “will allow a much faster reduction in the gap between relative living standards'' in Indonesia and the OECD, Luiz de Mello, one of the authors of the OECD report, said in an interview. Indonesia needs to “ensure the private sector can contribute to this growth process by investing more and make regulations lighter.''
President Susilo Bambang Yudhoyono estimates Indonesia needs $22 billion of investment in infrastructure projects annually to help boost growth and reduce poverty. The president, who faces elections next year, isn't likely to meet his target of reducing the number of poor people to 5.5 percent of the population, or about 17 million people, by 2009.
Labor Laws
Political opposition has stalled attempts to relax labor laws in Indonesia, where the 8.5 percent jobless rate is the highest in the Asia-Pacific region, deterring investment.
Indonesia, with an economy six times larger than Vietnam, attracted about $6 billion of investment to build factories and set up plantations last year. Vietnam lured $10 billion.
“The private sector can play a prominent role in the growth process, so long as the business climate can be improved considerably,'' the OECD said. “Economic and regulatory uncertainty, deficiencies in law enforcement and infrastructure bottlenecks are among the main barriers to entrepreneurship.''
Indonesia ranks 153rd out of 178 economies in terms of the ease of hiring labor, down from 140th last year, according to the World Bank's annual “Doing Business'' survey. Sudan was 36th in the rigidity-of-employment index, which gauges the degree of labor regulation in a country, better than Indonesia's 44th.
The OECD also asked Indonesia's central bank to “strengthen credibility in the policy regime,'' by reacting “pre-emptively by tightening monetary policy stance.''
The future downtown Scottsdale could encompass more high-rise office buildings and condos, pedestrian friendly walkways, bridges and crossings, more free parking and circulator trolleys that link to other regional transit systems.
Those goals are part of a draft plan being considered for Scottsdale's urban core. Scottsdale would be open to more high-rise, high-density developments in its downtown area if developers and builders offer amenities and benefits that help the city obtain other goals of the plan, officials said.
The plan also looks to develop more medical facilities in the downtown area.
Mexico's central bank raised its benchmark interest rate for the second straight month to curb the highest inflation rate in more than three years.
The bank's five-member board, led by Governor Guillermo Ortiz, raised the key lending rate by a quarter percentage point to 8 percent today, the highest since December 2005. Policy makers said the inflation outlook has worsened and they will raise their forecasts by an average of about half a percentage point in a quarterly report this month.
The peso surged to a five-year high on speculation the central bank may further increase interest rates, which would widen the yield advantage Mexico has compared with the U.S. The Mexican peso is up 6.8 percent this year against the dollar.
“The statement is very hawkish,'' said Alfredo Thorne, head of Latin America research for JPMorgan Chase & Co. in Mexico City. “As long as inflation expectations remain high and there are risks, then they will keep on hiking.''
Thorne said he expects a rate increase to 8.25 percent in August and possibly another one in September.
Inflation in Latin America's second-biggest economy has accelerated for five straight months on rising food and energy costs.
Consumer prices rose 5.26 percent in June, the first month that inflation exceeded the bank's forecast of no more than 5 percent in the second and third quarters of this year. The central bank targets inflation of 3 percent, plus or minus one percentage point.
`Anchored' Expectations
“It is indispensable to keep inflation expectations well anchored,'' the bank said in its statement today. “Monetary policy plays a fundamental role in this.''
The decision matched the forecast of 21 of 28 economists surveyed by Bloomberg. Seven others said the rate would stay unchanged. The bank released its report 22 minutes earlier than scheduled today because of a technical failure, according to its press office.
“The scenario is worse than expected,'' said Luis Flores, economist at IXE Grupo Financiero SA in Mexico City. “Food and energy prices will continue to exert pressure. The central bank is looking at this and decided to raise rates so inflation doesn't get out of control.''
The peso gained 0.3 percent to 10.2048 to the dollar at 12:38 p.m. New York time from 10.2354 yesterday, and earlier it reached a high of 10.1987. The yield on the government's benchmark 10 percent bond due December 2024 rose 14.7 basis points, or 0.147 percentage point, to 9.23 percent, according to Banco Santander SA.
Mexico's Bolsa index has gained 2.4 percent this year in dollar terms, compared with a decline of 14 percent by the Standard & Poor's 500 Index, the benchmark for U.S. stocks.
`No Choice'
Policy makers were forced to raise borrowing costs as annual inflation exceeds the bank's target of no more than 4 percent, said Bartosz Pawlowski, a strategist at TD Securities Ltd. in London.
“It had no other choice but to act,'' Pawlowski said. “The bank has to tackle inflation expectations and do something about the current situation.''
The bank surprised analysts last month by raising borrowing costs for the first time in eight months.
Gray Newman, chief Latin America economist at Morgan Stanley in New York, said the bank's statement today didn't clarify whether policy makers are likely to further increase rates. Newman said Banco de Mexico may give a clearer indication in its July 30 report, he said.
“They didn't send a signal that they're through for the time being,'' Newman said.
Economy
Mexico's government says the economy is less vulnerable to a slowdown in the U.S. than it was during the U.S. recession of 2001. Still, Mexican consumer confidence fell more than economists estimated in June to the lowest since January 2002.
The bank said today it estimates the economy expanded less in the second quarter than it did in the first. Gross domestic product grew 2.6 percent in the first quarter, or 3.7 percent when seasonally adjusted.
President Felipe Calderon on June 18 announced an accord with industry groups to freeze the price of canned tuna, coffee, beans and about 150 other items in a bid to hold down inflation. Wheat, corn and rice have risen to records this year because of shrinking global stockpiles and more demand.
Calderon has also tried to fight higher food prices by lifting import tariffs on corn, wheat, rice and beans in May. He eliminated import taxes on nitrogen-based fertilizer, and cut in half the tax on imported powdered milk.
Paul Klaassen, founder and chief executive of Sunrise Senior Living Inc., announced late Wednesday he is stepping down from his chief executive officer role in November.
Klaassen, who founded McLean-based Sunrise in 1981 along with his wife, Terry, grew what began as a single retirement community into the largest global senior living provider, with nearly 500 communities open and under construction serving 59,000 and with a staff of more than 40,000.
“Throughout my 27 years of leading Sunrise, I have been privileged to see our passion for improving quality of life for seniors fuel our growth from a single community to a thriving organization that has truly helped change the way seniors are served,” Klaassen said in a statement.
Replacing Klaassen as CEO at the next annual shareholders meeting in November will be Mark Ordan, Sunrise’s chief investment and administrative officer. Ordan, who joined Sunrise four months ago, is a founding partner of the Fresh Fields grocery chain and a former executive with Chevy Chase developer Mills Corp.
Ordan also joined the company’s board, effective July 15. Klaassen will become chairman of the board, while the current chairman, Lynn Krominga, will become lead independent director.
Sunrise was at risk over the past year of losing its New York Stock Exchange listing because of delinquent financial reports, and in March filed its 2006 report after an investigation into accounting errors to avoid being delisted.
The company ousted three top executives in December following an internal investigation that uncovered what the company called inappropriate accounting. Sunrise says accounting restatements for 1996 through 2005 cut its net income by $173 million.
Wednesday's company statement said Sunrise will add two new independent directors to its board and that it expects to file its Form 10-K for the year ended December 31, 2007 on July 31, 2008. Following the filing of its 2007 Form 10-K, Sunrise plans to file its quarterly reports on Form 10-Q for 2008.
The company said Klaassen will remain actively involved with Sunrise after his transition from CEO, focusing public policy advocacy, product design, leadership training and visiting Sunrise communities.
Wildfires are threatening homes in California, while East Coast residents brace for hurricane season. Judging by recent catastrophes, people should review their homeowners' coverage to make sure dollar amounts keep pace with current construction expenses.
About two-thirds of U.S. homes were underinsured in 2007 by an average 18 percent, according to data compiled by Los Angeles-based Marshall & Swift/Boeckh, which provides building-cost information for the insurance industry.
Owners often confuse the estimated resale value of their homes, which includes the value of the land, with what it costs to rebuild. The latter is determined by market prices for contractors and building materials, not the local housing market.
“Most policies used to be guaranteed replacement cost,'' said Robert Hunter, insurance director at the Consumer Federation of America in Washington. “That isn't true anymore. It puts people in a rather fragile situation.''
Insurance agents may provide a figure for coverage, but it's the responsibility of homeowners to make sure that's enough. Insurers generally pay up to a set amount, even if it's less than what it costs to restore a home. And, some homeowners mistakenly think they're covered for floods, earthquakes, mold, termites and water-line breaks, according to a 2007 survey by the National Association of Insurance Commissioners in Kansas City, Missouri.
“Companies are always looking at different aspects of homeowners' policies that they may exclude,'' said Marta Arrington, director of consumer services at Florida's Department of Financial Services. “Mold is a good example.''
Hurricane Andrew
While Hurricane Katrina added to pressures on insurers, it was Hurricane Andrew in 1992, which followed wildfires and earthquakes in California, that led to an overhaul of the way the industry wrote homeowners' policies, according to Hunter, who was the Texas insurance commissioner in 1993 and 1994.
Companies turned to consulting firms such as McKinsey & Co. and computer programs with names like Colossus to pinpoint where they were losing money. Results were dramatic, Hunter told Congress in October testimony. Even after record-setting amounts of damage by hurricanes, the insurance industry made $38.5 billion in 2004 and $44.2 billion in 2005, he said.
Thousands of homeowners battled insurers in court after Hurricane Katrina in 2005 on whether damage to their property was due to wind, which is covered by private insurance, or water, which would make the federal flood insurance program liable for repairs.
Inflation Adjustments
Allstate Corp., the largest publicly traded U.S. home and auto insurer, hasn't offered unlimited replacement coverage since the Oakland Hills, California, wildfires in the early 1990s, said Rich Halberg, a company spokesman.
The Northbrook, Illinois-based insurer paid $2 billion to victims of four Florida hurricanes in 2004. Afterward, it undertook a comprehensive review that resulted in new policy exclusions, the purchase of reinsurance to protect against catastrophic losses, and a move away from writing new policies in Florida, Halberg said.
Coverage for excluded items can sometimes be added at extra cost such as riders that automatically adjust for inflation. Customers also can add clauses covering expenses from tougher building codes following a natural disaster. For protection from floods, policies have to be backed by the federal government.
The insurance industry has moved away from a promise to rebuild to policies that stop at a set dollar amount, author Peter Gosselin wrote in his book, “High Wire: The Precarious Financial Lives of American Families.'' It's part of a gradual transfer of risk from companies to individuals, he said.
Hurricanes and Earthquakes
So-called extended replacement cost policies often will cap payouts at 25 percent over reconstruction estimates. This forces homeowners to keep up with local building costs, according to Gosselin's book.
Chubb Corp., which sells policies to higher-income families, said in May it would offer “unlimited replacement coverage'' in Texas. That now makes the coverage available in 41 states and Washington, D.C., said Peter Spicer, a spokesman for the Warren, New Jersey-based company.
States where the insurer maintains a cap are the ones most susceptible to hurricanes and earthquakes: Alabama, California, Florida, Hawaii, Louisiana, Mississippi, South Carolina, Utah and Wyoming, Spicer said. Chubb, the 11th-largest U.S. property insurer, interviews contractors, architects and builders year-round to keep up with building costs.
“In a down real estate market, you may not realize you need more than the market value of your house,'' Spicer said.
Fire Hydrants
In Texas, a homeowner with a $1 million house may pay $2,000 to $2,500 in annual premiums to insure a property with Chubb, according to Spicer. The actual cost depends on location, proximity of fire hydrants and fire stations, security systems and year of construction.
Policies are written annually so insurers can add exclusions. Consumers should talk to their agents at least once a year or when major improvements are made, said Jeanne Salvatore, consumer spokeswoman at the industry-backed Insurance Information Institute in New York.
A policy “may or may not'' cover the costs of rebuilding, Salvatore said. “You don't want to find out when you are filing a claim.''
Democratic Gov. David Paterson clamped down on firms that handle payroll and other services for employers–one of more than 130 bills that he signed into law on Tuesday.
Paterson also announced his intent to veto 16 bills, many pertaining to state offices, criminal laws or civil service issues.
Paterson signed a bill that strengthens the state's regulation of professional employer organizations, or businesses that administer payroll, workers' compensation, employee benefits and other human resources services for employers.
In 2002, the state Legislature mandated that such organizations register with the state, pay filing fees and comply with state labor laws. Bonding, which serves as an insurance policy for a firm's clients, is not automatically required.
But the 2002 law did not authorize the state Department of Labor to punish those who did not follow those regulations.
On Tuesday, Paterson changed that. The new law creates fines of up to $3,000 for a first violation; each following violation would prompt a fine of up to $5,000.
Paterson also signed bills that:
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