• Strategy
  • CFO.com | US

Five Empty Boxes, and More

Microsoft settles, risk managers unsettled, and an auditor scorned. Plus: Tyco's shipping news.

Who had a swell week? Who had a lousy week? Read on, MacDuff.


1. Arthur Krause

This week, Sprint Corp. announced that CFO Arthur Krause is retiring. Krause, 60, deserves a little golf time. He started at Sprint 31 years ago. 31 years. To give you an idea: when Krause first started at Sprint, the company’s entire long-distance service consisted of two carrier pigeons named Gus.

By all accounts, Krause has done a masterful job at Sprint. He took over as the company’s finance chief in 1988. Over the past fourteen years, the company’s sales have skyrocketed. Last year, despite a down market for telcom providers, Sprint reported net operating revenues of $26 billion.

Observers say Krause played a crucial part in growing Sprint into one of the largest phone companies in the world. Robert Dellinger, one time CFO of General Electric Motors, will replace Krause. He’s got some big shoes to fill.

In case you’re wondering, Sprint started out as the Brown Telephone Company in Abiline, Kansas in 1899. It did so.

2. Shareholder Activists

The Nell Minnow/CalPers set finally had something to cheer about. On Thursday, both Nasdaq and the New York Stock Exchange came out with stricter regulations for corporate governance.

It’s a long time coming. Between analysts apparently shilling for their investment banking colleagues, and CEOs treating off-balance sheet vehicles as personal cash machines, investors have been taking it square in the teeth lately. What’s really annoying, however, is that many C-level executives seem to have lost sight of a basic tenant of governance: shareholders own the joint.

Whether the proposals from Nasdaq and NYSE make a difference remains to be seen. Both proposals, which need to be approved by the SEC, address board and auditor independence. It may be days late — and billions of dollar short — but it’s a start.

3. Borrowers

According to Standard & Poor’s, the corporate default rate, as well as the number of companies suffering major credit problems, is starting to decline.

The 12-month junk bond default rate for U.S. companies fell to 9.57 percent in May from 10.26 percent in April, according to the credit rating agency. The default rate for European Union countries fell to 10.95 percent from 11.68 percent.

Currently, $19 billion worth of rated bonds are currently in a precarious credit position described as the “weakest links.” But that’s still less than the $24 billion of weak-link debt in April, $34 billion in January.

“The decrease in the number of weakest links supports the declining default rates,” says Diane Vazza, head of S&P’s global fixed-income research, said in a report. She’s looking for a “moderate deceleration in defaults” throughout 2002.


Your email address will not be published. Required fields are marked *