The Biggest CEO Mistakes of 2010

The American economy continued to recover in 2010, helping businesses generate record profits and create $1.9 trillion in untapped cash on their collective balance sheets.

Of course, some companies did better than others. In this interview with Sydney Finkelstein, professor at the Tuck School of Business at Dartmouth and author of Why Smart Executives Fail, we discuss the biggest CEO mistakes of 2010.

As you'd expect, former BP CEO Tony Hayward made some of the biggest blunders of the year. Especially memorable was Hayward's decision to watch yacht races while oil was still gushing into the gulf.  And his "I would like my life back" comment during the crisis is likely to go down as one of the dumbest things ever uttered by a CEO. 

President Obama also makes Finkelstein's list of blundering leaders, though he does admit Obama has had a very strong run during the lame-duck session of Congress (successfully passing the tax extension; repealing don't ask, don't tell; passing the START treaty; and passing the 9/11 worker's healthcare bill).

HP's former CEO Mark Hurd makes Finkelstein's list for his behavior involving contract worker Jodie Fisher.  Fisher had accused Hurd of sexual harassment, though an investigation by HP's board of directors found no violations. However, they did conclude Hurd had violated the company's code of conduct.  He proves that it's not always what you do, but how you do it.

A lesser-known executive with a well-known business also makes the list.  Andrew Mason, CEO of daily deals website Groupon, made a huge mistake, Finkelstein says, by turning down Google's $6 billion buyout offer.  Unlike Facebook's Mark Zuckerberg, who rightly turned down billions, Mason would have been wise to take the money and run.  It may be too soon to criticize Mason's decision. Time will tell if Groupon can sustain market dominance.

by Peter Gorenstein in Newsmakers

Home Accounting 101 (everyone should know) .

Get a handle on your finances with this guide. Figuring out your net worth and drawing up a budget is easier than you think.  

Calculate Your Net Worth

Let’s start at the beginning: Before you do anything else, it’s essential to figure out just how much you are worth. The easiest way to do it is to get a pad and pencil and make two lists—one of your assets and one of your liabilities.

 

Your Assets

Start by adding up the current value of everything that you own or have coming to you:

• Cash: Total of your checking and savings accounts, money-market funds, and CDs (certificates of deposit).
• House: The market value of your home.
• Other things of value: This includes jewelry, automobiles, home furnishings, art, vacation home, and such.
• Insurance: Figure out the cash value of all your policies.
• Investments: The current value of stocks and bonds, any rental properties, real estate partnerships, oil and gas partnerships, gold and silver, company stock options, personal collections (stamps, coins, antiques, and such), notes receivable, and the book value of a business.
• Retirement savings: RRSPs, pension and profit-sharing plans, 401(k)s, any deferred compensation, and company savings plans (only count the money you could take if you left the company tomorrow).

 

Your Liabilities

Now add up all your debts—the amounts that you owe to others: 

• Mortgage: Be sure to include home equity loans.
• Loans: Bank, car, and any other loans or notes.  
• Credit card balances or any other outstanding debts.

 

Your Net Worth

Once you have your two lists and have totaled them up, subtract your total liabilities from your total assets. The result is your net worth. Write that figure down. Memorize it. That’s the number that will tell you when you can retire and how far along your are toward reaching your financial goals. Chances are your net worth is more than you think; however, if you find out that you are worth less than you think, let it serve as a wake-up call to revise your budget fast.

 

Get with the Budget

Every household should have a written budget. Some people have the feeling that if they balance their checkbook regularly that should suffice. But focusing only on your checkbook is not a realistic, safe, or forward-thinking way to approach your financial well being. It is also crucial to be honest about your budget, even when you overspend. Again all you need is a pad and pencil.

 

Total Income

Add up all the money that you can expect to receive during the year: 

• Regular paychecks and bonuses.
• Part-time or freelance income.  
• Interest.
• Dividends.
• Other income: Rent on properties, benefits, and so on.

 

Fixed Expenses

Next add up all the payments that you make on a regular basis during the year: 

• Mortgage payment or rent.
• Electricity, gas, and water.  
• Telephone: Home and cellphone.
• Internet service.  
• Alarm service.
• Cable or satellite dish.  
• Insurance: Life, medical, dental, disability, homeowners, and automobile.
• Debt payments: Home equity and car loans.  
• Commuting expenses: Tolls, train or bus tickets, and such.

 

Variable Expenses

Now add up all the payouts you make that vary more widely from month to month: 

• Food and beverages.
• Paper goods: Toilet paper, paper towels, and so on.  
• Car maintenance: Gas, oil, upkeep.
• Home maintenance and other improvement.  
• Furnishings and appliances.
• Clothing.  
• Personal grooming: Haircuts, beauty products, etc.
• Recreation: Dining out, sports or cultural events, movies, museums.  
• Vacation.
• Gifts and contributions.  
• Health care not covered by insurance.

 

The Moment of Truth

Subtract all your annual expenditures from your total annual income. If the total expenditures are less than the total income, you are living within your income; if the expenditures are more than the income, you need to go through your variable flexible expenditures—and some of your fixed expenditures as well—and reduce your spending.

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By Reader's Digest

Dependent VS. Independent Status

Ok, let’s go over a common scenario…

You’re 21 years old, have been living on your own for a couple of years, are legal drinking age and yet you still need your parents information when filling out the FAFSA. It seems unbelievable, but it is true. The US Department of Education considers a student a dependent up until the age of 24 except in certain circumstances. Below I have broken down the difference between an Independent VS. Dependent student.

Independent Status

• You are at least 24 years old on the day you file your FAFSA
• You are or will be enrolled in a masters or Doctoral degree program at the beginning of the school year
• You are married on the day you file your FAFSA
• You are a parent
• You have dependents other than your spouse who live with you and who receive more than half their support from you at the time you apply
• Both your parents are deceased (or were until age 18) a ward of dependent of the court
• You are currently serving on active duty in the U.S. Armed Forces for purposes other than training
• You’re a Veteran of the U.S. Armed Forces.
• You were a foster child after the age of 13.
• You are an emancipated child as determined by a court judge.
• You are homeless or at risk of homelessness as determined by the director of a HUD approved homeless shelter, transitional program, or high school liaison.

If none of the above criteria apply to you, you’re a dependent student – even if your IRS tax status is different, even if you have no idea where your parents are.

That said, in rare cases, your school’s financial aid officer can override the FAFSA results to help you get more aid if you can demonstrate a compelling case that your parents and family provide absolutely no support, and therefore you’re not really a dependent. This is called a professional judgement override and while they are granted extremely rarely, they do exist. If you need a professional judgement override for dependency status, gather up as much documentation as you can, from rent bills to utility bills to the legal judgement from a court emancipating you from your parents and bring it to your financial aid advisor. While you’re not guaranteed anything, it’s at least worth a try.

Here’s what a financial aid administrator had to say on the topic of professional judgement override:

For Dependency Overrides the Federal guidelines are extremely clear. Being self-supporting is NOT grounds for an override.
Instead you must prove INVOLUNTARY DISSOLUTION OF THE FAMILY. This means you were forced to leave your parents’ home and have no contact with them. You must explain,in detail, why you cannot live with your parents. Then you must have official third party letters, on letterhead, that back up your story.
Just because you feel mature enough or responsible enough to be on your own does not erase your PARENTS’ OBLIGATION to assist you with your education.
We accept letters on letterhead from H.S. Guidance counselors and teachers, lawyers, personal counseling centers, social services, clergy, etc. We also will accept police reports documenting abuse. Absent that, we require two letters from people personally knowledgeable to the relationship with the parent like a Grandparent, Aunt or Uncle. The letters must be very detailed about the situation and their relationship to the student.
Most students make the mistake of having a roommate or employer write a letter that the student is self sufficient and pleading for us to just cut them some slack. They don’t realize that Fin Aid reps are personally liable for willfully violating Federal Law. I’ve been in Financial Aid for 12 years and I haven’t met a student yet that is worth going to jail for.

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Posted in FAFSA by Kristin Morris