What's Important in the Financial World (4/3/2012) CEO Pay Rises, $4 Gas

The hole into which Groupon (NASDAQ: GRPN) has fallen has gotten even deeper. The Wall Street Journal reports that the Securities and Exchange Commission has begun to examine the firm’s first quarterly report as a public company. Groupon has since revised some of the figures from that report, and it admitted its account had a “material weakness.” This caused enough concern to push shares near an all-time low. Some analysts question whether Groupon’s business model is viable long term. The more closely watched problem will be whether Groupon makes further changes to its earnings. The Groupon board says it stands behind management. That may not last if the humiliating string of missteps continues.

High Gasoline Prices

Improvements in the U.S. economy and ongoing fear of supply interruptions in the Middle East kept Brent crude near to $125 a barrel. Many experts continue to argue that the level is so high that it will erode improvements in the U.S. economy, slow China’s gross domestic product and push Europe deeper into recession. The case for a dent in American growth continues to gain traction as gasoline prices remain at incredible highs. The price actually ticked down a bit yesterday, but the fraction of a penny is not sufficient to give hope for relief. The average price across the country for a gallon of regular was $3.923, compared with $3.925 the day before, $3.764 a month ago and $3.662 a year ago. The case for $4 gas prices continues to be driven by the trend that usually takes hold as Americans increase the amount they drive in the summer.

CEO Pay Rises

CEO pay rose considerably last year, according to an analysis by Reuters. The 10% rise of the compensation of chief executives at large companies was caused mostly by stock options. The good news is that these CEOs will have to keep stock prices rising, if those options are to have real value. That may become harder to do. The DJIA is already near record levels, and many experts believe that, based on slow earnings improvements, the market cannot hold those levels. S&P has forecast earnings will not be as robust in the March quarter as they were last year. Because base salaries and bonuses were not up much, the CEOs will have to work for their higher pay.

Yahoo! Layoffs

If press rumors are to be believed, today is the day that thousands of Yahoo! (NASDAQ: YHOO) employees will be laid off. That likely will be followed by more next week. CEO Scott Thompson is supposed to reveal his strategic plan with the second wave of firings. He will do so as Third Point, an activist fund that owns 5.8% of the portal company’s shares, has taken its case to the internet with a website called Yahoo! Value. The site is a novelty that is unlikely to tell investors anything they do not already know. Neither the anticipation of Thompson’s plans nor the Third Point agitation has done anything for Yahoo!’s shares, which have languished at just above $15 — mid way between their 52-week high and 52-week low.

Douglas A. McIntyre