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Posts Tagged ‘Forbes’

Global measurement of luxury and wealth – The Cost of Living Extremely Well Index (CLEWI)

Wednesday, November 24th, 2010

Forbes lauched in 1976 the Cost of Living Extremely Well Index (CLEWI) that measures the price of a basket of luxury goods, being considered to be for the very rich what the Bureau of Labor Statistics’ Consumer Price Index is to ordinary people. The index is based on the selection of 40 goods and services reserved to very rich customers, such as:

Dinner costs at the famous La Tour d’Argent in Paris: decreased with 15%, to $ 1,704;
Average cost for a yearling racehorse from championship lines: decreased with 16% to $271,551;
Cost of Bombardier Learjet 40XR aircraft: $10.6 million versus $9.3 million one year ago.

The Cost of Living Extremely Well Index (CLEWI) was set to 100 in 1976 and had been continuously increasing since then.

Source: Forbes (2010)

Over the 12 months ended in August the CLEWI rose 1%, keeping pace with the Consumer Price Index’s 1.1%. During this period, the aggregate net worth of the Forbes 400 Richest People in America rose 8%, from $1.27 trillion up to $1.37 trillion (Forbes, 2010).

This index is tracking the cost of luxury items, being a relevant indicator both for the luxury market and the wealthy population. Conventional wisdom once dictated that no matter the turbulence within economy, the richest segment of the population would stay above the fray, allowing makers of luxury products to maintain their sales. However, as shown by CLEWI, this statement is questionable today, as not even luxury, nor richness can be immune to the global economic slide.

References:

Forbes (2010), Forbes Price Index of Luxury Goods Keeps Pace With Inflation, available at: http://blogs.forbes.com/scottdecarlo/2010/09/23/forbes-price-index-of-luxury-goods-keeps-pace-with-inflation/ (accessed 21 November 2010).

Tags: CLEWI, Consumer Price Index, Cost of Living Extremely Well Index, Forbes, Luxury, Wealth
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Evaluating universities based on the financial success of their graduates

Wednesday, August 11th, 2010

In 2008, Forbes ranked the top billionaire universities based on a performance indicator measuring the number of billionaire graduates.

The 2008 top five billionaire universities (Farell, 2008) are:

With a a $35 billion endowment, Harvard is consistently ranked as one of the top schools in the country, being the best-funded college in the United States.

The performance of universities as centers of academic education can also be measured through other performance indicators, such as:

For further examples of performance indicators, explore the Academic Education KPI examples section of the library of KPI examples available on smartkpis.com (smartKPIs.com, 2010).

References:

Farrell, A 2008, The Billionaire Universities, available at: http://www.forbes.com/2008/05/19/billionaires-harvard-education-biz-billies-cx_af_0519billieu.html (accessed 08 August 2010)

smartKPIs.com 2010, Academic Education KPI examples, available at: http://www.smartkpis.com/kpi/industries/education-training/academic-education/ (accessed 08 August 2010)

Tags: Billionaire universities, Columbia University, Forbes, Harvard, Stanford, University of Pennsylvania, Yale
Posted in KPI, Library of KPI examples, Measure, Performance Measurement, smartKPIs.com | No Comments »

Executive compensation and performance

Tuesday, July 13th, 2010

The compensation of the top executives represents an important aspect of administrative science, as it links together aspects that relate to corporate governance, human capital, organizational culture and performance management. Ideally, the executive remuneration philosophy of the organization should ensure that the remuneration properly reflects the duties and responsibilities of its executives and that remuneration is competitive in attracting, motivating and retaining people of the highest caliber.

Top executives are increasingly negotiating formal contracts that typically last 3-5 years and that specify minimum base salaries, target bonus payments, severance arrangements.

Most senior executive pay packages contain four basic elements:

Base Salary
Annual Bonus
Share Options
Long Term Incentive Plans

Additional components of pay can include:

Restricted Stock
Retirement Plans

An example of such a reward program mix is illustrated below. It contains elements specific to the industry in which the organisation operates, in this case aviation (Qantas Group, 2007):

Fixed Annual Remuneration (FAR)
The Performance Plan, comprising:
- the Performance Cash Plan (PCP) – a short term cash incentive; and
- the Performance Equity Plan – made up of a medium-term incentive, the Performance Share Pln (PSP) and a long-term incentive, the Performance Rights Plan (PRP);
Concesionary Travel Entitlements, some targeted retention arrangements and other discretionary benefits considered appropriate from time to time.

Source: Qantas Group, 2007

Another important issue is the retention aspect and the fact that executives have more job options than other employees. They also tend to have relatively high levels of confidence in their abilities and may be more willing to leave the organization (Bacal, 2004). The importance of motivating executives through a proper reward system in place is essential in this context.

However, common perceptions regarding executive compensation can also be surprising. In an interview with Forbes magazine (Forbes, 2010), compensation expert Robin A. Ferracone identified two characteristics of executive compensation in the 1500 S&P companies reviewed:

only 5% of S&P 1500 executives receive on a performance adjusted basis of over $25-100 million per year. These are considered the extremes that attract a lot of media attention.
only about 8% of the differences in pay are driven by performance. The size of the company and industry are bigger influencers of the CEO compensation package compared to the influence performance has.

Additional resources

The 2009 report of the Conference Board Task Force on Executive Compensation.

The smartKPIs.com library of remuneration and compensation KPIs examples.

References

Forbes Magazine, 2010, Myths About Executive Compensation, an interview with Robin A. Ferracone, available at http://video.forbes.com/fvn/bizviz/myths-about-executive-compensation, accessed on 12 July 2010.
Robert Bacal, 2004, Manager’s Guide to Performance Review, McGraw – Hill Companies, Inc.
Qantas Group, 2007, Qantas Annual Report – Director’s Report for the year ended 30 June 2007, available at http://www.reachinvestorsolutions.com/, page 59, accessed on 12 July 2010.

Tags: Conference Board Task Force on Executive Compensation, executive compensation, executive remuneration, Forbes, myths about compensation, pay for performance, Qantas
Posted in Case Study, KPI, Performance Management | No Comments »