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If Nascar thinks things are going south now, just wait ("A Wild Ride," August). The Car of Tomorrow and the Spec Motor that will be the engine of tomorrow will leave GM, Ford, and Dodge with no identity at all. What Nascar has created is a clone of IROC racing, and it will drive racing costs through the roof, the opposite result of what it's wishing for. By taking a great sport and making it a boring sport, they are not putting their customers first.
Nascar appears to be alienating many of its longtime supporters by the arbitrary way it conducts its business, particularly on the track, and the perceived way it treats different competitors.
Also contributing to the "softening" of the business is the press coverage, particularly the live broadcasts of each event. You may have a certain driver that you like, but chances are he or she will get zero coverage if they're not one of the chosen few that are followed during the telecast. Zero coverage for the driver/car also means zero coverage for those sponsors.
You'd have to say that's not a very good marketing tool for many, if not the majority, of Nascar's sponsors!
Why invest major advertising dollars for a car/driver/team where the only benefit is to be able to publish your own advertising, at your own cost, knowing the exposure at a race is very limited? Of the 50-plus-or-minus cars that show up on a weekend, only about 10 get nationwide coverage during the telecasts.
Nascar's loyal, longtime fans appear to be leaving, slowly but surely. History shows that it is easier and cheaper to keep what you have than to try and attract a new fan base.
Douglas A. Innes
Incorrect Tax Perspective
Your article "Lessons in Sitting Pretty" (Your Money, August) suggests that "employees can significantly reduce that tax hit by
holding the stock for at least a year after exercising the option; the resulting proceeds are then taxed at the 15 percent long-term capital-gains rate." I have seen this incorrect assertion many times, but seeing it in such a well-respected publication requires comment. One cannot reduce his tax bill by holding the shares.
When one exercises a nonqualified stock option, he is taxed on the spread between the option price and the market value of the shares at the date of exercise. He pays income tax at ordinary rates on this spread whether he sells the shares or holds them. This is considered compensation and is also subject to payroll taxes. Future appreciation is taxed at capital-gain rates (generally 15 percent) if the shares are held for more than one year from date of exercise.
This incorrect tax perspective is frequently offered in conjunction with advice to exercise options at vesting and hold the shares until expiration rather than holding the options until expiration. While this approach will cause a portion of the profits to be taxed as capital gains instead of ordinary income, it requires a cash infusion at the time of exercise. Rather than paying the taxman at vesting, this cash could be invested in shares, which when appreciated, by any amount small or large, will more than cover the difference in taxes.
Disappointment in Sarbox
The investing public is sorely disappointed in the Sarbanes-Oxley Act ("Five Years and Accounting," July). It promised jail time of up to 20 years and fines of up to $20 million for executives who sign off on materially false financial statements. In 2005 there were 1,599 restatements of financial statements and in 2006 there were 1,876, all of which were apparently material enough to require the restatement. But the grand total so far of prosecutions by the Justice Department for crimes under Sarbox is exactly zero. No wonder the billion-dollar flimflams keep on coming.
Fund for Stockowners' Rights
Woodland Hills, California
Measuring Nonfinancial Metrics
Your excellent article "Measuring Up" (June) points out what, in my opinion, is the basic shortcoming of current accounting and reporting systems: focusing on measuring the tangible rather than the [truly] valuable assets.
Every company says its most important asset is its workforce, yet the focus is on measuring labor and equipment costs. Rarely is there an effort to determine whether an employee who will earn, say, $270,000 over three years is well served by a newly purchased $1,500 PC — yet the company will carefully tag the PC as the asset and depreciate it accordingly even as it pays little attention to whether the employee who uses it plans to stay or is helping the company succeed.
The same misfocus occurs with customers, as companies measure receivables but not the relationship behind the receivables and how it affects future purchases, word-of-mouth, or other potential gains from a good relationship. And the same thing can be said for the relationship between equity and reputation, where the real value of the company is its perceived reputation yet the accounting focus is on "comprehensive income."
If boards of directors had relative measures of intangible assets to balance against the hard measures of tangible assets, wouldn't they be in a better position to assess and properly reward managers for effectively creating long-term value for their shareholders? Managers and directors should pay attention to, understand, and use these nonfinancial metrics for the good of their employees, their shareholders, their communities, and, yes, even themselves.
Mark L. Winzenread
Executive Vice President and CFO
Walker Information Inc.
Where's the Dock?
Surely the Sony Vaio laptop's size and performance are impressive, but my frustration has been with the lack of a reasonable docking station (In Tech, June). The Vaio screen is too small for regular desktop use, and I think most traveling executives prefer one computer for both road and office work. As far as I know Sony has never released a good docking station for the Vaio, and instead provides a cheap "port replicator" that has a limited number of USB ports and no audio port. (Speaker connections are made through the headphone outlet, which is in a bad location at the front of the unit since it pushes the laptop off of the port replicator when you are trying to connect the speaker plug.)
And yes, an outline of my keyboard did appear on the screen after a few months of use, but it's only noticeable when the display is not turned on.