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Hotshot Executives Are Fleeing the Scrutiny of Public Companies for The CLASS DIVIDE AT AMHERST (P. 64 ) lA DIFFERENT DIET PILL (P. 74 ) FEBRUARY 27, 2006 www.businessweek.com GoingPrivate Hotshot executives are fleeing the scrutiny of public companies for the mad money of the private-equity boom BY EMILY THORNTON (P. 52 ) February 27, 2006 52 FOLLOW THE MONEY Cover Story WIth so much private-equity 52 Going Private cash sloshing around, no Money and freedom. That’s wonder top talent is kissing what’s driving hotshot off public companies managers, midcareer folks, and newly minted MBAs alike to private equity, a world where investors buy slumping companies, turn them around, then sell or take them public. Pay is high even at the entry level—and can be spectacular for stars like ex-ibm chief Lou Gerstner. As for freedom, ceos can build for the long term without shareholders second-guessing every move. Not to mention that pesky Sarbanes-Oxley... 58 Buyout Mania’s Mountain of Debt By 2008 there may be a wave of defaults 62 A Chat With Lou Gerstner Why he doesn’t miss the quarterly grind The Business Week 26 News You Need To Know Retail sales; oil production; Merrill and 84 BlackRock; Warner Music; and more a; BAND WIDTH News: Analysis Your own kind & Commentary of music, online 28 How the IPO Market Got Its Buzz Back Investor appetites have returned, but this time they’re drawn to—mostly— saner offerings BusinessWeek (ISSN 0007-7135) Issue number 3973, published weekly, except for one week in January and one in August, by The 44 McGraw-Hill Companies, Inc. Executive, Editorial, Circulation, and Advertising Offices: 1221 Avenue of the Americas, New York, NON GRATA N.Y. 10020. Periodicals postage paid at New York, N.Y., and at additional mailing offices. Canada Post Publication Mail Icahn’s frosty Agreement Number 40012501. Return undeliverable Canadian addresses to: DPGM Ltd., 2-7496 Bath Road, Mississauga, ON L4T 1L2. Email: bwkcustserv@cdsfulfillment.com reception in Korea Postmaster: Send address changes to BusinessWeek. P.O. Box 8418, Red Oak, IA. 51591-1418. john kuczal by cover photo illustration (bottom left) rick maiman/bloomberg news 2 | BusinessWeek | February 27, 2006 31 Class Actions’ Great Divide More plaintiffs opt out of settlements—a headache for companies being sued 64 32 Commentary: Housing BIG PLAN ON CAMPUS Falling prices will bring on the pain. Even with financial aid, Who’ll get blamed if the roof caves in? most low-income kids 34 The Rising Stock of Black Directors can’t afford college. Companies seek to broaden their boards Amherst President 36 Wanna Buy a Money Manager? Tony Marx wants Banks and brokerages are selling to change that 38 Tesco’s California Dream A British supermarket heads for the U.S. Government 41 Washington Outlook A congressman’s guilty plea shines light Science & Technology 90 Your Very Own Hit Factory on Capitol Hill’s “black budget” A digital home recording studio requires 74 Girth of a Nation the right software and a lot of patience Many doctors may decide obesity is best fought with a pill nearing fda approval 92 Tuning Up a New Generation Global Business Teaching computer-savvy kids to compose 42 Electrolux Cleans Up ceo 94 Singing Beyond the Shower Straberg reverses a slide by Marketing Web sites to expand your audience jettisoning old ways and boosting r&d 76 Video Games: The New Ad Game 44 Icahn: Foreign Raiders in Korea Why they’re becoming the hot spots for His kt&g fight may be the first of many product placements Columnists 45 India’s Generic-Drug Wars 18 Wildstrom: Technology & You pc Suddenly, Dr. Reddy’s and Ranbaxy are Finance New security services for the home up against a fresh crop of competitors 20 Fine: Media Centric Golden West’s Golden Strategy What the U.S. Can Learn from Sasol 78 And the competition is...teen consumers 46 How it’s able to ride a housing bubble The South African company makes 23 Cooper: Business Outlook liquid fuels from coal, not Mideast oil An increasingly global economy will Entrepreneurs hamstring Bernanke’s domestic efforts Currencies: The case for a dollar decline Managing 80 Steering Patients Through the System 96 Marcial: Inside Wall Street 48 The Org Chart That Really Counts Quantum Health points people to the How mapping unofficial job links pays off best care and saves employers big bucks 102 Jack and Suzy Welch: The Welch Way Weighing worklife trade-offs The Corporation Information 50 Dot-Com Fever, Again Technology Ideas Small sites are pursued by Big Media 82 A New Chapter for Digital Books 100 Books In 2006 they may become best-sellers, Spar: The Baby Business thanks to big tech advances 104 Outside Shot: Barney Frank Special Report The free market is producing more 64 Amherst’s Campus Revolutionary inequality than is socially healthy President Tony Marx is developing a Personal Tech/Music radical plan to get more poor kids into 84 Boot Up the Band top colleges, starting with his own school Technology makes it easier to compose, Features record, and promote your own music 7 UpFront People 85 Plug ’n’ Play Pianos 14 Readers Report There’s a digital keyboard for everyone 16 Corrections & Clarifications 72 Death, Dying, and the CEO kpmg’s Eugene O’Kelly and his wife 88 Go, Go, Go Johnny B. Digital 98 Figures of the Week collaborated on a remarkable chronicle Bringing guitars into the 21st century 99 Index of Companies February 27, 2006 | BusinessWeek | 3 It’s about money. Earning it. WWW.BUSINESSWEEK.COM Updated every business day. BusinessWeek magazine is available online free to subscribers: Investing it. Go to www.businessweek.com and follow instructions to register. Spending it. Mourning the closing Check out this weekend’s of Chicago’s landmark show February 18 and 19: eatery Overlooked deductions: Tips to help lower your tax Keeping it bill and boost your refund. Teaching tunes: Kids review All in the Family software that teaches them As baby boomers gray, hundreds of how to compose and play music. thousands of family-owned businesses are facing a major decision: What will Destination CEO: Meet Barbie’s they do with the business? Options maker. Mattel CEO Bob Eckert abound: selling to investors, giving the a talks about his rise to the business to children, bringing in corner office. outside management. In this Online Special Report, we take a look at what Barking for bucks: families need to consider as they Dog-related products and decide whether and how to pass their services are making big businesses on. Meet Chicago’s Berghoff bucks for business owners. Family, who after three generations has decided to close the 108 year-old restaurant that bears their name. Visit Execs Craigie and Debbie Zildjian keep with the 14th generation of Zildjians to the cymbal maker marching on find out how they’ve managed to keep the family’s cymbal business running for nearly 400 years. Our report also examines Airs Saturday/Sunday nationwide. the generation ready to take control and offers a gallery of family- Check your local listings owned businesses that have stood the test of time. You’ll find all or view segments at this and more at www.businessweek.com/go/familybusiness (top to bottom) jeff roberson/ap/wide world; asia kepk www.businessweekweekend.com 4 | BusinessWeek | February 27, 2006 “I am stunned that he would be out speechifying the first week he was off the job.” –Donald Straszheim of Straszheim Global Advisors on Alan Greenspan possibly upstaging successor Ben Bernanke with his public appearances and planned memoir, to USA Today EDITED BY DAN BEUCKE MOTHER INDIA romance, politics, hatred, all creating high drama,” says AS THE Shristi Behl Arya, who is the show’s producer. CALL CENTER Indeed, the customer TURNS service scene in India is any- thing but boring. Centers can MAYBE IT SEEMS like you be a hotbed of hormones; spend half your life on the some average a marriage a phone with a call center in month, often outside tradi- India. But in India itself, call tional bounds of caste and centers actually are seeping economic status. The Call into everyday life, appearing Center, a show coming soon to in a wave of popular sitcoms channel NDTV, takes potshots and books. India Calling, a at Americans venting their hot Indian tv show (below) angst about losing jobs to the on Rupert Indians on the Murdoch’s other end of HAPPIER DAYS Eisner and Jobs STAR channel, the wire. A after A Bug’s depicts a best-selling Life premiere small-town book, One girl who Night @ The lands in Call Center, SHOW BIZ Bombay in touches on search of her love, bad boss- absconding es, even God Eisner: Let’s sister. She finds a job in a call (appearing, naturally, in a center instead. Viewers phone call). Then there are follow the highs and lows of the jokes making the rounds: Break a Deal the work, which attracts When a man complains to a thousands of young Indians. doctor about insomnia, the MICHAEL EISNER now knows they can put your name on the “Call center jobs are now part doctor suggests working at a building, but that doesn’t guarantee a warm welcome back. of India’s social fabric, call center as the remedy. Eisner, who left Walt Disney as ceo on Sept. 30, was honored offering immense scope for –Nandini Lakshman on Jan. 23 when Disney named its Burbank headquarters building after him. But later that day, the board turned down Eisner’s last pitch: a plea to pull out of talks to buy Steve Jobs’ Pixar Animation Studios.
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