BloombergBusinessWeek: This Week...What’s Driving the Spike in Small Business Acquisitions

 

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M&A

What’s Driving the Spike in Small Business Acquisitions

By Karen E. Klein on January 28, 2013

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In October, Silicon Valley entrepreneur Eric Bahn sold Beat The GMAT, his social network startup for MBA applicants, to Hobsons, an education technology company in Cincinnati. The money, he says, was “too good for us to pass up.” Timing was also a big factor: The sale closed before a raft of tax increases stemming from Obamacare and the fiscal-cliff deal kicked in on high earners in 2013. “Some others in the Valley are wallowing a bit in their alcoholic beverages right now, feeling like they missed a good time for liquidity,” Bahn says.

 

Bahn’s interest in getting the acquisition completed in 2012 appears to have been shared by many: BizBuySell, an online business-for-sale marketplace focused on Main Street companies, reported a 43.4 percent jump in business sales during the final three weeks of December 2012 compared with the same time period in 2011. Its report records a sample of transactions reported by 1,200 brokers across the country. “We had a daily average of 12.7 deals for the first 10 weeks of the fourth quarter. It spiked to 16.3 over the last three weeks, showing a very pronounced, consistent increase,” says Curtis Kroeker, the company’s general manager. (Disclosure: BizBuySell advertises its listings on Businessweek.com.)

 

Mergermarket, which tracks mergers and acquisitions globally, reported $672.9 billion worth of deals in the U.S. in the fourth quarter, up 45.6 percent over the same time period in 2011 and the best quarterly result since 2010′s fourth quarter. “I was very happy to see that, because when we do have that uptick at the year’s end, it really shows the next year is going to be a good year,” says Amanda Levin, who oversees the company’s M&A research in North America. “We’re not going back to 2007, but it’s a lot better than recently.”

 

STORY: Tax Laws Leave Small Government Contractors in Limbo

 

Clearly the impending tax increase was a major driver of late-year 2012 sales, but other factors are coalescing around an improving M&A market: aging boomers looking to retire; large companies that have amassed considerable cash reserves since the fiscal crisis; and laid-off employees approaching middle age, who are turning to entrepreneurship rather than trying to find full-time employment.

Small business valuations will also improve this year, if only due to a quirk of timing, says Scott M. Bushkie, principal at M&A advisory firm Cornerstone Business Services in Green Bay, Wis. “Most buyers go back three years in scrutinizing a company’s financials,” Bushkie says. “This year for the first time in a while, 2009 will not be included, and 2009 was a very bad year for most businesses. The seller’s story looks a little bit better now.”

 

In some sectors, including construction and manufacturing, acquisitions are motivated in part by the desire to acquire proven employees. The trend has been around for a while in a technology sector hungry for software engineers, but it is spreading, says Roger J. Murphy, president and chief executive of Murphy Business & Financial, a Clearwater (Fla.) business brokerage. “In Florida about 90 percent of all the construction-related workers were out of work because of the industry decline” stemming from the implosion of the mortgage industry and housing bubble, he says. “The guys working down here relocated out of state or got retrained. Now, if you’re doing a building and you need a sheetrock contractor, you just can’t find the labor.”

The solution for some midsize business owners is to buy small competitors and incorporate their technology and skilled workers. “We had a printing company client who couldn’t find good pressmen, so he bought a couple small companies that were going under,” Murphy says. “Those employees are now working 40 to 60 hours a week, where they were only getting 20 hours a week before.”

 

Diane Biersteker, who started Human Resources Consulting in Little Suamico, Wis., two years ago to advise small-to-midsize companies, says many of her clients are looking at targeted acquisitions mainly for the skilled labor. “The craftsman is incredibly important, and it’s a big pain point for the machine shops and manufacturers I consult with,” she says.

Bahn and seven of his employees from Beat the GMAT stayed on after the acquisition and now work in Hobsons’ Web properties group in San Francisco. When his friends complain about their tax troubles, he tells them they’re “facing a first-world problem. You have to pay a little more taxes, but that’s because you were successful and made a lot of money.”

STORY: The New (Old) Payroll Tax Is Starting to Hit Hard
 

E N M I O P I N I O N: Por: Ricardo Tribín Acosta

La lealtad y la gratitud van de la mano

Ser leal?, ser grato?, son estos dos un par de conceptos de mucha importancia para la convivencia entre las personas, aunque escasos en no pocas gentes. El ser leal significa corresponder, retribuir, apoyar, y no declinar. Y el ser grato, implica más o menos lo mismo. Algunos son leales y gratos y esto los hace dignos de encomio. Sin embargo hay otros que son leales, más no gratos, lo cual hace creer que su lealtad es “a la fuerza”, motivada quizás por la necesidad de un trabajo, o por temor a algo.

Por otro lado hay también gentes que son gratas, mas no leales, llevando su agradecimiento tan solo en sentimiento, mas no en acción, ya que cuando reciben un favor dan un gracias tan grande que retumba por todas partes, más al rato, cuando les corresponde dar señales de lealtad, parece que mandan la gratitud al rincón de los olvidos, y su actitud se vuelve bastante oportunista. Son los “Tarsucio, el desleal”, los que no esperan a que su favorecedor salga por la puerta, para empezar a despotricar de él.

La lealtad eleva al hombre a un ‘Olimpo” de solidaridad y amistad, en el cual apoya sin condiciones a quien le ha servido, especialmente cuando este ha descendido de alguna posición de privilegio en la que antes se encontrara. Es la amistad, tanto en la sabana larga, como en la corta, o en el belén de la colina, del afecto sincero y especial.

http://ricardotribin.blogspot.com

Miami, Enero 30 de 2013

Team Florida Trade Mission to Chile - May 20-23, 2013

Join Governor Rick Scott on a   Team Florida Trade Mission to Chile   May 20-23, 2013 Santiago, Chile       The Chilean economy continues to be a model for developing countries, surpassing their forecasted 5.5 percent growth for the second consecutive year. Florida enjoys a significant share of the total U.S. exports to Chile. The South American nation is ranked as Florida’s sixth-best trading partner with over $2.4 billion in Florida origin exports -an increase of 22 percent since 2011.Total merchandise trade amounted to $7 billion through November 2012  and there is ample opportunity to expand our trade and investment relationships. The Team Florida trade mission to Chile is part of a statewide strategy to market Florida products and services more aggressively in Latin America.  This strategy is intended to benefit small businesses as well as the state. The Team Florida trade mission to Chile will be highly active, featuring a business matchmaker program for Florida exporters, including one-on-one business appointments with potential Chilean partners. Leading sectors for Florida exports to Chile include, but are not limited to: Healthcare/Medical Equipment Computer Hardware/Software/Services Telecommunications Sector Electric Power Equipment (EPE) Financial Services Water Resources Equipment Construction Mining Equipment Security Systems and Safety equipment Travel & Tourism Services Agricultural Machinery and Equipment Food Processing/Packaging Equipment     Grants covering 100% of registration fees are available through an initiative with the U.S. Small Business Administration!   Trade grants will be available to qualified Florida manufacturers and professional service providers, covering 100 percent of the registration fee for the first company representative. Please note the grant is only available for Option 1 Gold Key Package.         Funded in part through a grant award with the U.S. Small Business Administration       Gold Key Registration Deadline is March 25, 2013 Delegate Deadline is April 10, 2013   For more information please contact:   Juliana Peña Enterprise Florida Inc. Tel: 305-808-3388 Email: jpena@eflorida.com   Jay Sumners Enterprise Florida Inc. Tel: 305-808-3389 Email: jsumners@eflorida.com           www.eflorida.com

From BusinessWeek: This WeekStory

Caveat Emptor

'Useless' Business Help: Inside a $200 Million Fraud Case

By John Tozzi on January 23, 2013

• Maranda James, a stay-at-home mom in West Monroe, La., was looking for ways to bring in some extra income in late 2011. So when she stumbled onto a Facebook (FB) page that led her to a $49 online course about how to sell merchandise on EBay (EBAY), she bought it.
  The initial sale led James down a rabbit hole that ultimately cost her more than $10,000 for services that promised to help her start a business, but delivered nothing, she says. She’s among tens of thousands of people who lost money in what the Federal Trade Commission calls a fraud that has scammed victims out of more than $200 million since 2008.
  On Jan. 9, the agency sued seeking to shut down the group, called the Tax Club, in federal court in New York’s Southern District. The decade-old operation, based in Utah with Manhattan offices at the Empire State Building, purports to sell business assistance such as bookkeeping and tax advice to people like James who want to start small businesses, according to the FTC complaint (PDF).
• Scams promoting work-from-home businesses are among the most common online frauds, preying on people who believe they’ll earn back the money they’re handing over to fraudsters. The FBI tracked more than 17,000 reports of online work-from-home scams in 2011, according to the Internet Crime Complaint Center. The victims reported losses of more than $20 million that year. An unknown number, like James, never go to authorities, so the full scope of the losses is hard to know.
  The Tax Club has outward signs of credibility, with a fancy office address and video clips from appearances one executive made on Fox Business and local NBC News prominently displayed on its website. Those masked what the FTC says is an enterprise designed to rip off would-be business owners. The group is made up of a dozen companies operating under more than 60 business names, according to the FTC’s complaint. The agency says this web of entities, with names like Corporate Tax Network and the Success Planning Group, is controlled by three college friends, Edward B. Johnson, Michael M. Savage, Gary J. Milkwick, and a fourth man, Brendon A. Pack. The four moved millions of dollars among the intertwined corporate accounts and into their personal bank accounts, according to the lawsuit.
• Johnson’s lawyer, Jeffrey Knowles, said in an e-mail that his client sold the company over a year ago and “strongly denies the FTC’s allegations” against him. Attorneys for the other three did not respond to two e-mails and phone calls seeking comment.
  
  Maranda James’s encounter with the Tax Club mirrors the narrative in the FTC’s lawsuit. Shortly after she purchased the EBay selling course, James got a call from a Tax Club salesman who said he was referred by the company she bought the course from. Among the first questions he asked: “Have you ever owned a business before?” James says. “The first time you tell them no, not really, they go in for the kill then. You have absolutely no idea what you need.”
  In less than two months at the end of 2011, James says, she signed up for a domain name, a logo, bookkeeping services, and tax assistance—all things she was made to believe she would need to open her planned Internet business. “It was very, very high pressure,” she says. “You were led to believe that you would be audited by the IRS if you did not go through these steps.” She knew she had a three-day window to get a refund. “What you don’t realize at first is you’re not going to know all this is useless until after three days is up,” she says.
• James ended up charging more than $10,000 on credit cards for the services. The Tax Club salesmen (the callers were always men, she notes) even offered to get on the phone with her credit-card company and ask to raise her limit, she says. The services she was supposed to be purchasing were never delivered or were irrelevant to the business she hoped to start. When James asked for her money back in December 2011, the Tax Club refused, citing the three-day refund policy. Her credit-card company wouldn’t void the charges because she had approved the purchases online, she says.Similar stories have played out for tens of thousands of Tax Club customers since at least 2008, according to the FTC. The Tax Club bought lists of customers from other companies that sold “work-at-home” programs. Then telemarketers, working from a suite on the 60th floor of the Empire State Building, called people like James and claimed they were referred by a company that the victim had done business with, the FTC says.
  Sales calls could last an hour or more. The people on the phone used heavy-handed tactics, according to the lawsuit, including suggesting that the initial business program the victim purchased would fail without the Tax Club’s help. The FTC says the telemarketers maximized how much money they could extract from each customer.
  “The exact price typically depends on the amount of savings and credit consumers have available,” the complaint says. “The Defendants’ sales representatives probe consumers’ financial circumstances during sales calls in order to maximize purchases and price.”
  
  FTC spokesman Frank Dorman says the agency got more than 600 complaints about the Tax Club. There are no criminal charges associated with the case. The FTC, along with the attorneys general of New York and Florida, are suing to shut down the businesses and freeze the owners’ assets.
• James has since paid off the credit-card charges from her Tax Club bill. She didn’t report them to any authorities, but left a negative review on the Tax Club’s Yelp profile. “I went through so many sleepless nights, just stressed out about all this money,” she says.
  Tozzi is a reporter for Bloomberg Businessweek in New York.

From Bloomberg BusinessWeek : Technology Insider

This Week:
By Bruce Einhorn on January 15, 2013

Chinese E-Commerce

Alibaba's Jack Ma Is Moving On, With an IPO Looming

Alibaba Group founder Jack Ma, who on Tuesday announced to employees his plans to step down as chief executive officer, has been thinking about retirement for a while. In June, Ma told me and my colleague Frederik Balfour about his interest in taking a step back from his role in running China’s largest e-commerce company. “Some day Jack Ma is going to retire—maybe not very long [from now],” he said then. “Life is so short. I don’t want to be 80 years old and still running this company.”

 

Now he is following through on that promise. Ma, who turned 48 in September, will retire as CEO this spring, the company announced on its Alizila website. “Stepping down as CEO is a difficult decision, for this could be confounding especially for someone of my age who should be at the height of his career,” Alizila reported Ma saying in a letter to employees. But, he added, “at 48 I am no longer ‘young’ for the Internet business.”

 

It also shows how far the e-commerce pioneer has come since his days as an upstart, when he battled such giants as EBay (EBAY) and the U.S. government over counterfeit products. Today the Alibaba Group includes Taobao, the largest e-commerce site in China; Tmall.com, a consumer shopping site; and Alipay, an electronic payments service. As of last year, Taobao and Tmall.com accounted for 71 percent of consumers’ online purchases in China, according to research firm Analysys International. Shortly before our interview, Ma reached a deal with Yahoo! (YHOO) and another large shareholder, Softbank (9984), cutting their Alibaba voting rights.

 

What’s next for Ma? Even after a replacement (still to be named) takes his place as CEO in May, Ma will stay on as executive chairman. According to Alizila, he will “focus his attention on setting strategic direction, helping to develop managerial talent within the company’s ranks, and strengthening Alibaba’s social-responsibility efforts.”

 

There’s also still the matter of an initial public offering for Taobao, Alibaba’s popular consumer e-commerce business in China. An IPO isn’t imminent, he said in June, but is likely within five years. It’s hard to see Ma staying in the background when that happens.

 

By ceding day-to-day control, though, Ma will have time to look beyond the world of Alibaba. The Alizila article doesn’t mention what he might do, but in the interview last June, Ma gave some hints. “I have a lot of interests,” he said. For instance, he has worked with movie star Jet Li to promote tai chi. Ma said his other interests include movies, private-equity investment, environmental protection and traditional Chinese medicine. “I still have not decided what to do yet, but I have decided I am going to enjoy some other things apart from the business,” he said. “For the past 13 years, I have been building up the Alibaba Group. Now I think there are a lot of things I can do after Alibaba.”

 

Ma also stressed that taking a less active role in Alibaba would be a sign of strength for Alibaba. “If the founder cannot leave the company,” he said in the interview, “this company is not healthy.”

Related stories:
VIDEO: Alibaba Deal Really Important for Yahoo, Bartz Says
STORY: Jack Ma Is the Loneliest Billionaire in China
VIDEO: Are China's Trade Numbers To Good to Be True?

SLIDESHOW: Choking in China: Beijing Suffers Amid Deadly Smog

STORY: A Rare Free-Speech Fight Erupts Over China Censors

STORY: In China's Smartphone Market, Lenovo Gets Busy

STORY: Can China Prevent Web Pseudonyms? Probably Not

STORY: The Silk Railroad of China-Europe Trade

STORY: The Jim Cramer of China

STORY: China's Least-Favorite Short Seller Targets Singapore

STORY: In China, a Real Estate Bust Threatens Investment Trusts

STORY: China Nabs Airplanes and Batteries in Latest U.S. Shopping

 

Einhorn is Asia regional editor in Bloomberg Businessweek's Hong Kong bureau.

E N M I O P I N I O N:Por: Ricardo Tribin Acosta

El severo impacto del “bullying”

Buscando en el internet algunos conceptos acerca de lo que significa este término relacionado con el abuso a otros en su entorno social adolescente, me encontré con una respuesta que me pareció contundente. Ella dice “la intimidación es un acto de conducta agresiva, esta se repite con el fin de hacer daño deliberadamente a otra persona; puede ser de manera física o mental. El acoso se caracteriza en un individuo por comportarse de una determinada manera en el que se desea ganar poder sobre otra persona.

El “bullying” puede tener como autores tanto a individuos como a grupos. Se caracteriza por un proceder sistemático y estratégico.Suele extenderse por un periodo más o menos prolongado. El “bullying” es un proceso de represión de problemas. Sus víctimas se sienten en desventaja y se consideran las culpables de la situación. Puede tener lugar tanto de forma directa como indirecta(a través de agresiones físicas o psíquicas, o de intriga)‏. Acechar y espiar en el camino de la escuela a casa, perseguir, echar, dar puños o codazos, empujar y dar palizas. Marginarlos de la comunidad escolar o clase. Inventar rumores y mentiras.

Juego sucio en el deporte y tender trampas. Reírse del otro, hacer comentarios hirientes sobre él. Burlarse, mofarse continuamente, tratar con sobrenombres. Tipos de “bullying” Físico: empujones, patadas, agresiones con objetos, etc. Se da con más frecuencia en primaria que en secundaria. Verbal: insultos, menosprecios en público, resaltar defectos físicos, etc. Es el más habitual. Psicológico: minan la autoestima del individuo y fomentan su sensación de temor. Social: pretende aislar al joven del resto del grupo y compañeros”.

Vaya, vaya, me dije para mis adentros, parece que esto de nuevo no tiene nada, excepto que apenas hasta ahora se le está presentando la debida denuncia. Y es que aquello, que en mis épocas de muchacho conocí, en el que los más fuertes le pegaban a los más débiles, y en la que se obligaba a los pequeños a hacer lo que no querían, e incluso se les asignaban nombres tales como “ La llorona Miriam; El orejón visco; La pecosa Teresa, La gorda Maruja, etc., hoy toma vigencia ante el repudio de una sociedad que ojala dé al traste con estos abusos que incluso han cobrado la vida de víctimas inocentes, las que en el desespero, han tomado la triste decisión de hasta despojarse de ella. No al abuso y si a la libertad para ser cada uno como cada cual es.

http://ricardotribin.blogspot.com

Miami, Enero 16 de 2013

 

Fiscal Cliff Deal: A Mixed Bag for Business Owners

Special Reports on Small Business 

TAXES

FISCAL CLIFF DEAL: A MIXED BAG FOR BUSINESS OWNERS

Most entrepreneurs will owe a little more. Here's how to gauge the   specifics of the New Year's Day deal

Congress pulled off a narrow escape for the U.S. economy this week, averting a fall off the so-called fiscal cliff. The New Year’s Day deal includes bad news and good news for entrepreneurs: Despite its billing as a tax hike on the wealthy, the deal actually raises taxes on 77 percent of U.S. households, thanks to the expiration of a payroll “tax holiday” passed in 2011.

On the other hand, most self-employed people and small business owners (including owners of so-called pass-through entities, such as S corporations, who pay income taxes as individuals) will benefit from the permanent extension of the 2001 and 2003 Bush-era tax cuts for lower- and moderate-income taxpayers. And small businesses will get generous limits on bonus depreciation, further encouraging investment in capital purchases.

What exactly will the American Taxpayer Relief Act of 2012 mean for individuals who run their own companies (with and without employees)? Here’s the rundown:

Income taxes: Current income tax rates, established under President George W. Bush in 2001 and 2003, were set to expire this year and increase on everyone. Instead, those rates were made permanent for individuals earning less than $400,000 and couples earning less than $450,000. People who earn more than those thresholds will see an income tax increase from 35 percent to 39.6 percent.

Payroll taxes: A 2011-12 payroll tax holiday reduced the self-employment tax from 15.3 percent to 13.3 percent of net earnings and the employee rate from 6.2 percent to 4.2 percent. But the holiday is over for 2013, and the tax rate goes back up. The amount that employers contribute on behalf of their employees has remained at 6.2 percent and will not change.

Business tax incentives: Two widely used tax incentives, bonus depreciation and expensing, were extended. Through 2013, businesses will be able to claim 50 percent bonus depreciation on capital purchases and expense Section 179 expenditures (for equipment, office furniture, and other material goods) to a generous $500,000 allowance and a $2 million investment limit. The allowance was scheduled to be reduced to $25,000, with a $200,000 investment limit, in 2013.

Tax credits: Tax Code Section 45 production tax credits were extended for wind energy, biofuels, and energy-efficient appliances. In addition the research, work opportunity, new markets, and empowerment zone tax credits and incentives were extended through 2013, along with an employer wage credit for hiring military reservists.

Dividends and long-term capital gains: Rates go from 15 percent to 20 percent for high-earning individuals; the 15 percent Bush-era tax rate remains in place for middle-income Americans.

Estate taxes: If you’re one of the tiny sliver of Americans who will leave your heirs more than $5 million, you won’t be too happy with a 5 percent jump in the federal estate tax rate, to 40 percent from 35 percent. The rate was made permanent, a feature that estate planners will no doubt cheer, after several years in which the rate jumped around from zero to a scheduled 55 percent on estates over $1 million.

The AMT: The alternative minimum tax was never indexed for inflation and so had to be “patched” annually by Congress to avoid raising taxes on the middle class. The new legislation permanently fixes that problem, indexing the AMT for inflation.

Unrelated to the new tax legislation, an increase of 0.9 percent in Medicare taxes on the wealthy becomes effective in 2013 as part of the 2010 Affordable Care Act. The tax hike, to cover health-care costs, is on earned income of more than $200,000 for individuals and $250,000 for married couples. Employers will not pay the extra tax, but it will need to be withheld from employees’ wages. The tax may or may not apply to earnings from S corporations and limited partnerships, depending on how the earnings are treated for tax purposes. Check with your accountant on this one.

Obamacare also imposed a new 3.8 percent Medicare tax for 2013 on net investment income (from sources such as interest, dividends, and annuities) for individuals making more than $200,000 (and couples making more than $250,000). Passive income from a business and income derived from trading in financial instruments are both considered investment income.

The bottom line? Most everyone will owe a little more, and those at the top will owe a lot more, between the fiscal deal and new health-care taxes.

Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.

Source: BusinessWeek

E N M I O P I N I O N: Por: Ricardo Tribin Acosta

Solidaridad sin límites

Una muy querida amiga me contó la siguiente historia que me impactó cual más y que le ocurrió a ella en una calle. Resulta que un conductor imprudente, de esos que anda súper rápido sin saber porque, atropello a una pobre patica que iba pasando de un lado a otro con sus cinco críos. El alboroto fue enorme pues volaron plumas a doquier y el pobre animalito quedó casi muerto en la vía, mientras que sus hijitos permanecieron a un lado, llenos de confusión. 

Nadie hizo mayor esfuerzo por ayudar, excepto detener el ritmo de sus vehículos para evitar atropellarla de nuevo.

Netti, mi amiga, se bajó entonces de su carro y fue y recogió la patica, se cuadró y luego la puso a lado de sus paticos. Estando en esas se le aproximó un niño de unos siete años quien llorando le dijo: gracias, muchas gracias, señora por tener compasión de la mama y de sus hijitos. Ella dejo entonces a la madre pata con su familia, con la grata sorpresa que esta empezaba ya a reaccionar favorablemente y de ver sus paticos a acercársele más y rodearla de cariño, lo cual sin duda alguna le dio más ánimos para recuperarse.

Esta sensible historia me acuerda de la parábola del buen Samaritano que recogió y ayudó al herido, después de que dos personajes lo habían negado su apoyo, quizás por ir demasiado de prisa o por evitarse problemas, según su concepción de la vida. El ejemplo de la patica me conduce a recordar acerca de cuantas veces no nos ha ocurrido algo similar con un ser humano que requiere ayuda y que quizás, si se la diéramos de inmediato, sin aprehensión alguna le salvaría su vida, tal y como aconteció en esta historia.

http://ricardotribin.blogspot.com

Miami, Enero 9 de 2013

BusinessWeek: La Peor Compañía para Trabajar en 2012/The Worst Company to work for in 2012

Dish Network, the Meanest Company in America

Charlie Ergen, chairman and co-founder of Dish Network

For 2012, the website 24/7 Wall St. determined that the worst company to work for in America was the Dish Network (DISH), the Englewood (Colo.)-based company that provides satellite TV to more than 14 million subscribers. To pick its winner, the site began by sifting entries on glassdoor.com, an online service where people gossip about their jobs. It was hardly the most scientific of methods. Still, the volume of miserable tales about Dish is impressive; 346 former or current employees had taken the time to write not-so-nice things about the company. On a scale of 1 to 5, they ranked their company an average of 2.2, beating Dillard’s (DDS) and RadioShack (RSH) for the spot at the bottom.

The most common complaints were long hours, lack of paid holidays, and way too much mandatory overtime. Some posts suggest that merely setting foot in Dish’s headquarters is a danger to the soul. “Quit” was the recommendation to one Dish employee who sought management advice. “You’re part of a poisonous environment … go find a job where you can use your talents for good rather than evil.” The roundup noted one other thing: The share price was up more than 30 percent for most of the year.

Photograph by Steve Marcus/ReutersErgen, circa 1999, with his satellite dish, the first to offer 500 channels

Much of the malice, and value generation, can be traced to one man: Charlie Ergen, 59, the founder and chairman of Dish. Although he turned over the role of chief executive officer to former Sirius XM Radio (SIRI) head Joseph Clayton in 2011, Ergen remains the core of Dish—and its largest shareholder, with 53.2 percent of the outstanding shares and 90.4 percent of the voting rights.

Ergen founded Dish more than 30 years ago, installing satellite systems with partner Jim DeFranco. Dish is now the second-largest satellite TV provider in the U.S., with 26,000 employees. Ergen, according to the Bloomberg Billionaires Index, has an estimated net worth of $11 billion. That puts him among the world’s richest men and makes him one of America’s greatest entrepreneurial success stories. He’s also a living rebuke to a library of management textbooks that suggest fostering happy, self-actualized employees in a transparent environment of trust and communal effort is the path to wealth. 

  

Michael Neuman knew the risks going in when he accepted Ergen’s offer to be Dish’s president and chief operating officer in 2005. Before Neuman, no president had lasted more than four years. Still, for Neuman, a man who’d known Ergen for more than a decade and had run a Dish-like satellite service in Canada, the opportunity was too tempting to pass up. Unlike its major competitor,DirecTV (DTV), Dish was fully integrated: It engineered, built, and sold all its own set-top boxes and ran its own installation fleet and customer service. (The company split in 2008, with EchoStar (SATS) building the boxes and Dish doing everything else. Ergen remains chairman of both companies.) “If you’re a student of management like I am, it was irresistible,” says Neuman.

At first, Neuman loved working at Dish. The company had attracted cable subscribers for a decade by offering clearer picture and sound for a cheaper price. Dish was so notorious for undercutting its competition, especially when it came to the cost of satellite dishes, that Preston Padden, former CEO of rival Rupert Murdoch’s American Sky Broadcasting, joked that the company’s slogan would one day be “Take this free dish, and we’ll buy a house to bolt it onto.” Digital cable had somewhat leveled the playing field, and for Neuman’s first few months on the job every day seemed to bring a new challenge.

Over time, Neuman says, he came to realize why former presidents such as John Reardon, who lasted less than a year, described Ergen as “pounding people into submission.” The hours were long, yes, but it was Ergen’s habit of unilaterally making decisions that most irked Neuman.

Although Dish had more than 100 people employed in its marketing department and reams of customer data to analyze, when it came time to figure out how much it was going to charge for satellite service, Ergen went into his office and came up with the final number alone. “It would be like the CEO of Kraft (KRFT) getting up in the morning and determining how much they were going to charge at retail for 12 slices of American cheese,” says Neuman. “It wasn’t that he didn’t invite input or share his thought process, because he did both. It’s just that he’d had his hands on the wheel for so long that he trusted his own judgment the best.”

For the whole story, go to: BusinessWeek

Hannan is a Bloomberg Businessweek contributor.