Методическая записка

Учебное пособие подготовлено для студентов первого курса магистратуры и направлено

на дальнейшее совершенствование навыков перевода текстов по специальности
«Международный бизнес». В качестве исходного материала использованы аутентичные
источники — статьи из журналов «The Economist)), «Business Week», «Fortune», «Time»,
«McKinsey Quaterly», «Marketing» и других изданий.
Пособие состоит из 4 глав-модулей, 16 основных уроков и 4 уроков на закрепление
материала.
Пособие организовано по тематическому принципу, и его основные разделы отражают
некоторые актуальные проблемы стратегического менеджмента, организации взаимодействия
с партнерами и клиентами, продвижения продукта, проблемы брендинга, роли альянсов и
слияний в достижении успеха компании, наиболее интересные аспекты управления
персоналом, обеспечение достоверности бухгалтерской отчетности, особенности управления в
банковской и страховой сфере.
В начале каждого раздела представлены один или два основных текста, снабженных
лексическим или переводческим комментарием, списком активной лексики, лексическими
упражнениями по переводу слов и словосочетаний с английского языка и с русского языка.
Слова и словосочетания, представляющие специальный и общеязыковой интерес, выделены в
отдельные разделы. Лексические упражнения предусматривают консолидацию лексики урока
и самостоятельную работу со словарем. В пособии рассматриваются некоторые встретившиеся
в текстовом материале переводческие трудности и приводятся упражнения на закрепление
предлагаемых способов перевода.
Кроме основных текстов, каждый раздел включает дополнительные тексты, которые
могут быть использованы в качестве тренировочного материала. По выбору преподавателя
некоторые статьи могут быть использованы для реферативного изложения, служить основой
для самостоятельного исследования того или иного вопроса. В некоторых уроках пособия
предусматриваются задания творческого характера, требующие аналитического подхода и
умения найти и представить информацию в виде письменного доклада или подготовить
устную презентацию.
В конце почти каждого урока приводятся отрывки из статей и интервью из российских
экономических журналов для перевода с русского языка на английский, которые направлены
на закрепление пройденного лексического материала и на совершенствование знаний в
области грамматики и синтаксических структур английского языка. Данный вид работы для
многих магистрантов представляет особые трудности, поэтому желательно, чтобы данные
упражнения выполнялись в письменной форме с последующей проверкой преподавателем
и/или с обсуждением вариантов перевода в аудитории.
Наряду с пособием рекомендуется использовать фрагменты экономических новостей Би-
Би-Си из мультимедийной программы «Соmрапу News» (#1155/1157) и видео материал
«Слияние не состоится», которые могут оказаться ценным дополнением урока.
Автор выражает благодарность коллегам доц. Хватовой Н.И., доц. Мальцевой A.M. и доц.
Давыдовой Л.Н. за предложения и замечания, сделанные в ходе подготовки пособия.
Автор
Contents
Chapter 1. The Big Ideas. Management and Marketing
Unit 1. Text: The Big Ideas………………………………………………….7
Unit 2. Text: All Yours……………………………………………………...23
Unit 3. Text: Quality Isn't Just for Widgets 36
Unit 4. Text: Nokia's Next Act..............58
Unit 5. Consolidation.............................67
Unit 6. Text: Halfway Down a Long Road 71
Unit 7. Text: The Case for Brands.........83
Unit 8. Text: When Battles Commence.99
Unit 9. Consolidation........................... 119
Chapter 2. Where Is the Stick? How to Motivate and Manage the Personnel and the Executives
Unit 10. Text: Where's the Stick?........132
Unit 11. Text: Under Water.................143
Unit 12. Text: Going Sideways on the Corporate Ladder149
Unit 13. Consolidation........................166

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 Chapter 3. The Numbers Game. Creative Accounting. Insolvency and Bankruptcy
Unit 14. Text: Fuzzy Numbers............181
Unit 15. Text: I Swear.........................202
Unit 16. Text: Up From the Ashes......221
Chapter 4. Banking. Stronger Foundation
Unit 17. Text: The Coming Storm......230
Unit 18. Text: Stronger Foundations. .239
Unit 19. Text: Conflicts, Conflicts Everywhere 253
Unit 20. Consolidation.......................270

CHAPTER 1. THE BIG IDEAS.

MANAGEMENT AND MARKETING

UNIT 1

• Text
THE BIG IDEAS
Scientific management. Frederick Winslow Taylor is the management thinker humanists still
love to hate, although he's been dead since 1915. His system of scientific management, they say,
dehumanizes workers and reduces management to a matter of measurements. But ever since Taylor's
methods of "working smarter" first made him famous at the turn of the century, our appetite for
greater productivity has been insatiable.
Taylor first got out his stopwatch in 1881 in the hope that science could end a tug of war over
piece rates. As a young foreman at Midvale Steel in Philadelphia, he was expected to cut rates when
production was high, but he knew that workers would react by holding down production when rates
fell. Seeking a Platonic ideal of steelmaking, Taylor carefully isolated and timed each step in the
process. Along the way, he saw ways to improve the system — by rearranging the shop, modifying a
tool, or eliminating a movement. He supplied instruction cards so that the machinist didn't need to
think: Taylor had done the thinking for him. Taylor spent the next 30 years refining his principles of
scientific management. When in 1910 Louis Brandeis publicized Taylor's ideas to expose the wasteful
habits of the railroads, the efficiency era was born. "In the past the man was first," Taylor wrote. "In
the future the system must be first."
Assembly line. Henry Ford gets his due elsewhere in this magazine, so why mention him here?
Two words: mass production. In 1909, Ford produced almost 14,000 cars; just five years later the
moving assembly line had increased output to over 230,000. Ford's moving assembly line upped
Taylor's ante: Taylor tested the maximum a man could produce; Ford's assembly line had its own
speed, and the workers had to adapt to it.
Modern Corporation. Turning a random assemblage of car companies into what has been
America's largest corporation for the better part of seven decades is impressive, but it didn't earn
Alfred Sloan Jr. a place on this list. What did was his design for General Motors — multiple divisions
controlled and supported by a central core. That set the standard for the modern decentralized
corporation.
Leadership. The most ingenious corporate structure means nothing unless someone leads it
well. One of the earliest and most original thinkers on leadership issues was Mary Parker Follett, a
New England social worker trained in political science who became an adviser to business leaders in
the 1920s and 1930s. Follett preferred constructive conflict to compromise. She believed employees
should have a voice in how things are done, but only if they share in the responsibility. And half a
century before the business schools got around to it, she spoke of managers who lead with shared
vision and common purpose. No wonder Peter Drucker has called her the "prophet of management."
Brand management. It's tough out there in consumer-products land: so many products, so little
supermarket shelf space. But those crowded shelves are a testament of sorts to the glory of brands.
And all those brands, in their sometimes maddening variety, owe their vitality to an idea that surfaced
at Procter & Gamble way back in 1931. The poor showing of Camay against the well-established
Ivory soap led P&G manager (and future CEO) Neil McElroy to suggest that what Camay needed
was an advocate. This "one man, one brand" system turned company men into entrepreneurs who
went all out for their product, a system that left its mark on products the world over.
Management guru. If Peter Drucker's name comes up frequently in these pages, it might be
because he has chronicled or anticipated almost every major management landmark, from GM at the

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 close of the Sloan era (in Concept of the Corporation) to knowledge workers (a term he coined 40
years ago). The Practice of Management, first published in 1954, is still going strong. The original
management guru (a word Drucker says people use only because "charlatan" is too long to fit in a
headline), Drucker has done more to legitimize management as a profession than a business school
full of theorists.
Labor rights. Not all big ideas about managing have come from managers. No one has fought
harder in this century than labor unions to make work safer and more fair. And no one better
personifies the nobler side of labor's struggles than Walter Reuther. He negotiated the 1955 merger of
the Congress of Industrial Organizations (which he led) with the American Federation of Labor and
broadened labor's influence. In 34 years with the United Auto Workers, he championed the rights of
workers to medical coverage, pensions, and unemployment benefits. The boss was still the boss, but
the workers had found a voice.
Managing by the numbers. Add, subtract. That pretty much sums up 30 years of finance-
driven management. The '60s brought the conglomerate era, when companies like 111 branched out
into rental cars, hotels, and Wonder Bread bakeries. It was no drawback to be ignorant about these
new businesses, the gods of finance proclaimed — with good data, you could manage anything.
Bigger was better, and being on top of the FORTUNE 500 was best. But the conglomerate strategy
did not stand the test of time. Harold Geneen, the king of the conglomerators, managed to hold ГГТ
together until he stepped down as CEO in 1977. Disassembly followed.
By the 1980s the momentum had reversed, so the equation 2 + 2 = 5 was now 5 - 2= 7. What
fueled the frenzy of the Deal Decade were new fads in financing — leveraged buyouts and their new
currency, junk bonds. By piling on debt, takeover artists aimed to force managers to eliminate waste
and reawaken the entrepreneurial impulse in bloated businesses.
Although investors saw gains, often such deals left companies strapped for capital to invest in
the future or sent once stable businesses into bankruptcy.
Quality. W. Edwards Deming hated American management style, and by the 1980s American
managers came to love him for it. Deming, the traveling evangelist of quality, had been ignored by
American corporations in the late 1940s when he tried to interest them in his statistical methods for
process control. So in 1950 he took his tent show to Japan, where he railed against American evils
like competition (cooperation was more constructive), production quotas (which sacrificed quality for
quantity), and end-of-the-line inspections (which in effect plan for defects rather than design
processes to prevent them). Having lost everything in the war, Japanese manufacturers proved
receptive and soon were taking market share from American companies. When an American
television program "discovered" Deming in 1980, business was finally ready to listen to it.
Reengineering. Michael Hammer and James Champy set the business world on fire in the early
'90s, selling two million copies of their manifesto, Reengineering the Corporation and FORTUNE,
we admit, helped to fan the flames. Now that reengineering is about as popular as Linda Tripp, it's
fair to ask, what were we thinking? First, Hammer and Champy's vision was no mere cost-cutting tool
but the first large-scale, systematic application of information technology to management. By re-
imagining business processes, companies could put back together tasks that Taylor and Co. had
pulled apart, building responsibility into jobs that used to pass the buck. Second, no one said
reengineering would be easy. In fact, one critic has compared it to chemotherapy — a radical
treatment that destroys a lot along the way. Half-hearted attempts pretty much guaranteed failure.
And there were plenty of failures, not to mention that companies used the idea to justify willy-
nilly downsizing. As the authors later acknowledged, they hadn't paid enough attention to the people.
Knowledge management. If the Internet economy has taught us anything, it's that the physical
world Frederick Taylor lived in determines less and less of what we value. A good idea, especially
one that is well timed, has almost unprecedented worth. It follows, then, that the stuff between
workers' ears, obviated by Taylor and barely tolerated by Ford, becomes treasure to today's managers.
Now the challenge for managers is how to capture, harness, and develop that knowledge profitably.
Fortune

Notes

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 Congress of Industrial Конгресс производственных профсоюзов (КПП)
Organizations (CIO)

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 American Federation of Labour Американская федерация труда (АФТ)
(AFL)
United Auto Workers (UAW) Объединенный профсоюз работников автомобильной
[United Automobile, Aerospace промышленности (Объединенный профсоюз
and Agricultural Workers of работников автомобильной, авиакосмической
America] промышленности и сельскохозяйственного маши-
ностроения)
Linda Tripp Monica Lewinsky's friend who recorded telephone
conversations with Lewinsky in late 1977 which eventually
led to the impeachment of President Clinton
Vocabulary
to dehumanize workers обезличивать работников
piece rate сдельная ставка (оплаты труда)
time rate повременная ставка
refine v 1) очищать; рафинировать; перегонять нефть;
2) совершенствовать, улучшать
to refine one's principles оттачивать свои принципы
refinery n нефтеперерабатывающий завод
efficiency n эффективность
Ant. inefficiency
core n ядро, сердцевина, основная, центральная часть
core business 1) основное направление деятельности; профильная
Syn. core competence деятельность;
Ant. sideline business 2) профильное предприятие
leadership n лидерство
vision n видение
brand n торговая марка, марка производителя, брэнд
brand management управление торговыми марками
fad n преходящее увлечение, (ново)модное направление
management fad новомодное направление в менеджменте
leveraged a с использованием заемных средств
leveraged buyout выкуп с привлечением заемных средств; поглощение
(takeover) или выкуп компании с использованием
заемных средств («финансового рычага» или
«левериджа»)
national champion лидер национальной индустрии; предприятие —
предмет национальной гордости
junk bond высокодоходная, высокорискованная облигация

loated а раздутый, чрезмерный

Syn. swollen, sprawling
champion v защищать, отстаивать; бороться (за что-либо)
Syn. advocate, vindicate, bear up,
stand up (for), stick up (for),
advance (smth), support, protect,
light (for), evangelize
champion n 1)защитник, поборник (чего-либо); борец (за что-либо);
Syn. advocate, proponent, 2) чемпион, призер
vindicator, stickler, evangelist
coverage n 1) охват;
2) репортаж, освещение события (в печати, по радио и
т.п.);
3) страховое покрытие
medical coverage медицинское страхование

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 quota n квота, количественное ограничение

production quota производственное задание, квота на добычу (нефти и

т.п.)
dodge v уклоняться, избегать (уплаты налога, контроля)
end-of-the-line inspection контроль (качества) на конечной стадии производства
Syn. end-item inspection
downsizing n сокращение размеров компании, числа занятых

reengineering n реинжениринг, программа полной перестройки ком-

пании

Useful Words and Phrases

tug of war перетягивание каната, борьба с переменным

успехом, решительная схватка
to get one's due получить по заслугам, получить причитающуюся
долю
to fan the flame разжигать пламя, разжигать страсти
landmark n веха, поворотный пункт
Syn. milestone, turning point,
tipping point

Vocabulary Commentary
В английском языке существует несколько терминов для обозначения понятия
«перестройка, реорганизация» — restructuring, downsizing, delayering, streamlining,
reengineering. Restructuring представляет термин общего характера. Downsizing означает, что
усилия руководства направлены на сокращение штата сотрудников и уменьшение размеров
компании. Слово delayering подчеркивает, что в центре внимания — сокращение количества
уровней управления. Слово streamlining включает в себя и значение «рационализация».
Reengineering — это полная перестройка компании, в процессе которой пересматриваются не
только все стороны ее деятельности, но и цель и концепция самого предприятия.
Кроме этих терминов, в экономической литературе встречаются и другие лексические
единицы, описывающие процесс изменений в компаниях — некоторые из них изначально
употреблялись метафорически, а затем в связи с частой повторяемостью потеряли свою
необычность и красочность, и поэтому могут переводиться словами перестраиваться,
проводить реорганизацию. К ним относятся такие глаголы, как overhaul, revamp, remake
oneself, reinvent oneself, turn around.

Business Commentary

Leveraged Buyouts (LBO)

При выкупе компаний с привлечением заемных средств операция по приобретению
компании-объекта осуществляется за счет внешнего финансирования.
В качестве обеспечения займов, взятых компанией-покупателем, часто служат ее активы,
при этом задолженность погашается из денежных средств приобретенной компании.
Менеджеры используют этот подход, чтобы сохранить контроль над компанией, превратить ее
из открытой в частную.
Очень часто при выкупе с привлечением заемных средств акционеры открытой компании
получают премию сверх текущей рыночной стоимости их акций.
Junk Bonds
Высокорискованные облигации с кредитным рейтингом ВВ и ниже.
Термин «junk bonds», имеет негативный оттенок, и поэтому эмитенты и владельцы
предпочитают, чтобы такие облигации назывались высокодоходными (high-yield bonds).
Такого рода облигации выпускаются компаниями, не имеющими длительной истории и
хорошей деловой репутации или компаниями с сомнительной кредитоспособностью.
Они являются распространенным способом финансирования поглощения. «Отцом»
рынка «бросовых», «мусорных» облигаций считается известный американский финансист
Майкл Милкен (Michael Milken), который в 1987 году заработал 400 млн ф. ст. и в 1990 г. был

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 приговорен к 10 годам заключения и штрафу в 366 млн ф. ст. Отбыв наказание, он продолжал
финансовую деятельность, управляя фондами, но уже в сфере образования и научных
исследований.

См. также Иван Боуски {Ivan Boesky).

Exercise 1.
a) Define the adjectives shown in the chart and give possible combinations with the nouns in the box.
diamond, politician, businessmen, appetite, mind, leather, population, ambition, attempt,
toy, signature, person, solution, desire, tool, pleasure, companies, money, speech

Adje Definiti Colloc

ctives on ations with
nouns
insatiable
ingenious
indigenous
genuine
half-hearted
hard-nosed

b) Complete the chart. Use your dictionary if necessary. Study the following phrases
based on the word "inspection".

inspection осмотр; проверка; инспектирование; досмотр

(таможенный)
inspection during manufacture
in-process inspection
(un)scheduled inspection
acceptance inspection
quality-inspection cost(s)
заводской контроль
one-time inspection
контроль (груза) перед отправкой
частичный контроль
purchase subject to inspection

Exercise 2. Give the Russian for the following.

a moving assembly line, to roll off the assembly line, to end a tug of war over smth; to expose
wasteful habits and inefficiencies; leadership issues; the leader's vision; multiple divisions controlled
from the central core; to get one's due; corporate structure; to dodge price controls; sprawling empires
of HR departments; bloated businesses; bloated (swollen) budget; to branch out into hotels and
bakeries; to impose import quotas; to dodge oil production quotas; to build responsibility into jobs; to
downsize a company; delayering; to make one's business lean; to flatten the hierarchy of an
organisation; a landmark deal; to lead with shared vision and common purpose

Exercise 3. Translate the following into English.

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 управление качеством; устанавливать обязательные для членов нефтяного картеля квоты
на добычу; сосредоточить внимание на основных направлениях деятельности; устранить все
дефекты в автомобиле на конечной стадии производства; подливать масла в огонь;
обоснованное сокращение компании; переосмысление всего процесса; крупномасштабное
сокращение издержек; разросшиеся компании; обсуждать показатели работы компании;
использовать систему поставок «точно в срок»; оптимизировать бизнес; полностью
перестроить работу в компании

Exercise 4. Translate the following sentences into Russian paying attention to their
structure.
1. Propping up weaker companies hurts the strong ones, since they then have to cope with
subsidized competitors.
2. Tapping into the knowledge base of GE is a negotiating tool or benefit of doing business,
not an end in itself. Bringing customers to GE's research and development centers or famed training
facilities in Crotonville, for example, is meant to improve productivity, not provide free field trips.
1. That the products which the business units select to sell globally, will continue to be
tailored to local markets only adds to the complexity. Internal "disruption" is already affecting sales.
2. Whatever detailed rules the SEC agrees are almost certain to be challenged by the
lawyers, who are not a group lacking in legal representation.
3. Gone are the days when Vivendi Universal's top executives hobnobbed with pop stars and
gave interviews to Rolling Stone. What Jean-Marie Messier once trumpeted as the core of his ill-
starred vision of a global media and communications empire has become a faint echo after his
departure as chief executive and almost two years of aggressive restructuring that has rescued the
French conglomerate from the brink of collapse.
4. As Microsoft focuses increasingly on developing an image as an innovator — the
company is trying to fend off not only antitrust threats but also the competitive challenge to Windows
from the rise of open-source software like Linux — it has adjusted its advertising strategy in recent
years. While Microsoft in the past had predominantly used product-specific advertising, the company
is now spending about one-quarter of its ad budget on a brand-building campaign that seeks to give
Microsoft a more human face.

Exercise 5. Give the English for:

1. Кто бы мог подумать, что новая теория в области управления разожжет страсти в
деловом мире и заставит многих переосмыслить все основы бизнеса.
2. Нельзя было ожидать, что новые веяния в менеджменте заставят управленцев
заняться сокращением издержек и устранением потерь.
3 Вскоре после окончания войны президент Франции Шарль де Голль (Charles de Gaulles)
распорядился о создании собственной компьютерной фирмы «Буль» (Bull), призванной стать
гордостью национальной индустрии и бросить вызов доминирующему положению
американской компании Ай-Би-Эм (ЮМ).
4. Многие конгломераты начинают избавляться от неприбыльных предприятий и уделять
внимание основному виду деятельности, в которой компания добилась преимущества в
конкурентоспособности на мировом рынке.
5. Использование заемных средств при выкупе компаний расширяет финансовые
возможности компании в таких операциях и позволяет захватывать объекты поглощений,
которые оказались бы ей не по зубам, если бы она опиралась на собственный капитал.
6. Что касается стратегии, то компания «Джи-И Кэпитал» (GE Capital) пошла в Европе
тем же путем, который обеспечил ей успех в США: захват недостаточно хорошо работающих
предприятий в области лизинга, страхования или потребительского кредита. В случае
необходимости компания назначала новое руководство и внедряла более эффективную
технологию и методы работы. Она объединяла компании одного профиля для достижения
эффекта масштаба, ставя нелегкие задачи перед менеджерами этих компаний.

Exercise 6. Translate the text into Russian in writing.

Buy-Outs Get a Safer Image
The buy-out is back. Within the last month, the incredible split personality of the US stock
market has spawned a shoal of deals in which managers of low-technology companies, disgruntled
with their market valuation, have sought partners to take them private.

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 But there is bad news for those who relished the cut-and-thrust of the late 1980s, when colorful
financiers such as T. Boone Pickens and Ivan Boesky took advantage of the gap between public and
private market values to raid targets.
Analysts and buy-out specialists believe leveraged buy-outs of the early 21st century will be
greyer, less extravagant — and safer.
The companies that have taken the leap so far are small — US Can, which makes plastic and
steel containers, and Cameron Ashley
Building Products, both of which announced leveraged buy-outs last week, are hardly household
names. But bigger and better-known companies are also examining their options, and the trend is
embracing high-tech as well as "old economy" companies.
LBOs got a bad reputation in the late 1980s, as predators put pressure on companies to do deals
on unreasonable terms, financing break-up bids with junk bonds issued by the likes of Michael
Milken.
But LBOs did not die in the 1990s. The phenomenon has gathered pace as the gulf has widened
between the valuation of high-tech stocks and the old-line manufacturers and service companies. Jack
Malvey, chief global fixed income strategist at Lehman Brothers, points out that some companies are
now trading at three times cash flow, when the raiders of the late 1980s would have snapped up a
bargain at six or seven times cash.
But the rationale and structure of buy-outs have changed. "The prices are more reasonable and
there seem to be more alliances with managements that have a good business reason to go private,"
says Brad Bloom, managing director of Berkshire Partners, the Boston-based investment firm backing
the US Can buy-out. Managers' overriding desire is to realise value that they believe is being ignored
by the markets.
Another factor preventing a greed-is-good explosion of LBOs is the weak state of the high-yield
bond market. Most of the acquisitions of this bull market have been equity-financed, and it is getting
more not less costly to issue high-yield bonds. The latest deals have a higher proportion of equity. "I
would have to question how much financing is there for a gigantic LBO extravaganza over the next
six months," says Mr Malvey. "But on the margin I wouldn't be surprised if you saw a few more of
these transactions," he says.
The Financial Times

Exercise 7. Translate the text into Russian orally.

Creating Euro Giants
What is the French and German plan to create bi-national champions really about?
THE latest attempt by France and Germany to revive tired old industrial policies by jointly
creating European business champions got off to an inauspicious start. Before the German chancellor,
French prime minister and their respective economy and finance ministers could hold their summit in
Berlin on June 1st to hammer out the details of the plan, on May 17th Nicolas Sarkozy, the French
finance minister, and Mario Monti, the European Union's competition commissioner, agreed a rescue
deal for Alstom, a troubled French engineering firm, that flies in the face of the new spirit of co-
operation.
Siemens, a huge and prosperous German firm, has expressed a strong interest in buying
Alstom's turbine business — on the face of it, a perfect opportunity to create a symbol for the new
policy. Instead, under the deal between Messrs Sarkozy and Monti, Alstom will remain a French
company, bailed out by the French state. This decision led several German officials to complain about
France going it alone. Siemens is considering a legal challenge, once the details of the rescue package
are official.
In theory, at least, the French and Germans have in mind a different sort of national champion to
the inefficient, protected monopoly, state-subsidised sort of which Alstom is a reminder. A classic
example of the old-style champion, says Louis Schweitzer, chairman of Renault, is Fiat before the EU
forced open the Italian car market.
The new sort of national champion, or Euro champion, would have a somewhat different
objective, says Mr Schweitzer, to ensure that Europe, or a given European country, has firms able to
hold their own in competitive global markets, particularly against America's mighty multinationals.
This, he says, is the logic behind the recent controversial drug merger, pushed by the French
government, of Sanofi-Synthelabo, a French company, with Aventis, a Franco-German firm.
France and Germany launched their new plan on May 13th, when they declared an intention "to
formulate a joint industrial policy aimed at creating a framework for mergers and joint-ventures

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 between major German and French corporations." Together Germany and France could create a
number of industrial champions modelled on EADS, the European Aeronautic Defence and Space
firm, formed in 2000, said Jacques Chirac, the French president.
Such a policy would have its downside even if it were being pursued in conjunction with
general economic liberalisation. But there are reasons to think that the big talk about cross-border
action may be mere cover for various politically driven national initiatives in France and Germany,
many of them protectionist.
The Economist

UNIT 2

• Text
All YOURS
Manufacturing companies are increasingly using the Internet to give customers the
impression of personal service. But true customisation needs new production techniques as well
"ANY COLOUR you want so long as it's black," was Henry Ford's approach to customer choice.
Click on the website of idtown.com, and you see the next industrial evolution at work. This firm, in
Hong Kong, will sell you any of an almost infinite variety of designs of watch, assembled from
standard parts, at much the price of a Henry Ford-type watch.
Thanks to the Internet, all sorts of firms are using one-to-one marketing to elicit information
about individual customers. Such information could once have been collected only through a direct
sales force, and its high cost meant that it was used only for high-value customers. Now, the cost has
fallen sharply. And mass customisation allows companies to use such information to produce
individually tailored products at affordable prices. "As in so many areas," notes Ward Hanson, author
of "Principles of Internet Marketing" and a professor at Stanford Business School, "the Internet
allows the democratisation of goods and information."
Until now, these techniques have been applied chiefly to services. Banking, stockbroking,
communications, on-line information: all increasingly appear on your computer with your name
attached. "Anything that can be digitised can be customised," says Joseph Pine, who helped to found
Strategic Horizons, a consultancy in Ohio, and also wrote a book on mass customisation. But now,
products that cannot be digitised are increasingly receiving die all-yours treatment too. And as the
revolution spreads to manufacturing, firms are finding they need to change their entire production
process.
The first manufacturers to tailor products to particular customers have, not surprisingly, been
selling to other businesses. Mass customisation is more prevalent in business-to-business, because the
customer can attach a dollar value to it," says Mr Pine. The simplest approach is to design a product
that buyers can customise themselves. However, too many choices, and too much flexibility, create
problems for both customers and company.
But the change has not merely affected customers' costs and convenience. Gradually, it has
affected the way that customers work too. The manufacturer that has done most to apply this
approach in the consumer world is Dell Computer. To the customer, the company's most striking
feature is a website that allows the buyer to design an individual computer and then track it through to
delivery. But Dell also shows that when you get mass customisation to work, some remarkable things
start to happen.
First, the need to hold stocks of parts, partially finished and finished goods falls sharply:
inventories at Dell have fallen from 31 days of parts at the end of the financial year to only six days
today, says Paul Bell, who runs Dell's operations in Europe. Much of Dell's production, up to the
point of final assembly, is outsourced. That makes it essential for suppliers at every link in the chain
to be plugged into good information about what customers want, and when. "If all our suppliers are
guessing," says Mr Bell, "you end up with inventory, which is the physical embodiment of bad
information." Mind you, this process can also bring an opposite problem: delays when Dell runs out
of a particular part.
Speed and good communications are thus essential if mass customisation is to work. Get them
right, and another prize is yours. In Henry Ford's day, Ford made the car and the customer paid for it.
In Michael Dell's day, the customer pays for the computer and then Dell makes it. Thus, in the past
quarter Dell has been sitting on 18 days' sales, and the figure is creeping up as the speed of production
increases.

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 Car makers, lumbered with more than $100 billion of stocks in America, look on this with envy.
"We've learnt a lot from studying Dell," admits Mark Ryhorski, manager for consumer-relationship
marketing at Ford in America. "After all, they broke the paradigm that great consumer choice means
huge amounts of inventory. The auto industry is a trillion-dollar industry, sitting on 60-100 days of
finished goods. Think how much of this country's capital is tied up in that." Conventional car making
pumps thousands of cars through each plant to keep costs down. But accumulating stock has to be
financed and, as often as not, cleared using special deals, both of which eat into margins.
As a step away from this, Ford announced a partnership with Microsoft last year that will give
potential customers a view, not just of their local dealer's lot, but of what regional dealers have, what
is on order and what is being built. The trouble is that this is not that many steps away from Henry
Ford. What Ford and Microsoft propose is merely a customisation of the stock pipeline. Customising
the car itself will be harder: for instance, body colour is determined early on, when the newly bashed
metalwork is sprayed. By contrast, the colour of a Smart Car, made by DaimlerChrysler, is decided
almost at the last minute, when plastic panels are clipped on to the sides. Without changing their
production process, traditional car makers will not really be able to customise their cars.
To succeed in mass customisation, firms must change more than just the order in which things
are assembled. "One of the biggest changes is in the design and construction of products," says Frank
Filler, an expert in mass customisation at the Technical University of Munich. Companies, he says,
need to move to modular production processes, in which each group of steps can be separated or
clipped together "like Lego blocks."
One example is in the garment business. Timothy Belton left Andersen Consulting in 1997 to
set up Express Custom Tailors, producing tailored menswear to order. He offers "a custom garment in
less time than you have to wait for the alterations, at a lower price than off-the-rack."
He put the garment-producing end of his business in Cleveland, Ohio, because the town's
tailoring tradition gives it a ready supply of skilled workers. But the production process he uses is
Lego-style, not old-style. Instead of making the sleeves of a jacket first and then the body, assembling
the garment in a series of steps, his workers make sleeves and body simultaneously, working in
parallel with others who are stitching other sections. By breaking the 100 or so operations into
modules, a garment can be assembled in five hours. "Saville Row on steroids," is how Mr Belton
describes it.
Some firms are developing the link between one-to-one marketing and mass customisation.
Reflect was created by Procter & Gamble to develop online sales of beauty-care products. It takes
information from its customers and offers them cosmetics, shampoos and so on, all made to their
specification. It opened 12 weeks ago, and half its orders are already repeat business.
Part of the appeal to customers, says Richard Gerstein, who runs design and marketing for
Reflect, is to enjoy a wider choice than in even a well-stocked department store, where "most brands
can sell only 15 or so items." But the producer gains even more. Reflect has complete control of its
relations with customers, learning from them as well as being able to market to them without a
retailer getting in the way.

A new metric too

Few things reflect a firm's priorities more clearly than what it chooses to measure. One corollary
of mass customisation is a focus on what customers want, rather than what the company can produce.
This is shown, says Stanford's Mr Hanson, in a switch from measuring market share to measuring a
customer's lifetime value. "The old way was to measure performance against a fixed set of
competitors," he points out. "Now, I may not know who is my competitor. It becomes more important
to measure how much a customer costs to acquire and to retain. We couldn't do that before; instead
we just measured what went out on the loading dock."
The key to exploiting mass customisation is to manage customers at the same time, observes Mr
Filler. Don Peppers, an American writer on one-to-one management, makes a similar point:
"Customers are no longer passive recipients of a message. They tell you what they want. You stay
with me because we have a learning relationship."
It is not easy to turn around a business designed, in the style of Henry Ford, to produce first and
sell afterwards, and point it instead towards serving each customer individually. It requires a different
corporate structure, built not around products but around different kinds of customers. Henry Ford's
mass production transformed manufacturing in the 20th century. Mass customisation may do the
same in the 21st.
The Economist

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 Notes
1. Saville Row - 1) a street in London where fashionable tailors have their shop; 2) an
expensive men's suit
2. paradigm - 1) система понятий или представлений ( в какой-либо области знаний),
принцип; 2) тип (напр. потребителей), модель, разновидность

Translation Commentary
Speed and good communications are thus essential if mass customisation is to work.
Следует запомнить перевод конструкции «tо be + Infinitives” в условном предложении:
1. для того, чтобы; 2. если кто-то желает чего-либо; 3. если суждено (см. упр. 3).
Vocabulary
personal service индивидуальное обслуживание; бытовое обслуживание
one-to-one marketing индивидуальный маркетинг
direct sales force персонал, осуществляющий продажи непосредственно потребителю
high-value customer ценный клиент
individually tailored products продукция, произведенная с учетом индивидуальных потребностей
покупателя
mass customisation массовое производство товаров по индивидуальным запросам
покупателя
business-to-business (b2b) межфирменные операции в Интернете; оптовый рынок в
Интернете
outsource v передавать какие-либо свои функции внешним исполнителям,
Syn. to contract out использовать подряд
outsourcing n передача каких-либо своих функций внешним исполнителям на
Syn. contracting out; offshoring, договорной основе; использование субподряда
found v основывать, учреждать
founder n учредитель (компании)
pipeline n 1) трубопровод, магистраль; [to lay a pipeline — укладывать трубы];
2) коммуникационная линия; 3) канал, источник информации (особ,
конфиденциальной); 4) система снабжения; 5) процесс подготовки
(разработки)
to be in the pipeline быть в работе, в разработке; в процессе подготовки

Useful Words and Phrases

to elicit information извлекать, получать информацию

to tie up вкладывать (деньги); вложить во что-либо свои деньги
to tie up one's money in smth

Exercise 1. Give the Russian for the following.

to have affordable prices; to have one's money tied up in the mining industry; the white-goods-
producing end of the business; inventories; individually tailored products; to receive the all-yours
treatment, to found a consultancy; to be ill founded; to elicit quite useful information; to elicit the
truth; a direct sales force; to customize a car; mass customization; to turn around a company; accounts
receivable; to attach a dollar value to smth; to affect customers' costs and convenience; to outsource
production; to have one's job outsourced

Exercise 2. Give the English for the following words and word combinations.
приемлемые (для потребителя) цены; удерживать цены на низком уровне; испытывать
нехватку каких-либо комплектующих; сырье; полуфабрикаты; готовая продукция;
распространение опыта, полученного в сфере услуг, на обрабатывающую промышленность;
применять индивидуализированные методы маркетинга; индивидуализированный продукт;
использовать субподряд; создавать товарные запасы; проводить коррекцию запасов;
высокорискованные, «бросовые» облигации; применять финансовый рычаг;
квалифицированные рабочие; проводить монтаж (демонтаж); определять (измерять)

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 результаты деятельности компании; гибкость; руководить деятельностью компании в
Северной Америке; повышать качество и эффективность

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 Exercise 3. Translate the following extracts paying attention to:
a) emphatic structures
1. What Ford and Microsoft propose is merely a customisation of the stock pipeline.
2. What has kept the educated job market from falling off the cliff so far is continued hiring
by some key industries.
3. If the Conoco/Phillips fusion does trigger yet another round of consolidation however, it
is unlikely to be as earth-shattering as the previous one, for one simple reason: the oil industry's
premier league is too far ahead.
4. If chief executives had taken the depressed market valuations of the 1970s and 1980s
seriously, there would have been virtually no investment. Fortunately they did not do so.
Unfortunately, they did take the overvaluations of the late 1990s quite seriously and promptly
proceeded to waste resources on a vast scale. In both environments, however, wise managers would
have paid little attention to the market gyrations, just as wise shareholders would have shielded their
managers from its temptations.
5. What worries Nestle's chief executive far more are accusations that the Swiss group is
swapping a consistent, long-term strategy of controlled expansion for an unbridled acquisition spree
to pep up its growth rate — and that it is doing so just when dullness is back in fashion in the
business world.
6. Only when one of the shareholders began asking questions was the company forced into
initiating an investigation. What was unveiled and made public yesterday might have been expected
to have already disturbed some investors.

b) to be + Infinitive
7. Yet a huge strength of American firms is their ability to reap scale economies and roll
out brands across the world's largest single market. If Europe is to benefit fully from the Euro, it
needs to follow suit. And that is more likely to happen if Europe's companies find it easier to merge
across borders.
8. The Carlsberg Foundation controls the brewing business and is obliged to maintain the
ownership of the Carlsberg holding company above 50 per cent. It might need a clever structure to
sell. If the Carlsberg Foundation is to protect its investment, it is time to make sure it has done the
necessary groundwork.
9. Imposing Japanese-style quality and efficiency is a must if Renault is to have a shot at
reentering the US, a goal the French company has set for some time after 2010.

Exercise 4. Translate the following text into Russian paying attention to the structures
with "it".
1. As it turns out, it's how Michael Dell manages the company that has elevated it far above
its sell-direct business model. What's Dell's secret? At its heart is his belief that the status quo is
never good enough, even if it means painful changes for the man with his name on the door. When
success is achieved, it's greeted with five seconds of praise followed by five hours of postmortem on
what could have been done better.
2. Hilfiger's no fashion leader. When it comes to mergers and acquisitions, clothes are all
the rage. That has some smart investors worried that prices are getting too high. "It's a buying spree
that doesn't seem to have a lot of pricing discipline," say Liz Clairborne Inc.
3. It's only this year that Yahoo, prompted by the sudden and huge success of Google, has
set about trying to build a solid engineering culture of its own around a handful search engine
companies it acquired.

Exercise 5. Translate the following text into English in writing.

Трансформация «Эй-Би-Би»
Швейцарский концерн «Эй-Би-Би» (ABB) — один из мировых лидеров по производству
энергетического оборудования — объявил о начале реструктуризации. В прошлом году
доходы компании снизились, и руководство компании почти в открытую стало обсуждать
возможность выкупа 6 млн акций.
Из-за плохих финансовых показателей компанию покинули 612 .менеджеров. Среди них
был и президент компании, который ушел в отставку, не пробыв на своем посту и трех лет.
Пришедший ему на смену новый глава компании объявил о принципиально новой стратегии

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 «Эй-Би-Би», которая должна помочь группе «найти свое место мире». Раньше отдельные
подразделения компании работали с одним и тем же заказчиком на разных условиях. Отныне
же все части «Эй-Би-Би» будут работать «по единым правилам».
Эксперт

Exercise 6. Translate the text into Russian orally.

Has Outsourcing Gone Too Far?
Farming out in-house operations has become a religion. Faith now be tempered by reason
If all manufacturers sang from the same hymnal — and many do — they would outsource
almost everything: management gospel holds that manufacturing is too labor- and capital-intensive to
support the high margins and fast growth that investors demand. By shedding assets, companies can
be born again as product designers, solution providers, industry innovators, or supply chain
integrators — and, it is said, quickly boost their return on invested capital. Standard & Poor's reports
that in the year 2000, the market-to-book ratio of the S& P 500 was six times greater than it had been
in 1981 — a reflection of the declining importance of tangible assets.
Such pressures and perceptions make outsourcing an almost irresistible impulse for
manufacturers. Gobal access to vendors, felling interaction costs, and improved information
technologies and communications links are giving manufacturers unprecedented choice in structuring
their businesses. Through outsourcing, companies can now dump operational headaches and
bottlenecks downstream, often capture immediate cost savings, and avoid labor conflicts and
management deficiencies. We are aware of no managers who have been taken to task for farming out
in-house operations.
But in the race to hand over capital-intensive manufacturing assets to outside suppliers,
companies may be ceding the very skills and processes that have distinguished them in the market
place. Consider the case of Gibson Greetings, the oldest US greeting card maker. In the 1990s, it
started running out of cash. To realize savings, Gibson chose to outsource its manufacturing, but it
soon ran into supplier-management problems that cost the company its place at large retailers. In the
meantime, its competitors had been investing in more efficient printing and production technologies.
Ultimately, one of those competitors acquired Gibson. An analyst observed, 'The final nail in the
coffin was that Gibson got out of the manufacturing business and started outsourcing."
Obviously, the decision to outsource doesn't produce such a drastic outcome; done right,
outsourcing manufacturing or services can deliver game-changing levels of value. But by assuming
that outsourcing is the answer rather than critically assessing its pros and cons, companies may be
failing to do what really matters: improving a company's performance and maximazing value.
Outsourcing can be instrumental in realizing these goals — but not always.
The rush to outsource has delivered much less value than it might have. It has been forgotten
that outsourcing isn't an end in itself but rather a strategic tool for enhancing overall performance.
The ability of outsourcing to play this role depends partly on the form chosen — the re-lease or sale
of assets, a spin-off or intitial public offering of the business, or the formation of an alliance or joint
venture. If outsourcing isn't used strategically, it probably shouldn't be used at all.
McKinsey Quaterly
Exercise 7. Translate the text orally.
Can Bayer Cure Its Own Headache?
Shareholders would like it to shed everything but health care
On Jan, 24, Germany's biggest drug-maker, Bayer, will make its debut on the New York Stock
Exchange. The company, best known for inventing aspirin, in 1897, likely hopes to use its new
shares as currency for acquisitions in the world's most profitable drug market: the U. S.
But why should American investors buy into a sluggish, old-fashioned conglomerate? After all,
Bayer's German shareholders are deserting the company in droves: Its Frankfurt-traded shares have
plunged close to 40% in the past 12 months. Bayer's recent performance indicates that its glory days
are behind it.
Bayer can attribute some of its disastrous results to Baycol, the cholesterol-lowering drug that
was pulled from the market last year after it was implicated in 52 deaths. But the problems run much
deeper. For years, shareholders have tried and failed to persuade management to sell
underperforming units and focus on the more lucrative pharmaceuticals business. Citing a recent
study by Boston Consulting Group, Bayer executives say conglomerates perform better than more
narrowly focused companies over the long term. Yet that's not a convincing argument for one

15 129
 London analyst: "This is a classic case of a company that should be broken up to get some value out
of it, but management clearly doesn't agree," he says.
Blame this impasse on Bayer's determination to cling to the now discredited notion that there
are real benefits in owning both chemical and pharmaceutical businesses. The synergies, however,
aren't there. Just ask other giants of the so-called life-sciences industry. Switzerland's Novartis and
Britain's AstraZeneca spun off their agrochemicals units in 2000. Bayer, in contrast, has been
expanding its own, buying Aventis Crop Sciences in October for $6.5 billion. The acquisition pushed
Bayer's net debt to more than $12.5 billion. "Any successful drug company today doesn't have all
this baggage of specialty chemicals or plastics," says Barrie James, president of Pharma Strategy
Consulting in Huntingdon, England.
Bayer Chairman Manfred Schneider is open to a joint venture. "Ibis could involve part of our
activities or even the whole [healthcare] business," he says. Schneider hopes any partner would have
a strong position in the U.S. market yet be small enough that Bayer could retain management control.
Few drugmakers fit that bill.
Schneider, 63, may need to moderate his criteria if he is ever to find a partner for Bayer. In
December, Schneider announced that next year Bayer would separate its four divisions into legally
independent entities. The move could open the way for strategic partnerships. But a bolder, fast-
working treatment is in order for Bayer's long-suffering shareholders.
BusinessWeek

Exercise 8. Speak on the following topics. Use of other resources is necessary.

1. Mass customization .
2. Dell - the company and its boss.
3. The challenges Dell's computer business has to face.
4. Outsourcing - ins and outs of the strategy.

UNIT 3

• Text
QUALITY ISN'T JUST FOR WIDGETS
Six Sigma, the quality-control and cost-cutting power tool, is proving its worth on the
service side
IN the world of manufacturing, Six Sigma has become something akin to a religion, with none
other than John F. Welch as its charismatic apostle. The former chairman and CEO of General
Electric Co. came late to this rigorous, statistical approach to quality control. But once he embraced it
in 1996, he quickly assembled an unprecedented army of employees to pinpoint and fix problems
throughout GE using the number-crunching skills they learned in Six Sigma training.
The results were awesome. In the past three years alone, these troops saved the company $8
billion, according to GE. Little wonder, then, that Welch has won so many converts preaching the
cost-cutting power of this methodology.
So what is GE doing with Six Sigma under Welch's successor, Jeffrey R. Immelt? More than
ever. The $126 billion conglomerate spent $600 million on Six Sigma projects in 2002 — mostly for
the salaries of 4,000 full-time Six Sigma experts, plus 100,000 employees who've undergone, basic
training. Altogether, they have a target of finding an additional $2.5 billion in savings in the
company.
On top of that, GE is sending out its Six Sigma squads to customers such as Dell Computer and
Wal-Mart Stores to help them root out what GE estimates to be more than $1 billion in inefficiencies
and waste — and help GE win more business.
GE may be preeminent, but it's certainly not unique in pushing Six Sigma into new comers of
its business. Originally conceived by Motorola Inc. as a quality-improvement device in the mid-
1980s, Six Sigma soon morphed into a cost-cutting utensil for manufacturers of all stripes. Now, it's
fast becoming the Swiss army knife of the business world. Goods producers still make up the bulk of
users, who typically rely on statistics to uncover and then reduce product variance in order to boost
quality and efficiency. But increasingly, manufacturers are applying Six Sigma to functions as varied
as accounts receivable, sales, and research and development.
And their success in these non-factory domains has inspired Six Sigma projects at financial
institutions, retailers, health-care concerns, and in other areas of the service sector. Says Gregory H.

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 Watson, a consultant and past president of the American Society for Quality in Milwaukee: "Six
Sigma might be the maturation of everything we've learned over the last 100 years about quality."
It's easy to see why Six Sigma works well in large-scale manufacturing. For one, factory
processes tend to be both repetitive and easy to track as goods move along the line. Also, companies
usually quantify what happens at each step. So, by measuring defects per output, they can quickly
assess how a different way of doing things at any stage affects productivity or profits.
Generally the gains add up swiftly as Six Sigma squads discover ways to reduce personnel,
capital spending, or overhead. Bosses can then re-deploy staff or take the gain to the bottom line. At
Dow Chemical Co., for instance, each Six Sigma project has freed up an average of $500,000 in the
first year. In one case the discovery that an additive was causing imperfections in packaging
materials enabled Dow to reduce defective items on that line by 70%. Managers claim that in total,
such improvements have saved the company more than $750 million since 1999.
Increasingly, however, manufacturers are racking up their big savings far from the factory floor.
Dow Chemical, for example, projects it will save another $750 million by the end of next year as it
applies Six Sigma to such areas as procurement and sales. And Six Sigma experts at 3M Co. have
employed the methodology to reduce inventories and speed up R&D efforts at the company's
headquarters. One team even analyzed the performance of sales reps in 3M's orthodontic-products
division to identify exactly why its top agents sold so much more than others. And it doesn't stop
there. By judging how well employees run fix-it projects, company leaders are hoping to spot their
successors. "Six Sigma is about developing tomorrow's managers," says Chairman and CEO W.
James McNerney Jr. "It gives them a shot to show what they can do."
Six Sigma isn't a cure-all, to be sure. In the first few months of a project, up-front training costs
always outweigh any savings. And through the life of the project, the expense of compiling and
analyzing data may also exceed what is saved, particularly in areas where a process cannot be easily
standardized.
Even GE, which does thousands of Six Sigma projects a year, concedes it hasn’t yet made
much headway in applying Six Sigma to its legal operations. Companies also stand to lose if top
management doesn't buy the program and implement the fixes recommended by its top Six Sigma
analysts, known as '"black belts."
But that said, GE is still pushing the envelope. Its GE Capital subsidiary recently dispatched a
couple of black belts to Dell Computer Corp.'s headquarters in Round Rock, Tex., to analyze its
accounts-payable process. After mapping the procedure step by step, they discovered that Dell was
getting buried in paper invoices because its just-in-time manufacturing operations required that the
company purchase some types of parts as often as 12 times a day. To solve the problem, the GE
Capital team moved Dell from its slowpoke manual system to an Internet-based electronic filing
setup. Estimated savings: $2.4 million a year.
Although Dell pockets the cash, GE can come out ahead, too. If GE customers are more
productive and profitable, GE wagers that the goodwill generated through Six Sigma advice will
translate directly into contracts. Jack Welch may have moved on. But to more and more companies,
Six Sigma is gospel.
By Michael Arndt in Chicago
Business Week

The Nuts and Bolts of Six Sigma

What is it?
An analytical method aimed at achieving near-perfect results on a production line. In
statistics, the Greek letter sigma denotes variation in a standard bell curve. One sigma equals 690,000
defects per 1 million. Most companies do not better than three sigma, or 66,000 errors per million.
Six Sigma reduces that count to 3.4 defects per million That saves money by preventing waste.
How does it work?
The tool achieves results by reducing subjective errors in the assessment of problems. First,
auditors define a process where results are subpar. Then they measure the process to determine
current performance, analyze this information to pinpoint where things are going wrong, and
improve the process and eliminate the error. Last, controls arc set up to prevent future bugs.
The language of Six Sigma

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 Black Belt — Leaders of team responsible for measuring, analyzing, improving and controlling
key processes that influence customer satisfaction and/or productivity growth. Black Belts are full-
time positions.
Green Belt — Similar to Black Belt but not a full-time position.
Master Black Belt — First and foremost teachers. They also review and mentor Black Belts.
Selection criteria for Master Black Belts are quantative skills and the ability to teach and mentor.
Master Black Belts are full-time positions.
Variance — A change in a process or business practice that may alter its expected outcome.
Process mapping — illustrated description of how things get done, which enables participants
to visualize the entire process and identify areas of strength and weaknesses. It helps reduce cycle
time and defects while recognizing the value of individual contributions.
BusinessWeek
Notes
1. Swiss army knife — швейцарские армейские ножи славятся качеством и обилием
приспособлений, что позволяет с их помощью решать множество разнообразных задач
2. bell curve — колоколообразная кривая, гауссова кривая, кривая нормального
распределения

Vocabulary

widget п штука, «железка»,

нечто, некая вещь, какой-либо
товар (в гипотетических примерах)
quality control контроль качества
quality management управление качеством
successor n преемник
accounts receivable счета к получению, дебиторская задолженность,
дебиторы
accounts payable счета к оплате, кредиторская задолженность,
кредиторы
factory processes производственные процессы
track v отслеживать
quantify v определять количество, представлять в количественной
форме
overhead(s) n накладные расходы
redeploy v переводить, перебрасывать на другую работу,
передислоцировать
to redeploy staff переводить персонал на другую работу
redeployment n перераспределение трудовых ресурсов; перевод на
другую работу передислокация
gain n прирост, увеличение, выигрыш, (pl) прибыль

bottom line 1)прибыль (или убыток), результат деятельности

компании (последняя строка отчета о прибылях и
убытках, показывающая результат деятельности
компании);
2) итог, результат
top line объем продаж, объем реализации (первая строка отчета
о прибылях и убытках)
rack up v увеличивать(объем)
just-in-time система поставок «точно в срок»
procurement n материально-техническое снабжение, закупки

Exercise 1. Give the Russian for the following phrases.

to number crunching skills

to pinpoint and fix a problem
to make (much) headway in doing
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 smth
to pocket the cash
to push the envelope

Exercise 2. Translate the following word combinations into Russian.

to undergo basic training; a sales target; to make up the bulk of the users; capital spending;
capital gains, public spending; consumer spending; large-scale manufacturing; economy of scale; to
rack up profits; to rack up savings; sales reps; procurement and sales; to implement the recommended
fixes; just-in-time manufacturing operations; to generate profit; chief quality officer; to spot one's
successor; for two successive years; to reduce inventories; to build up stocks of the goods; up-front
costs; to outweigh advantages; to push the envelope; to pinpoint and fix a problem; gain in
production; to gain ground

Exercise 3. Translate into English.

крупномасштабное производство; панацея (средство на все случаи); накапливать запасы;
сокращать запасы; проводить корректировку товарных запасов; приносить прибыль;
произвести оценку проблемы; расходы на капитал; отгрузить некий товар г-ну А; переводить
работников на другое место; счета к оплате; счета к получению; накладные расходы;
преимущество в конкуренции; назначить преемника; передать управление снабжением
поставщику; рост производительности труда; прирост объема производства

Exercise 4. Translate the following text into Russian paying attention to the underlined
words.
1 Since the salad days of just 18 months ago, worldwide revenues from investment banking
have fallen on average by 43% at the big firms, and profits by 49%, according to Boston Consulting
Group (BCG).
2. Underwriting initial public offerings (IPOs) of shares is one of the juiciest bits of investment
banking.
3. As they wield the axe, the heads of the biggest investment banks hope that they are
merely chopping away the forced growth of the past two years, bringing a healthier cost structure
back to the industry.
4. Alfa Bank, a leader of the Russian corporate-banking world, is treading water when it
comes to individual accounts, growing no faster than the overall market.
5. The latest merger boom may turn out to be just a boomlet.
6. The uninspiring track record of some shipowners is but a squall compared with the
storms that may be gathering over the horizon. The recent bumper returns from shipping have
prompted a ship-building boom. As a result an armada of new ships is joining the world's fleets just
as the rate of growth of world trade may be slowing.
7. The bottom line, Ms Reid said, is that Coca-Cola wants to be as successful with
marketing beverages geared toward kids as it is selling carbonated soft drinks to teens.

Exercise 5. Translate the following text into English.

Концепция «шесть сигма» была разработана компанией «Моторола» (Motorola) в 80-е
годы как действующая философия и подход к достижению высокого качества посредством
процесса всеобъемлющего управления качеством, что позволило компании «Моторола»
получить национальную премию Малколма Болдриджа (Malcolm Baldridge) за работы в
области качества.
С тех пор такие компании, как «Элайд Сигнале», «Дженерал Электрик», «Тексас
Инструменте», «Бомбардье» (Allied Signals, General Electric, Texas Instrument, Bombardier) и
другие, адаптировали эту концепцию к своим нуждам. Однако базисные понятия,
первоначально выдвинутые «Моторола», сформировали основы метода «шесть сигма». Они
включают следующие положения:
• Подчеркивается, что число дефектов на единицу продукции и число дефектов на
миллион событий служат стандартами измерений, применимыми ко всем аспектам любого
предприятия: аппаратные средства, программное обеспечение, производство, разработка
новой продукции, администрирование.

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 •Проводится интенсивное обучение с последующим развертыванием проектной бригады
в целях повышения рентабельности, сокращения непроизводительных действий и времени
производственного цикла.
•Осуществляется опора на корпоративных спонсоров, ответственных за поддержку
деятельности рабочих бригад. Эти спонсоры обеспечивают механизмы, которые могут
потребоваться рабочим бригадам, чтобы преодолеть сопротивление переменам, получить
дополнительные ресурсы, а также удерживают бригады от выхода за пределы стратегических
целей предприятия.
•Подготавливаются высококвалифицированные эксперты по улучшению процессов
бизнеса, умеющие применять качественные и количественные инструменты улучшения для
достижения стратегических целей бизнеса.
•Обеспечивается, чтобы соответствующие меры измерения процесса
идентифицировались заранее, а измерения отражали бы результаты бизнеса до и после
изменений и вносили бы вклад в конечный результат. Устанавливаются цели,
ориентированные на величины улучшений на порядок (в 10 раз) выше.
•Назначаются обученные и сертифицированные эксперты по улучшению процесса
бизнеса, осуществляющие руководство проектными бригадами, на полномасштабную
нагрузку в течение от одного до трех лет.
Каковы отличия концепции «шесть сигма»?
Некоторые специалисты помнят программы «нулевых дефектов» 60-х годов. Что
отличает метод «шесть сигма»? С одной стороны, этот метод сосредоточен на определении
меры удовлетворения потребителя на каждой стадии процесса, а также на непрерывном
снижении времени производственного цикла и числа дефектов на миллион событий на каждой
стадии. Число 3,4 дефекта на миллион событий, получаемое при использовании метода
«шесть сигма», столь мало, что воспринимается как «фактическое совершенство». Тот факт,
что это не ноль, как раз и позволяет людям уверовать в «шесть сигма».
www.six-sigma. Rи

Exercise 6. Read the article and summarize its contents in writing. Speak about GE
changing its course under Jeffrey Immelt.
The Immelt Revolution
He's turning GE's culture upside down, demanding far more risk
and innovation
I
Despite his easy-going confidence, Jeffrey R. Immelt admits to two fears: that General Electric
Co. will become boring, and that his top people might act like cowards. That's right: cowards. He
worries that GE's famous obsession with bottom-line results — and tendency to get rid of those who
don't meet them — will make some execs shy away from taking risks that could revolutionize the
company.
Immelt, 49, is clearly pushing for a cultural revolution. For the past three and a half years, the
GE chairman and CEO has been on a mission to transform the hard-driving, process-oriented
company into one steeped in creativity and wired for growth. He wants to move GE. average organic
growth rate — the increase in revenue that comes from existing operations, rather than deals and
currency fluctuations — to at least 8% from about 5% over the past decade. Under his former boss,
the renowned Jack Welch, the skills GE prized above all others were cost cutting, efficiency, and
deal-making. What mattered was the continual improvement of operations, and that mindset helped
make the $152 billion industrial and finance behemoth a marvel of earnings consistency. Immelt
hasn't turned his back on the old ways. But in his GE, the new imperatives are risk-taking,
sophisticated marketing, and above all, innovation.
This is change borne of necessity. The Welch era reached its zenith in the booming, anything-
goes economy of the late 1990s. Back then, GE always seemed to beat the consensus forecasts by a
penny a share — and investors felt no burning need to figure out exactly how they did it. Immelt has
no such luxury. With a slower-growing domestic economy, less tolerance among investors for buying
your way to growth, and more global competitors, Immelt, like many of his peers, has been forced to
shift the emphasis from deals and cost-cutting to new products, services, and markets. Any other
course risks a slow descent into irrelevance. "It's a different era," says immelt, a natural salesman
who still happily recounts the days when he drove around his territory in a Ford Taurus while at GE
Plastics. He knows the world looks to GE as a harbinger of future trends, says Ogilvy & Mather
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 Worldwide Chief Executive Rochelle B. Lazarus, who sits on the GE board. "He really feels GE has
a responsibility to get out in front and play a leadership role."
П
So how, exactly, do you make a culture as ingrained as GE's sizzle with bold thinking and
creative energy? To start, you banish some long-cherished traditions and beliefs. Immelt has
welcomed outsiders into the highest ranks, even making one, Sir William M. Castell, a vice-
chairman. That's a serious break with GE's promote-from-within past. He is pushing hard for a more
global workforce that reflects the communities in which GE operates. Immelt is also encouraging his
homegrown managers to become experts in their industries rather than just experts in managing.
Instead of relying on execs who barely had time to position a family photo on their desk before
moving on to the next executive assignment, he's diversifying the top ranks and urging his lieutenants
to stay put and make a difference where they are.
Most of all, Immelt has made the need to generate blockbuster ideas more than an abstract
concept. In true GE fashion, he has engineered a quantifiable and scalable process for coming up
with money-making "eureka!" moments. While Welch was best known for the annual Session С
meetings during which he personally evaluated the performance of GE's top several hundred
managers, Immelt's highest-profile new gathering is the Commercial Council. Immelt leads the group
of roughly a dozen top sales and marketing executives, including some unit heads such as GE
Consumer Finance CEO David R. Nissen. The members hold phone meetings every month and meet
each quarter to discuss growth strategies, think up ways to reach customers, and evaluate ideas from
the senior ranks that aim to take GE out on a limb. "Jeff has launched us on a journey to become one
of the best sales and marketing companies in the world," says Nissen, who describes the meetings as
collegial and more experimental than other GE gatherings.
This is no free-for-all, however. Business leaders must submit at least three "Imagination
Breakthrough" proposals per year that ultimately go before the council for review and discussion.
The projects, which will receive billions in funding in the coming years, have to take GE into a new
line of business, geographic area, or customer base. Oh, and each one has to give GE incremental
growth of at least $100 million. Such change can be scary stuff for folks steeped in Six Sigma, who
were led to believe that if you made your numbers and were prepared to uproot your family every
year or two, you had a shot at the top rungs. Now they're being asked to develop real prowess in
areas such as creativity, strategy, and customer service that are harder to measure. They are being
told to embrace risky ventures, many of which may fail. Immelt's GE can be seen as a grand
experiment, still in its early days, to determine whether bold innovation can thrive in a productivity-
driven company.
ш
То inspire the fresh thinking he's looking for, Immelt is wielding the one thing that speaks loud
and clear: money. The GE chief is tying executives' compensation to their ability to come up with
ideas, show improved customer service, generate cash growth, and boost sales instead of simply
meeting bottom-line targets. As Immelt puts it, "you're not going to stick around this place and not
take bets." More concretely, 20% of 2005 bonuses will come from meeting pre-established measures
of how well a business is improving its ability to meet customer needs. And while he hasn't exactly
repudiated Welch's insistence that managers cull the bottom 10% of their staff, insiders say there's
more flexibility, more subjectivity to the process. Risking failure is a badge of honor at GE these
days.
IV
To lay the groundwork for an organization that grows through innovation, Immelt took steps
early on to rejigger the GE portfolio. He committed to sell $15 billion of less profitable businesses
such as insurance, while shelling out more than $60 billion in acquisitions to dive into hot areas such
as bioscience, cable and film entertainment, security, and wind power that have better growth
prospects. In doing so, he pared the low-margin, slower-growth businesses like appliances or
lighting, which he diplomatically calls "cash generators" instead of "losers," down to 10% of the
portfolio, from 33% in 2000. Nicole M. Parent of Credit Suisse First Boston is impressed with "the
way they have been able to evolve the portfolio in such a short time" and with so little disruption.
"This is a company where managers will do anything to achieve their goals."
Good thing, as their back-slapping chief is now looking for "those things that grow the
boundaries of this company." He's confident that the new business mix and growth incentives are
already paying off. At GE's annual gathering of its top 650 executives in Boca Raton, Fla., in

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 January, he insisted that "there's never been a better day, a better time, or a better place to be [at
GE]!" Strong words in a company that stretches back 127 years to founder Thomas Edison.
That in itself may be a stretch of the imagination for now, but Immelt is trying to recast the
company for decades to come. He's spending big bucks to create the kind of infrastructure that can
equip and foster an army of dreamers. That means beefing up GE's research facilities, creating
something akin to a global brain trust that GE can tap to spur innovation. He has sunk $100 million
into overhauling the company's research center in Niskayuna, NY, and forked out for cutting-edge
centers in Bangalore, Shanghai, and Munich.
Globalizing research has allowed GE to get closer to overseas customers. The simple fact is that
most of GE's growth will come from outside the U.S. Immelt predicts that developing countries will
account for 60% of the company's growth in the next 10 years, vs. about 20% for the past decade.
But he is also spreading new practices to lethargic economies such as Germany. After a 2002
meeting with German Chancellor Gerhard Schroder reinforced his notion that GE could be doing
more in that country Immelt decided to open the Munich center. By July, 2004, a new center was up,
and the results were immediate: the company saw a 22% growth in German-speaking markets last
year from 2003.
V
Now that Immelt has repositioned the portfolio and added resources, his main objective is to get
more immediate growth out of the businesses he already has. That's where the Imagination
Breakthroughs come in. Over the past 18 months, Immelt has agreed to invest $5 billion in 80
projects that range from creating microjet engines to overhauling the brand image of 3,000
consumer-finance locations. The hope is that the first lot will generate $25 billion in revenue next
year — cheap, if it works, when you consider what it would cost to acquire something from the
outside with that level of sales. In the next year or two, Immelt expects to have 200 such projects
under way.
The pressure to produce could not be more intense. Many of the company's 307,000 workers
weren't exactly hired to be part of a diverse, creative, fleet-footed army of visionaries who are acutely
sensitive to customers' needs. "These guys just aren't dreamer types," says one consultant who has
worked with the company. "It almost seems painful to them, like a waste of time." Even insiders who
are openly euphoric about the changes under Chairman Jeff admit to feeling some fear in the depth of
their guts.
"This is a big fundamental structural change, and that can be tough," says Paul T. Bossidy, CEO
of GE Commercial Equipment Financing, who is reorganizing his sales force so that each person
represents all of GE to particular customers. Susan P. Peters, GE's vice-president for executive
development, even talks about the need for employees to "reconceptualize" themselves. "What you
have been to date isn't good enough for tomorrow," she says. Ouch.
VI
To Immelt. the best managers are great marketers and not just great operators. That's a
rethinking of GE's long-held bias that winning products essentially sell themselves. Beth Comstock,
who was appointed chief marketing officer three years ago with the mission of boosting the
company's marketing expertise, says that when she started, a number of insiders were skittish about
the new agenda: "Everyone thought, I've got to get into sales and marketing to be relevant in this
company?"
Well, yes. Comstock is trying to elevate the role of marketing throughout GE. She has helped
develop a commercial leadership program that sends the best and brightest marketers around the
organization for two intensive years, much as GE's corporate audit staff has long done on the finance
side. The auditors were important to maintaining financial discipline under Welch. Now, GE has
initiated new courses in marketing, as well as ones on how to spark idea generation. Some executives
have also taken to holding "idea jams," where people from diverse businesses brainstorm. Within GE
Energy alone, there are "growth heroes," who are held up as emblematic of where the company wants
to go, a "virtual idea box" to spur brainstorming via the Web, and "Excellerator awards" for the
development of ideas. The jargon may smack of classic GE, but the approach is novel. "This is about
unlocking the curiosity, yet having the rigor stay intact," says Comstock.
In this era, marketing is not just a matter of producing edgier commercials or catchier slogans.
It means getting outside the company to understand markets and customers. Among other things,
GE's top marketing executives have spent a lot of time examining the practices of companies such as
Procter & Gamble Co., which let them spend time last November in "The GYM" where strategies

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 and issues are debated, examined, and maybe even solved. "The idea is to enhance a team's creative
thinking," says P&G spokesman Terry Loftus. GE staffers also spent time at FedEx Corp., which has
exceptional customer service. Welch did the same thing in benchmarking Motorola Inc. when he
delved into Six Sigma, but the external focus is even stronger now.
Immelt wants his managers to lead industries rather than merely follow demand. Take the
company's move to create a cleaner coal plant another Imagination Breakthrough — before its
customers were even asking for it. GE initiated the push after acquiring Chevron-Texaco Corp.'s
gasification technology business last year. Immelt and GE Energy CEO John G. Rice brought
together big power customers and experts on subjects such as climate change at GE's education
center in Croton-on-Hudson, N.Y., last July to debate where the industry would be in 2015. James E.
Rogers, chairman and CEO of public utilities giant Cinergy Corp., was shocked to hear Immelt talk
about the need to generate electricity with far fewer emissions — a touchy subject in an industry that
still bums a lot of coal. "He was unafraid to articulate a point of view that his customers might not
share, " says Rogers, whose company bums 30 million tons of coal a year.
What convinced Rogers to partner with GE on a cleaner coal power plant was the prospect of
having an integrated package managed by GE. Instead of forcing Rogers to license the technology
and figure it out himself, GE in partnership with Bechtel Corp. will design and implement the plan.
GE's promise: that the cleaner-burning plant will soon become competitive with pulverized coal and
that GE will handle any hiccups in the process.
VII
But there's a limit to how much Immelt can transform his own people. A key strategy — and
one that amounts to a gut punch to the culture — involves bringing more outsiders. In sales and
marketing alone, GE has hired more than 1,700 new faces in the past few years.
Immelt is also looking for more leaders who are intensely passionate about their businesses and
are experts in details. No one represents Immelt's vision of what a GE leader should be better than
Bill Castell.
Castell is quite unlike the archetypal GE executive. He's totally immersed in his industry, a
leading thinker on the future of personalized medicine who will never head up a business based on jet
engines or commercial finance. Nor is he pursuing a black belt in Six Sigma or losing sleep over
making his numbers. Yet Immelt loves him. "I want managers to have the kind of curiosity that Bill
has, his passion for the industry," he says. "He understands where the market is going."
To encourage that kind of expertise and passion in the rest of his organization, Immelt is urging
people to stay in place longer to build stronger relationships with customers and markets. GE
Energy's Rice —a hotshot who is emblematic of the old system, in which a great GE manager could
parachute onto the scene to turn any business into gold —notes that the idea of staying put takes
some adjustment "There was always an impression in the midlevel ranks that if you weren't moving
every few years, something was wrong," says Rice. He now says he likes the fact that he has been in
one place for four years, because he's developing a deeper knowledge.
Investors are still waiting to see whether GE's evangelizing chairman can truly make his
company grow faster than the world around it. Even some of his fans think that GE's new momentum
has more to do with the overall economy man with idea generation. Says Steve Roukis of Matrix
Asset Advisors, which owns 2 million GE shares: "H" you have a revolutionary decade of growth
around the world, who's going to be there to capture it? GE."
Capture it? Jeff Immelt wants to shape it, drive it, make it his own. For him, reinventing GE is
the only way to make his company dominate this century, much as it led the one before.
Business Week

Exercise 7. Write a report and make a presentation on one of the Allowing topics. Use of
other resources is highly recommended.
1. Jack Welch - what made him the world's best manager?
2. GE - is it the best run company?
3. Jeffrey Immelt - new strategy for GE.
4. GE and its people.
1. Practices used by GE management to improve the company's performance.
5. How is the CEO trying to shift the GE mindset?
6. Where do GE's best managers and leaders come from?

8. GE's business mix - shuffling the portfolio.

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 9. Six Sigma.
Exercise 8. Read the text and answer the following questions.
a) What does «bundling» mean?
b) What forms can it take?
c) Should bundling be banned by the authorities?
Translate the text orally.
A Bundle of Trouble
Behind antitrust actions against Microsoft and General Electric lie concerns about
"bundling" different products together. Is bundling really so bad?
In English schools, "bundling" is what happens when boys knock a fellow pupil to the ground
and then pile on top of him. Economists use the term to describe something less rough-and-tumble,
yet, some fear, equally suffocating to the victim, bundling two or more products together as a
package, and selling it for a single price.
In the 1940s, America's Supreme Court concluded that "tying agreements serve hardly any
purpose beyond the suppression of competition." Economists have long challenged that absolutism.
Many now think that, though there are exceptions, selling bundles of goods together as a package can
be a source of economic efficiency.
Bundling covers many things. Two or more of the same product might be sold as a package —
a "buy one, get the second at half-price" deal, say, or a railway season ticket. A camera might be sold
in a box with a free film; a hotel room might come with accompanying breakfast.
A product can also be bundled together with a loan. Financial bundling has become so
widespread that three economists at Morgan Stanley — Steven Galbraith, Mary Viviano and Elmer
Hub — suggest in a recent report that, as manufacturers such as GE, General Motors and Lucent
grow ever more involved in providing finance, so "manufacturing is becoming the loss-leader of the
profit chain for many companies." In other words, give away the product; make money on the
lending that is bundled with it.
Bundling can be good for consumers. It can reduce "search costs" (the bundled goods are in the
same place), as well as the producer's distribution costs. There are lower "transaction costs" (because
a single purchase is cheaper to carry out than multiple ones). And the producer may be a more
efficient bundler than the customer: few of us choose, after all, to buy the individual parts of a car to
assemble them ourselves.
Win some, lose some In perfectly competitive markets, bundling should happen only if it is
more efficient than selling the products separately. Where there is less than perfect competition —
that is, most markets — economic models suggest that bundling sometimes benefits consumers and
sometimes producers. Nicholas Economides, of New York University, says that when firms have a
measure of market power, they can engage in price discrimination, charging different prices to
different customers. Bundling can play a part in price discrimination, as different bundles of goods
and prices may appeal to different customers.
Price discrimination in general, and bundling in particular, is usually a profit-maximising
strategy for a producer that enjoys substantial market power, says Mr Economides. But if there is a
deal pf competition, two rivals selling bundled goods may see their margins fall even more readily
than if they were not bundling.
Wherever there is market power, the antitrust authorities have reason to be watchful. Bundling a
monopoly product with one that is competitively provided may result in the competitive market
being distorted. But it would be wrong to assume that bundling is inevitably bad in those
circumstances. If there is some loss of consumer choice, the cost may be outweighed by efficiencies
from bundling, Each case must be judged on its merits. The merits are harder to assess where there is
"pure bundling," involving products available only as a package, than where there is "mixed
bundling," with products available both as a package and individually.
Microsoft's package of Explorer and Windows is a pure bundle. On the face of it, requiring
Microsoft to sell Windows and Explorer as separate products as well as bundled ones would end the
arguments — except that Microsoft claims they are not a bundle at all, rather a single product
incapable of being broken into parts. In the past, such claims have been resolved by assessing
whether a viable market exists for each product on its own: if it does, the product is a bundle.
Yet, as the appeals court noted, this does not work well in Microsoft's case, because any
innovation that improves an integrated product might be stifled. Again, the costs and benefits of any

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 such innovation, and whether it constitutes a genuinely new, integrated product, not a bundle, should
be judged case by case.
The Economist
• Bundling Terms

Fill in the chart.

Term Definition Examples

Bundling Bundling is the sale of two or
more separate products in
one package
Price bundling Price bundling is the sale of
two or more separate
products as a package at a
discount, without any
integration of the products
Product bundling Product bundling is the
integration and sale of two or
more separate products at any
price
Mixed bundling Mixed bundling is a strategy
in which a firm sells both the
bundle and (all) the products
separately
Unbundling Unbundling is a strategy
when a firm sells only the
products separately but not
the bundle
"Strategic Bundling of Products and Prices "from Journal of Marketing

Exercise 9. Translate the following text into English in writing. Use the active vocabulary.
See Ex. 6, Text 2, p. 32 for prompts.

«Байер» перестраивается
Руководство германского конгломерата «Байер» (Bayer) заявило, что приступает к
реструктуризации своего бизнеса. «Байер» сконцентрирует усилия исключительно на
европейском рынке фармацевтической продукции, а его подразделения по производству
полимеров и весь химический бизнес будут выделены в новую химическую компанию.
По словам генерального директора «Байер» Вернера Веннинга, бизнес обновленной
компании будет зиждиться только на трех китах: лекарственные препараты и медицинское
оборудование, сельскохозяйственная химия и промышленные материалы.
"После реструктуризации компания «Байер», оборот которой будет составлять порядка
$25 млрд, сможет уделить больше внимания основному бизнесу, в котором мы располагаем
прекрасными технологиями, сильными позициями и, прежде всего, перспективными
направлениями", — заявил журналистам после заседания совета директоров Вернер Веннинг.
Направления, которые Веннинг назвал перспективными, обладают большими
возможностями роста, но при этом требуют крупных затрат на научные исследования, из-за
чего компания оказывается не в состоянии поддерживать свой бизнес по производству
химических веществ.
Поэтому было принято решение выделить химический бизнес «Байер» в новую
компанию «НьюКо» (NewCo). Штаб-квартира новорожденной будет располагаться по
соседству со штаб-квартирой «Байер». В начале следующего года «НьюКо» уже проведет
первичное размещение акций.
Решение о кардинальной реструктуризации бизнеса «Байер» было принято после двух
лет безуспешных поисков партнера для фармацевтического подразделения. Многие аналитики
полагают, что фармацевтический бизнес «Байер», слишком мал, чтобы составить достойную
конкуренцию крупнейшим корпорациям.
Ведомости

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 UNIT 4

• Text
NOKIA'S NEXT ACT
Can the Finnish giant stay on top in an age of commodity phones
and stalling sales?
The get-togethers were cordial and businesslike, the agenda ambitious. There were no raised
voices, no objects hurled against the wall. And above all, there was no sense of panic. But in a series
of meetings starting last summer, the top five executives of Nokia Corp., the world's No. 1 maker of
mobile phones, hammered out a strategy to remake the $28 billion company's handset business from
top to bottom. A decade after Nokia chucked its heritage as a maker of everything from toilet paper
to rubber boots and bet its future on wireless communications, it was time for the next act.
The immediate objective was to deal with the consequences of dramatic slowdown in sales both
in the industry and at Nokia itself. The top brass also had to face up to resurgent competition from
rivals left in the dust years earlier and the threat posed by Asian manufacturers. Then there was a
challenge from software behemoth Microsoft Corp. Its push to get phone makers to adopt a stripped-
down version of its Windows software threatens to erode Nokia's power.
At every meeting, Chairman and CEO Jorma Ollila would throw out a hypothetical proposal.
"What if Nokia expanded from two to four business units?" he asked the group. "What if the
company merged manufacturing of mobile phones and networking equipment to reap new economies
of scale? Or what if it was reorganized along regional lines?" Each scenario was painstakingly picked
apart — and all but one was ultimately discarded. No slick management gurus were hauled in to
provide the Big Think. As with virtually everything Nokia does, the solution was homegrown.
Just before Christmas, the executives settled on a scheme that Ollila is convinced will propel
his company to the next level. Few in the industry know the details of the changes, which Ollila was
set to outline for analysts on June 20. But they are already in place, effective May 1, Nokia split its
monolithic $21 billion mobile-phone unit into nine profit-and-loss centers, each charged with
bolstering the company's position in a particular market. There's always a risk that such a massive
overhaul could slow down the 53,000-person company. But Ollila, 51, argues it will have the
opposite effect. "We foresaw that being too big was a real danger," he says. "We had to break up the
company in a meaningful way to retain the entrepreneurial thmst we had in the 1990s."
It's the next stage in the maturation of the mobile industry. Nokia gets credit from analysts and
rivals alike for having been the first to grasp that cell phones were becoming consumer items. In the
mid-1990s, it started segmenting its product line by "styles", such as Basic, Classic, and Fashion. But
the mobile-phone division remained a single, increasingly unwieldy business unit. Now that old
structure is gone, replaced by a stable of mini-Nokias. Heading them up is a new generation of
managers, one of whom could some day graduate to CEO.
Pretty dramatic stuff for a company that's clearly on top, with an estimated 37% global share.
But nothing equals Nokia's internal reorganization for symbolic import. Gone is the unified structure
of a business that grew so fast nobody had time to consider alternatives. In its place, Nokia has
conjured up a complex organization of separate businesses, each with its own product, R&D and
marketing. One unit, for instance, will address the particular needs of business users, while another
will chase the nascent market for phones with built-in digital cameras. Perhaps the boldest gambit is
a unit focused on ultracheap phones for markets such as Russia, India, and China. The very existence
of such a group is a tacit admission that the old Nokia lacked the focus to win this segment. "Nokia
became its own worst enemy," says Juha Christensen, the vice-president of Microsoft's mobility
group. "By having vast economies of scale, it lost the ability to deal with niche markets."
The changes at Nokia parallel those that have occurred in other industries. By the 1920s, Henry
Ford had figured out that not every customer wanted a black Model T. But his rival Alfred P. Sloan
Jr. gained the upper hand by building a General Motors Corp. that housed separate divisions —
Chevrolet, Oldsmobile, Cadillac — targeting different classes of buyers. It even happened to the
most generic of all products, the microprocessor, when Intel split its Pentium line into three price
brackets to focus engineering and marketing efforts on specific customers.
But GM had decades to perfect its system, and Intel enjoyed a near-monopoly with its
microprocessors. Nokia has neither of these luxuries. That's why Ollila's reorganization is fraught
with risk. Nomura International analyst Richard Windsor worries it could raise fixed costs. Plus the
sheer complexity of it might — instead of producing nimble, market-focused teams — simply gum
up the works and confuse employees, clients, and investors.
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 To keep the separate units from straying too far apart, all will tap the 4,500-person central
research lab for basic-technology and product design. And to avoid diluting Nokia's efficiencies in
procurement and manufacturing, each will hand off its products to a shared operations and logistics
group.
Everybody who competes with Nokia will be watching its experiment with a mix of curiosity
and dread. If it works, the rush to imitate will be swift and massive. If it doesn't — well. Nokia will
have to work even harder to stay on top. One way or another, there's no going back to the Model T.
BusinessWeek

Note
Model T - the first best-selling car model made by Ford; smth in the past, foretime

Vocabulary

to remake a company перестраивать компанию

Syn. to turn around, to restructure,
to revamp, to reinvent, to overhaul
top brass высшее руководство, руководящая верхушка,
Syn. senior (top) management, заправилы, «тузы»
executives
nimble a проворный, ловкий, гибкий
Ant. stodgy, laggard, unwieldy
Costs n издержки, расходы, затраты
fixed costs фиксированные издержки, постоянные издержки
variable costs переменные издержки
marginal costs предельные [маржинальные] издержки; приростные
издержки (увеличение или уменьшение полных
издержек производства при увеличении или
уменьшении объема производства на одну единицу
продукта)

Exercise 1.Translate the following into Rusian.

to hammer out a strategy; to staff sales; a shared logistics group; resurgent competition;
economies of scale; to reinvent a company; a dramatic slowdown in sales; a drastic cut in overheads;
a nascent market; a fledgling industry; to become a full-fledged multinational; market-focused teams;
procurement; manufacturing; R&D; to be fraught with risk; to split one's product line into three price
brackets; to bolster the company's position on the market; to address the needs of business users; an
increasingly unwieldy business unit; the next stage in the maturation of the industry

Exercise 2.
a) Translate the following into English.
добиться превосходства на раздробленном рынке; так или иначе; разделить конгломерат
на отдельные компании; операции по снабжению; заниматься проблемой; капиталоемкий;
трудосберегающий; сохранить лидерство; подрывать позиции конкурента; сбивать цены;
отсутствие роста объёма продаж; провести встречу в теплой деловой атмосфере;
вырабатывать стратегию перестройки; представлять угрозу; обострение конкуренции;
коренная перестройка; ценовая категория товара; предельные издержки; постоянные
(переменные) издержки
b) Give all possible words and word combination in English meaning:
1) проводить перестройку, рационализацию;
2) высшее руководство;
3) гибкий, проворный, динамичный (with collocating nouns);
4) неповоротливый, медлительный, отстающий (with collocating nouns).

Exercise 3. Translate the following paying attention to the underlined words and
structures.
1. Companies are combining to get bigger, taking over competitors for synergy, and selling
off businesses that don't make money or don't fit in with their strategy. This relentless process leaves
behind dozens of corporate orphans, some of them underperforming companies in need of capital and
27 129
 a turnaround strategy. Enter the buyout boys. Almost a cottage industry a few years ago, leveraged
buyouts are becoming big business. Financiers hope to borrow money to buy up unwanted
companies, turn them around, and take them public at profits up to several times their original
investment.
2. For a long time, both companies reacted by arguing that size wasn't everything. But they
now seem as convinced as their peers that big companies are better able to weather the increasing
volatility in oil markets.
3. So far, Europe hasn't produced a counterpart to U. S. junk bond king Michael Milken.
4. "Fads" is the four-letter word of marketing research, more so even than "hype”, "puff',
"plug", and "spin".

5. The offer (P&G's offer to buy Wella's shares) formally complies with the core of the
German law, which demands that it represents at least the minimum of the last three months' share
price
6. The Siemens restructuring plan was announced a year ago and involved disposing of
noncore businesses.
7. In 1999, Nestle shed its ground and roast coffee business in the U.S., and said it would
look at outsourcing its capital-intensive cocoa-processing business. People close to Nestle say the
company is also considering outsourcing some or all of its research and development, which cost the
company nearly Ibn francs. Outsourcing the commodity elements of production is the right direction
for Nestle, said Nic Sochorsky, an analyst for Lehman Brothers in London. "You don't value Nestle
on its cocoa processing but on its brands," he explained.

Exercise 4. Translate the text into English.

«II о к им» несет кадровые потери
В понедельник стало известно о предстоящем уходе из «Нокия» (Nokia) ее директора по
стратегии Алахухты (Alahuhta). Это самая значительная кадровая потеря финской корпорации
за последнее десятилетие. Наблюдатели отмечают, что новость свидетельствует о расколе в
слаженной управленческой команде, которая в течение нескольких лет обеспечивала «Нокия»
развитие бизнеса под руководством генерального директора Нормы Оллилы.
Алахухта, которому сейчас 52 года, проработал в «Нокия» 26 лет. После своего
увольнения в конце декабря он займет должность президента финской компании «Коне»
(Копе), производящей лифты и эскалаторы. Освобождающуюся с его уходом должность
займет нынешний руководитель подразделения научных исследований и опытно-
конструкторских разработок.
«Алахухта был одним из создателей «Нокия» в ее нынешнем виде, он очень много
сделал для стремительного взлета компании в начале прошлого десятилетия, — говорит
Ричард Виндзор, аналитик из лондонского отделения компании «Номура» (Nomura). —
Возглавляя операционную деятельность, этот человек добивался великолепных результатов.
Но перспективы «Нокия» изменились, и, возможно, стратегия, которой Алахухта следовал в
прошлом, теперь уже неприменима».
«Нокия» остается ведущим мировым производителем сотовых телефонов, однако ее доля
на этом рынке за последнее время снизилась, — компания слишком поздно отреагировала на
изменения рыночной конъюнктуры.
Бывший директор по стратегии был членом команды Оллилы, сформировавшейся в
начале 1990-х. Эта группа руководителей определила корпоративную культуру «Нокия»,
характеризующуюся целеустремленностью и последовательностью стратегического подхода.
В 1998 г. Алахухта возглавил подразделение сотовых телефонов. За время его
пребывания на этой должности объем продаж телефонов «Нокия» утроился, в результате чего
финская корпорация сумела оттеснить американскую компанию «Моторола» (Motorola) с
первого места на мировом рынке мобильной телефонии.
Одно время директора по стратегии считали преемником Оллилы на посту гендиректора,
но в последние годы слава его померкла. Многие возлагали на директора по стратегии вину за
неспособность «Нокия» вовремя распознать важную рыночную тенденцию. Правда, в системе
коллективного руководства корпорации было не принято указывать на конкретных
виновников неудач. Как бы то ни было, Алахухта стал первым из команды Оллилы,
решившим покинуть свою компанию.
Ведомости

28 129
 Exercise 5. Translate the following texts.
Canon Cutting Edge
By trimming down to four product lines, it's making record profits
Walk through the gates of Canon Inc.'s headquarters and you might think you're back in Japan's
boom days of the late '80s.
With good reason. While much of Japan Inc, is stuck in the past, Canon is busy reinventing
itself as a globally focused 21st-century company. Much of the credit goes to its President Fujio
Mitarai, who is at the vanguard of a new breed of CEO bent on combining Japanese quality and
attention to detail with the U.S. focus on cash flow and shareholder value. Mitarai also puts a
premium on providing job security as a way of keeping staff hard-working and loyal. In Japan, at
least, he has managed to avoid layoffs.
That doesn't mean Mitarai, 66, shies away from the hard choices, however. He has hacked
spending, closed plants, and refocused Canon on four main product lines At the same time, Mitarai is
pushing into lucrative consulting work, helping corporations plan and maintain their office machine
networks. "Canon is the exception in Japan," says Satomi Ushioda, industry analyst at Nikko
Salomon Smith Barney. "It's on the growth track even though its core business is mature."
Can Canon keep up the momentum? There are some concerns. For starters, it can't expect much
growth in the near-and midterm in Japan, which accounts for one-third of sales. Furthermore, as the
global recession deepens, orders for Canon copiers and printers could tank.
That marked the start of Canon's transformation to a more global enterprise. It became one of
the first major Japanese companies to report its earnings on a consolidated basis and to emphasize
shareholder value. The stock has tripled in value since Mitarai took over. He also introduced cash-
flow management through better budget planning and inventory reductions. Instead of borrowing
money for capital investment, as many Japanese companies do, Canon used its own cash.
Mitarai's reforms extended to Canon's factories, 70% of which are based in Japan. The
company improved just-in time manufacturing, and introduced other production changes to eliminate
waste, while tweaking supply chain management to increase efficiency. This enabled Canon to
reduce parts inventory by a third and to cut the number of warehouses.
Business Week
Nip, tuck
One of Europe's finest conglomerates needs more radical surgery
Klaus Kleinfeld, 15 months into his tenure as boss of Siemens makes a good fist of selling his
company as an "infrastructure supplier" well positioned to follow "megatrends" such as urbanisation
and die growing demand for water, transport, health care, security and power. Yet he cannot disguise
the fact that Siemens is for all that an unfashionable conglomerate that some analysts and investors
would like to see streamlined further, or even broken up. Some Siemens divisions, such as power
generation, automotive parts, or medical equipment, are world leaders. Others such as business
services and communications are languishing.
Even if Mr Kleinfeld misses next year's targets, his job is unlikely to be on the line. Despite the
impatience of some shareholders to see profits across all divisions — the last year that happened was
2000 — there is a counter-argument in favour of some diversification. Siemens' power generation
and medical divisions, now success stories, were once problem children.
But for Siemens' worst businesses to come good — and hence for Mr Kleinfeld to meet next
year's target — analysts think he will have to take drastic action: He has already shown he can be
tough. Last June he sold Siemens' mobile-phone division to BenQ of Taiwan.
But investors would like to see more streamlining.
The Economist

UNIT 5 CONSOLIDATION

• Text 1. Translate the text from English into Russian in writing.

Great-Grandma Bell Is the once great telecoms company on its last legs?
Churches have altars, royalty has thrones, and AT&T has its network. For over 125 years, this
was the source of the telecoms company's power and its most prized asset. Yet as telecoms capacity
has become a commodity, the value of owning a network has diminished dramatically. It has forced
AT&T to search for new areas of growth, but its prospects are not promising. Last week, the
company's latest earnings figures included an $11.4 bn write-down of its assets, forced by a fall in

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 prices due to competition and new technologies. The troubles which AT&T faces are severe. The
company earns roughly half of its revenue by charging for long-distance calls, but these earnings are
tumbling at around 20% a year and will never recover.
The company is therefore between a rock and a hard place: it must migrate to the more efficient
technology without cannibalizing its existing revenue, at a time when there is a plethora of
competitors. This dilemma has been predicted by telecoms pundits for a decade, but AT&T never
developed a suitable strategy to cope. Its plan now is to slow its decline in income and cut debt by
continuing to slash its workforce. It hopes that a better balance sheet will help as it hunts for new
business, focusing on large corporate accounts, which make up about 60 % of its revenue. AT&T's
foundering fortunes come amid difficulties in the telecoms industry as a whole. America's second-
and third- largest long-distance companies are also suffering from the glut of telecoms capacity and
the fast erosion of revenue.
The Economist
* Text 2. Translate the text from Russian into English in writing.
Вкус прибыли
«Кэдбери Швепс» (Cadbury Schweppes), по сообщению Би-Би-Си, начала
реструктуризацию бизнеса, в ходе которой компания планирует закрыть несколько фабрик и
уволить почти 6000 сотрудников. Необходимость в проведении реструктуризации возникла
после того, как в марте этого года компания купила за 4,2 млрд долл. США фирму «Адаме»
(Adams) — американского производителя конфет и жевательной резинки.
Теперь многие службы объединенной компании дублируют ДРУ Г друга. По расчетам
руководства Cadbury Schweppes, реструктуризация, затраты на которую оцениваются в 900
млн ф. ст., в дальнейшем позволит компании экономить до 400 млн ф. ст. ежегодно.
Одновременно менеджеры компании заявили, что в связи с предстоящей реструктуризацией
акционерам придется на некоторое время забыть о ежегодном увеличении прибыли.
Компания

•Text 3.Translate the text orally.

The Hard Way
If General Electric hoped to buy itself out of trouble, it may have to think again. GE had in
three days showcased bold, supposedly business-transforming, deals worth over $25 billion. As
investors promptly cut their valuation of GE's shares, however, it was not wholly clear whether
Jeffrey Immelt, the firm's boss, was climbing out of a hole, or digging himself deeper in. Mr Immelt
has had a torrid time since taking over from Jack Welch, GE's former boss, in 2001.
Waking from the dreamy 1990s, investors discovered that GE was not, after all, a smooth
earnings machine that pumped out profit growth of 16-18% a year, but a collection of mature
industrial assets bolted to a fast-growing, opaque and highly-leveraged finance business. Worse,
thanks to the effect on profits of a bubble in GE's power business and a seemingly overfunded
corporate-pension fund, the firm's best days now looked to be behind it. Last year, GE failed to grow
its profits at the promised double-digit rate for the first time in ten years. Most likely, it will fail to do
so again both this year and next.
The Economist

• Text 4. Translate the text orally.

Dell
Michael Dell prefers to view his company as a high-tech Robin Hood, delivering cheap prices
to "parts of the market where customers are not getting a fair deal."
Michael Dell's mixture of price sensitivity and tech savvy has worked well, especially recently.
Its now famous business formula, called the Dell model, includes setting up superefficient factories,
keeping parts on hand for only a few days before they're used and selling computers based on
common industry standards like Intel chips and Microsoft operating systems. Most notably, Dell cuts
out the retail middlemen and sells directly to customers over the Internet.
By its nature, the Dell model requires aggressive expansion. Back in the mid-'90s, Michael Dell
would often say he didn't need to enter new markets because the PC business was growing so
quickly. Then the Dell model helped uncork the PC's downward price spiral, and suddenly computers
were a commodity that everyone owned. "Dell's problem is that it picked a business that you now
need to be great in just to break even," says Wharton professor David Croson.
Newsweek

30 129
 • Text 5. Translate the text orally.
Nike's New Advice? Just Strut It
The sneaker giant is betting big on a foray into the fickle world of street fashion
When Mindy Grossman took the helm of Nike Inc.'s apparel division three years ago, it was
staggering along like a winded sprinter. The New York fashion veteran wasted no time whipping
things into shape: slashing costs, consolidating global sourcing, and centralizing design. Her efforts
have paid off. While sales at the core footwear business grew just 5%, for the fiscal year ended in
September, apparel sales climbed 12%.
But this race isn't anywhere near done. With a host of collections set to hit stores next spring,
Grossman, wants to move the sneaker giant well beyond clothes for serious athletes and into the
market for sporty street apparel. By combining Nike's high-tech athletic materials with casual
fashion, she hopes to gain an edge over other apparel makers in creating "must-have outfits."
Getting it right in the faddish casual-wear market is notoriously difficult. Nike figures it has
little choice, and if anyone can pull it off, say industry watchers, it's Grossman.
BusinessWeek

UNIT 6

• Text
HALFWAY DOWN A LONG ROAD
Carlos Ghosn's efforts to meld Nissan with Renault have become the stuff of management
legend. But the alliance faces some daunting challenges
WHEN Carlos Ghosn moved from Renault to tackle the problems at Nissan, after the French
car company took a 36.8% stake in the ailing Japanese firm in 1999, it looked like mission
impossible. Yet two years later, much has been achieved. A thumping loss of ¥684 billion ($6.1
billion) in the year ended March 2000 has been turned into a profit of ¥331 billion for the past fiscal
year. Nissan has, as Mr Ghosn says, moved from the emergency ward to the recovery room. This
success, in the face of universal skepticism, is already the subject of six books, with four more being
written. Harvard Business School and INSEAD have both prepared case studies on the turnaround,
and Harvard is working on a second.
The Nissan story is interesting not just as a dramatic corporate recovery, but also as a study of
how to work in an alliance, and of how a foreigner can shake up a failing Japanese company, despite
a perceived cultural gulf. Mr Ghosn plays down the cultural aspect: "I don't know what is a Japanese
company," he says. As with anywhere else, "you just get bad ones and great ones." He defines his
objective at Nissan as no less than turning it into the best-performing car company in the world.
He is off to a good start. Last year, he more than tripled the operating profit margin to 4.75%,
bringing him over halfway to meeting his target of 8% by 2005. Small wonder that the car industry is
buzzing with rumours that the man dubbed Le Cost Killer in his Renault days will be headhunted to
solve the problems of GM, Ford or DaimlerChrysler.
The real challenge now, says Mr Ghosn, is to change attitudes at Nissan, from design through to
sales. About the first thing he noticed at the company, which had been making losses year after year
and losing domestic-market share for a generation, was that nobody seemed to take responsibility
when things went wrong. Managers blamed the strength of the yen or the poor state of Japan's
economy for the company's plight, ignoring the fact that competitors such as Honda and Toyota were
prospering. The first thing Mr Ghosn did was to form "cross-functional" teams to work on ways to
break down barriers between departments. "It's at the interstices between functions that you get real
creativity," he notes.
When he first spelled out his recovery plan to senior managers, he met pockets of resistance,
but decided to ignore them. Then he began to see changes as more executives accepted that the plan
was worth a try. Now he waxes enthusiastic about Japanese managers. "When you get a clear
strategy' and communicate your priorities," he says, "it's a pleasure working in Japan. The Japanese
are so organised and know how to make the best of things. They respect leadership."
The next thing Mr Ghosn has to do is to improve Nissan's brand image with cars that are not
just well manufactured, but exciting. Next year, no fewer than 12 new models will be unveiled, as the
Japanese company begins to design a whole new fleet based on ten basic platforms (the floorpans
and basic body parts), which it will share with Renault. By 2010, Renaults and Nissans will be made
of essentially the same building blocks, even though they will look different. This platform-sharing is
expected to bring huge savings.

31 129
 The same will be true of the companies themselves as they create a more integrated structure.
Renault has the right to increase its stake in Nissan to 44%. But it will not want to exercise its option
until the Japanese company's huge debt has shrunk, as this would go on Renault's balance sheet.
Nissan also has the right to buy Renault shares, something that looks less unlikely now that its
market capitalisation is about twice the French company's. Its profits last year were three times
Renault's $1 billion. Ironically, having helped Nissan back on its feet, the French company's fortunes
are declining, partly because its model range is ageing all at once.
Mr Ghosn sees the development of the alliance as "managing the contradiction between synergy
and identity." Too much synergy, throwing the companies together willy-nilly, and you lose identity.
"Identity matters," he says, "because it is the basis of motivation, and motivation is the fuel that
companies ran on." Renault people identify with their company and brand, as do Nissan people with
theirs. That is an important thing to hold on to, says Mr Ghosn.
So Renault has no immediate plans to take over Nissan; nor is the resurgent Japanese company
going to swallow Renault, which is still 44% owned by the French government. Instead the two will
become genuine partners, perhaps like the Royal Dutch/Shell oil and gas group. Mr Ghosn sees
Renault-Nissan as a global group, with Renault the European core and Nissan the pole for Asia and
America.
There is no other alliance quite as deep as this in the car industry. Certainly, the industry needs
new ways to do things. DaimlerChrysler is a takeover with deep problems, while the General
Motors/Fiat tie-up, involving some platform-sharing, is far from solving either company's problems.
Alliances, however deep, are normally seen as sub-optimal, because they fail to rationalise assets. Mr
Ghosn is determined to show that creative thinking can contradict that view.
The Economist
Exerise 1. Translate the following into English.
cross-functional teams; lackluster demand; to become the best performing company; to sell at
bargain prices; bargain basement; to extend fresh credits; to raise capital; to sell a stake in another
company; principal and interest; to meet pockets of resistance; debt burden; to lose a domestic
market share to rivals; to define one's objectives; to dispose of one's prized assets; a tie-up; long-term
(fixed) liabilities; equities; to bring huge savings; to be headhunted; headcount; to lurk in odd
comers; to hide money in odd comers; to be in great, (dire, financial) straits; to drag smb downhill; to
communicate one's priorities; small wonder

Exercise 2. Translate the following into Rusian.

компания, переживающая трудности; компания на грани банкротства: задача;
процветать; терять долю на рынке; стареющий модельный ряд; высокий курс йены; считать
что-либо причиной бедственного положения компании; настоящие партнеры; творческое
мышление; помочь кому-либо встать на ноги; эффект взаимоусиления; эффект масштаба;
представить новый продукт; поглощение компании; использование одной и той же
концептуальной модели; использовать одинаковые комплектующие
Exercise 3. Study the following word combinations. Translate them into Russian.
a) "debt"

to make
to pay down
to consolidate
to service one's debt
to reschedule
to roll over
to restructure
to downgrade

b) "credit"
to extend
to cancel
to give
to obtain credit
to run out of
32 to do smb 129
to give smb
 Exercise 4. Translate the following extract paying attention to the underlined words.
A downgrade is no trivial matter. Companies with even the lowest of the four investment-grade
ratings — a Baa in Moody's rating system, and a BBB with S&P — can borrow at an average 3.6
percentage points over benchmark Treasury rates — roughly 6.6% for a five-year loan.
But once companies slip into "junk" status, they are in dire straits. With default rates on junk-
rated companies' debt above 9%, their average interest rate is 10 percentage points above Treasuries
— roughly 13% for that five-year loan.
Lenders and the commercial paper market are increasingly leery of junk-rated companies. "It
has become more costly than ever to have your credit rating downgraded," notes John Lonski, chief
economist at Moody's.
Some borrowers complain that rating agencies have become too quick to downgrade. Others
grouse that creditors now treat a downgrade to junk as tantamount to default, rushing to cut their
exposure to troubled companies. "A liquidity crisis is a phone call from a ratings agency," Vivendi
Universal CEO Jean-Rene Fourtou complained at a recent news conference.
Rating agencies say the markets want them to anticipate credit problems sooner. "There's more
pressure on rating agencies to act more quickly than we did before," notes David A. Wyss, chief
economist at S&P. Low rates notwithstanding, many companies may find money harder and harder
to come by.
BusinessWeek

Exercise 5. Translate the following texts using some of the words and word combinations
from the above exercises.
Долги тянут «Нисан» вниз по наклонной плоскости
Положение хуже, чем казалось, и сделка с французской фирмой «Рено» вряд ли поможет
поправить дела.
Такое признание было ошеломляющим. Председатель совета директоров «Ниссан мотор
компании» заявил, что ошибки руководства в управлении огромной задолженностью второго
по значению производителя автомобилей в Японии довели компанию до отчаянного
положения. Но его откровения вызывают гораздо более тревожные вопросы: какова точная
величина долгового бремени компании «Нисан»? И если уж «Нисан» допустил ошибки в
управлении задолженностью, сколько же других японских компаний совершили подобные
промахи?
Фактическое состояние задолженности «Нисан» будет в значительной мере сказываться
на оценке инвесторами перспектив альянса между японским производителем автомобилей и
французским «Рено», компанией, которая окажется вероятным спасителем «Нисан». Чаще
всего упоминается размер долга по автомобильному бизнесу в 21 млрд долл. США,
превышающий собственный капитал компании в 2,5 раза.
Однако еще больше долговых обязательств, возможно, скрывается в других потаенных
уголках японской автомобильной империи. В соответствии с новым законодательством о
консолидации долга «Нисан» придется взять на себя задолженность своих дочерних
компаний, где ее доля участия составляет не менее 40 %.
Обслуживание собственного долга и оказание помощи попавшим в беду филиалам
становится еще более трудной задачей из-за значительных убытков компании. Ежегодно
«Нисан» должна раскошеливаться на сумму в 847 млн долл. США для уплаты процентов.
Недавнее понижение рейтинга долга «Нисан» до уровня самых высокорискованных долговых
инструментов приведет в этом году к увеличению платежей еще на 254 млн долл. США.
Дружественно настроенные банки, особенно входящие в ту же финансово-
промышленную группу, «кейрецу», всегда были готовы переоформить долговые
обязательства или предоставить новые кредиты — теперь же они проявляют все большую
разборчивость. В настоящее время иссякает число финансистов, проявляющих готовность
потакать привычке «Нисан» жить в долг. Поэтому компании пришлось продать по бросовой
цене свои самые ценные активы. Даже миллиарды «Рено» могут не защитить «Нисан» от
будущих потрясений.

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 (По материалам журнала « Businessweek».)
P.S. Менеджмент по Госну
Глава «Нисан» Карлос Госн, бразилец по национальности, родившийся в Ливане,
гражданин Франции, принадлежит к числу самых популярных представителей бизнес-элиты
Японии. Он говорит на пяти языках и имеет репутацию лучшего специалиста по
реструктуризации и улучшению дел в компании. Его появление в «Нисан» было связано с тем,
что японская компания заключила старатегический альянс с французским концерном «Рено».
В 1999 году Госн принял убыточную компанию, долги которой превышали 15 миллиардов
долларов. Но уже вскоре Госн вновь сделал «Нисан» прибыльным предприятием. Госн
проводил жесткую политику: он закрыл пять заводов «Нисан» в Японии, в результате чего в
общей сложности 23 тысячи человек потеряли свои рабочие места. За четыре года «Нисан»
освоил 19 новых моделей. План на ближайшие два года — 16 моделей. Стратегия оказалась
верной: долги к концу 2002 года были полностью погашены. В настоящее время по размеру
прибыли «Нисан» занимает первое место среди производителей отрасли.
В 2005 году Госн вернулся во Францию, чтобы возглавить «Рено», одновременно
сохраняя за собой пост главного исполнительного директора «Нисан». Доля альянса «Рено-
Ниссан» на автомобильном рынке достигла 9,3%, по объему продаж альянс уступает лишь
компаниям «Дженерал Моторс», «Тойота» и «Форд».
(По материалам статей из журнала «Итоги».)
Exercise 6. Translate the following texts.
Text 1
Can Ford Fix This Flat?
Ford Motor's International boss, David W. Thursfield, has sent Ford of Europe its marching
orders. Get the fourth-quarter numbers back in the black.
The top brass at Ford Motor Co. in Dearborn, Mich., want visible proof that the elusive
turnaround — promised for three years now — is nigh. Last month, Ford announced it expected its
European unit to lose $1.2 billion this year, plus second-half restructuring charges of as much as
$656 million.
Eking out a small fourth-quarter operating profit is clearly just the start. Despite all the
whittling and reengineering to date, the $19 billion unit still suffers from a bloated cost structure and
models that make European drivers yawn.
Unless new products can recharge sales, Ford's position is likely to weaken further. UBS
Warburg analyst Saul Rubin forecasts a loss of $400 million for Ford Europe. "History does not offer
much comfort about the ultimate success of these efforts," says Scott Sprinzen, auto credit analyst at
Standard & Poor's in New York, citing repeated attempts to fix Ford Europe. "We believe there's a
risk of additional restructuring."
Ford's anxieties about Europe go far beyond stemming the losses from a large division. In late
2001, when Ford's North American operations were floundering, new CEO William C. Ford Jr.
adopted Ford Europe's two-and-a-half-year-old turnaround plan as the blueprint for repairing the No.
2 carmaker's core auto operations at home. So red ink in Europe is raising red flags about Ford's
broader turnaround efforts.
While the carmaker is progressing toward its goals in cost cutting, plant closings, factory
flexibility, and quality in Europe and the U.S.. the success of its next-generation models is still
uncertain. In Europe, Ford has delivered more than 80% of the new vehicles that it promised would
revive sales, but market share remains weak. In the U.S., where Bill Ford has promised "a product-
led recovery" that is just kicking off now, investors remain wary. That's why Rubin titled his latest
Ford report: "If Europe Is the Template, Proceed with Caution."
When it comes to the industry mathematics in Europe, Ford's in a bind. Steadily shrinking sales
and ebbing market share make it doubly difficult to turn a profit, and the huge fixed costs of excess
capacity can quickly wipe out the most diligent effort to cut costs. Ford Europe sells nearly 300,000
fewer cars annually in Western Europe now than it did a decade ago.
The already brutal competition is bound to ratchet up as the Japanese prepare for a major
European offensive. Analysts say Ford is among the automakers most vulnerable to losing market
share to Toyota, Nissan, and Honda.
To hold their ground, weaker brands such as Ford and Fiat are resorting to profit-eroding
discounts, "I cannot see anything happening to reverse the trend. Instead of leading, they are limping

34 129
 behind the competition. The turnaround plan is 10 years late," says analyst Stephen B. Cheetham at
Sanford C. Bernstein Ltd. in London.
BusinessWeek

Text 2
У компании «Форд» проблемы
Состояние компании «Форд» (Ford) вызывает все большие опасения. Так,
международное рейтинговое агентство «Стандард энд Пуэрз» (Standard & Poor's (S&P))
понизило рейтинг компании, обосновав это «недостаточностью мер, принятых для
восстановления конкурентоспособности».
Одна из основных проблем компании — большие долги. По данным на 30 сентября,
консолидированный долг компании составил 162 млрд долларов. «Стандард энд Пуэрз»
допускает возможность дальнейшего понижения рейтинга компании «Форд». Третий квартал
закончился для компании относительно благополучно — чистые убытки оказались
значительно ниже прогнозировавшихся.
Однако, несмотря на некоторое оздоровление финансового состояния компании,
специалисты «Стандард энд Пуэрз» сомневаются в том, будет ли аккумулировано достаточное
количество денежной наличности по сравнению с ожидаемыми расходами. Инвестиционные
банки также не рекомендуют своим клиентам вкладывать деньги в ценные бумаги «Форд».
План восстановления, который компания собирается официально представить в
ближайшее время, пока никак не влияет на динамику акции «Форд» на рынке. Более того,
инвесторы крайне недоверчиво относятся к заявленным в плане мерам по реорганизации.
Дело в том, что компания предполагает уменьшать производственные издержки и
бороться с увольнениями. Но первое, по сути, противоречит второму. Уменьшение
производственных затрат без сокращения служащих практически неосуществимо. От
компании ждут более жесткой и активной политики глубокой реорганизации.
Пока этого нет, перспективы дальнейшего развития «Форд» остаются крайне
туманными.
Эксперт

Exercise 7. Translate the following text into Russian.

Detroit's Wounded Giant The world's biggest car firm needs to confront its demons
IN 1943 General Motors invited a promising young author Peter Drucker (who died in
November, 2005) to study the company from the inside. The book this sojourn produced influenced
generations of leaders and managers. But it was ignored by GM itself, which remained famously
bureaucratic and as complacent as one might expect of a company that then dominated the biggest
car market in the world. One wonders what a business academic on a similar mission would make of
the world's biggest carmaker today: its domestic market share is down to around 25%; it has tumbled
back into losses; and it is hobbled by the high wages and generous health benefits promised to its
existing and former workers.
Unless GM can magically turn around its falling market share and mounting losses while
slashing its labour costs, it could be headed for bankruptcy in a couple of years. It is burning cash at
the rate of $5 billion a year and faces extra liabilities of up to $11 billion following the collapse of
Delphi, the parts maker spun out of GM six years ago. It is planning to sell a slice of its profitable
finance business and has sold at a loss its stake in a Japanese carmaker, Fuji's Subaru, to Toyota - the
nemesis that looks set soon to snatch its crown as the world's biggest car firm. Earlier this year, GM
even had to pay $2 billion to wriggle out of a promise to buy all of Fiat, Italy's ailing carmaker in
which it had unwisely invested $2.4 billion some years ago.
GM's travails are most often discussed in terms of the enormous costs of the pension and
health-care promises that it so cavalierly made to employees in easier times. But the company is also
like some Gulliver tied down by other, equally damaging, concessions it made to the United Auto
Workers Union (UAW), which mean it cannot easily close factories and cut payrolls to adjust to
straitened circumstances.
Making these self-inflicted constraints even worse has been GM's inability to do what it once
did best: come up with products that American consumers love to buy. For almost a decade GM has
sustained its sales volumes only by offering deep price discounts that eat into its already weak profit
margins. Ford and the Chrysler division of DaimlerChrysler have been obliged to follow suit. GM
has improved the appeal and quality of some products, notably its Cadillac models, but not enough to

35 129
 win the loyalty of American consumers long accustomed to turning to Toyota, Nissan and Honda for
everyday transport and to Mercedes and BMW for fancier models.
The Economist

Exercise 8. Write a report and make a presentation on one of the following topics.
1. Renault-Nissan, the past and the future of the alliance.
2. Carlos Ghosn - personal profile.
3. Carlos Ghosn's track record in turnarounds.
4. DaimlerChrysler, a bumpy road to success.
5. Compare the two combinations - DaimlerChrysler versus Renualt-Nissan.
6. Is Ford Motor Co. still in trouble?
7. Is Toyota a full-fledged global company?
8. Porsche - VW.
9. General Motors - the rise and fall of the giant.
10. General Motors and the formation of the management theory (Alfred Sloan, Peter
Drucker).

UNIT 7

• Text
THE CASE FOR BRANDS
Far from being instruments of oppression, they make firms accountable to consumers
IMAGINE a world without brands. It existed once, and still exists, more or less, in the world's
poorest places. No raucous advertising, no ugly billboards, no McDonald's. Yet, given a chance and a
bit of money, people flee this Eden. They seek out Budweiser instead of their local tipple, ditch
nameless shirts for Gap, prefer Marlboros to home-grown smokes. What should one conclude? That
people are pawns in the hands of giant companies with huge advertising budgets and global reach?
Or that brands bring something that people think is better than what they had before? The pawn
theory is argued, forcefully if not always coherently, by Naomi Klein, author of "No Logo," a book
that has become a bible of the anti-globalisation movement. Her thesis is that brands have come to
represent "a fascist state where we all salute the logo and have little opportunity for criticism because
our newspapers, television stations, Internet servers, streets and retail spaces are all controlled by
multinational corporate interests." The ubiquity and power of brand advertising curtails choice, she
claims; produced cheaply in third-world sweatshops, branded goods displace local alternatives and
force a grey cultural homogeneity on the world.
Brands have thus become stalking horses for international capitalism. Outside the United
States, they are now symbols of America's corporate power, since most of the world's best-known
brands are American. Around them accrete all the worries about environmental damage, human-
rights abuses and sweated labour that anti-globalists like to put on their placards. No wonder brands
seem bad.
Product power or people power
Yet this is a wholly misleading account of the nature of brands. They began as a form not of
exploitation, but of consumer protection. In pre-industrial days, people knew exactly what went into
their meat pies and which butchers were trustworthy; once they moved to cities, they no longer did.
A brand provided a guarantee of reliability and quality. Its owner had a powerful incentive to ensure
that each pie was as good as the previous one, because that would persuade people to come back for
more.
Just as distance created a need for brands in the 19th century, so in the age of globalisation and
the Internet it reinforces their value. A book-buyer might not entrust a company based in Seattle with
his credit-card number had experience not taught him to trust the Amazon brand; an American might
not accept a bottle of French water were it not for the name of Evian. Because consumer trust is the
basis of all brand values, companies that own the brands have an immense incentive to work to retain
that trust.
Indeed, the dependence of successful brands on trust and consistent quality suggests that
consumers need more of them. In poor countries, the arrival of foreign brands points to an increase in
competition from which consumers gain.

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 Anybody in Britain old enough to remember the hideous Wimpy, a travesty of a hamburger,
must recall the arrival of McDonald's with gratitude. Public services live in a No Logo world:
attempts at government branding arouse derision. That is because brands have value only where
consumers have choice, which rarely exists in public services. The absence of brands in the public
sector reflects a world like that of the old Soviet Union, in which consumer choice has little role.
Brands are the tools with which companies seek to build and retain customer loyalty. Because
that often requires expensive advertising and good marketing, a strong brand can raise both prices
and barriers to entry. But not to insuperable levels: brands fade as tastes change (Nescafe has fallen,
while Starbucks has risen); the vagaries of fashion can rebuild a brand that once seemed moribund
(think of cars like the Mini or Beetle); and quality of service still counts (hence the rise of Amazon).
Many brands have been around for more than a century, but the past two decades have seen many
more displaced by new global names, such as Microsoft and Nokia.
Now a change is taking place in the role of brands. Increasingly, customers pay more for a
brand because it seems to represent a way of life or a set of ideas. Companies exploit people's
emotional needs as well as their desires to consume. Hence Nike's "just-do-it" attempt to persuade
runners that it is selling personal achievement, or Coca-Cola's relentless effort to associate its fizzy
drink with carefree fun. Companies deliberately concoct a story around their service or product,
trying to turn a run-of-the-mill purchase into something more thrilling.
This peddling of superior lifestyles is something that irritates many consumers. They
disapprove of the vapid notion that spending more on a soft drink or ice cream can bring happiness or
social cachet. Fair enough: and yet people in every age and culture have always hunted for ways to
acquire social cachet. For medieval European grandees, it was the details of dress, and sumptuary
laws sought to stamp out imitations by the lower orders; now the poorest African country has its
clothing markets where second-hand designer labels command a premium over pre-worn No Logo.
The flip side of the power and importance of a brand is its growing vulnerability. Because it is
so valuable to a company, a brand must be cosseted, sustained and protected. A failed advertising
campaign, a drop-off in quality or a hint of scandal can all quickly send customers fleeing. Indeed,
protesters, including Ms Klein's anti-globalisation supporters, can use the power of the brand against
companies by drumming up evidence of workers ill-treated or rivers polluted. Thanks, ironically
enough, to globalisation, they can do this all round the world. The more companies promote the value
of their brands, the more they will need to seem ethically robust and environmentally pure. Whether
protesters will actually succeed in advancing the interests of those they claim to champion is another
question. The fact remains that brands give them far more power over companies than they would
otherwise have. Companies may grumble about that, but it is hard to see why the enemies of brand
"fascism" are complaining.
The Economist

Note
sumptuary laws - законы, регулирующие потребление предметов роскоши

Vocabulary

brand п имя фирмы-производителя, марка, брэнд

brand awareness узнаваемость марки фирмы: знание покупателей о
существовании данной марки фирмы
brand image имидж брэнда: представление о товаре в сознании
потребителей
brand loyalty brand franchise предпочтение товаров определенной марки,
приверженность потребителей
brand recognition признание имени фирмы: реакция покупателей на
продукцию со знакомой маркой
brand value стоимость марки фирмы, стоимость брэнда
brand owner собственник марки фирмы
global brand глобальный брэнд; марка фирмы, товары которой
распространяются по всему миру

glut п v избыток, перенасыщение (рынка), затоваривание;

перенасыщать, затоваривать

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 saturate v насыщать
to saturate a market насыщать рынок (товарами)
saturation n насыщение
market saturation насыщение рынка
appeal n 1) привлекательность, притягательность;
2) апелляция, обжалование
consumer appeal привлекательность для потребителя
advertising appeal рекламная концепция, привлекательность рекламы
sweatshop n предприятие с крайне тяжелыми условиями труда и
низкой зарплатой

Translation Commentary
При переводе слов given и barring могут возникать трудности. Так, слово given может
быть существительным, прилагательным, предлогом. Слово barring встречается реже и
употребляется в качестве предлога и в качестве формы глагола bar. Следует запомнить
следующие значения этих слов.

given а данный, установленный, определенный, заданный

many people pay off the money
owed within a given time
given predic
given smth; given that
given that conflict is inevitable,
we must learn how to manage it
многие выплачивают сумму задолженности в течение
определенного времени
учитывая; принимая во внимание; если учесть, что
учитывая, что конфликт неизбежен, мы должны
научиться с ним справляться

barring prep кроме; за исключением; исключая; если не

barring accidents за исключением несчастных случаев
barring a miracle, everything если не произойдет чуда, все потеряно
will be lost
bar v запрещать, препятствовать

Exercise 1. Give the Russian equivalents of the following.

to lift standards; supply chain; public relations; to hold smb to account; to be accountable to
consumers; established brands; a brand consultancy; a high-profile product launch; a logo; to lose
customer loyalty; to build a brand; a global brand owner, to revamp one's business; to run
sweatshops; fickle consumers; insidious advertising; ubiquitous brands; weightless (asset-free)
companies; a nimble player; human rights abuses; oversupply; the flip side; to promote the value of
the brands; to curtail consumers' choice; to command a premium; sweated labour

Exercise 2. Give the English for the following.

быть пешкой в руках гигантских корпораций; не желать оставаться маленьким винтиком
в машине; выдумать историю; вездесущая реклама; фирменный товар; капризы моды;
доверять интернет-компании свою личную информацию; огромный стимул; приверженность
потребителя марке; уязвимость; вызывать «бегство» покупателей от торговой марки; наносить
ущерб окружающей среде

Exercise 3. Translate the following sentences paying attention to the underlined words.
1. Indonesia has a dire record of trademark violations, including piracy as bizarre as Sony
underwear, Intel jeans and Rolex cigarettes.
2. Window-shopping and a huge magazine industry have made Japanese women some of
the savviest and fussiest shoppers in the world (with a weakness for international luxury brands).
They are also fickle; these days fashion cycles rarely last six weeks. Jupiter, another big American
home-shopping channel, has neatly tailored its strategy to meet such demands.
3. The quality of service, traditionally the pride of department stores, is falling as they
scramble to cut costs by reducing staff.
4. The chances of restoring the shine to these iconic brands depend on a real upturn in the
industry.

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 5. After more than a decade of straddling a strategic drive, Eastman Kodak Co. is poised to
jump full speed into digital imaging and to de-emphasize traditional film and photographic products,
acknowledging that its business line's glory days are past. In what it characterizes as a historic shift,
Kodak is expected to announce today that it will boost investment in non-photographic areas and
make new forays into digital territory dominated by big competitors.

Exercise 4. Translate the following examples focusing on the words given and barring.
1. The odds of a smash hit are low, given the general industry downturn and fierce global
competition.
2. Given the attraction of the deal (to acquire Bestfoods), few believe that Unilever will
simply put its tanks into reverse.
3. Given the importance of Telmex as an employer, investor and taxpayer, regulators are
unlikely to come down hard on the company.
4. Competitors have known about Dell's business model for over a decade but seem unable
to compensate. The coming crunch between Dell and Hewlett-Packard has all the kinetic
characteristics of an irresistible force hitting an all too movable object. Given its market leadership,
consistent profitability, high return on capital and adamantine balance sheet, it is not surprising Dell
has been hitting 52-week highs.
1. It might seem an odd time to enter this market (of mobile computer devices), given the
uncertainty and technical difficulties surrounding the switch to "third-generation" (3G) mobile
networks.
2. Simon Waxley, fund manager at Elliott, which holds about 10% of the preferred shares
of Wella, the German haircare group, said that, barring last-minute hitches, the fund would today
announce the lawsuit.
3. It's not every day that a store advertises that, no, it's not lowering prices. But that's what
French hypermarket group E. Leclerc did in a billboard-and-radio campaign a few weeks ago. "The
French lost 1% of the purchasing power in last year, yet the law forbids us to lower prices," the ads
said. Stirring Leclerc's wrath is an eight-year-old law barring retailers from wringing deep discounts
or rebates from suppliers of brand-name goods. That, in turn, puts a floor under the prices customers
pay. Leclerc and other big chains are lobbying to repeal the law, which is intended to protect small
shops.

Exercise 5. Translate the following text at sight.

The Spin Doctors Get Serious The financial public-relations industry is coming of age
HOW many PR people does it take to change a lightbulb? "Don't know. I'll have to get back to
you on that one." An old joke, perhaps, but apposite surprisingly until recently. The typical London
public-relations person of the 1980s did little more than hand out press releases and take journalists
to lunch — and was more familiar with the Savoy's wine list than with his client companies'
strategies.
That has all changed. Lunch, this correspondent is happy to report, still definitely plays its part.
But today's spin doctors are sharp-minded professionals, often indistinguishable from investment
bankers and lawyers — and increasingly demanding to be paid like them. In America, financial PR
(communicating companies' strategies to shareholders, analysts and the financial press) is still done
largely in-house. But it is the top British agencies which are showing that financial PR is becoming
an industry in its own right. This change is being recognised by the markets. Over the past two years,
big marketing and advertising groups have spent large sums of money buying financial PR firms.
What has made PR companies such hot property? The answer is twofold, their relationships and
their power. Chris Matthews, head of Hogarth, a mid-sized British agency, claims, with the usual
hype, that "financial PR is a Trojan horse to sell other things. We have the ear of the CEO." That
used to be the case with advertising agencies too, he says, but these days "they go through the
tradesmen's entrance. "Financial PR's close relationship with the boss reflects the growing
importance of spin and image-management to modem companies. To keep the share price up, it is no
longer enough merely to have a strategy. The strategy also needs to be articulated smartly — as any
manager at ВТ, Ford or Marconi will tell you.
Senior executives also need PR people to deal with the increasing number of interest groups
that scrutinise companies' behaviour. Shareholders are becoming more demanding and environmental

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 groups more hostile. The rise of online media and the increasing attention that broadcasters pay to
financial news mean that companies are having to respond, ideally with carefully crafted and
consistent messages, more or less in real time. The consequences of displeasing these various groups
can be huge — as shown by the failure of the agrochemical industry to make the case for genetically
modified food, or the drag makers' botched attempts to protect their patent rights in poor countries.
How can a humble PR man deal with all this? One answer is to become more professional. "In
the future, PR will definitely be staffed by better trained and educated operators," says Angus
Maitland of Maitland Consultancy. Roland Rudd, Finsbury's founder and boss, put his entire team
through corporate-finance training to increase their financial literacy, while at Tulchan, account
executives are supported by in-house analysts who research clients and their competitors. If not yet
exactly sexy, financial PR is becoming at least a respectable option for graduates. It is even starting
to attract big names from the political spin-trade. James Rubin, the American State Department
spokesman under Madeleine Albright, recently joined Brunswick, bringing the firm valuable
publicity.
Sharing in the spoils. Having secured a seat at the top table, PR firms are now seeking
financial recognition too. Their top partners have always made a decent living, but now they are
starting to close the gap with top lawyers and bankers. But the real money comes from crisis work,
public listings and mergers, where agencies are, like investment banks, demanding success fees."
Retainers are the enemy of value," says Mr Parker. "We want to be paid for results." And with staff
as the only big cost, profits can be juicy: Tulchan's Andrew Grant says that any PR company that
cannot make a 20% margin is doing something wrong.
PR agencies are following the bankers in another way: they are expanding internationally. As
pension reform, deregulation and globalisation create an equity culture on the mainland, French,
German and Italian companies are becoming subject to the dictums of shareholder value. Although
in-house PR is growing in Britain, it seems unlikely to dislodge the hold that the biggest agencies
have on their customers. In many industries, British and American managers claim a special
relationship. But financial PR is one area where they will continue to do things differently.
The Economist
Kxercise 6. Translate the following into English. Text 1
Мыльная война
В начале февраля исполнительный директор «Проктер энд Гэмбл» (Procter & Gamble)
Алан Лэфли (Alan Lafley) заявил, что его компания готова возобновить борьбу за мировое
лидерство с англо-голландской «Юнилевер» (Unilever). Первая «мыльная война» между
мировыми лидерами по производству продуктов питания и бытовой химии завершилась
победой «Юнилевер», сумевшей в прошлом финансовом году значительно опередить своего
конкурента по обороту.
Несколько лет назад «Юнилевер» решила сосредоточить свои усилия на продвижении
почти двух тысяч новых брэндов и завоевании перспективного американского рынка. Она
купила крупную американскую компанию «Бестфудс» (Bestfoods), которой принадлежали
известные брэнды «Кнорр» (Knorr) и «Хельманс» (Hellmann's), а также крупнейшего в мире
производителя пищевых добавок для снижения веса «Слим Фаст Фудс» (Slim Fast Foods).
Подобная тактика, учитывая «цветущее» на тот момент состояние американской экономики,
дала «Юнилевер» огромное преимущество перед P&G.
«Проктер энд Гэмбл» в 2000 году, наоборот, допустила несколько серьезных
маркетинговых ошибок. Группа решила сосредоточиться на «великих сделках». Она
намеревалась купить американские фармацевтические компании «Уорнер-Ламберт» (Warner-
Lambert) и «Америкэн Хоум Продактс» (American Home Products). Однако сделки не
состоялись, а имидж компании был настолько испорчен, что акции обвалились сразу на 50%.
На финансовой отчетности компании негативно сказалось и падение курса евро. Около 25%
продаж P&G приходится на Европу, поэтому удешевление единой европейской валюты
сделало неконкурентоспособными многие американские товары.
Дальнейших потерь P&G удалось избежать благодаря Алану Лэфли, сменившему
прежнего генерального директора Дерка Джагера (Durk Jager). Лэфли предложил новый план
реструктуризации группы, согласно которому группа собиралась вложить 10 миллиардов в
развитие новых брэндов и сократить на 13% число служащих, работающих в подразделениях
по выпуску продуктов питания, гигиенических и бытовых товаров. Решено было избавиться
от филиалов, деятельность которых шла вразрез с долгосрочными планами группы, и

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 некоторых торговых марок. В настоящее время компания P&G вновь готова бросить вызов
«Юнилевер» и начать конкурировать с ней по всем направлениям.

Text 2
Компании «Юнилевер» придется не только сконцентрировать свои усилия на группе
торговых марок, оставшихся после проведения рационализации системы брэндов. Она также
должна оказывать им лучшую поддержку путем перестройки всех операций сверху донизу. В
ходе крупномасштабной реструктуризации будет уволен каждый десятый из 230 ООО
сотрудников компании. Недостаточно успешно работающие предприятия, например,
европейские компании, выпускающие хлебо-булочные изделия, будут проданы, если они не
приведут свои дела в порядок.
Text3
Кто-то пошутил, что скоро производство товаров прекратится, а на фабриках будут
производить одни только бренды и слоганы. Правды в этой шутке в последнее время все
больше и больше. Что бы мы ни покупали, вместе (а иногда и вместо) с продуктом мы
приобретаем какой-нибудь имидж, статус и, в конце концов, стиль жизни. Свои ценности
через бренд стараются донести до потребителя все - от ювелирных домов до мясо-молочных
комбинатов. В числе прочих в гонку под названием «стиль жизни от» включились ведущие
производители электроники, причем практически одновременно.
Эксперт
Text 4
Быть знаменитым некрасиво...
Название поискового портала «Гугл» (Google) попало на страницы толкового
словаря «Мериам-Вебстер» (Merriam-Webster). Образованный от него глагол теперь
обозначает в английском языке поиск в Интернете. В компании вспыхнула паника -
превращение торговой марки в родовое обозначение для всех поисковых порталов
отменяет имущественные права ее владельца.
Каждая компания стремится сделать свою торговую марку как можно более узнаваемой
и популярной. Чем большему числу потребителей известен бренд, тем выше его стоимость и
тем дороже оцениваются активы компании правообладателя. Кажется, что команды
маркетологов ставят конечной целью затмить все конкурирующие марки, вытеснить их из
сознания потребителей, а свою - сделать общеизвестной. Иногда у них получается слишком
хорошо: бренд оказывается на вершине популярности, и там его ждет смерть. Торговая марка
становиться наименованием целой товарной группы и больше не подлежит защите патентным
законодательством.
Покупатели начинают называть все копировальные машины «ксероксами», подгузники -
«памперсами», а гидромассажные ванны - «джакузи», при этом силы и средства, вложенные в
продвижение соответствующих торговых марок, развеиваются по ветру. Бренды
«растворяются в языке», а компаниям-правообладателям приходится бороться со стихийным
словообразованием. Именно так произошло сейчас с «Гугл». Через этот портал производится
более 60% всех поисковых операций в Интернете, и его пользователи давно употребляют
слово googling. Это устраивает всех, кроме владельца портала.
Компания

Exercise 7. Translate the text into Russian in writing.

The Care and Feeding of Jaguar
Big missteps have tarnished the marque, which now clouds Ford's outlook
Jaguar is Bill Ford's recurring nightmare. For 15 years, Ford Motor Co. has owned the British
luxury marque, and each time it seems to turn the corner, Jaguar starts bleeding red ink again. On
Sept. 17, Ford unveiled yet another rescue plan, announcing that it will shutter an aging factory in
Coventry to reduce excess capacity and cut costs.
Each setback pushed CEO Ford's ambitious goals for the company's European brands further
out of reach. If Ford can't turn Jag around, meeting Bill Ford's vow to rake in $7bn in pre-tax profits
by mid-decade will be tough. So why has Ford failed to turn its top-shelf brand into a consistent
moneymaker?
Ford bungled Jag's marketing by adopting a mass-market approach for the luxury-niche brand
— and then changed the strategy as frequently as though it were engine oil. Jag needs consistent
positioning as enduring as BMW's three-decade old "Ultimate Driving Machine".

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 Jag also uses the same pitch worldwide - never mind that its distinct "Britishness" plays
differently in Peoria than it does in Picadilly. Worse, the current slogan, "Born to Perform," extols
horsepower not looks, even though style is the main reason owners cite for buying a Jag. Ford ought
to dash the current strategy and hire a small, talented agency that will nurture the brand's leaping cat
icon, helping it segue in the the US from Avengers-style panache to the generation personified by
Brit actor Jude Law.
Better products and an appealing marketing strategy should help Jaguar cut back on the cheap
sales gimmicks that have tarnished its image.
Ultimately, Ford needs to get real. Even Mark Fields, head of PAG and Ford Europe, says that
4
*a quick turnaround is unlikely." If demand still doesn't match Jag's reduced output by next year,
more painful factory cuts may be needed. Jaguar is a venerable brand that survived decades of
antique factories and quality so bad it was the butt of jokes. It would be a shame if the British cat
ended up as road kill.
Business Week

Exercise 8. Translate the text into Russian in writing.

Harry Potter and the Marketing Mystery
For most academicians, fads are an anomaly, a profanity, a pustular pain in the proverbial
posterior. Whether it be Teletubbies, or Rubik's Cubes, fads, crazes, and gimmicks are an affront to
the modem marketing paradigm, the absolute antithesis of analysis, planning, implementation, and
control. They seem to erupt spontaneously (in an inexplicable, unpredictable fashion), they are the
domain of all sorts of disreputable hucksters, drummers, and quick-buck makers (veritable
throwbacks in an era of calm professionalism), and they quickly disappear over the marketing
horizon (until the next kiddie craze comes hurtling down the preteen pike). At best, fads are an
example of word-of-mouth marketing or a component part of the innovation diffusion process. At
worst, fads are a mutant form of the product life cycle, commercial instantiations of extraordinary
popular delusions and the madness of crowds. At all times, however, fads are something to be
avoided; to be belittled; to be broken, bucking bronco fashion, and transshipped into the more
respectable conceptual categories of "trends," "tendencies" and "traits."
The irony, of course, is that marketing itself is incorrigibly faddish, as is management studies
generally. True, there is no shortage of scholarly commentators who roundly denounce management
by buzzword, readily condemn fad surfing in the boardroom, and repeatedly excoriate the craze-
blazing antics of self-appointed marketing gurus. So voluminous, indeed, is the antifad literature that
faddissness is the latest management fad, according to Harvard Business Review (Wetlaufer 2001).
Management metafads and scholarly denial notwithstanding, an academician would need to be
pretty obdurate not to have noticed Harry Potter. The brainchild of the British author J.K. Rowling,
Harry Potter is perhaps the most astonishing kiddie craze of recent years. To date, approximately 70
million copies of the first four books in a seven-book series have been sold. The texts have been
translated into 30 languages and published in multitudinous formats (e.g. illustrated, Braille,
audiocassette. adult cover, large print, box sets) and are chart-toppers in 120 countries.
Journal of Marketing
UNIT 8

• Text 1
WHEN BATTLES COMMENCE
Hostile bids are back again. Who should rejoice?
This week, in both America and Europe, corporate bosses locked horns as the biggest hostile
bids in years twisted and turned their way towards a denouement. Even in gentlemanly corporate
Japan, where hostile bids are a rarity, at least two big companies are fighting off the unwanted
attentions of outsiders. The boom in mergers and acquisitions in the late 1990s was notable for
agreed deals between CEOs who made them sweet as possible for themselves. Is the boom that many
forecast for this year going to be equally notable for long contested corporate tussles? And, if so, who
is going to benefit the most this time?
So accustomed are investors to the idea that companies overpay for acquisitions that news of a
takeover bid almost invariably sends the target company's share price soaring.

Poisonous tactics

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 How successful the next wave of hostile bids is will depend largely on a shifting legal and
regulatory framework which, despite some surviving obstacles, seems to be making them easier than
in the 1990s. In America, corporate law is the province of state governments. There was a time when,
as in Europe, American firms could hope to rely on friendly local governments to help them out of a
tight spot. As hostile bids flourished during the 1980s, states such as New Jersey, Ohio and
Pennsylvania rushed to pass management-friendly anti-takeover laws.
Such laws have become highly controversial, and they may now be beyond the hopes of all but
the most generous patrons. About 40% of the 5,500-odd publicly owned companies tracked by
Institutional Shareholder Services, a research organisation, employ a poison pill. Typically, this
is a device that allows shareholders in firms threatened by a hostile bid to buy new shares in their
company at a big discount. That makes it more costly to take over the firm by tendering for its newly
enlarged pool of equity.
At the same time, 60 % of American firms have a staggered board, under which different
groups of directors are elected in different years. This device hinders attempts to take over companies
because it can take years for shareholders to materially change the composition of the board. In a
recent paper, Lucian Bebchuk of Harvard Law School argues that staggered boards cost shareholders
about 4-6% of their firms' market value by allowing entrenched managers and directors to spurn
attractive offers.

No yen for a fight

Japan has few defences against hostile takeovers largely because it doesn't need them.
Companies that have break-up values in excess of their market capitalisation (and there are many in
Japan) are increasingly becoming the targets of hostile bids.
Last December, Steel Partners, an American investment fund, launched a hostile bid for Sotoh,
a textile-dyer. In its defence, Sotoh turned to NIF Ventures, an arm of Daiwa Securities, the country's
second-largest stockbroker. NIF charged in as a white knight and backed a rival management buy-
out.
After a rare one-and-a-half month-long bidding war, on February 16 th Sotoh withdrew its
support for the deal. Instead, it announced that it would raise its dividend 15-fold for the current year,
a strategy that appears to have been successful. The next day its share price surged to almost 20%
more than Steel Partner's offer.
Japanese shareholders are becoming more demanding partly because of the unwinding of cross-
shareholdings between Japan's banks and their corporate chums. This has put many of the freed-up
shares in the hands of foreigners or local activists. Yet despite these glimmers, the pace of change is
still glacial. Traditional stakeholders, such as labour unions and banks, remain very powerful and
often override the interests of independent shareholders.

Who thrives in the end?

One big unanswered question is whether the latest mergers will perform any better than those
during other waves of mergers. In one of the studies three American-based economists paint a picture
of financial carnage in the period of 1998-2001. After examining the acquisitions of some 4,136
American companies during that time, they found that the announcements of the bids reduced the
combined value of the merging firms by a whopping $158 billion.
A series of studies of American firms stretching back to the 1950s had found that merger
announcements led to an increase in the combined value of the acquirer and its target of around 5%,
with most of the increase going to the selling shareholders.
Strikingly, many of the big-loss deals were paid for in part with the buyers' own equity. They
may thus, say the three economists, have been buying in order to exchange over-valued equity for
real assets. That suggests, at least for the shareholders of some acquirers, that value was not being
destroyed in the long term.
Within this overall story, there are important sub-plots. First, the value created by takeovers has
been almost twice as large when there has been more than one bidder. Secondly, the value creation
has been bigger for mergers within the same industry than for diversifying acquisitions. So, as CEOs
set out on their hunt for takeover targets, they should not stray too far from home. And if they are the
only hunter for any particular target, they should perhaps ask themselves why.
The Economist

Note

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 denouemant [deinu.'ma] - (from French) the end of a book or a play, in which everything is
explained or settled; the end result of the situation

Vocabulary

bid n 1) предложение (цены);

2) попытка приобрести компанию;
3) попытка (чего-то добиться)
hostile bid враждебная попытка поглощения
friendly takeover дружественное поглощение
takeover bid попытка поглощения
in a bid to do smth пытаясь добиться чего-либо
target company компания-объект возможного поглощения
Syn. takeover target, prey
poison pill защитная мера компании при угрозе поглощения;
«отравленная пилюля»
stagger v осуществлять ротацию; заменять поочередно (членов
совета директоров компании)
equity n собственный капитал
defence n 1) защита; правовое средство защиты;
2) возражения по иску;
3) обстоятельства, освобождающие от ответственности
white knight дружественная компания, спасающая компанию-жертву
от враждебного поглощения; «белый рыцарь»

cross-shareholdings взаимное участие

unwinding п совершение обратной сделки; закрытие позиции
bidding war «война» за обладание компанией-
потенциальным объектом поглощения
Vocabulary Commentary
При описании методов, используемых компаниями в борьбе против враждебных
поглощений, используются также следующие выражения.
corporate raider корпоративный налетчик
Syn. predator
unsolicited bid непрошенная попытка поглощения
greenmail(ing) 1) «зеленый шантаж»; приобретение значительного
Syn. good-bye kiss, bon voyage количества акций какой-либо компании с целью
bonus вынудить ее выкупить свои акции по более высокой цене;
2) «прощальный бонус»; выкуп компанией своих акций с
премией у фирмы, угрожающей ей поглощением; уплата
отступного враждебному претенденту;
3) деньги, уплаченные для выкупа акций у лица,
пытающегося завладеть компанией
grey knight «серый рыцарь»; компания -конкурент «белого рыцаря»,
еще один претендент на дружественное поглощение

Exercise 1. Translate the following into Russian.

a boom in mergers and acquisitions; to pass management-friendly anti-takeover laws; to charge
in a bidding war as a white knight; mergers; to employ a poison pill; a soaring target company's
price; to be threatened by a hostile bid; to hinder attempts to takeover companies; to spurn an
attractive offer; to break up a company; to unwind cross-shareholdings; a staggered board of
directors

Exercise 2. Translate the following into English.

помочь компании выйти из затруднения; средства защиты при попытке враждебного
поглощения; стать объектом поглощения; вызвать рост цены на акции; закон о компаниях;
взаимное участие в капитале компаний; сделать предложение о враждебном поглощении
компании; корпоративные «налетчики»; существенно изменить состав совета директоров
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 • Text 2
Hold My Hand
Takeovers are certainly changing the corporate landscape. But alliances may be altering it
even more
BUY, buy, buy. All around companies seem to be snapping each other up. AT&T wants to buy
MediaOne; Deutsche Telekom and Telecom Italia plan to coalesce; Hoechst and Rhone-Poulenc
have agreed, after much dithering, to be spliced. Some of the current crop of marriage proposals may
stop short of the altar; others, such as the mooted deal between Texaco and Chevron, two oil firms,
may come to grief. But feverish though the current merger activity is a more important change may
be in the scale and complexity of alliances.
In Silicon Valley and Hollywood, alliances are old hat: in a sense, almost every movie is in ad-
hoc alliance, as is the development of every new computer chip. But, as in so much else, these two
fashionable places are proving models for older industries.
Mergers, like marriages, can be legally defined and therefore readily counted. Alliances are
more like love affairs: they take many forms, may be transient or lasting, and live beyond the easy
reach of statisticians.
However, the numbers represent just one part of the picture. Relying on outsiders for more than
a fifth of your sales represents a fairly big dent in many companies' definition of what they are: it
erodes corporate boundaries and forces imperious types to cooperate with one another. Thus AT&Ts
takeover of MediaOne may in the long term prove less remarkable and complicated than the alliance
it has simultaneously formed with Microsoft to deliver broadband services over cable-television
networks.
The degree to which alliances transform companies varies with the type of alliance. The most
common reason, still, is to find a way into a foreign market. Indeed, the need to expand abroad helps
to explain why alliances have long been more common in Europe and Asia, which between them
account for half the world's total, than in the United States, which now accounts for around a third.
Outside the United States, nearly all alliances are cross-border ones.
Worse, this need to find an ally is often driven by governments rather than by commercial logic.
The number of alliances soared partly because there are usually national barriers to foreign
ownership.
The huge Star Alliance, which includes Lufthansa and United Airlines, began as a series of
loose arrangements to share codes and direct passengers to partners' flights; now it is beginning to
look more like a quasi-merger, with shared executive lounges and pooled maintenance facilities.
Such arrangements look less efficient than full-blown mergers: were it one company, the Star
Alliance could save a lot in managerial overheads.
The same applies to many telecoms alliances. Pat Gallagher, managing director for Europe of
Britain's ВТ says that the telecoms giant formed lots of joint ventures in the early 1990s with foreign
firms "because we couldn't do an acquisition." But this was often a policy of second-best. "Is it easier
to run a 100 % owned company?" he asks rhetorically. "Of course it is." However, even when they
cross borders, many alliances are not merely frustrated mergers, but deliberate attempts to change
direction.
In industries where local knowledge is particularly important, such as retailing, cross-border
partnerships still seem essential. Having watched several of its peers make expensive mistakes trying
to buy stores or going it alone, Britain's Tesco has begun its push into South Korea arm-in-arm with
Samsung. Wal-Mart is a past master at learning from local partners. It started working with Cifra in
Mexico as long ago as 1991 before taking control of the local retailer two years ago.
This implies that alliances may be mere stepping-stones. In fact, once one looks beyond the
cross-border deals, a different picture begins to emerge — much closer to the endlessly forming and
re-forming webs of Silicon Valley and Hollywood. An increasing number of alliances are not about
geographic areas but managerial ones — and particularly about defining where firms begin and end.
Typically a firm will focus on one or two core competences, and outsource other things to its allies.
Sometimes this merely means sharing resources on a big project.
Alliances seem even more useful when companies are not potential rivals at all, but firms that
are at different points on the same value chain. If a company wants access to another firm's
knowledge in a particular area, argues Marcus Alexander, a director of Britain's Ashridge Strategic
Management Centre, an acquisition can be a disaster. Buying your customer also means running the
risk of losing other customers.
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 Indeed, for all the talk about "long-term strategic partners," two things seem to be pushing big
companies towards an ever more promiscuous lifestyle, with multiple partners. The first is that many
of the people whose brainpower the big firms most need simply do not want to work for them. The
second reason is the speed of change. Alliances give you the chance to move on if something better
comes along.
On paper, all this knowledge-sharing sounds wonderfully creative. In practice, it can be hell.
Buy another company, and rationalisation is simply a matter of aiming the hatchet in the right place.
Running an alliance, says Firoz Rasul of Ballard Power Systems, a Canadian pioneer of fuel cells, is
"like getting married. You have to understand each other's expectations. And even then, you have to
work very hard to keep the initial excitement going."
When the partners are corporate titans, such as Bill Gates of Microsoft or Michael Armstrong of
AT&T, there is obviously plenty of room for disagreement. But things are not much easier when
partners are small. Ballard has alliances with two giants of the car industry, Ford and
DaimlerChrysler. "We're like a mouse sleeping with two elephants," says Mr Rasul. In Silicon Valley
plenty of people argue that if you get into bed with a company like Microsoft or Intel, you will get
squashed.
In this context, trust seems to matter much more than bits of paper. Peter Boot, an alliance
expert, argues that trust must be present at every level. "You have to be disposed towards the most
benign interpretation of the strange signals you get from time to time," he says. "You have to
interpret them innocently."
More than anything this requires leg-work by the managers concerned. If nothing else, the new
fashion for alliances should prove a boon to restaurants all over the world.
The Economist
Notes
1. But feverish though the current merger activity is, a more important change may be in the
scale and complexity of alliances. - В данном предложении имеет место инверсия, используемая
для усиления значения слова feverish. Без инверсии предложение выглядело бы следующим
образом:
But though the current merger activity is feverish, a more important change may be in the scale
and complexity of alliances.
2. ad hoc — (лат) на данный случай; ad hoc committee — специальный комитет; ad
hoc(c)ery, ad hockery — решения, постановления, принятые на данный случай;
договоренности, достигнутые на данный случай
3. broadband — широкополосный (в кабельной оптике)
Useful Words and Phrases
to come to grief 1) попасть в беду, в затруднительное положение;
2) потерпеть неудачу, плохо кончить
short of smth не доходя до чего-либо
to fall short of 1) потерпеть неудачу;
2) не хватать; 3) не достигать (цели)
his income falls short of his его доходы на 500 фунтов ст. меньше, чем его расходы
expenditure by £500
to fall short of accepted не соответствовать стандартам
standards
old hat нечто давно известное
(a) past master непревзойдённый мастер, знаток, специалист
to be a past master in smth быть непревзойденным мастером в какой-либо области
benign interpretation толкование, благоприятное для данной стороны

Exercise 1.
Articles about company relationship often use the language of courtship, marriage and divorce.
Read the above article and find examples of such language of personal relationship describing
alliances and mergers.
Watch the video The Merger is off.

Exercise 2. Read the following text.

Types of Mergers

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 Economists classifies mergers into four groups. (1) horizontal, (2) vertical, (3) congeneric, and
(4) conglomerate.
A horizontal merger occurs when one firm combines with another in the same line of business
- for example, when one widget manufacturer acquires another, or one retail food chain mergers with
a second.
An example of a vertical merger is a steel producer's acquisition of one of its own suppliers,
such as an iron or coal mining firm, or an oil producer's acquisition of a company which uses its
products, such as a petrochemical firm.
'Congeneric' means "allied in nature or action"; hence, a congeneric merger involves related
enterprises but not producers of the same product or firms in a producer-supplier relationship.
A conglomerate merger occurs when unrelated enerprises combine.
Operating economies (and also anticompetitive effects) are at least partially dependent on the
type of merger involved. Vertical and horizontal mergers generally provide the greatest synergistic
operating benefits, but they are also the ones most likely to be attacked by the government
Explain the word combinations in English and translate them into Russian.
backward vertical
forward vertical
full-blown merger
frustrated

Give your own examples of the biggest mergers and analyse them using the above
terminology.

Exercise 3. Translate the following into English.

давать предвзятое толкование; оказаться благом для страхового бизнеса; быть готовым
проявлять терпение при выработке решения; сверхкрупные корпорации; получить доступ к
информации о клиентах; обмен информацией; объединять ресурсы при работе над крупным
проектом; стирать границы между корпорациями; ТНК в полном смысле этого слова;
добиться экономии накладных расходов; попытка приобрести компанию

Exercise 4. Translate the following extracts paying attention to the attribute structures.
1. But while Mr. Kilts relied on extensive research to identify unsatisfied consumer needs,
Gilette traditionally adhered to an "if we build it, they will come" strategy. Consumers might not
know they needed better shave, the theory went, but once they had tried a superior Gilette system
they would "trade up" and pay premium for the invention.
2. Klein, the author of the book about AOL and Time Warner ill-fated merger, is effective
in depicting the culture clash between the arrogant AOLers and staid Time Warnerites that ultimately
rocked the merger. Ideas that AOL saw as forging synergies were repeatedly shot down by the Time
Warner side, which seemed intent on demonstrating that it had its own way of doing things. The oil-
and-water mismatch between the companies played out in the corner suites, too. Klein has little
inside dope on what took place - perhaps because his sources were mainly middle managers - but he
does recount the dramatic and rapid unraveling of the company's top management. Recriminations
were common as AOLTimeWamer's outlook deteriorated in the soft economy.
3. The narrative picks up speed about halfway through, when the author begins exploring the
business practices of AOL chief deal-maker David Colburn, who was ousted last summer during the
accounting scandal. Colbum, who Klein says affected a grizzled, rumpled "I-don't-care-what-the-
hell-you-think manner of dress," came to be feared in the dotcom world as a take-no-prisoners
negotiator. He extracted onerous terms from fledgling Web startups, who felt they had to advertise on
AOL if they were to have any credibility on Wall Street.

Exercise 5. Translate the text into Russian orally.

A Challenge From the Nimble Newcomers
A new model of international companies is emerging that is driven by networks, global
links and adaptability
In the debate over globalisation, large multinational corporations, especially those from the US,
European and Japanese origin, are often portrayed as omnipotent villains.

47 129
 But these companies arc themselves facing a serious challenge from a new type of business,
according to John Mathews, professor of management at the Macquarie Graduate School of
Management in
Sydney, Australia.
In Dragon Multinational: A New Model for Global Growth, he examines some of the
companies that have emerged outside the US-Europe-Japan triad over the past decade. "Periphery"
companies, such as Taiwan-based Acer, Mexico's Cemex and Indian-based steel company Ispat
International, have used novel organisational structures to establish strong global positions quickly.
In fact. Prof Mathews points out, for such latecomer companies, organisational innovation is not so
much an option as a necessity.
These companies are a far cry from the traditional structure, based on a corporate headquarters
that strictly controls subsidiaries around the world. The new companies have a networked character
and, because of that, they have been able to take advantage of the opportunities presented by all the
links of the global economy.
Prof Mathews points out that these companies are not based on a new piece of technology or a
new process, even though they are adept at using net-based systems as part of their accelerated
internationalisation. They are defined by the decentralisation of their structure and by the fact that
they were "born global," with an eye on the international marketplace from inception. Old-style
companies tend to look overseas only when they have outgrown home markets.
In this framework, the central office acts as a coordinator rather than a controller. The network
is held together by common technology, strategic goals and attitudes. Stan Shih, head of the Acer
group, describes the new multinational form by using the Chinese characters meaning "circle of
dragons with no leading dragon."
The picture that emerges goes against the grain of much of the globalisation debate. That debate
tends to present globalisation as driven by a handful of monolithic global companies, working to
create a uniform world in their image. But those traditional companies are going to have to struggle
to keep up with more nimble cell-based groups, Prof Mathews believes. The command-and-control
structure is, he says, simply not suitable for the emerging global economy.
Is the argument convincing? Certainly, there are difficulties with the model that Mathews
describes The cellular nature of the group creates problems with raising capital externally, for
example. Another issue is that most of these companies are led by a particularly competent and
visionary individual; how much of each company's success can be attributed to the leader is an open
question.
Nevertheless, it is important food for thought, especially for anyone who wants a new
perspective on the arguments about globalisation. One suspects that there is still a good deal of life in
the model of die hierarchy-based company — but Dragon Multinational makes the case that serious
alternatives are emerging.
The Financial Times
Exercise 6. Translate the text into Russian orally.
Limited Appeal
One giant step across Europe may find few imitators
IТ IS a grand title with a grand idea behind it. The idea of a Societas Europaea (SE), a company
based and regulated in the European Union as a whole, rather than a single nation, has been around
for at least 30 years. But it was not until September 11th this year that Allianz, Europe's biggest
insurer, became the first big company to opt for pan-European status, announcing the move as part of
a merger and business re-structuring. The legal groundwork for SE status was put in place only in
October last year with the passage of EU legislation which, in theory, allows this new animal to
operate seamlessly across the 28 countries of the European Economic Area (the EU and three
neighbouring countries).
But there has hardly been a rush to sign up: only a handful of firms, headed by Strabag, an
Austrian road-builder, have done so. One reason is continued uncertainty about tax treatment and
aspects of corporate governance, as well as the slowness of some European countries to adapt their
national laws. Moreover, for smaller European firms, setting up a limited company under British law
is cheaper than opting for SE-status - and arguably allows the same freedoms.
Allianz decided on the SE structure as the best way to take over and integrate RAS, a 55.4%-
owned insurance subsidiary in Italy, into its other European businesses. By creating a European
company, and making an offer in Italy for the balance of RAS shares, Allianz avoids the irksome task

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 of squeezing out reluctant shareholders at a later date - which it would have to do under German
takeover law.
The Economist

Exercise 7. Translate the text into English in writing.

Коркунов и Риттер
Российский производитель дорогих конфет и немецкая компания, выпускающая
элитный плиточный шоколад, создали альянс
На шоколадном рынке появилось российско-немецкое предприятие. Одинцовская
кондитерская фабрика, принадлежащая предпринимателю Андрею Коркунову, и немецкая
компания «Альфред Риттер Гмбх & Ко.» объявили о создании альянса. Эксперты оценивают
союз как перспективный. «Этот шаг усилит позиции обоих участников, - полагает Ирина
Седова, менеджер кондитерских проектов консалтинговой компании «Бизнесе Аналитика». -
«Риттер» начинает выпуск своей продукции в России, а «Коркунов» получает инвестиции для
расширения производства». И все логично, так как союзники работают на разных сегментах
рынка шоколада: немцы - в нише шоколадных плиток, а «Коркунов» - в нише конфет в
коробках.
Одинцовская кондитерская фабрика уже успела занять достойные позиции на рынке
шоколадных конфет, на фоне именитых конкурентов - таких, как столичный «Красный
Октябрь» с его вековыми традициями и швейцарская компания «Нестле», обосновавшаяся на
куйбышевской фабрике «Россия». Причин для такого успеха несколько. Во-первых, компании
повезло с моментом выхода на рынок. До августовского кризиса ниша элитных шоколадных
конфет, на которую претендовал Андрей Коркунов, была полностью занята западными
компаниями. Но кризис до того напугал иностранцев, что те оставили поле битвы. И
появившаяся продукция Коркунова оказалась единственной в дорогом сегменте. Во-вторых,
на российском рынке шоколада еще не было именных торговых марок. Надпись «А.
Коркунов» на конфетных коробках резко выделяла одинцовскую продукцию на фоне
«ассорти» разных фабрик и придавала ей имидж немассового продукта.
Однако немассовость продукта имеет свои недостатки: объемы продаж не позволяют
получить достаточных финансовых ресурсов для расширения производства. А между тем
спрос на одинцовские конфеты растет быстрее предложения, особенно в регионах: по данным
компании, при нынешних мощностях она способна удовлетворить лишь 60% заявок
региональных дистрибьюторов.
Так что «Альфред Риттер и Ко.» появился со своим инвестиционным предложением
очень вовремя. «Благодаря сотрудничеству с «Риттером», - говорит Андрей Коркунов, -мы
сможем расширить свою долю на региональных рынках до двадцати пяти процентов. Кроме
того, это позволит нам увеличить объемы экспорта. Например, уже появилась возможность
прорыва на рынки Канады и США, нужно только увеличить производство».
Всего в совместный проект будет вложено 20 млн долларов, половина из которых -
германские. В итоге мощность производства увеличиться до 22 тысяч шоколадной продукции
в год. В результате оборот Одинцовской фабрики вырастет с 50 млн долларов до 100 млн в
будущем. Коркунов не исключает и возможности продвижения своей продукции в Германию,
для чего ему пригодятся наработанные связи «Риттер».
Анастасия Матвеева
Эксперт
Exercise 8. Translate the following texts orally.
Text 1
French Twist?
IN THIS summer of corporate love, the unwanted embrace of Pechiney, a French aluminium
company, by Alcan, its Canadian rival, could become a thorny romance.
Alcan's offer recalls a friendly menage a trots attempted in 1999 between Alcan, Pechiney and
Alusuisse of Switzerland, which was rudely interrupted by offended European antitrust officials.
Even so, Alcan went ahead with the purchase of Alusuisse.
Will this new, hostile attempt to complete the earlier threesome - thereby creating an aluminium
giant to rival America's Alcoa - fare any better? Pechiney's board has rejected Alcan's offer as much
too low, and is said to be seeking an alternative "white knight" buyer.
On its face, Alcan's pursuit of Pechiney makes sense. Along with the economy, the aluminium
business has been in a slump; consolidation is in order.
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 Alcan has yet to raise its bid, but is expected to do so. It has been playing to French pride, and
to French unions' aversion to job cuts. Full-page ads in Le Figaro argue for the deal by highlighting
Alcan's long history in France and the Quebecois firm's "francophone culture." So how will the EU's
antitrust watch dogs respond this time? In the years since Alcan's 1999 bid, the team headed by the
competition commissioner, has been buffeted by a series of successful legal challenges to its merger-
blocking decisions.
In one case, the European Court of First Instance declared baldly that the European
Commission's merger analysis was "vitiated by a series of errors of assessment." Whether this will be
enough to make it go easy on today's deals remains to be seen. Alec Burnside of Linklaters, a law
firm, thinks that the commission is likely "to bounce back and show that the system still has teeth."
Already, it is looking hard at a bid by GE, which it once stopped from buying Honeywell, for
Instrumentarium, a Finnish medical-equipment maker. The commission will certainly worry about
the risk of collusion in a consolidated aluminium industry — a realistic fear in an industry already
more integrated than for other metals, says Magnus Ericsson of Raw Materials Group, a consultancy.
On the other hand, Alcan has learned from its earlier rebuff. It has come up with a plan to shed assets
in Germany to pacify the commission.
Moreover, its bid will be helped by the continuing pain in the industry, deriving in part from
growing competition from aluminium suppliers in China and Russia. This new competition makes it
harder to believe that a merged firm would wield excessive market power.
In the end, the decision may rest with Pechiney's shareholders and, above all, its executives. If
they try to construct an elaborate defence on antitrust grounds, perhaps the bid can be blocked. But
this would probably be victory at a price: Pechiney might prevent itself from making any future
acquisitions of its own.
The Economist

Text 2
Mergers & Acquisitions
Will the latest cycle of European mergers produce better
results?
COMPANIES have embarked on what looks like the beginnings of a re-run of the mergers and
acquisitions (M&A) wave that defined the second bubbly half of the 1990s. That period, readers
might recall, was characterised by a collective splurge that saw the creation of some of the most
indebted companies in history, many of which later went bankrupt or were themselves broken up.
Wild bidding for telecoms, internet and media assets, not to mention the madness that was
Daimler's $40 billion motoring takeover in 1998-99 of Chrysler or the Time-Warner/AOL mega-
merger in 2000, helped to give mergers a thoroughly bad name.
A consensus emerged that M&A was a great way for investment banks to reap rich fees, and a
sure way for ambitious managers to betray investors by trashing the value of their shares.
Now M&A is back. Its return is a global phenomenon, but it is perhaps most striking in Europe,
where so far this year there has been a stream of deals worth more than $600 billion in total, around
40% higher than in the same period of 2004.
Shareholders' approval of all these deals raises an interesting question for companies
everywhere: are investors right to think that these mergers are more likely to succeed than earlier
ones?
There are two answers. The first is that past mergers may have been judged too harshly. The
second is that the present rash of European deals does look more rational, but — and the caveat is
crucial — only so far. The pattern may not hold.
The Economist

UNIT 9 Consolidation

• Text 1. Read the text. Summarize the text in writing.

Autos: a New Car Industry
If any industry represented America's industrial might in the 20th century, surely it was auto
makers. The handful of companies clustered around Detroit produced the assembly line in 1913,
tanks and aircraft engines during World War 11 and thousands of high-paying factory jobs when
peace came. The industry became the backbone of the U. S. economy and its companies America's
bellwethers. As cars went, so went the nation.

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 That's truer than ever, but it's no longer because of Motown's might. Today, it is foreign players
that are reinvigorating America's car business — and turning the U.S. into the center of a global
industry. An intense new wave of competition from Europe and Asia is forcing a fundamental
transformation that is profoundly changing the way cars and trucks are designed and built. Of course,
it's not the first time Detroit has been under assault by foreign auto makers, but this time, there's a
difference, instead of arriving by container ship or being assembled from imported parts in a handful
of U.S. factories, this onslaught of cars, trucks, and sport-utility vehicles is born and bred in America.
The revolution is taking place in a second generation of hyperefficient foreign-owned factories that
are popping up across America's rural South, far from northern union halls.
The first Japanese transplant factory appeared 20 years ago when' Honda Motor Co. began
making cars in Marysville, Ohio. More followed, slowly at first. But now, they've reached a critical
mass. The vehicles they make are increasingly being designed and engineered in this country. And
with foreign-based manufacturers planning to boost their North American production capacity 40%
by 2006, they will force a fundamental shift of investment dollars, jobs, and supplier assets from the
North to the South and from American-owned companies to companies with overseas ownership. As
the transplants crank out hot-selling vehicles (pickups, minivans, and SUVs), they're challenging
notions of what constitutes a domestic industry. This shadow sector is more than just an
encroachment: Today, more than half the passenger sedans sold in America are import brands — and
more than half the vehicles sporting foreign nameplates are made in the U.S.
The new factories are woven deeply into the fabric of the U.S. economy. They spawn their own
mini-galaxies of parts suppliers, subassemblers, and service businesses wherever they appear. And
they're putting intense pressure on traditional American carmakers. Most important, they're forcing
Detroit's Big Three to resume a painful restructuring that began two decades ago but was sidetracked
by the '90s economic boom. "By putting it off, we may have amplified the consequences," says
David E. Cole, executive director of the Center for Automotive Research (CAR) in Ann Arbor, Mich.
That may be bad news for Motown, but as globalization takes root at home, the U.S. is enjoying
a massive infusion of talent and investment. Indeed, looked at more broadly, the U.S. auto market has
never been healthier — or better served. Here's why:
•Better and cheaper cars. Foreign auto makers have used their toehold in the U.S. and
favorable currency rates to greatly heighten competition. That has given consumers higher quality,
more choice, and lower prices from U.S. as well as foreign carmakers. The pressure has sparked a
creative, more disciplined approach to product development that prizes quality and efficiency.
•Factory innovation. When Honda built its first Accord in Marysville in 1982, the point was to
dodge import quotas and political pressure. But the transplant factories opening now represent a huge
advance in flexibility and efficiency. U.S. companies are beginning to follow, but with little hope of
beating foreign-owned factories on costs, they must innovate or die a slow death.
•Job redistribution. The new car factories now employ about 50,000 people, replacing
thousands of jobs lost in textiles, steel, and other dying industries in the South. The billions of dollars
invested by Honda, Toyota, Mercedes, BMW, Hyundai, and others is raising wage and skill levels
and pressuring states to improve educational standards,
On the losing side of the ledger, of course, are die Big Three's old-style factories and their
unionized workers. For years, the U.S. industry has been suffering a steady drip of lost market share
to overseas rivals. But today, it is under attack on all sides: European luxury brands have roared past
once mighty Cadillac and Lincoln, and Japanese carmakers are plowing into the lucrative truck
market. Even those once-flimsy Korean cars have moved up the value chain and arc winning first-
time customers. The result has been a dizzying drop in U.S. market share for Detroit auto makers.
Since 1995, they've lost a full 10 points to foreign-based rivals.
If this feels like deja vu, that's because 20 years ago, Motown was pushed to the brink by an
earlier wave of Japanese and European imports. The ultimate victory by Toyota, Honda, Nissan,
BMW, and Mercedes was so complete that an entire generation of car buyers stopped considering
American cars. GM, Ford, and Chrysler fought back, attacking their bloated costs and embracing
many of the lean manufacturing principles that made the transplants so efficient. It was a painful
reckoning, resulting in 150,000 jobs lost from 1979 to 1991. But by the mid-'90s profits were up, and
the cloud over Motown seemed to lift.
It has become clear, though, that what bailed out Detroit was not a profound new appreciation
for global competition. Instead, it was a roaring U.S. economy and shifting consumer tastes.
Americans had fallen in love with bulky minivans, SUVs, and pickups, all uniquely American

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 concepts. With scant foreign competition, the Big Three feasted on those fat truck profits through
most of the '90s, barely noticing that they had surTranslateed the car market to import brands.
Detroit's swagger returned, and with it, bad old habits. Rather than conducting a housecleaning,
Detroit shoved its problems to the back of the garage for a decade. "We have absolute collective
amnesia in this business," says Ford Motor Co. Chairman William C. Ford Jr. "We can't handle
success. We do our best as a company when our back is to the wall."
He'd better hope so: Foreign auto makers are unveiling a slew of impressive products aimed
squarely at Detroit's profit base. Having long since ceded the car market, Detroit is in danger of
losing' a big chunk of the lucrative SUV and minivan markets. Japanese, European, and South
Korean companies have already grabbed more than seven points of share in tracks just in the past
five years, cutting Detroit's dominance from 83 % to 76%.
There's a danger that Detroit will keep slipping — right off the edge. The result: in a decade or
so, the U. S. auto industry may no longer be dominated by domestic player; that's remarkable
considering that 40 years ago. General Motors Corp. alone had a 50.7% market share and looked like
a prime target for a government-ordered breakup. There's no chance of that happening now —
America's biggest carmaker slipped to just a 28%. share through May. What's more likely is that the
U.S. could end up looking like Europe with five or six players splitting roughly equal shares. "It's no
longer the Big Three; it's the Big Five," says George Peterson, president of Autopacific Group Inc., a
Tustin (Calif.) consulting firm.
The transplant invasion is a sensitive topic in Detroit G. Richard Wagoner Jr., GM's CEO,
points out that the Japanese and Koreans can invest so heavily here because they dominate their
home markets with virtually no outside competition. In a May speech in New York, Wagon said,
"Once these manufacturers establish a foothold in the U.S., they begin to mimic our broad product
lines, eventually become accepted by the public as a 'domestic' brand, and suddenly, we lose our
home-field advantage."
But globalization began blurring national auto identities years ago. Today, the concept of a
purely American carmaker seems quaint. Even the term Big Three no longer seems appropriate, since
Chrysler Corp. was acquired in 1998 by Daimler Benz. Japan, which had five major independently
owned auto companies in 1998, now has only two: Toyota and Honda Motor Co. And just as Asian
and European carmakers have been expanding in North America, U. S. companies have been looking
for growth overseas. As the world's largest manufacturing companies jockey for power in the U.S.,
the tectonic shifts are only starting to ramble through the industry.
BusinessWeek

Note
cluster - кластер, группа тесно связанных между собой компаний
Exercise 1. Give the Russian equivalents.
a) high-paying factory jobs; to boost production capacity; to cluster around smth; hot-
selling brands; to resume production; foreign players; to represent a big advance; to put intense
pressure on smb; to be under assault by foreign auto makers; flexibility; assembly line, to challenge a
notion; overseas ownership; to be sidetracked; shifting consumer tastes; to cede control; to enjoy a
massive infusion of talent and investment; to move up the value chain; to spark a new approach to
product development; to arrive by container ship; to embrace many new manufacturing and
marketing principles; bloated costs; bloated personnel departments; first-time customers; injection of
state aid; influx of capital
b) to have one's back to the wall; to feast on fat oil profits; to suffer a steady drip of lost
market share to overseas rivals; to take root; to shove one's problems to the back of the garage; to be
on the losing side of the ledger
Exercise 2. Translate the following examples into Russian.
1. He said the market's strong gains were unusual in light of bellwether IBM's weakness.
2. Now that IBM Corp is in the long decline, market-makers are looking for another
bellwether to signal the direction of the entire market.
3. A recent surge in debt downgrades has hit bellwether borrowers such as J.P. Morgan
Chase & Co. and General Mills Inc.
4. Firms who were early adopters of new technology get a greater benefit than do laggards.

Exercise 3. Translate the following into English.

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 1. Всем известно, что сборочный конвейер является основой любого автомобильного
завода.
2. Прошли те дни, когда американская компания «Дженерал Моторс» могла
похвастаться, что может «предложить автомобиль для любого кошелька и для любой цели»,
чего не могли сделать друтие участники рынка.
3. Автомобильная отрасль перестраивается в то время, когда происходит обострение
конкуренции, и Детройту, возможно, придется довольствоваться (settle for) уменьшающейся
долей на рынке.
4. Кластеры — это группы фирм в связанных между собой отраслях, которые
успешно развиваются, используя близость и взаимную поддержку.
5. Даже неэффективная автомобильная компания является воплощением
национальной гордости. Государство вливает в нее средства, веря в то, что она играет
ведущую роль для самых различных предприятий в других отраслях обрабатывающей
промышленности и определяет направление их развития.
6. Неоспоримо, что автомобильные компании имеют обширную сеть поставщиков и
субпоставщиков, и поэтому огромные ресурсы уходят на обработку счетов к оплате.

• Text 2. Translate the text orally. Speak on new developments in branding.

Fallen Icons
Coca-Cola and McDonald's seemed ready to take over the world. But global branding has
lost its appeal. Richard Tornkins looks at the rise of local brands and the decline of the big
names
Thirty years ago, Coca-Cola made one of the most memorable commercials in advertising
history when it stood 200 multi-ethnic youngsters on a hilltop in Italy and had them sing: "I'd like to
buy the world a Coke." In a sense, it was a defining moment for the notion of the global brand — the
idea that the whole world could be united in its desire for a single product. But what is that idea
worth today as Coca-Cola begins the biggest restructuring in its 113-year history?
A couple of years ago, buying shares in big consumer goods companies looked the nearest
thing in life to a one-way bet. As the barriers to world trade had fallen, the argument went, vast new
markets had opened up, offering the prospect of almost limitless growth for the owners of powerful
global brands.
Coca-Cola liked to point out that the annual consumption of its soft drinks in the US was 376
drinks a head. In China, it said, the figure was only six drinks a head — and the market was five
times as large. Procter & Gamble came up with a similar refrain in 1997, when John Pepper, then
chief executive, said the number of consumers within its reach had shot up from 1 bn to 4.5bn in a
decade, adding that the opportunities for growth were now "literally unprecedented."
As more investors became persuaded by arguments such as these, a perception set in that almost
no price was too high to pay for a share in a global brand company, because their profits could only
go up. It was re-run of the "nifty fifty" era of the early 1970s, when a similar belief in the power of
the top 50 global companies took hold.
Confidence in this new investment paradigm took a drubbing in the third quarter of 1998, when
emerging markets were battered by the Asian financial crisis. But even before the crisis struck, brand
owners had been discovering that the apparent potential of emerging markets was less easy to realise
than expected. To justify the heavy cost of building distribution systems and marketing their brands,
consumer goods companies needed to achieve high volumes. In 1990, the sight of long queues
outside the first McDonald's restaurant in Moscow led to the assumption that these were easily
available.
But local cultures around the world have not, as some commentators feared, been annihilated by
the onward march of Coca-Cola and McDonald's. Instead, big consumer goods companies have been
surprised at the speed with which indigenous brands have evolved, creating a much more competitive
market than expected.
To some extent, this is a matter of affordability. For many people in emerging markets, a
McDonald's meal, an everyday purchase in the US, is an expensive luxury. But it also turns out that
many people take pride in their national identity, and prefer a domestic product.
The multinationals have responded by trying to build, or buy, more local brands. In Russia,
before the financial crisis, the international tobacco division of RJR Nabisco had more success with a
new cigarette brand named Peter I than it did with Winston and Camel, its big US brands.

53 129
 Coca-Cola says it plans to go further in this direction, decentralising the company to get a better
understanding of local markets and introducing more local brands than in the past. It is a logical
response, but a troubling one: for investors might justifiably ask why high price/earnings multiples
should be attached to companies with global brands if they then need local brands to expand in
overseas markets.
Meanwhile, global brands are also facing challenges closer to home. In the US and other
industrialised countries, brands have become more important than ever over the last decade or so, but
their function has changed.
Originally, brands were simply a means of differentiating one product from another. Then,
many of them acquired a more aspirational function: people drank Martini in the hope of conveying
the idea that they were sophisticated jet-setters. But as people have become more individualistic, they
no longer want to keep up with the Joneses: instead, they want to be as different from the Joneses as
possible. One way they seek to achieve this is by adopting brands that in some way reflect their
values and self-image.
The worry for big brand owners is that this is leading to a fragmentation of brands as people try
to express their individuality by moving away from the mass market. McDonald's, facing a saturated
market for its hamburgers in the US, has gone on an acquisition spree, buying fast-food chains in the
US and in Britain. But like Coca-Cola, the parent company is not putting its brand name on any of
the chains.
As with the decision to launch local brands in overseas markets, the diversification away from
existing brand names may be logical. But again, it raises the question of why high price/earnings
multiples should be attached to global brand companies if it turns out that not everyone wants to
drink Coke or eat a McDonald's burger. Former Coca-Cola boss Roberto Goizucta used to say he
would never rest until the С on the cold tap in English-speaking countries stood for Coke. But being
a global brand owner was never as easy as it may have appeared in the 1990s, and it is getting harder
all the time.
The Financial 'Times Notes
jet-set — «реактивная публика», узкий круг богатых путешественников (летающих на
реактивных самолётах на фешенебельные курорты и т. п.); избранные, элита jet-setter —
завсегдатай модных курортов, человек, принадлежащий к узкому кругу богатых
путешественников, к элите

Useful Words and Phrases

• Text 3. Translate the text orally.

one-way bet односторонняя игра, спекуляция в одном направлении

(игра либо только на повышение, либо только на
понижении)
to take a drubbing потерпеть поражение
to give a drubbing нанести поражение

Exercise 1. Translate the following word combinations into Russian.

to suffer a severe downturn in sales; market saturation; sagging earnings; tumbling prices; to cut
one's global workforce; to meet the company's revenue targets; to revise one's growth targets;
consumer products; glut; manufactured goods, a global brand owner, long-term outlook, after-tax
profits, to rebuff a tentative takeover approach, to abandon merger talks, to be battered by a crisis, to
face a challenge, to keep up with the demand, a mass-market retailer, price/earnings multiple; to go
on an acquisition spree ; to go on a shopping spree; consumer spending; defence bill; import bill;
wage bill; to bolster a company's position; spin and image management; to command a high price; a
lower consumer price index; ubiquity and power of brands; to make the bulk of the users; genuine
partners; in-house prices; to have one's job outsourced
Exercise 2. Translate the following adjectives into Russian and give nouns that can be used with them.
indigenous
unwieldy
nimble
complacent
hard-nosed
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 laggard

Gone Flat
When former Coca-Cola Co. executive Neville Isdell agreed last May to come out of retirement
and become chief executive of the beleaguered soda giant, he brimmed with confidence.
As late as the 1990s, Coca-Cola Co. was one of the most respected companies in America, a
master of brand-building and management in the dawning global era. Now the Coke machine is
badly out of order. The spectacle of Coke's struggles has become almost painful to watch: the battles
with its own bottlers; the aged, overbearing board; the failed CEOs and failed attempts to recruit a
successor; the dearth of new products; the lackluster marketing. "They've been their own worst
enemy, a casualty of their own success," says an analyst who has followed Coke since 1970s.
Yet as grave as those problems are, they only hint at the real dimensions of Coke's woes. The
Coca-Cola organization is stuck in a mindset formed during its heyday in the 1980s and '90s, when
Goizueta made Coke into a growth story that captivated the world. An unwillingness to tamper with
the structures and beliefs formed during those glory years has left the company unable to adapt to
consumer demands for new kinds of beverages, from New Age teas to gourmet coffees, that have
eaten into the cola king's market share. "The whole Coke model needs to be rethought," says Tom
Pirko, president of BevMark LLC, a Santa Barbara (Calif.) consulting firm. "The carbonated soft-
drink model is 30 years old and out of date."
Business Week
• Text 4. Translate the text orally.
Rag-Trade Deals
One of the certainties of visiting an American department store - and stores in many other
countries too - is the familiar offerings from some of the world's most recognised clothing brands:
stacks of Levi jeans, shirts from Polo Ralph Lauren, collections from Liz Claiborne and, of course,
lots and lots of Tommy Hilfiger. All this sameness is a big problem for the apparel business.
Department stores are increasingly being squeezed by specialist retailers on one side and discount
chains on the other. At the same time, prices everywhere are falling as many items of clothing
become commodities. For the brands concerned, this loss of sparkle could lead to yet more
consolidation.
One company rumoured to be a takeover target is Hilfiger, which despite annual sales of close
to $2 billion has been struggling. The firm insists that it wants to retain its independence, and on
August 4th appointed David Dyer as its new chief executive. Mr Dyer has plenty of retail experience
to help Hilfiger: he built Lands' End into a highly successful mail-order and e-commerce business
before selling it to Sears, Roebuck last year.
Few of Hilfiger's problems are unique. If clothing prices were denominated in end-1992 dollars,
prices would have tumbled below many other products, such as food and drink.
Most firms have already adjusted to global competition, which has seen a big shift in garment
production to low-wage countries and a subsequent glut of cheap manufacturing capacity. Hilfiger is
based in Hong Kong, where the eponymous founder, Mr Hilfiger, now the firm's chief designer,
formed a partnership with Silas Chou, a member of a wealthy Hong Kong textile family, who helped
the firm list on the New York Stock Exchange in 1992.
According to A.T. Kearney, the strongest defence against price erosion is to support a clothing
brand, especially a mature one such as Hilfiger, with innovative products. To boost profits, the brand
can be spread to other products, such as home furnishings, perfumes and fashion accessories. Hilfiger
already does this through a variety of licensing agreements. But spreading the brand too widely can
dilute its value.
An alternative tactic is to build a portfolio of brands aimed at different segments of the market.
This has led some clothing firms to buy, license or invent new brands. With powerful discounters,
such as Wal-Mart and Target, rapidly taking the place of many traditional department stores, it is
becoming vital for companies to have products for the mass-market chains. "Consumers are looking
for greater value, and increasingly more fashion, in their clothing offerings, and they are finding
discounters' wide aisles and large shopping areas more convenient and 'shopper friendly'," according
to a recent report by Susan Ding, an analyst with Standard & Poor's, a credit-rating agency.
The Economist

CHAPTER 2. WHERE IS THE STICK? HOW TO MOTIVATE AND MANAGE THE

PERSONNEL AND THE EXECUTIVES
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 UNIT 10

• Text 1.
WHERE'S THE STICK?
Something has gone wrong with bosses' pay. The solution has to lie with shareholders
RUNNING a large public company is a stressful and important job. Thousands of employees
and business partners and millions of customers and shareholders rely on the good judgment of
corporate chief executives, who have to make decisions in a climate of constant uncertainty. Only the
savviest and most determined need apply. Lately, though, these adjectives hardly spring to mind
when company bosses are mentioned. For many, top bosses are not the toughest or most talented
people in business, just the greediest.
A string of corporate scandals in recent years, from Enron to WorldCom to Tyco, have revealed
senior executives apparently plundering their companies with little regard to the interests of
shareholders or other employees. And even when no wrongdoing is alleged, huge pay awards are
provoking growing outrage. Just ask Richard Grasso, the former chairman of the New York Stock
Exchange, who went from folk hero to a symbol of excess almost overnight when it was revealed
that he was due to receive $188m in accumulated benefits. (What is now causing the most
indignation, in Europe as well as in America, are "golden parachutes" and other payments which
reward bosses even when they fail. Not only does it seem that bosses are being fed ever bigger
carrots, but also that if the stick is finally applied to their backside, they walk away with yet another
sackful of carrots to cushion the blow. Bugs Bunny couldn't ask for more.
The highest-profile cases of excessive pay, unfortunately, are not isolated exceptions. Bosses'
pay has moved inexorably upwards, especially in America. In 1980, the average pay for the CEOs of
America's biggest companies was about 40 times that of the average production worker. In 1990, it
was about 85 times. Now this ratio is thought to be about 400. Profits of big firms fell last year and
shares arc still well down on their record high, but the average remuneration of the heads of
America's companies rose by over 6%.
This one-way trend in top executives' pay has rightly raised eyebrows, on both sides of the
Atlantic. The supply of good bosses may be short, but can it be that short, even during an economic
slowdown and stockmarket slump? A recent poll in Britain found that 80% of people believe that top
directors are overpaid. This summer customers boycotted a Dutch retailer, Ahold, to express
disapproval of the pay awarded to that company's new chief executive.
Unions in America and Britain want governments to be more directly involved in regulating
bosses' pay. But that cure threatens to be even worse than the disease itself. It would be much wiser
to play to capitalism's strength — its flexibility — and to encourage shareholders themselves, the
'ostensible owners of companies, to sort the problem out. For too long the missing element in the
setting of top executives' pay has been the active interest of shareholders. Only once that comes into
play can the bargaining between boards and bosses become a more equitable affair.
Lavish pay-outs are not only costly in themselves but can also damage the long-term health of a
company. Too many bosses have manipulated corporate results to fill their own pockets.
Moreover, pay packages thought excessive or unfair can destroy morale among the rest of a
company's workforce.
So what should shareholders do? For a start, big institutional investors can often make better
use of the powers that they already possess. In Britain this year shareholders received the right to
vote on top executives' remuneration. And yet at only one company (GlaxoSmithKline) did big
investing institutions vote against an existing package - not an impressive performance if they are
genuinely aggrieved.

Beyond Lake Wobegon

The pay-setting process is characterised by what has come to be known as the Lake Wobegon
effect, after the novel "Lake Wobegon Days" by Garrison Keillor. All Lake Wobegon's children are
said to be "above average." Most boards appointing a new chief executive will seek the advice of a
pay consultant, who will tell them the going rate. The trouble is, no board wants to pay the average
for the job. The above-average candidate which directors have just selected as CEO, they invariably
reason, deserves more. And so bosses' pay spirals upwards.

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 If shareholders want to break this mould they need to be far more diligent. Greater transparency
about executives' pay will undoubtedly help, and moves in that direction in both America and Europe
are to be welcomed. And yet shareholders must also exercise more say in choosing genuinely
independent directors to select and monitor the CEO. Few public companies today in either America
or Europe have a majority of independent directors. This week, America's Securities and Exchange
Commission took steps in the right direction by proposing an increase in the power of shareholders to
nominate and appoint directors. Once they have these powers, shareholders should make use of them.
That leaves the vexed question of how, and how much, to pay top bosses. There can never be
any simple, single formula for this. Much will depend on the situation of each company. The boss of
a firm in a stable or declining industry should probably not be paid in the same way as one in a fast-
growing high-tech market. Some corporate boards ought to at least consider a return to what was
once the norm in both America and Europe (and still is in Japan) and largely ditch pay-for-
performance and instead pay largely through a straight salary (most lower-level employees are paid
this way).
Yet most boards will probably stick with pay-for-performance of some kind. Whether in the
form of options, the outright grant of shares, bonuses tied to criteria such as earnings or revenue
growth, or some other means, pay should be explicitly aligned with the long-term interests of the
owners, not short-term blips in share prices or profits. Whatever formula is chosen, some bosses arc
bound to try to manipulate it. This is why, in future, capitalism's pillars, the shareholders who own
the company, will have to become more actively involved in choosing the directors who represent
them and in policing what they do. Shareholders, after all, supply the carrots.
The Economist

Notes
1. carrot and stick policy - политика кнута и пряника
2. Bugs Bunny - an American cartoon character. He was created in 1940 by Tex Avery for
Warner Brothers. Bugs likes carrots, often asks "What's up, Doc?" and always tricks the hunter
Elmer Fudd.
Vocabulary

plunder v грабить, расхищать, воровать

to plunder one's own company грабить собственную компанию
Wrongdoing n правонарушение, совершение правонарушения,
Syn. offence, delinquency, malefaction, причинение вреда, проступок
misdeed
to answer for one's wrongdoings отвечать (нести ответственность) за свои
проступки
pay n плата за труд
pay award назначение жалования; решение о размере
вознаграждения руководителя
pay package соглашение с сотрудником компании об оплате
труда; компенсационный пакет, общая сумма
вознаграждения за труд
pay settlement заключение коллективного договора об уровне
заработной платы
performance n 1) выполнение, исполнение
[specific performance — юр.исполнение
(обязательства) в натуре];
2) результат деятельности, показатель;
3) работа (машины), характеристика работы
машины, эксплуатационные качества;
4) представление, спектакль, исполнение,
выступление
non-performance n неисполнение (контракта)
pay-for-performance оплата труда в зависимости от показателей
компании
remuneration n вознаграждение

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 Syn. reward, compensation, pay
accumulated a накопленный
Syn. accrued
benefit n 1) выгода, благо; 2) пособие; 3) pl льготы;
привилегии
fringe benefits дополнительные льготы
Syn. (Br E) perks
cushion v смягчать, ослаблять (неблагоприятное
воздействие)
cushion п 1) ослабление, смягчение,
амортизация;
2) резервный запас
ratio п коэффициент, отношение
poll n v опрос, проводить опрос
ostensible а очевидный, презюмируемый
ostensible authority (agency) презюмируемое правомочие (представительство)
equitable a 1) справедливый, равный, равноправный;
2) основанный на праве справедливости
fair and equitable справедливый и равный
equitable action иск, основанный на праве справедливости
morale n моральное состояние
workforce n 1) число работающих на предприятии, в
Syn. labour force, headcount компании; численность персонала;
2) самодеятельное население, трудовые ресурсы
aggrieve v удручать, обижать; юр. наносить ущерб,
отказывать в удовлетворении (требования)
aggrieved party потерпевшая сторона
nominate v 1) выдвигать кандидата, назначать) номинировать
судно (назначать под перевозку)
a board of two nominated and six правление из двух назначенных и шести
elected members выбранных членов
monitor v контролировать, наблюдать
align v 1) увязывать; 2) приводить в соответствие,
Syn. to tie, to link корректировать; 3) присоединяться (к блоку)
alignment n 1) корректировка, приведение в соответствие;
2) союз, объединение
going rate обычная ставка (уровень, курс)
Useful Words and Phrases
to have (exercise) a say in the matter иметь влияние на решение какого-либо дела
one-way trend односторонняя тенденция (в сторону понижения
или повышения)
golden parachute «золотой парашют»; «отступное»; щедрое
Syn. golden handshake, golden boot вознаграждение руководителя при его уходе из
компании
tin parachute «оловянный парашют», выплаты рабочим при
увольнении
to raise eyebrows вызывать удивление
to sort the problem out решать (улаживать) проблему
Syn. to handle, to tackle, to address, to
rectify the problem
to spiral upwards резко расти вверх

Vocabulary Commentary
В английской экономической литературе при описании вознаграждения сотрудников
компании встречаются некоторые профессиональные жаргонные выражения, такие как golden
parachute, golden handshake, golden boot tin parachute. Каждое из них в образной форме

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 передает информацию не только о характере вознаграждения, но может содержать указание
на определенные события в жизни компании, которые по всей вероятности повлекли такие
выплаты.
Golden parachute - букв, «золотой парашют».
Golden handshake - букв, «золотое рукопожатие». Чрезвычайно выгодный контракт,
предлагаемый руководящему работнику и предусматривающий предоставление огромной
компенсации в случае потери работы в результате поглощения компании.
Golden boot - букв, «золотой сапог». Финансовые и нефинансовые поощрения,
предлагаемые пожилому служащему, чтобы вынудить его «добровольно» выйти на пенсию.
Tin parachute - букв, «оловянный парашют». Гарантированный бонус и другие льготы
для рядовых сотрудников в случае потери работы в результате слияния.
Golden handcuffs - букв, «золотые наручники». Контракт, связывающий сотрудника и
предусматривающий
значительное вознаграждение в том случае, если он остается работать в данной фирме.
Golden hello - букв, «золотое приветствие». 1) Разовое вознаграждение, предлагаемое
особо ценному работнику в начале его трудовой деятельности в новой фирме. 2) Разовая
скидка новому клиенту.

Exercise 1. Translate the following into Russian.

• pay; to pay through a straight salary; pay-outs; to overpay; the pay-setting process; pay
package; pay consultant; pay-for-performance; pay awards; payroll; pay settlement
•insurable earnings; fringe benefits; lucrative bonuses; perks; unemployment benefit; generous
reward; compensation package; severance package
•involuntary redundancy; repeated unemployment (of a person); early retirement; duration of
social insurance unemployment allowances; entitlement to unemployment benefits; to qualify for
income supplements; labour placement offices; to destroy the morale of the workforce

Exercise 2. Translate the following into English.

управлять акционерной компанией открытого типа; чрезмерные выплаты; правление
компании; кризисная отрасль; грабить компанию; народный герой; руководитель высшего
звена; вызывать негодование; вознаграждать неудачников; решать проблему; набивать
собственные карманы: комиссия по ценным бумагам и биржам; средний размер
вознаграждения руководителя компании; коэффициент; способный руководитель; оказывать
большее влияние на процесс определения уровня оплаты труда; контролировать работу
главного исполнительного директора; выдвигать кандидатуру и назначать на должность
директора; полномочия акционеров

Exercise 3. Translate the following text paying attention to the underlined words.
No More Mr. Nice Guy
Independent directors at big public companies need to be tougher
WHERE were they? The rash of corporate scandals over the past few years has produced not
only outrage at the greed and shenanigans of top executives, but also incredulity that their boards of
directors went along with their misdeeds.
What did directors know and when did they know it? Were they, too, corrupt, or merely
incompetent or complacent? These are now the questions being asked in dozens of criminal
investigations and scores of lawsuits.
At the same time, regulators in America and Europe have placed new burdens on board
directors and, despite the perceived failure of so many directors in the recent past, the favourite
remedy for ensuring corporate rectitude in the future is to appoint a new generation of directors who
will, next time, be truly independent and ever watchful. What was once often a comfortable, and
lucrative, sinecure is beginning to look like the job from hell.
As a result, the behavior of corporate boards has already-begun to change in important ways.
But there is still much confusion. What exactly are directors supposed to be doing? The answer
seems obvious: representing shareholders. Yet what is the best way to do that? Should directors aim
to help the chief executive — who, after all, is also supposed to be acting in the best interests of
shareholders—by offering advice on management or strategy? Or is the main task of independent
directors to monitor a firm's managers, and make sure they obey the rules, don't pay themselves too

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 much and generally behave? In other words, should directors see their role as that of colleague or
cop?
"Both," would be the ideal answer. And in superbly run firms, playing both roles
simultaneously may be possible. But in many big companies, directors have found it impossible to be
both effective guard dogs and loyal members of the pack, and most have chosen to be the latter.
This has also been the choice that most bosses want them to make. How much more
comfortable it is to work chummily with the clever person who has appointed you, or had a strong
say in your selection, than to look continuously over his shoulder and ask awkward or embarrassing
questions. It is understandable that so many directors have taken this approach, but it is the wrong
one.
The perils of collegiality
The primary function of independent board directors in a large public company is to monitor
the firm's managers, not to give strategic or managerial advice, and directors should allow nothing to
impair their monitoring role.
Most big firms operate in highly competitive markets, and honest strategic errors will be
quickly punished by rivals. Moreover, bosses are not short of advice from consultants, industry
experts and management gurus, not to mention their own subordinates. But market competition
cannot monitor the internal workings of a firm, check an overweening boss, expose a fraud or simply
stop top managers from paying themselves far too much. Only independent directors can perform
these essential tasks.
This inevitably will require more of an adversarial stance from directors. Of course, to act as
effective monitors directors need to know enough about a company's operations to ask the right
questions, and they will form views on its strategy. If they think a firm is headed in the wrong
direction, they should say so.
But they must remember that their first duty is to speak for shareholders, and that the firm's
boss works for them, as the shareholders' representatives, not the other way around.
Despite encouraging steps in this direction, there is a long way to go.
Warren Buffett, the world's most successful investor and an acute observer of corporate
America, has no doubt about this. For him the "acid test" of directorial independence is chief
executives' pay, which has continued to soar, at least in America, through good times and bad. And
he has no doubt about why this "piracy," as he calls it, has succeeded. Too often, he has written,
"boardroom atmosphere" means that collegiality trumps independence. Whenever it does, millions of
shareholders are the losers.
The Economist
UNIT 11

• Text 1.
UNDER WATER
The downturn is making companies think anew about how to tie managers' compensation
to performance
IТ HAS been a remarkable experiment. Reward top executives according to the performance of
their companies, and their interests will be more closely aligned with those of shareholders. So far
has the experiment gone, particularly in America, that William M. Mercer, a pay consultancy, says
that only 18% of the compensation of American chief executives (and 40% of that of British chief
executives) came from fixed salaries last year. The rest came from variable sources such as stock
options and other performance-related bonuses.
As corporate profits and share prices soared in the late 1990s, so did these rewards. With the
fall in the stockmarket this year, however, many executives' stock options have become almost
worthless. Ira Kay of Watson Wyatt, another pay consultancy, reckons that 90% of American quoted
companies have some options "under water"— i.e., the share price is below that at which the options
were issued. At perhaps half of these companies, he reckons, all the options are under water.
At Harvard Business School, Brian Hall and Thomas Knox have done more detailed sums,
studying a sample of top executives in large and small companies. In some 40% of the companies
they looked at, the top cadre of executives had near-valueless options.
This is not the only way in which performance-related pay is being whacked. Other measures
on which executive bonuses are based, such as hitting budget targets, are doing badly. Richard
Bednarek, a director of the Hay Group, a remuneration consultancy, says that for executive directors

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 of FTSE 100 companies in Britain last year, the median bonus was 50% of basic salary. Some got
well over 100%. These figures will be far lower this year.
Because most bonuses are at least partly related to such fuzzy things as "personal goals," some
companies will (if they so wish) be able to massage them back up a bit. For many industries, though,
that will be impossible. Wall Street bankers' bonuses are likely to be down by as much as 70% this
year. Several airlines, including Delta, have already ditched bonuses for their top managers; so have
Ford.
For many, this year's bonus is being allowed to keep the same salary. British Airways and
CSFB are among a number of companies seeking to cut their executives' nominal salaries. Others,
says Steven Hall of Pearl Meyer, a company that monitors top pay, are giving no salary increases but
raising possible bonus pay-outs, so that high-fliers have a chance to earn a little more if things go
well.
With options drowning and bonuses shredded, how will companies reward their stars'? No
longer will the likes of Enron, a toppled American energy company, be able to pay less than the
industry average by relying heavily on options. "Cash is king," says Charles Wardell of Korn/Ferry
International, a big headhunting firm. The star candidates he sees want a basic salary and a cash
bonus. That is bad news for many companies: cash is a scarce commodity these days.
New options add to the overhang of allocated but unclaimed corporate equity, something that
shareholders dislike. But they hate it more when companies "reprice" options (cancel them and
reissue them at a lower, more favourable price).
Pay consultants therefore sweat through the night to concoct ingenious ways to issue options
that will motivate and retain talent without annoying shareholders. One device that minimises
overhang, popular on America's west coast, is the "stub option"- a short-term option that "vests"
(becomes available for an employee to exercise) within 12 months but expires after 13. Most options
vest within four years and expire after ten.
On both sides of the Atlantic, the fast-growing fad in remuneration packages is "deferred
bonuses." A company will, typically, pay a cash bonus of 40% of salary up-front, and another 40% in
shares (not, note, options) which become available only at some future date. "Restricted" stock of this
sort has become an increasingly popular part of top executives' pay packages in America over the
past couple of years. When the share price falls, options become worthless — but restricted stock is
merely worth much less than before.
The longer-term question, however, is how to link pay better to sound performance. Some
academics, such as Sendhil Mullainathan of MIT, have criticised stock-related pay on the ground that
it rewards good luck as much as good performance. The rising stockmarket tide of the past did
wonders for a host of leaky boats (and their top executives).
Now that options are so drenched, even some of the compensation consultants who once helped
to design them wonder about their worth. "Options were given to too many people," reflects Scott
Olsen, who specialises in executive compensation at Towers Perrin. "Many sold as soon as they
could. So they did not build a sense of ownership."
Moreover, a relentless focus on some performance measures can skew corporate policy. In the
latest issue of the Harvard Business Review, Michael Jensen, a professor at Harvard Business
School, criticises the ties that exist in most companies between a manager's budget and his pay.
These, he says, "distort decisions, and turn honest managers into schemers." Mr. Jensen argues that
compensation should reward actual performance, independent of budget targets.
At root, though, badly designed rewards often reflect bad corporate governance. Board
remuneration committees too often indulge in a form of high-level back-scratching. Nell Minow, an
expert on corporate governance, says that decisions on pay are "best made by capable, expert, vitally
involved directors, and until our boards meet that standard, companies and their shareholders will
break out with bad pay the way that sufferers of poison ivy break out in an itchy rash." The rash
developed in the 1990s has not yet subsided; it has merely changed colour a bit.
The Economist
Vocabulary

Notes
1. FTSE [ futsi] 100 companies - Financial Times Stock Exchange index of 100 companies
2. CSFB - Credit Swiss First Boston banking group

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 3. MIT - Massachusetts Institute of Technology
compensation n 1)возмещение, компенсация
2) вознаграждение, жалование, денежное
вознаграждение,
Syn. pay, earnings, reward, 3) уравнивание; компенсация
remuneration,
by way of compensation in в качестве компенсации
compensation for smth

compensate (for) v компенсировать

to compensate smb for smth
Syn. reimburse; indemnify;
recompense smb for smth.; make
up for smth; refund smth
option n опцион
to issue options выпускать опционы
to exercise options исполнять опцион, использовать
право, предоставляемое по опциону
exercise price цена исполнения опциона
Syn. strike price
call option опцион «колл», опцион на покупку
Syn. buyer's option
put option опцион «пут», опцион на продажу
Syn. seller's option
median a срединный, медианный
median bonuses средний размер премиальных, медианный размер
премий
overhang n «навес» [совокупность ценных бумаг или товарно-
сырьевых контрактов, которые в случае выхода на
рынок могут существенно снизить цены (напр. акции,
хранимые у брокеров, фондовые опционы и т.п.)]
4. poison ivy - бот. сумах ядоносный; ядовитый плющ, вызывающий при контакте
сильнейший зуд и высыпания на коже

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 Exercise 1. Suggest the Russian for the following.
to align top executives' interests with those of the shareholders; to claim compensation for
damages; fixed salaries; performance-related bonuses; stock-related pay; stock options; high-fliers;
cash bonus; to indulge in high-level back-scratching; restricted stock; pay package; compensation
consultants; deferred bonuses; deferred demand; to hit budget targets

Exercise 2. Suggest the English for the following.

увязывать вознаграждение менеджеров с результатами деятельности компании;
требовать возмещения убытков; возвращать стоимость купленной вещи; возмещать кому-
либо, понесенные расходы; вознаграждать руководителей; выплаты премиальных; достигать
намеченных показателей; искажать стратегически важные решения; цена исполнения
опциона; полагаться в значительной степени на вознаграждение в виде опционов

Exercise 3. Translate the sentences paying attention to the underlined words, and in
particular to those having "er/or" endings.
1. Schrempp is definitely a survivor.
2. A P&G lifer. Mr Jager looked nervously into his glass, counted backwards in his native
Dutch to raise a smile and spilled the beans on a group that, by his own account, remains
conservative and bureaucratic.
3. Dragging Marks and Spencer into the 21st century is a task that would tax even a retailing
genius. But the British clothes and food chain has only Peter Salsbury as chief executive, an M&S
lifer, desperately learning at top speed what it might take to correct some elementary mistakes.
4. Chrysler was expected to lose billions, and some shareholders and commentators were
calling for his (Schrempp's) ouster.
5. Mr. Folz, Peugeot-Citroen's management board chairman, is something of a loner.
Unlike most other executives in the top flight of the motor industry, he does not believe the profit
motive leads inevitably to mergers and acquisitions.
6. The spread of satellite and cable television has made the industry (TV-shopping) one of
the best performers in direct marketing.

UNIT 12

• Text 1.
GOING SIDEWAYS ON THE CORPORATE LADDER
More workers are stuck in the same jobs at the same pay
Steven E. Gross, a U.S. compensation expert at New York-based William M. Mercer
Consulting, has been getting lots of phone calls lately from clients at large, publicly traded
companies. These addled human-resources chiefs have been consumed with one question. If they cut
raises to help defray the costs of runaway hikes in health care — an unpopular trade-off they can
consider only because of the lousy job market — how much will employee morale suffer?
That calculation is going on all across the business world right now. And, invariably, the
answer appears to be: go ahead, grab back what you can from employees. With job growth flat,
workers have little choice but to accept what's offered. The coming squeeze is apt to be all the more
painful because it comes on the heels of average raises for salaried employees of just 3.6% in 2002
— the smallest hike in 25 years, according to a recent survey of 1,045 large public companies by
compensation consultants Hewitt Associates. For salaried workers who aren't in hot sectors such as
utilities, pharmaceuticals, and health care, pay hikes could shrink to as low as 3% in 2003 — if they
get any raise at all, predicts Gross.
Call it the sideways labor market, formerly known as the corporate ladder. Rather than
climbing, many ambitious workers now find themselves treading water in the same jobs at much the

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 same pay. The combination of stalled pay and spikes in health-care costs, together with decimated
retirement accounts, nonexistent promotions, and battered bonuses and options, has left many
workers feeling as if they are stuck, if not falling behind. "The budget is so small, you can only do so
much," says Karl Fischer, vice-president for compensation and benefits at Marriott International Inc.
Nowhere are workers getting hit harder than in their healthcare costs. Next year's overall
premiums — which are charged to employers, then often passed on to workers — are likely to
increase an average 15%. That's on top of a 13% jump in 2002, the largest since 1990. Even worse,
no relief is in sight, with experts predicting double-digit annual premium hikes for several years.
Those increases have many companies scrambling to rein in outlays. As a result, many are
shifting more of the cost, risk, and responsibility for health-care coverage to employees.
Companies are shifting the burden to workers in more subtle ways, too. Typically, a large
company picks up about 75% to 80% of the cost of the total premium. Now, many companies are
lowering the amount of the premium they pay by 1% to 2% per year. In addition, many companies
are asking workers to shoulder higher deductibles and payments for doctor visits. Add it all up, and
for many workers, rising health-care costs will cancel out whatever small raises they pocket.
For managers who grew accustomed to the lavish pay packages of the bull market, the new
reality is especially harsh. At tech companies such as Intel Corp. and at many Wall Street firms,
senior managers who made the bulk of their salary in performance bonuses during the boom have
seen their pay fall by as much as 60% or more in recent years. And forget about such perks as stock
options Given the pressure to treat options as an expense, experts say companies will now be less
generous with them.
What's more, pay-for-performance programs have done away with the era of across-the-board
raises. Far more than in the past, companies are using their paltry salary pools to reward stars with
relatively meaty raises. "Companies are aggressively managing their compensation dollars toward
their best performers," says Rick Real, a pay consultant at Washington-based Watson Wyatt
Worldwide, a human-resources consulting firm. "That means some people will get zero." Still, these
days, a 0% raise is a whole lot better than pounding the pavement in search of a new job.
Business Week
Vocabulary

to move (to go) sideways тер. разг. «двигаться в сторону» (отсутствие

движения на рынке, застой, отсутствие продвижения)
corporate ladder «служебная лестница», корпоративная карьера, путь
наверх в корпорации
double-digit выраженный двухзначной цифрой
defray v ком. оплачивать
trade-off n 1) обмен;
2) компромисс
[the education versus experience trade-off governs
personnel practices — при подборе кадров
учитывается образование, с одной стороны, и опыт
практической работы, с другой];
3) уступка (в ответ на уступку другой стороны)
[trade-offs between apparently unrelated topics —
взаимные уступки по вопросам, внешне никак не
связанным друг с другом]
trade off v поступиться чем-либо; сбывать (товар)
deductibles n расходы, подлежащие вычету;
а) страхование: сумма денег, которую владельцы
полисов должны выплатить по своим полисам
прежде, чем могут
начаться выплаты возмещения страховщика
(некоторые программы страхования на случай
болезни требуют выплат в виде процента от
заработной платы); франшиза б) налоги: расход,
который создает вычет из налога

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 across-the-board a всеобщий, всеобъемлющий, всесторонний;
Syn. comprehensive, sweeping, blanket применимый ко всем случаям; без всяких
исключений
across-the-board reduction общее сокращение (увеличение) [по всем статьям в
(increase) равной доле]
Translation notes
Перевод абсолютной номинативной конструкции
Абсолютная номинативная конструкция имеет довольно широкое распространение в
письменной речи и желательно не только уметь узнавать ее в тексте и понимать ее значение,
но и активно ею пользоваться при переводе с русского языка на английский. Абсолютная
номинативная конструкция характеризуется тем, что содержит свой собственный субъект,
своего рода псевдоподлежащее, отличное от подлежащего главной части предложения,
причем действие, совершаемое этим субъектом, чаще всего выражается неличными
глагольными формами (причастием, инфинитивом). Следует иметь в виду, что причастие
being часто опускается и тогда имеет место усеченная форма.
With incentives surging in the U.S. market, Chrysler may have to cut costs even more next
year than planned.
With total August sales at a peak, each of the four main manufacturers, managed to achieve
record or near-record results in volume terms despite the decline in their market share.
The Treasury predicted a 3 per cent rise in prices, with unemployment increasing slightly in
the next few months.

Абсолютная конструкция в этих примерах вводится предлогом with, что чаще

встречается в политических и экономических текстах, но может употребляться и без него, что
больше характерно для юридического языка.
Абсолютная конструкция также нередко встречается в художественной и научно-
технической литературе.
If the creditor has been offered cash, and requests a bill or a cheque, instead, then the payment
is absolute and the right of action on the original contract is lost, the only remedy being to sue on the
dishonoured instrument.
The cheque having been dishonoured, and the instalments not having been duly paid, the
aggrieved party brought an action to recover the sum due under the agreement.
The study was a nice room, with books lining the walls.
Абсолютная конструкция может основываться не только на причастии, но и на
инфинитиве, который нередко обозначает долженствование.
The sellers offered the buyers 5,000 tons of crude oil, delivery to be made in October.

The buyers requested the sellers to keep them informed of the position of the vessel, the
communications to be addressed to their agents.

It was a quiet house now, with only a secretary to see to his meals and to take care of his
business affairs.
Отличительной особенностью абсолютной конструкции является то, что она имеет
собственное подлежащее, не связанное с подлежащим главной части.
Значение и, следовательно, перевод абсолютной конструкции, как правило, зависит а) от
ее места в предложении, б) от контекста.
I. Если данная конструкция стоит в конце предложения или после главной его части, то
значение ее сводится к тому, чтобы дать уточняющие сведения или сопутствующие
обстоятельства, проиллюстрировать основное утверждение. В этом случае при переводе
следует использовать сложносочиненное предложение с союзами а, и, слова причем, так.
The agreement is done in English and in French, both texts being equally valid. —
Соглашение совершено на английском и французском языках, причем оба текста имеют
одинаковую силу.
П. Если абсолютная конструкция стоит в начале предложения перед основной частью, то
она, как правило, выражает причину, время или условия того, что утверждается в главной
части, и переводится соответственно сложноподчиненным предложением. Характер
подчинения определяется контекстом. Чаще всего используются слова так как. поскольку,

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 учитывая, что, в условиях, когда, иногда хотя и несмотря на. Если встречается в том
случае, когда глагол в основной части предложения имеет форму будущего времени.
The professor being ill, the lecture was put off. — Так как профессор был болен, лекция
была отложен.
There being a severe storm at the sea, the ship will not leave the port. — Если на море будет
сильный шторм, судно не выйдет из порта.
Exercise 1. Translate the following words and phrases into Russian.
•compensation; remuneration; pay; stalled pay; pay hikes; pay settlement; lavish pay packages;
compensation in kind; accrued personnel compensation; deferred compensation; by way of
compensation; compensation expert;
•trade-off decision; to make a trade-off; trade-off between output growth and income equality;
trade-off between unemployment and inflation;
•to rein in outlays; to shoulder a debt; rising health-care costs; to shift the burden to smb; to
shift production to low-cost countries
•performance bonuses; performance curve; economic performance; specific performance; non-
performance of a contract; performance test of the equipment;
•to tread water; decimated retirement accounts; utilities; to reduce headcount through attrition
and early retirement;
•to treat options as an expense; to exercise an option; strike price; to grant restricted stock; put
option; call option; stock-related remuneration
Exercise 2.
a) Translate the following into English.
специалисты по работе с персоналом; заплатить компенсацию за что-л.; компенсация за
увечье; требовать возмещения убытков; сбывать залежалые товары; проблема выбора между
сохранением психологического настроя персонала и сокращением его численности;
сокращение затрат (два варианта); пенсионный счет; принять на себя обязательства по
задолженности; переложить долговое бремя на кого-либо; выпускать опционы; цена
исполнения опциона; честолюбивый сотрудник, «птица высокого полета»; обесценившиеся
опционы; фирма по подбору персонала
b) Practice the following words - comprehensive, across-the-board, sweeping and
general.
общие для всех правило; комплексное предложение; исчерпывающий отчет;
комбинированное страхование; большие перемены; огульные обвинения; всеохватывающий
контроль (всех факторов); всестороннее соглашение; общее сокращение тарифов

Exercise 3. Translate the following sentences analyzing the meaning of the Absolute
Nominative Construction. Make sure you know the meaning of the underlined words.
1. With U.S. consumer confidence at a seven-year low and recession clouds gathering in
Europe, all auto makers are facing tense times. Schrempp, being Schrempp, has set ambitious goals.
2. With capital spending still stagnant, tech companies are still in shrink mode. Cisco
Systems Inc. has trimmed its head count by 5%, or 2,000 workers, in the past year, through attrition
and a hiring freeze.

3. With options drowning and bonuses shredded, how will companies reward their stars?
4. Corporate services, such as accounting and travel, are being centralised and there will be
renewed emphasis on R&D, with individual managers given responsibility for individual products.
5. Now, with the European Commission preparing to deliver a list of objections within
weeks followed by hearings, both companies (Honeywell and General Electric) face a messy — and
costly — delay.
6. With much uncertainty surrounding the merger of Hewlett-Packard and Compaq, those
big companies that need to buy high powered computer equipment now face straight choice between
Sun and IBM. The struggle between these two companies has intensified in the past few weeks, with
each trying to move on to the other's turf.

7. No relief is in sight, with experts predicting double-digit annual (insurance) premium

hikes for several years.
8. With ad sales still languishing, Mr Murdoch declared last month that "there arc some
hints of a modest upswing in the US advertising market."

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 9. Goldman Sachs reckons that most Japanese firms break even at around 90% of current
sales, with any additional sales dropping quickly through to the bottom line.

10. With fracturing TV audiences moving to the Web and cable, the classic 30-second spot
that had made household names of the likes of Mr. Clean and Tide was losing traction.
11. In the Wealth of the Nations, published in 1776, Adam Smith characterised the problem
as follows: "The directors of companies being managers of other people's money than their own, it
cannot well be expected that they should watch over it with the same anxious vigilance with which
partners in a private copartner frequently watch over their own."
Exercise 4. Read the text and say what a firm should do (or not do) to avoid personal
injury when it decides to dismiss its employees.
U R Sakd
Is there a nice way?
THERE are, Paul Simon once sang, 50 ways to leave your lover. There may be fewer ways to
sack your staff, but most are unpleasant — though rarely as nasty as the method chosen last week by
Accident Group, a firm that specialises in personal-injury claims, after Amulet, its Luxembourg-
based parent, ran out of money. Accident Group's 2,500 staff received a series of text messages on
their mobile phones, telling them to call a number. There, a recorded message from the company's
insolvency administrators at PricewaterhouseCoopers infonned them that, "All staff who are being
retained will be contacted today. If you have not been spoken to you are therefore being made
redundant."
This may be the nastiest case of workers being fired by text message. But it is not the first time
that firing has been nastier than it need be. Wayne Cascio, a professor of human resources at the
University of Colorado-Denver, recalls a technology firm whose staff returned from lunch to find
that their security cards no longer worked. Paul Sanchez, of Mercer HR, recalls one firm that invited
its staff to a conference in Florida. Briefing packs told some to go to Ballroom A others to Ballroom
B. Those in Ballroom A got a presentation on the firm's future; the others were told to go by noon.
Is there a better way? Francis "Tom" Coleman, an American lawyer who recently wrote a book
on "ending the employment relationship," urges bosses to sack staff in private, doing it respectfully
and preparing a script of what to say. He says bosses often panic, fearing that dismissed staff may
steal valuable information if allowed to linger.
In fact, brutally sacked staff may do more damage than those let go kindly. In America, they
may sue for the "intentional infliction of emotional distress." At Accident Group, the staff promptly
ransacked the firm's offices and made off with computers and other equipment.
The Economist
Exercise 5. Translate the text paying attention to the underlined words.
Suitable Job for Two Why it is time to split the roles of chairman and CEO
If the events of the past year have taught the world anything about corporate America, it ought
to be that the cult of the invincible chief executive, unfettered and unchallenged, is dead.
In their different ways, the experiences of Kenneth Lay, Jack Welch, Sandy Weill and a host of
others have forced a rethink of the 1990s orthodoxy that placed the chief executive officer in a
unique role at the helm of powerful companies.
The plentiful and painful tales of greed, venality and sheer ineptitude at the top of many US
corporations require new means of ensuring proper accountability for CEOs.
Today directors of Walt Disney will get a chance to become the first to take a step that would
improve accountability, restore investor confidence and set American boardrooms on a path to a
more effective system of governance.
Disney's directors, concerned about the company's poor financial performance for the past few
years, will be considering a package of reforms pressed by a number of activist shareholders. By far
the most important and far-reaching of them is the proposal to split the roles of the company's
chairman and chief executive officer, currently both held, in the standard practice of American
boardrooms, by Michael Eisner.
Mr. Eisner should not take the proposal too personally. The case for dividing the two jobs is an
overwhelming one — and not just at Disney.
The role of the chairman-CEO undermines the very structure of corporate accountability that a
board of directors is supposed to provide. A chairman who also happens to run the company has
come to regard the board as part of his own fief

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 In the absence of a genuinely independent chairman, independent directors lack a leadership
figure to whom they can property express their concerns about corporate management.
Opponents of the idea say it would increase tension in boardrooms, weakening the cohesion and
unity of purpose of the dynamic company.
But the problem in US companies in the past few years has been precisely the opposite: too
little challenge to chief executives. And the British experience — where, for the past decade splitting
the two roles has been the norm — has resulted in a significantly improved structure of governance.
Many American CEOs fear that, since the dual role is standard practice at most big US
companies, giving up their chairmanship would look like accepting a vote of no confidence in their
management of the company.
But it need not be interpreted that way. Good ideas have a way of becoming popular. Leading
by example is what really good CEOs are supposed to do.
The Financial Times

Note
Kenneth Lay — former Chairman and CEO of toppled Enron.
Sandy Weill — Citigroup's former CEO.
Jack Welch — General Electric's CEO, now retired.
Translation Notes
Unfettered and unchallenged; plentiful and painful — в данном случае автор использовал
аллитерацию. Аллитерация, то есть использование слов, начинающихся с одной и той же
буквы, — один из древнейших стилистических средств в английском языке и передается в
переводе в тех случаях, когда это целесообразно и возможно по условиям русского языка и
когда аллитерация имеет ярко выраженную экспрессивную цель. Аллитерация может
передаваться в русском языке словами на одну букву или с помощью стихотворной формы.
Аллитерация лежит в основе многих фразеологизмов, но поскольку аллитерация не влияет на
смысловую сторону, то, как правило, в переводе фразеологизмов она не передается.
Например, safe and sound — жив и невредим, as cool as cucumber — невозмутимый,
хладнокровный , fit as a fiddle — в полном порядке. То же самое относится к аллитерации,
часто встречающейся в заголовках, таких как Wallowing in Wages, Merger Misery, An Overdose
of Options, Basle Bust.
Exercise 6. Read and translate the text. Give a list of words that help the author to support the
animalistic image of the corporate world.
Top Managers under Threat as Corporate Jungle
Evolves
Simon London finds the post of chief operating officer falling prey to a new breed of
executive with greater powers and access to the boss
It may be too early to put them on the endangered species list but chief operating officers are a
breed that, like butterflies and songbirds, you just do not see as often as you once did.
For every handful of companies that appoints a COO to take the strain off an over-worked chief
executive — recent examples include Sprint, the telecoms group, and Wrigley the chewing-gum
maker — a slightly larger handful abolishes the position.
Julie Wulf, an assistant professor at the Wharton School of Business at the University of
Pennsylvania, said: "Statistically, companies are less likely to have chief operating officers than they
were a decade ago."
She and Professor Raghuram Rajan, of Chicago University business school, say the most likely
explanation is that chief operating officers are falling victim to "delayering," the process by which
companies reduce the number of steps between the top and bottom of the organisational ziggurat.
The theory that the CEO, the ultimate boss, seems to be shouldering more responsibility for
direct oversight of the business is strengthened by their finding that the average big-company chief
executive had seven people reporting to him or her at the end of the 1990s against four in 1986. This
was not because companies were getting bigger; the average number of employees per company fell
slightly over that time.
Jeffrey Immelt, chairman and chief executive of General Electric, exemplifies the trend. When
Denis Nayden quit as GE Capital chairman last year, he was not replaced. Instead, the heads of its
four business units report directly to Mr. Immelt. Mr. Immelt said then: "The reason for doing this is
simple — I want more direct contact with the financial services teams." Thus a management layer
was removed and the CEO gained a net three additional reports.
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 Where GE goes, other US companies are sure to follow. But is it healthy that today's chief
executives are increasing what management theorists call their "span of control"?
Opinions are mixed. While management lore is that the best chief executives are steeped in
operational detail, countless CEOs owe their downfall, at least in part, to a tendency to "micro
manage." Steve Milunovich, technology analyst at Merrill Lynch, believes Sun Microsystems is in
danger of falling into this trap.
Last week he called for the troubled computer companv to recreate the COO's position to
counter the influence of Scott McNealy, chairman chief executive and founder. Prof Wulf believes
that many companies have found a compromise in which the CEO is closer to the action, yet
divisional managers have more decision-making authority.
She says these managers are more likely to be appointed "officer" of the corporation in
companies that have eliminated the position of COO. This suggests they inherit at least some of their
former boss's authority.
Technology could be helping to create this new status quo. "Enterprise resource planning"
systems of the kind many US companies implemented in the 1990s make it easier for CEOs to get
information about the performance of individual business units.
But such systems also let divisional managers get the information needed to make informed
decisions without having to rely on the corporate bureaucracy.
That said, delayering and CEO aggrandisement are not the only factors behind the increased
"span of control" today's CEOs enjoy. Another part of the explanation is the proliferation of "C-suite"
executive positions.
For example, a decade ago it was rare to find the chief information officer reporting directly to
the CEO. Today, after years in which ГТ spending has accounted for nearly half of all capital
spending by US corporations, the CIO is a more powerful figure. Similarly, US companies are more
likely to have chief marketing officers, chief human resource officers, chief competitive officers and
chief learning officers.
In some cases these are new positions. In others they are old jobs with new titles and additional
status. In other words, if delayering is destroying the natural habitat of COOs, the evolution of new
C-level positions has increased competition for scarce resources. The most precious resource of all
remains the ear of the CEO; the species perched right at the top of the organisational food chain.

The Financial Times

Note
ziggurat - зд. (многоуровневая) пирамида

Exercise 7. Translate the text in writing.

The Bottom Line on Options
Who are the winners in the battle over expensing? Just look in the corner office by Mark
Gimein
More than one war has been fought over the fine points of religious dogma, and the narrowest
differences in ideology have caused some of the bloodiest conflicts. These are the wars that sweep
away everything in their path while the participants forget the reason they started fighting in the first
place.
So it is — minus the blood — with the Great Options Battle. You will recall how it started, with
Warren Buffett leading the charge on one side, Intel Corp.'s Andy Grove and Cisco Systems Inc.'s
John Chambers waving their pennants on the other, all battling over accounting rules.
Lifted on a tide of anger over ever-more-outsize executive pay packages, the corporate-
governance party prevailed. Now the new rules that require U.S. companies to count stock options as
an expense are in effect for nearly everyone. But it turns out CEOs might well lose little or nothing.
If anyone is taking a hit, it is the professionals, engineers; and managers who hoped they too could
cash in on the options boom.
Stock options became popular in the 1990s as a tool that was supposed to "align the interests"
of shareholders and management — in other words, reward CEOs for concentrating on raising their
stock price. Silicon Valley, of course, seized on options as a way of attracting top engineering talent.
Finally, at the height of the market boom, big companies that wanted to project an image of
rapid growth and general with-it-ness started giving out options to thousands of their employees.
Aetna, when it shed most of its old insurance businesses, instituted an option plan for all employees.
So did Time Warner when it merged with America On-line.

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 The total number of U.S. employees who got stock options grew to roughly 10 million at the
height of the options boom in 2002, according to a study by the National Center for Employee
Ownership (NCEO), a think tank in Oakland, Calif. Now the center's director, Corey Rosen,
estimates the number is down to 7
million and shrinking.
Before the new accounting rules kicked in, options were invisible on the corporate income
statement. No matter how many a company handed out, they could tell investors that they cost
nothing. Not anymore.
Google, hugely generous with employee options through last year, when almost $420 milion
worth were handed out, this year has switched to giving out restricted stock, which vests over time.
But Google's expansive stock program is the exception.
Aetna, whose employees profited handsomely as its shares ran up in the five years or so that it
gave options, last year replaced them for non-managers with $500 bonus checks.
Business Week
UNIT 13 Consolidation

• Textl
Will CEOs Find Their Inner Choirboy?
YOU can understand why people are furious over CEO pay: Just read this issue's cover story.
But even the noblest reformers generally fail to understand that if you change the way CEOs are
paid, you change the way they manage their companies, with huge implications for investors. It
happened ten years ago, influencing management in unexpected ways right up to the present, and it's
about to happen again, with results that will likely be just as significant but radically different.
In 1992, after the last major bout of rage over CEO pay, Congress changed the tax code so
companies couldn't deduct executive salaries to the extent that they exceed $1 million. That'll show
'em! But of course the change didn't mean CEOs got paid less. It just meant they got paid differently.
Responding to the new rules, boards eased up on higher salaries and instead ladled out vast new
grants of stock options. Because of bizarre and indefensible accounting rules, paying the CEO with
options never reduced reported profits but did reduce taxes when the options were exercised. The
stock market was chugging upward, so the options looked as though they'd pay off, and they seemed
to align a CEO's interests with shareholders', assuaging investor anger. What the reformers didn't
focus on was that options motivate CEOs to do things investors may not w/ant at all. One of the most
fundamental traits of an option is that it. is more valuable if the underlying stock is more volatile.
Option holders love stocks that swing violently, because holders can exercise the option during one
of the spikes and make loads of money. Result. As CEOs were paid increasingly in options, they
were nudged to love risk more than they would otherwise — and more than ordinary shareholders
might want.
Another wedge between option holders and shareholders is that shareholders can be rewarded
in two ways, through price appreciation and dividends, but option holders make money only through
price appreciation. So CEOs who held a lot of options faced a powerful incentive to make sure their
companies paid minimal or no dividends. Dividend payouts have fallen sharply since 1992 and today
are at their lowest levels ever. Yet empirical evidence shows that companies faced with paying a
stodgy old dividend every quarter have on the whole rewarded shareholders better than companies
that don't pay dividends.
No one realized ten years ago that a rule intended to limit the cash pay of CEOs would turn
them into risk-loving, dividend-despising cowboys. Now new rules may be about to turn them into
just the opposite. Here's how.
Options have changed from beautiful to beastly. Recent accounting rules force companies to
report their value, and Senators McCain and Levin are pushing a bill that would go much further in
uglifying the reporting and tax requirements. Boards will respond to these changes, and in fact are
already doing so by rewarding CEOs much more heavily with outright ownership of stock. An
important difference between stock options and stock is that while volatility makes an option
valuable, predictability makes a stock valuable. Investors love to see earnings march steadily,
reliably upward every quarter. Far from being motivated to like big risks then, CEOs will
increasingly be motivated to play it safe.
And remember, stockholders receive dividends while option holders don't. Even when a board
gives a CEO restricted stock, a common practice, the restriction prevents sales for only a certain
period. In the meantime the CEO still owns the stock and collects dividends from day one. That fact
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 alone should start dividends flowing out of corporate treasuries in a much bigger way, but there's
more. The double taxation of dividends is a legitimate argument against paying them: they really are
a terribly inefficient way to reward shareholders. But President Bush is intent on eliminating
dividend taxation, and while he may not get everything he wants, he may very well get something,
maybe a 50% exclusion. Combine that rule change with CEOs newly positioned to receive more
dividends, and don't be surprised if many CEOs decide it's profoundly wise to make regular
payments to shareholders.
The newly motivated CEO is a big change from the old one: less cowboy, more choirboy. Will
that be a good thing?
After investors' trauma of the past few years, it's tempting to think so. But I wouldn't bet on it.
What I know for sure is mat just like last time, the rule changers have little idea what kind of new
business environment they're creating.
Fortune

Exercise 1. Act as an interpreter.

A. Executives can no longer think of stock options as a free ride. The exodus of investors
from equity markets and the accounting scandals that toppled Enron and WorldCom have made
scores of blue-chip companies announce plans to account explicitly for the cost of the options they
use to compensate executives and other employees. Rather than burying options as a footnote in
financial reports, more and more companies will report these payouts in the same way they do office
rents, salaries and other business expenses.
B. Можно рассмотреть ситуацию, когда главное исполнительное лицо располагает
значительным числом опционов, фактически не имеющих ценности, потому что цена на акции
снизилась значительно ниже цены исполнения опциона, то есть цены, при которой опцион
может быть использован. Если вероятность существенного повышения цены на акции
компании невелика, то главный исполнительный директор вполне может подумать об
осуществлении рискованных приобретениях других компаний или о новых проектах, которые
могли бы повысить ожидаемую неустойчивость курса акций и восстановить ценность
опциона.
При всех подходах к оценке стоимости опционов вывод один — неустойчивость курса
акций, лежащих в основе данных опционов, способствует увеличению стоимости опционов,
поскольку по мере усиления колебаний цены на акции, все больше вероятность того, что в
какой-то момент в течение срока действия опциона она превысит цену исполнения опциона
(strike price). При этом риск, которому подвергается главное исполнительное лицо компании,
весьма ограничен. Прежде всего, опционы не представляли никакой ценности, и как бы низко
ни падала цена на акции компании, они никак не могут обесцениться еще больше. При
усилении неустойчивости курса акций руководитель компании, ничего не теряя, может
выиграть все.
A. That is true but such greater volatility increases the potential magnitude of downward
share price movements and may therefore introduce a degree of risk that many investors would
neither anticipate nor welcome.
B. Чтобы не допустить возникновения таких обстоятельств, наилучшим выходом,
вероятно, будет сокращение доли опционов на покупку акций в вознаграждении руководителя
компании.
• Text 2
How to Pay
Michael Jensen still thinks he has the answer
WANT somebody to blame for those disgraced bosses, with their ill-gotten share-option
fortunes? Look no further than Harvard Business School, and in particular, at a (now) emeritus
professor, Michael Jensen. No academic is more closely linked to the cause of tying a boss's pay to
his firm's shares than Mr. Jensen (who now works mostly for the Monitor Group, a consultancy). But
don't send a lynch mob to the banks of the Charles River. It is not Mr. Jensen's ideas that are rotten,
but how they have been implemented — and he has things to say about how to fix the present mess
that are well worth hearing.
Although he has influenced many aspects of financial economics, Mr. Jensen is best known for
work on "agency" problems — those that arise when somebody (the "principal") hires somebody else
(an "agent"). Public firms, with their separation of ownership (shareholders) and control (bosses),
have been beset by agency problems for as long as they have existed. Mr. Jensen first explored how
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 companies might remedy these problems in a paper written with William Meckling, then dean of
Rochester University's graduate management school. This was published in the mid-1970s against a
backdrop of depressed share prices and lacklustre corporate performance.
Managers manage in their self-interest, the authors said, a claim that, though often deeply
resented by managers, is basically true enough. A rational manager with no investment in his firm
would have little incentive to maximise its value, and every incentive to use it for his own ends. The
smaller the ownership stake a manager has, the more likely he is to channel corporate resources in
directions that give him value (perks, empire-building, and so on), and the more effort shareholders
have to make to monitor the manager's behaviour to stop him feathering his nest at their expense.
Taken to its extreme, a boss without shares might build a comfortable but profitless empire that
squandered excess cashflow on shareholder-value-destroying acquisitions. This turned out to be a
fairly good description of conglomerates, which were common at the time,
What, then, was to be done? Messrs Jensen's and Meckling's implicit answer was to make the
managers into owners, by giving them equity. Later, Mr. Jensen expanded the argument, first by
arguing for higher levels of executive compensation and a stronger tie to share performance, and
then, in a logical progression, arguing that the best way out of America's corporate-structural rut was
through leveraged buyouts (LBOs).
By taking a firm private, Mr. Jensen saw a way for a boss's incentives to be tightly tied to
shareholder returns, for financial discipline to be supplied by big debts, and for monitoring to be
done by private-equity firms backing the buyouts. The chance of a hostile LBO would encourage
existing managers to improve returns or risk losing their jobs. Mr. Jensen's 1989 essay on the subject,
in the Harvard Business Review, was entitled "The Eclipse of the Public Corporation." Thus
inspired, to a degree, firms took on more discipline-encouraging debt. Managers were paid
increasingly with ever-larger grants of share options (often justified by a citation of Mr. Jensen's
work). But then something happened that Mr. Jensen had never expected: the stockmarket bubble.
When Mr. Jensen first pondered agency issues, the big problem was under-utilisation of
company assets, and their consequent undervaluation. In the 1990S, the most salient corporate-
finance problem was overvaluation — an eventuality seemingly so unlikely that few economists had
ever given it much thought.
Mr. Jensen now thinks that the way in which executive pay was typically tied to share
performance through options meant that, in the bubble, the carrots became what he calls "managerial
heroin," encouraging a focus on short-term highs with destructive long-term consequences. Once a
firm's shares became overvalued, it was in managers' interests to keep them that way, or to encourage
even more overvaluation, in the hope of cashing out before the bubble burst. Doing this not only
meant being less than honest with shareholders, or being creatively optimistic with corporate
accounts. It also encouraged behaviour that actually reduced the value of some firms to their
shareholders-such as making an acquisition or spending a fortune on an Internet venture simply to
satisfy the whims of an irrational market.
One answer to this problem — the wrong answer, Mr. Jensen says — is to increase monitoring
by putting many new demands on corporate boards and on how contracts with managers are
structured, which is how he sees the recently passed Sarbanes-Oxley act. That could increase costs
sharply, prompting many smaller firms to go private, Mr. Jensen believes. (Call it the partial eclipse
of the public corporation.)
A better answer, says Mr. Jensen, is to retain the link between pay and share price, but to do it
in a way that removes the incentive for managers to exploit and encourage short-term overvaluation.
Ideally, bosses should not be able to bank most of the rewards for their performance until it has been
proved genuine. One method, suddenly all the rage, is to grant managers "restricted stock" that
cannot be sold for many years. Mr. Jensen is not convinced: restricted stock is more expensive to
provide than, and does not penalise underperformance as much as, share options, which may become
worthless if a firm's share price falls. Far better, says Mr. Jensen, to grant a new sort of customised
share option, which is profitable only if the share price not only appreciates, but does so by more
than a firm's cost of capital: and which can be exercised only after a long period.
Better-designed share options, not fewer options, is hardly a populist message in today's boss-
bashing era. But Mr. Jensen may be right that it is what corporate America needs.
The Economist

Exercise 1. Translate the following sentences paying attention to the structure of the
sentence.
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 1. With the talent shortage causing salaries to shoot into the stratosphere in the late 90s,
some companies are exploiting the current downturn to bring pay levels back to prior levels.
2. With the tech collapse causing a drop in demand for DiamondCluster's services, the
company asked many of its 1,400 employees to give back some of the gains; indeed, workers making
more than $50,000 were required to take as much as a 20% pay cut.

3. After a decade of doling out bonuses, stock options, and other perks like candy during
the go-go "90s, a generation of managers is wrestling with an issue many have never faced before:
how to run their businesses and maintain worker morale at a time when many companies are facing
fierce pressure to rein in costs.
4. With the labor shortages of the late'90s still fresh in their minds, many corporate leaders
are taking a new tack in the first recession of the New Economy: rather than opting for the sweeping
layoffs of the past, which often require managers to hastily rehire when the economy recovers,
companies are trying to limit layoffs by freezing or cutting pay across the workforce.
5. Many recruiters and management experts argue that companies would be better off biting
the bullet by laying off their least- productive workers, while being careful to lavish enough on truly
valued employees to ensure they stick around.
Exercise 2. Read and translate the text orally without using a dictionary.
Wallowing in Wages
April brings pay season, a time of rituals in the American business calendar. First comes news
that chief executives have paid themselves even wilder sums of money than before. Next, there is
outrage. Lastly comes the familiar sound of snouts returning to the trough for another feed.
Executive pay has risen to such heights that the bad times look rather like the good times used
to: the median total compensation in the Mercer survey was still $2.16m. Nor has pay fallen by
nearly as much as profits have done. The total compensation of chief executives is down by 2.9% on
a year ago, but after-tax profits fell by nearly 50% last year among the companies included in the
S&P 500. Some components of bosses' pay, such as basic salaries, actually rose healthily on the back
of this dreadful performance. Most important of all, says Nell Minow of The Corporate Library, a
watchdog website, top executives earn most of their money these days from large grants of stock
options, which are typically exercisable over ten years. Shareholders should therefore pay the most
attention to how pay changes over the medium term.
Here, the picture is more mixed. The four punished and bonusless AOL-Time Warner
executives, for example, each nonetheless collected stock options valued at around $40m per head.
Pay consultants also admit to inflation in parts of the pay package not captured by their surveys, such
as perks.
Some of the financial services that American companies offer their top chaps would put regular
banks out of business. Pension arrangements, which the consultants' surveys also fail to capture, are
suffering rampant inflation as well. At almost all big American companies, executives belong to
pension plans other than the basic company scheme. At first, says Graef Crystal, a former pay
consultant, these plans treated executives and regular employees even-handedly. Gradually, however,
the ordinary company pension plan and the executive plan have parted ways.
On the whole, Americans suffer neither envy nor egalitarian yearnings when gazing at the
fortunes of their business leaders. But they do like to think that their market-based system works
fairly. The collapse of Enron, Andersen and other once-prestigious companies has rocked that faith.
Companies and their shareholders ought to be trying their best at the moment to restore confidence.
Besides, the boss's pay is no small amount of shareholders' money, especially in these lean times. On
Mr. Crystal's calculation, given current trends, by 2021 there will emerge a big American company
where the boss is paid more than the firm's entire annual sales. If that is market forces эх work, then
market forces had better be ignored.
The Economist
Exercise 3. Translate the text orally.
Опционы эмитента
Опцион эмитента — эмиссионная ценная бумага, удостоверяющая право ее
владельца на покупку в предусмотренный срок определенного в опционе количества
акций эмитента по определенной цене
Использование опционов для стимулирования эффективной работы менеджмента
компании стало широко распространенным явлением на Западе. Суть метода проста: работник
компании (чаще всего менеджер какого-либо звена) часть своего жалованья получает
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 опционом "колл" на акции своей компании. Это означает, что он приобретает право в течение
определённого срока (как правило, это несколько лет) купить акции компании по заранее
оговорённой в опционе цене — обычно она близка к рыночной цене этих акций на момент
выдачи опциона. Таким образом, если акции в течение означенного срока вырастут в цене,
скажем, со 100 до 200 рублей, то работник получит неплохую прибавку к зарплате: он сможет
тогда реализовать свой опцион, то есть купить акции по цене 100 рублей — и тут же продать
их на рынке по 200.
Считается, что опционы — это наилучший из известных механизмов оплаты труда,
который ориентирует менеджеров в сторону обеспечения и долгосрочной успешности своих
компаний, и текущего достатка их работников и акционеров. В то же время существует
немало и критиков опционных выплат. Часто полагают, что, привязывая оплату труда к курсу
акций, топ-менеджеры тем самым поощряют ответственных работников сосредотачиваться на
сиюминутных мероприятиях. В результате они тратят массу времени на то, чтобы результаты
следующего квартала совпали или даже превысили ожидания рынка, — и при этом теряют
чувство перспективы, необходимое для долгосрочного развития своей компании.
Чтобы метод оплаты труда мотивировал менеджеров уделять внимание и долгосрочным
целям, его следует увязать с каким-нибудь измерением эффективности работы, которое
нацелено в будущее, а не в настоящее (и даже прошлое). Традиционное измерение через
калькуляцию прибыли здесь не проходит — ведь прибыль отображает прошлое, а не будущее.
В то же время курс акций является мерой, которая направлена в будущее, — ибо он
прогнозирует, как сегодняшние акции повлияют на будущие прибыли компании. Прогнозы,
естественно, никогда не бывают точными, но так как инвесторы вложили свои собственные
деньги, то они находятся под тяжким прессом желания правильно прочесть будущее. Это и
делает биржевой рынок относительно лучшим предсказателем эффективности работы.
Но как быть исполнительному директору, чья отличная долгосрочная стратегия пока ещё
полностью рынком не оценена? Или, что ещё хуже, что делать с менеджером, который может
одурачить рынок, выкачав сиюминутную прибыль и запрятав серьёзные проблемы компании
поглубже? Лучшие прогнозы могли бы дать сами инвесторы, однако и они не всеведущи.
Опционы на покупку акций компании предоставляют эффективные средства для обращения к
этим рискам — а именно медленное вкладывание капитала. Практика такова, что в
большинстве случаев исполнительные директора могут исполнять свои опционы лишь
поэтапно и через длительный период времени, например, не более 25 % в год на протяжении
четырёх лет. Такая задержка необходима для того, чтобы вознаграждать тех менеджеров,
которые взяли акции с долгосрочными выплатами, и налагать жёсткие штрафные санкции на
тех, кому не удалось справиться с главными проблемами ведения бизнеса. Сергей Егшиянц
http: stockportal.rи/
Exercise 4. Translate the following text in writing. Use the active vocabulary of the units
and the words listed below.
to motivate, motivation to work for peanuts headhunting
corporate system of compensation fixed salaries short-term incentives deferred payouts
efficiency
«Все выше, и выше, и выше» Как мотивировать топ-менеджмент Мотивация
относится к вечным проблемам любой компании. Человек «не управляется копейкой»,
но и бесплатно работать не будет. И чем выше уровень сотрудника, тем сложнее система
мотивации Корпоративная система вознаграждения — результат соглашения между
руководством компании и наемным менеджером. Руководителям вновь и вновь приходится
искать ответ на вопрос: «Как привлечь и мотивировать топ-менеджера на эффективную
работу?»
Классическая схема вознаграждения менеджера включает фиксированную часть
(зарплату — 50%), краткосрочное премирование (например, годовые бонусы -25%),
долгосрочные поощрительные выплаты (опционы на акции, отсроченные денежные выплаты
— 20%), остальное — дополнительные льготы (например, автомобиль, страховка). В
российских компаниях, не имеющих долгосрочных программ поощрения, доля базовой
зарплаты в доходе топ-менеджеров составляет в среднем 80%, а годовых бонусов — около
20%.
Что касается зарплаты, то, по мнению специалистов, ее мотивационный КПД самый
низкий. «Зарплата — не мотиватор, а фактор «гигиены», позволяющий менеджеру думать о

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 самореализации. Как показали исследования американских психологов, повышение зарплаты
стимулирует мотивацию сотрудника в течение одного - пяти месяцев, после чего мотивация
снижается до прежнего уровня. Однако, по мнению Андрея Младенцева, гендиректора
компании «Нижфарм», совсем не учитывать зарплату в качестве фактора мотивации тоже не
стоит. «Текущая зарплата — тоже кусочек прибыли, а следовательно, собственности, —
говорит Младенцев. — Весь вопрос в том, какой именно способ мотивации предпочитает тот
или иной топ-менеджер и насколько его предпочтения встретят понимание и удовлетворение
со стороны собственника».
Чтобы увеличить мотивационный КПД зарплаты, компании устанавливают «зарплатные
вилки» для каждой должности. В западных компаниях уровень зарплаты сотрудника
(минимальный, средний иди максимальный) устанавливается в зависимости от оценки работы
сотрудника по результатам деятельности компании, процедура, называемая «performance
appraisal». «Ежегодная оценка проходит в рамках собеседования с менеджером, итогом
которого должна стать согласованная сторонами оценка результатов работы по пятибалльной
шкале, — поясняет Татьяна Даниленко, директор по персоналу международной компании
«Главербель Восток» (производство стекла). — Далее, на основании стандартной формулы и
полученной оценки определяется сумма годового вознаграждения руководителя. Формула
включает в себя относительный показатель прибыли компании, оценку результата работы,
процент от годового дохода менеджера. Это и есть "плавающая мотивация"». Еще одним
результатом «preformance appraisal» становится индивидуальный план развития карьеры:
какие тренинги, программы обучения необходимы менеджеру для того, чтобы выполнить
поставленные задачи. Повышение стоимости труда сотрудника и его карьерное продвижение
в западной компании в немалой степени связано с приобретением определенных знаний и
навыков.
Пролетая над Таити
Сергей Мартьянов, партнер компании по подбору персонала «РосЭксперт», считает, что
«при достижении результата высокооплачиваемый менеджер должен «награждаться» высокой
степенью ответственности и полномочий, возможностью открывать новые проекты или
направления в бизнесе». Если компания не в силах предложить менеджеру другую задачу,
предполагающую расширение сферы ответственности, мотивация его к работе в рамках
данной компании падает. Поэтому одним из серьезных методов мотивации является ротация.
Например, менеджеры TNT Express могут участвовать в глобальной корпоративной
программе Multy Truck. Цель этой программы — обнаружить внутри TNT сотрудников,
способных решать проблемы компании в разных странах. Процедура отбора происходит в
режиме on-line. Для прошедшего конкурс кандидата предыдущая работа заканчивается, и
после специального тренинга его отправляют, например, финансовым менеджером TNT на
Таити.
Философия бонуса
В больших корпорациях годовой бонус привязывают к трем показателям: общей
динамике акций компании, успехам подразделения, контролируемого топ-менеджером, и его
личным результатам. По каждому из показателей определяются весовые коэффициенты.
«Если компании важнее мотивировать командную работу, в формуле увеличивают вес
достижений компании, — поясняет Ирина Савицкая, директор службы по работе с
персоналом «Cargill Россия». — Философия бонуса может быть пересмотрена, когда
компания переходит из одной фазы развития в другую, либо когда меняется стратегия
компании».
Специалисты ВРО Executive Search & Consulting отмечают «сезонность» переходов
сотрудников из одной компании в другую, связанную с периодом выплаты бонусов топ-
менеджерам. «В тех секторах, где размер бонуса приближается к годовой зарплате или
превышает ее (например, в инвестиционно-банковской сфере), компании часто намеренно
оттягивают выплаты, — рассказывает Юлия Бевзенко. — Менеджер не уходит, пока не
получит "того, что ему причитается"». Очевидно, что такой способ удержания управленца в
компании не приносит результатов в долгосрочной перспективе: если решение о переходе
принято, человек уйдет. Удержать топ-менеджера в компании надолго позволяют «длинные»
системы мотивации: опционы на акции, стратегические (отложенные) бонусы, корпоративные
пенсионные планы.
Т. Андропова

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 Компания

CHAPTER 3.
THE NUMBERS GAME.
CREATIVE ACCOUNTING. INSOLVENCY AND BANKRUPTCY

UNIT 14

• Text 1
FUZZY NUMBERS
If you thought accounting reforms did the job, think again. Corporate earnings can be as distorted and confusing as
ever
by David Henry
CONSTRUCTION GIANT and military contractor Halliburton Co. did something mind-boggling last year: The Texas
company reported earnings of $339 million, even though it spent $775 million more than it took in from customers. There
was nothing illegal here. Halliburton made big outlays in 2003 on contracts with .the U.S. Army for work in Iraq — contracts
for which it expected to be paid later. Still, it counted some of these expected revenues immediately because they related to
work done last year. Investors didn't get the full picture until six weeks later, when the company filed its complete annual
report with the U.S. Securities & Exchange Commission. Halliburton says it followed generally accepted accounting
principles (GAAP). Maybe so, but after three years of reforms in the wake of corporate scandals, the Halliburton case
illustrates that earnings remain as susceptible to manipulation as ever. Why? Because U.S. accounting rules give companies
wide discretion in using estimates to calculate their earnings. These adjustments are supposed to give shareholders a more
accurate picture of what's happening in a business at a given time, and often they do. Bean counters call this accrual
accounting, and they have practiced it for decades. By accruing, or allotting, revenues to specific periods, they aim to allocate
income to the quarter or year in which it was effectively earned, though not necessarily received. Likewise, expenses are
allocated to the period when sales were made, not necessarily when the money was spent.
The problem with today's fuzzy earnings numbers is not accrual accounting itself. It's that investors, analysts, and money
managers are having an increasingly hard time figuring out what judgments companies make to come up with those accruals,
or estimates. The scandals at Enron, WorldCom, Adelphia Communications, and other U.S. companies are forceful reminders
that investors could lose billions by not paying attention to how companies arrive at their earnings. The hazards were
underscored again Sept. 22 when mortgage-finance giant Fannie Mae said its primary regulator had found that it had made
accounting adjustments to dress-up its earnings and, in at least one case, achieve bonus compensation targets. The company
said it is cooperating with government investigators. The broader concern is that corporate financial statements are often
incomplete, inconsistent, or just plain unclear, making it a nightmare to sort out fact from fantasy. Says Trevor S. Harris, chief
accounting analyst at Morgan Stanley: "The financial reporting system is completely broken."
Indeed, today's financial reports are more difficult to understand than ever. They're riddled with jargon that's hard to fathom
and numbers that don't track. They're muddled, with inconsistent categories, vague entries, and hidden adjustments.
The upshot: The three major financial statements — income, balance sheet, and cash flow — that investors and analysts need
to detect aggressive accounting and get a full picture of a company's value are out of sync with one another. Often, the income
and cash-flow statements don't even cover the same time periods.
Worse, many of the reforms adopted by Congress and the SEC will not remedy the situation. Most are aimed at policing the
people who make the estimates rather than the estimates themselves. The big question is whether increased scrutiny is
yielding more realistic estimates or just more estimates documented by reams of assumptions and rationalizations. We'll only
know the answer when the economy begins to falter and corporate earnings come under pressure.
Already, recent academic research suggests that the abuse of accrual accounting is pervasive across a broad swath of
companies. And it's enough to goad Wall Street into action. Over the past two years, investment banks have beefed up their
already complex computer programs to screen thousands of companies to find the cheerleaders who make very aggressive
estimates. But accounting games are spreading beyond earnings reports as some companies start to play fast and loose with
the way they account for cash flows. That's a shocker because investors always believed cash was sacrosanct and hard to
trump up. Now they're discovering that cash is just as vulnerable to legal manipulation as earnings. Companies from Lucent
Technologies Inc. to Jabil Circuit Inc. have boosted their cash flow by selling their receivables — what customers owe them
— to third parties.
The standard-setters at America's Financial Accounting Standards Board (FASB) are deep into a drive to require companies
to make even more estimates — increasing the potential for further manipulation of their bottom lines. One example: It's
requiring companies to estimate changes in the value of a growing list of assets and liabilities, including trade names and one-
of-a-kind derivative contracts. Eventually, companies will have to make corresponding adjustments, up or down, to their
earnings.
There's some logic in FASB's position. It wants to improve the way changes in the value of corporate assets are reflected in
financial statements because they can have a significant impact on a company's value. FASB argues the new estimates should
be reliable since many will be based on known market prices. Unfortunately, others will rest on little more than educated
guesses that in turn depend on a lot of other assumptions.
FASB is understandably gun-shy about imposing even more rules on businesses. It has spent the last three years, and lots of
political capital, trying to put in place requirements to expense the cost of stock options and to limit off-balance-sheet
arrangements.

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 But it has come up short by not insisting on financial statements that show in a simple way what judgments have gone into the
estimates. FASB Chairman Robert H. Herz doesn't feel any urgency to do so. He argues that investors and analysts aren't yet
using all the information they now have. Besides, he adds, he doesn't want to pile too many new requirements on companies.
After the recent reforms, Herz says: "Right now, [they] are very tired."
Tired, maybe, but not tired enough to renounce numbers games. Even among execs who wouldn't dream of committing fraud,
there are plenty who are ready to tweak their numbers in an effort to please investors. In a Duke University survey of 401
corporate financial executives in November, 2003, two out of five said they would use legal ways to book revenues early if
that would help them meet earnings targets. More than one in five would adjust certain estimates or sell investments to book
higher income. Faulty accounting estimates by execs caused at least half of the 323 restatements of financial reports last year,
according to Huron Consulting Group.
The cost of this obfuscation is high. According to studies of 40 years of data by Richard G. Sloan of the University of
Michigan Business School and Scott Richardson of the University of Pennsylvania's Wharton School, the companies making
the largest estimates — and thus reporting the most overstated earnings — initially attract investors like moths to a flame.
Later, when the estimates prove overblown, their stocks founder. They lag, on average, stocks of similar-size companies by
10 percentage points a year, costing investors more than $100 billion in market returns.
That's why more portfolio managers are screening to identify companies that make aggressive estimates and those that don't.
Sloan and Richardson discovered that if you had sold short the companies with the biggest estimates and bought those with
the smallest, you would have beaten the market 37 out of 40 years and by a huge margin — 18 percentage points a year
before trading costs.
THE SOLUTIONS For now, investors are left largely to their own devices to make sense of companies' numbers. Auditors —
the first line of defense against financial shenanigans — are under scrutiny by a new oversight board, which is rewriting audit
standards. Other accounting reforms have yet to take effect. And while the SEC's Corporation Finance Div. has started
prodding companies to disclose more of their critical accounting estimates in public filings, the results so far are spotty, and
many disclosures are buried in dense text.
There's plenty that regulators could do now to improve the quality of financial information. If the form and presentation of
financial statements were cleaner and more consistent, investors would be better able to spot accounting tricks. For example,
earnings statements could be recast to distinguish between profits that come from selling products from those that come from
ever-changing estimates.
FASB should make it easier for investors to make reliable comparisons. An obvious step would be for companies to present
their statements of cash flows for the same periods as their earnings statements. Even better would be to show the cumulative
earnings and cash flows for the previous four quarters as well.
With better and more consistent information in financial statements, investors would be able to reward and punish companies
based on the quality of their accounting.
Because companies will be using even more estimates in the future, they'll have even more opportunities to hype their results.
To avoid future blowups, investors need a clear picture of a corporation's finances. Investors shouldn't have to wait for
another Enron for regulators to tackle these issues.
Business Week
Notes
Fannie Mae — Federal National Mortgage Association, «Фэнни Мэй»
bean n — монета, «грош», деньги (жарг)
Vocabulary

earnings n 1)доход(ы), прибыль, заработок, заработная плата;

2)поступления, валовая выручка
revenue n доход
outlay (on) n издержки, расходы, затраты
discretion n 1)свобода действий; 2)осмотрительность, осторожность
discretionary a предоставленный на усмотрение, дискреционный
accrual n&a приращение, накопление; начисление;
Syn. accretion юр. возникновение (права)
accrual accounting учет методом начислений
cash accounting кассовый метод учета
accrue v 1) нарастать, накапливаться;
2) (to) выпадать на долю, доставаться;
3)возникать; 4)получать (льготы, права)
allot v allocate v 1) распределять, относить (затраты);
2) ассигновывать, отчислять
allocation n 1)распределение, отнесение (затрат); 2)ассигнование,
Syn. allotment отчисление
bean counter n бухгалтер (жарг)
regulator n регулирующий орган
hazard n риск, опасность
dress-up v 1)приукрашивать (отчетность); 2)завышать (прибыль); 3)
наряжаться
to shore up earnings завышать прибыль, манипулировать показателем прибыли

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 to overstate
to hype
to dress-up
to pump
to boost
to massage
to trump up
to manipulate
to spin

entry п 1)(6ухгалтерская) запись, проводка, занесение (в список);

2)проникновение, вступление (фирмы на рынок)
statement п 1)утверждение; 2)выписка из счета; 3)отчет
income statement profit and loss отчет о прибылях и убытках
statement profit and loss account
cash flow движение денежных средств; поток наличных средств;
кассовая прибыль
cash-flow statement отчет о движении денежных средств
aggressive accounting агрессивный бухучет
Syn. creative accounting
remedy n средство, мера, юр средство судебной защиты
remedy v 1) исправлять, 2) предоставлять средство правовой защиты
to remedy the situation исправить положение
Svn. rectify
receivables счета к получению, дебиторская задолженность
payables счета к оплате, кредиторская задолженность
bottom line результаты деятельности компании, прибыль (или убыток),
последняя строка отчета о прибылях и убытках
top line объем продаж, реализация, первая строка отчета о прибылях и
убытках
assumption n 1)принятие на себя обязательства (долга); 2)предположение,
допущение
assumptions оценки, предварительные цифры, допущения
Syn. estimates
assume v 1) принимать (на себя обязательство); 2) допускать,
предполагать, исходить из чего-либо
assuming that исходя из того, что
off-balance-sheet items Забалансовые статьи
restate v 1) повторить утверждение, заявление;
2) пересматривать
to restate one's accounts представлять заново (отчетные данные)
restatement n 1) повторное заявление; подтверждение;
2) повторное представление финансовых отчетов (после
уточнения)

Useful Words and Phrases

mind-boggling ошеломляющий, поразительный
to file a report with the commission подать отчет в комиссию
in the wake of smth после, вслед
to be riddled with jargon сплошь состоять из профессиональных терминов
to come up with smth предложить, выработать
to come up short не оправдать надежд, ожиданий
to play fast and loose действовать безответственно, искажать (показатели)
to commit fraud мошенничать, совершать мошеннические действия,
обманывать
effectively adv фактически
underscore v подчеркивать
Syn. emphisize, stress, point out

Exercise 1. Suggest the Russian for the following.

to filter out the effects of the accounting rules; to underscore the hazards; a mortgage rate; to follow generally accepted
accounting principles; to make big outlays; to allocate expenses to the period when sales were made; fuzzy earnings numbers
to be unable to track the numbers; to detect aggressive accounting; income and cash-flow statements; bonus compensation
targets; to police the people who make the estimates; accounting games; one-of-a-kind derivative contracts; one-time
earnings; to limit off-balance-sheet arrangements; to tweak numbers; to inflate or deflate the earnings; to book high income;
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 to be gun-shy; to be trigger-happy; regulators

Exercise 2. Suggest the English for the following.

быть подверженным манипуляциям; отделять факты от вымысла; счета к получению; счета к оплате; предоставлять
компаниям широкие права по своему усмотрению использовать оценочные данные; отчет о прибылях и убытках;
рассчитать прибыль; регистрировать прибыль; приводить в отчете завышенную прибыль; относить доход к периоду,
когда он был заработан; основные документы финансовой отчетности; баланс; отказываться от манипуляций с
отчетностью; забалансовые статьи; злоупотреблять методом начислений; бухгалтер высшей категории; усиленный
надзор; регулирующий органы

Exercise 3. Translate the following into English in writing.

«Нортел»
Канадская телекоммуникационная компания «Нортел» (Nortel) постепенно выходит из глубокого кризиса, в
котором она пребывала с начала 2000 годов. По итогам прошлого года убытков у компании было всего 51 млн
долларов, в 2001 же году чистый убыток составил 4,5 млрд долларов. Есть все основания ожидать, что в этом году
компания достигнет безубыточности и затем вновь станет прибыльной.
Как и всю телекоммуникационную индустрию, кризис поразил «Нортел» в 2000 году, после того как рухнул
фондовый рынок, и стало ясно, что бурный рост отрасли, породивший безудержный оптимизм в конце 90-х,
прекратился. В 2001-2002 годах компанию сотрясали скандалы с бухгалтерской отчетностью — Комиссия по ценным
бумагам и биржам (SEC) дважды требовала от «Нортел» пересмотреть бухгалтерскую отчетность. Один из ведущих
производителей телекоммуникационного оборудования был вынужден начать серьезную программу
реструктуризации - от изменения в структуре менеджмента до массовых сокращений. С 2000 по 2005 год «Нортел»
сократил более 30 тыс. рабочих мест, то есть почти одну треть сотрудников.
Реструктуризация позволила выправить финансовую ситуацию и сохранить свои позиции на рынке, невзирая
даже на жесткую конкуренцию со стороны таких гигантов, как «Нокия», «Эриксон» и «Сименс» (Nokia, Ericsson,
Siemens).
Компания «Нортел» сумела достойно выйти из кризиса, сформировав новый взгляд на перспективы
глобального телекоммуникационного рынка.
Эксперт

• Text 2.
The Numbers Game
Companies use every trick to pump earnings and fool investors. The latest abuse: "Pro forma" reporting"

I
It is simply a matter of "creative accounting"' says Matthew Broderick, playing bean counter Leopold Bloom in the hit
musical The Producers. "Under the right circumstances, a producer could make more money with a flop than he could with a
hit." Max Bialystock, Bloom's client, immediately sees the potential for solving his money woes. He raises as much as he can
from rich widows to finance a new Broadway musical, Springtime for Hitler. He blows the money on himself, intending for
the show to bomb so that nobody will ask awkward questions.
For all the hoopla on the Great White Way, Bloom is a primitive in the numbers game. He's operating without pro forma
accounting, which allows all kinds of fictions in the way companies present their earnings. In the great bull market of the
1990s, companies and their CEOs used aggressive tricks to deliver the continually rising sales and earnings that Wall Street
wanted to see. It's gotten far worse in the market slump. The pricking of the Wall Street bubble has stepped up pressure on
desperate CEOs to shore up earnings ravaged by the sudden economic slowdown. Whether it's boom time or bust, companies
have cast aside constraints on how they report sales and earnings to the public. They are dodging accounting rules built up
over decades, choosing instead a slew of unconventional and often questionable practices that would turn Bloom green with
envy.
Sure, companies have always tried to present themselves in the best possible light. But some of today's practices, though,
perfectly legal sail close to the wind: They seem designed to mislead unwary investors about the real financial state of
companies that use them. Fading dot-coms, new tech giants, and venerable blue chips all hype their earnings. Cisco Systems
Inc. subtracts payroll taxes on employee stock options in its earnings-per-share numbers. IBM lifts its earnings by assuming it
would pay less into its pension fund, and Motorola Inc. boosts sales by lending huge sums to customers. "CEOs were
obsessed with growth," says Christopher M. Davis, portfolio manager at the family firm of Davis Selected Advisers. "They,
as in the past, tortured accounting to produce income statements that would be applauded by Wall Street."
The full extent of bad stuff that happened during the boom is only now becoming clear—and it is worse than anyone thought.
Ordinary investors and Wall Street pros alike are beginning to cry foul. What's alarming them is that the games affect the
stock market and its integrity every day. It's getting harder to answer the basic questions that underlie rational investment
decisions. What is a company's bottom line? Is it making money or not? What is the price-earnings ratio on its stock? The
answers are all over the place.
Variations in how companies report their results make it harder to know if their valuation is cheap or rich compared with their
peers and the rest of the market. Chipmaker Intel Corp. includes gains from stock investments in its preferred earnings
measure; Cisco does not. And with inconsistent numbers seeping into calculations of p-e's for the major indexes, it's harder to
gauge whether the market is valued high or low compared with the past. Companies "are destroying the credibility of the
profits they are producing," says Robert Olstein, manager of Olstein Financial Alert, a mutual fund. "There is no way some of
these companies were growing at the rates they were representing."

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 II
CREDIBILITY GAAP. The emergence of pro forma accounting is what enables companies to play the numbers game to the
hilt. Tech companies in particular discovered a powerful new way to obscure what was really happening in their often shaky
businesses. Traditionally, pro forma accounts were a way of giving an idea of what earnings would look like in completely
new businesses or in those that would result from a merger. But real New Economy companies now conjure up a second set
of figures — created outside generally accepted accounting principles, or GAAP, which still must be used in reports to the
Securities & Exchange Commission — and call them pro forma. "It is open season [for companies] to say what they want in
press releases," says Chuck Hill, research director at Thomson Financial/First Call, an earnings tracking service.
GAAP is a set of accounting rules hammered out by regulators, companies, and their auditors over decades. It aims to give a
fair and true picture of a company's financial position and make it harder for executives to hype their results. GAAP rules are
applied to every company, no matter what its business or stage of development. A small biotech startup with little more than
patentable ideas is treated the same way as a fast-food empire or a giant auto maker with, billions invested in plants. Some
companies argue that GAAP isn't always the best way of measuring how they're doing. And on some points, even skeptical
investors agree with them. But the virtue of GAAP is that it is the most consistent and objective way to compare results across
companies and industries.
That can't be said of pro forma. Each company uses it any way it wishes. Yahoo! Inc., one of the first to emphasize pro forma,
in January, 1999, presented results 35% better than GAAP by excluding a variety of costs of buying Internet companies. In its
latest set of results, issued on Apr. 11, Yahoo excluded yet more items, such as payroll taxes on stock options. Data center
operator Exodus Communications Inc., in its version of pro forma, also excludes some acquisition costs, but apparently not
options taxes. Network Associates Inc., meanwhile, conveniently drops a loss-making 80%-owned subsidiary, McAfee.com
Corp., in working out its' pro forma results, which show only half the loss reached under GAAP.
The magic of pro forma can turn losses into profits. That's just what happened at Computer Associates International Inc.,
whose accounting was challenged in an Apr. 29 story in The New York Times. By changing the terms of its software sales and
how it accounts for them, CA reported 420 of pro forma earnings per share in the final quarter of last year, vs. a 590 loss
under GAAP. Company officials say the new presentation is actually more conservative and not done to enhance growth.
Similarly, giant telecom carrier Qwest Communications International Inc. reported $2 billion in quarterly earnings before
interest, taxes, depreciation, and amortization, or EBITDA, an early version of pro forma, in a Jan. 24 release. Shareholders
had to wait weeks to find out, in a footnote to the annual results, that Qwest actually lost $116 million, according to GAAP
rules. Qwest says the variation is extreme because of adjustments for its takeover of US West Inc.
Some companies with profits can really give themselves a lift. Take Quintiles Transnational Corp., a number cruncher that
sells statistical services to the drug industry. In press releases, it excludes the costs of Internet operations when it reports
earnings from "core operations." The result: a 77% higher net income. Quintiles' investor relations officer, Greg Connors,
says there's nothing wrong since GAAP results are attached: "We thought this was the best way to describe ourselves to the
market." Including the cost would make it hard for investors to compare Quintiles with rivals that don't invest so much in the
Net, he says, calling the cost "unusual." But the expenses aren't a one-time event: They have been going on for a year, and
they are continuing.
The spread of pro forma earnings has plunged investors into an Alice-in-Wonderland world. SEC Chief Accountant Lynn
E.Tumer calls pro forma results "EBS earnings" — for Everything but Bad Stuff. "Way too often, they seem to be used to
distract investors from the actual results," Turner says. Wall Street, of course, is happy to play along: First Call's Hill says
more than 260 companies have persuaded a majority of top financial analysts to abandon GAAP when making earnings
estimates.
Pro-forma is the most egregious of the numbers games. But new variants of old accounting tricks are also flourishing
throughout the corporate world. Here are the gambits for which investors should be on the lookout:
Ш
VENDOR FINANCING. Pressure from Wall Street for ever increasing sales generated lots of bad numbers as high-tech
companies took to overstating their revenues by lending big to customers. In moderation, vendor financing is a sound selling
technique; abused, it's a dangerous way to do business. Just ask some telecom-equipment suppliers: By the end of 2000, they
were collectively owed as much as $15 billion by customers, a 25% increase in a single year. Effectively, they were buying
their own products with their own money, exaggerating the size and sustainability of their sales and earnings growth.
Investors were spooked to discover, deep in a company filing to the SEC on Mar. 30, that Motorola is owed $1.7 billion by
Turkey's No. 2 wireless carrier, Telsim. In a Feb. 3, 2000, press release announcing a $1.5 billion order from Telsim,
Motorola made no mention of any loans. Motorola says it properly disclosed its financing practices in filings to the SEC.
Employee stock options have proved useful throughout the economy in recruiting and holding staff. But companies don't have
to deduct the cost of options from their income, as they must for wages paid in cash. So they have a powerful tool to pump up
profits in the short run — at the cost of diluting ordinary shareholders' equity as employees exercise their options
Aggressive options accounting makes overall corporate profits look much higher than they really are. Analyst Pat McConnell
of Bear, Stearns & Co. figures the average earnings growth rate for companies in the Standard & Poor's 500-stock index with
options fully expensed would have been cut from 11% to 9% for the three years to mid-2000. But the information is hard to
come by. Companies are required only to disclose their option costs in a footnote to their annual reports.
SQUEEZE AND STRETCH Companies that need to show earnings growth can help themselves by booking sales early or
costs late. For instance, software company Microstrategy Inc. reported revenue in three quarters in 1998 and 1999 based on
contracts it did not complete until after the quarters had ended, the SEC found. The company restated three years' worth of
profits to losses and settled the matter with the SEC, neither admitting nor denying the allegations. Three corporate officers
agreed to pay penalties totaling $1 million.
More companies than ever are boosting earnings by changing assumptions that will lower their reported expenses, says the
SEC's Turner. Typically, executives use stratagems such as extending the expected life of assets to reduce depreciation
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 charges or betting that they'll have fewer bad debts. Reader's Digest Association Inc. became more optimistic about the
number of customers who would pay their bills on time and gained about 160 a share in last year's December quarter.
Reader's Digest spokesman William Adler says the company's collection estimate "is not put in to affect income in any way."
He says the estimate was raised properly, because its mix of business had shifted from books toward subscriptions, which are
more likely to be paid. In some cases, there has been no change in assumptions at all, but a questionable judgment from the
start. The SEC recently took issue with Verizon Wireless lnc.'s decision to amortize the cost of its wireless licenses over 40
years instead of 20 years or less. The longer amortization, which Verizon says is appropriate because the licenses are
renewable, helps earnings, but assumes the licenses will never lose value because of another technology.
Company pension plans can become a fruitful source of extra earnings. Companies can't generally take money out of their
pension funds, but by juggling several factors, including the actuarial present value of benefits, interest rates, and expected
returns on assets, they can reduce or even eliminate what they have to pay into their plans in any given year, according to
Gabrielle Napolitano, accounting maven at Goldman, Sachs & Co. For example, IBM picked up $195 million — 1.7% of
pretax income — in 2000, when it raised the expected rate of investment return from 9.5% to 10%.
BIG BATH The slowing economy is also giving a maneuver known as the big bath a whole new lease on life. A company
takes a huge restructuring charge one year, often when it's making losses or much lower profits than before. It may sound
crazy to make losses look worse, but the ploy gives the company big help in reducing expenses and enhancing earnings in the
future.
On Apr. 16, Cisco announced two whoppers. One charge, of up to $1.2 billion, is for the cost of laying off workers, closing
buildings, and erasing goodwill from its balance sheet. The other is to write off $2.5 billion of excess inventory, primarily raw
materials that Cisco says have zero value. Will Cisco sell the inventory, or use it in products later? A Cisco spokesman said
the inventory is worthless and "we have no plans to use it, period."
Worried about the possible abuse of the big bath technique, the SEC in late 1999 directed companies to disclose sizable
charges in more detail. But the facts are still sometimes hard to find. Even before Computer Associates' issues with revenue
recognition surfaced, analysts were suspicious of its earnings numbers. Last year, Sterling Software Inc. apparently took a
charge right before being acquired by CA, a move that may have accelerated operating expenses to the benefit of CA's later
earnings, according to Howard Schilit, head of the Center for Financial Research & Analysis, an earnings watch service. CA
says the charges were described in its filings to the SEC and notes that it reported lower-than-projected earnings following the
merger.
How did earnings reports slide into such chaos? It's tempting to finger the auditors, who after all are supposed to be the first
line of defense against financial chicanery. But that would be too simple. "Auditors are really not responsible for doing
analysis on financial reports," says Schilit. A more serious problem is that strict accounting is losing its champions within
companies. Fewer and fewer chief financial officers are certified public accountants, notes the SEC's Turner.
But now, with the renewed skepticism that comes amid big stock market losses, investors and regulators are much less
inclined to tolerate aggressive accounting.
Private groups are getting involved, too. At the behest of the SEC's Turner, Financial Executives International, an
organization of financial officers, on Apr. 26 issued guidelines aimed at reining in the excesses of pro forma reporting. At the
New York Society of Security Analysts Inc., a discussion group has focused attention on the way Amazon reports its results.
Gary Lutin, an investment banker and co-sponsor of the group, says: "I hope we are helping to accelerate the natural process
of the cycle" back to reality-based financial reporting. Apparently, he has made some progress. Amazon included a table
reconciling pro forma and GAAP data in its latest results.
Still, cleaning up financial reporting won't be easy, given that the stakes for companies are so high. But so are those for
ordinary
investors whose wealth and retirement prospects are ultimately on the line in the numbers game. Unless they and their
advisers want to end up as thoroughly fleeced as Max Bialystock's rich widows, they need to pay a lot more attention to the
numbers than they did during the bull market.
By David Henry and Christopher H.Schmitt
Business Week

Notes
the White Way — Broadway
number cruncher — a powerful computer or mainframe, a person having to deal with a great deal of calculations, here:
вычислительный центр
EBITDA — earnings before interest, taxes, depreciation, and amortization
dotcoms — Internet companies

Vocabulary

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 pro forma «ради формы», условные [гипотетические] данные в балансе, счёте прибылей и
убытков
pro forma reporting предварительная отчетность
creative accounting креативный (творческий, нетрадиционный) бухгалтерский учет
window dressing приукрашивание финансовой отчетности
to cook the books приукрашивать бухгалтерскую отчетность
dodge v Уклоняться
to dodge accounting rules,
taxes, price control
Syn: evade
integrity п честность, прямота (о качествах служащего, рабочего), целостность, неделимость
price-earnings ratio р-е, отношение рыночной цены акции компании к доходу на одну акцию
per, р/е
gauge v измерять, оценивать (человека характер и т. п.)
to gauge smb's strength оценить чьи-либо силы
to gauge smb by what he судить о ком-либо по его поступкам
does
mutual fund взаимный фонд
conservative a умеренный; заниженный (напр. о подсчётах); охранительный, охранный;
консервативный
conservative assumption осторожное предположение
disclose v раскрывать информацию
disclosure n раскрытие информации
to dilute capital "разводнять" капитал (в результате увеличения акций в обращении)
dilution of shareholders' "разводнение" капитала акционеров
capital
Syn. watering of stock
to expense options учитывать опционы в качестве расходов компании
actuarial a страховой, относящийся к страховому делу, актуарный
present value приведённая стоимость, текущая стоимость; дисконтированная стоимость (сумма
ожидаемого в будущем дохода или платежа минус процент на капитал как
«компенсация за ожидание»)
big bath списание больших сумм
recognition n признание (регистрация в учетных записях), оценка особенностей статьи перед
регистрацией
reconcile v согласовывать, выверять (счета); улаживать, примерять, приводить в соответствие
reconciliation n сверка, выверка (счетов); улаживание, примирение
Exercise 1. Explain the following phrases. Make your own statements using these expressions and translate them into
Russian.

j to sail close to the | wind

to cry foul
open season (for companies to say what they want)
to present oneself in the best possible light
to play the numbers game to the hilt

Exercise 2. Translate into Russian.

to deliver continually rising sales and earnings; bull market; to evade taxes; bear market; balance sheet; pro forma accounting;
bottom line; top line; to pump up profits; to shore up earnings; regulators; to book sales early and costs late; to enhance
growth; to be obsessed with growth; to take a huge restructuring charge; to overstate revenues; a biotechnology start-up;
operation losses; payroll taxes on stock options; to massage the company's earnings; to mislead unwary investors; net-of-tax
earnings; net earnings; retained earnings; taxable earnings; future stream of earnings; a net interest expense; employee stock
options; to exercise an option; a charge for restructuring costs; acquisition costs; conservative prediction; a footnote to the
annual results; to dilute ordinary shareholders' equity; to deny (admit) allegations; bad debts; longer amortization; return on
assets; return on equity; to issue guidelines; to rein in the excesses; to rein in outlay

Exercise 3. Translate into English.

давать инструкции компаниям более подробно раскрывать информацию о крупных списаниях; отчет о прибылях и
убытках; раскрывать информацию о списаниях крупных сумм; финансовая отчетность; завышать показатели
прибыли; предоставляемые сотрудникам компании опционы на покупку акций; ожидаемая прибыль на активы
компании; собственный капитал; уклоняться от выполнения правил бухучета; уклонение от налогов; правила
выработанные регулирующими органами; расходы по приобретению компаний, амортизационные отчисления; срок
службы активов; строгое выполнение правил бухучета; амортизация неосязаемых активов

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 UNIT 15

• Text l
I SWEAR…
Oaths are only a small step in the business of cleaning up American companies
THIS week, hundreds of chief executives and chief financial officers at the biggest American companies have undertaken a
curious task. They have sworn in front of a notary that, "to the best of my knowledge," their latest annual and quarterly
reports neither contain an "untrue statement" nor omit any "material fact." Some goody-goodies such as ExxonMobil, Oracle
and Federal Express rushed to get their oaths in early. Others waited until the last minute.
More is to come. The oath is a one-off, but the Sarbanes-Oxley act, rushed into law at the end of July, will require many more
chief executives and CFOs, including (to their irritation) foreign companies quoted in New York, to certify at regular intervals
that both their reports and their financial statements contain no untruths and omit no material facts.
As a way of reassuring a sceptical public that chief executives are truthful, all this has a certain primitive charm. Voters, in
the run-up to the midterm elections, certainly feel a sense of primitive fury. Every week seems to unearth another bunch of
beasts in the boardroom who have made fortunes while destroying much of the value of the nation's mutual funds and 401(k)
pension schemes. A troupe of grotesque characters have convinced many investors that company bosses are a greedy and
dishonest bunch: Linda Wachner, say, now suing Wamaco, the company she bankrupted, to be treated as a preferred creditor
for a multimillion pay-off, or Dennis Kozlowski, who extracted the cost of a $6,000 gold-and-burgundy floral-patterned
shower curtain and much, much more from the unfortunate shareholders in Tyco.
An oath, with its touch of mediaeval mysticism, certainly concentrates the mind. And it narrows the legal loophole that has
allowed chief executives such as Jeffrey Skilling of Enron and Bemie Ebbers of WorldCom to protest that they had no idea —
no idea — that their finance chaps were fiddling the figures. Given that a fifth of CFOs have apparently said that their chief
executives had put pressure on them to misrepresent their results in the past five years, this stretches credulity.

Something must be done

However, if the Skillings, Ebberses and their sort didn't know what was going on down in the finance department, they
certainly should have done. After all, accounting fraud is already a crime. Indeed, the very suggestion that the 950 or so
bosses making these new declarations might previously have allowed their firms to publish reports that — to the best of their
knowledge — contained untrue figures or omitted material facts ought to alarm investors, not calm them. If this is the true
state of things, something more radical is needed. Yet the danger is that this week's oaths and Sarbanes's certificates may
create the impression that enough is now being done.
The main impact of certification is likely to be the establishment of a paper trail, to show that top brass has signed off on
reports and accounts. Other aspects of the Sarbanes-Oxley legislation will matter more, such as the act's ban on subsidised
personal loans to top executives and its insistence on prompt disclosure of share dealings to repay company loans. Most
important are likely to be proposals that toughen the audit process, such as the insistence that accountants rotate the audit
partner overseeing a firm's accounts and that auditors can no longer sell certain non-audit services to audit clients.
The new five-member board to oversee the accounting industry is also potentially powerful — as long as it acquires members
of the calibre of Paul Volcker, a former chairman of the Federal Reserve Board, and Chuck Bowsher, a former Comptroller
General, rather than a pack of industry poodles. Auditors have too often chosen to ignore skeletons in corporate cupboards. A
forthcoming survey by CFO, a sister magazine of The Economist, finds that auditors had challenged practices at 38% of
respondents in the past year-but that in 57% of cases, the company persuaded the auditor to accept the questionable practice.
That is too many for comfort.
Yet audit reform, although crucial, is not enough. Too little in the new legislation will change behaviour. The desire to take
action fast has resulted in missed opportunities. As Nell Minow, a corporate activist, likes to point out, federal law has much
less to say on the duties of company boards than on day-care centres. Here was a missed chance to encourage states to
compete to protect shareholders' rights with light but effective rules, by allowing shareholders, rather than executives, to pick
the state in which a company is incorporated.
Here too was a missed chance to make it easier for shareholders to put up candidates as board directors, and thus discourage
powerful chairmen from choosing their suppliers and golfing chums for the job. That would prevent the sort of thing that
happened at Tyco, whose compliant board granted Mr Koziowski a contract saying that conviction for a felony that did not
directly injure the company would not be grounds for dismissal. And here was a lost chance to infuse real transparency and
meaning into the role of institutional investors, by insisting that they disclose their proxy votes. That would discourage
behaviour such as that of Deutsche Asset Management, which had a business relationship with Hewlett-Packard and switched
its vote on the HP-Compaq merger in HP's favour at the last minute.
Quick legislation is usually bad legislation. The Sarbanes act may be better than most. But its impact will be mild, compared
with two other forces. One is that of example. White-collar crime rarely results in prison, still less in long sentences. Simply
seeing a few CFOs go, handcuffed, to court has already had an electric effect in comer offices. The other is that of investors.
It was investors, with their relentless hunt for double-digit earnings growth, who encouraged executive fiddling in the final
years of the stock-market bubble. Now, when some companies have decided to treat stock options as expenses, the value of
their shares has risen. Others have acquired new executives who boast of their integrity. If the market comes to admire
honesty, transparency and good corporate governance, executives will rush to acquire those characteristics. Even in morality,
the market rules — in the end.
The Economist

Vocabulary

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 certify v удостоверять, заверять, подтверждать
certified public accountant дипломированный бухгалтер высшей категории
(CPA)
certificate n удостоверение; свидетельство, сертификат;
справка
preferred creditor кредитор, имеющий преимущественное
требование
fiddle v Обманывать, мошенничество
misrepresent v искажать
to misrepresent the results искажать результаты
misrepresentations, n введение в заблуждение, обман
wilful misrepresentation умышленное введение в заблуждение
representation n юр 1) представительство, 2) заявление,
представление фактов, сведений; создание у
другой стороны определённого представления
о фактическом положении вещей
trail n «аудиторский след»
audit trail отслеживание сделок при проверке (аудите)
to incorporate a company инкорпорировать компанию, учредить и
зарегистрировать компанию
transparency n 1) прозрачность, транспарентность; 2)
диапозитив
infuse v 1) вливать; 2) вселять, внушать, зарождать
proxy n 1) представитель; уполномоченный;
доверенный;
2) полномочие; доверенность;
3) голосование по доверенности
by proxy по доверенности, по полномочию; через
представителя
proxy season период проведения отчетных собраний
акционеров

Exercise 1. Suggest the Russian for the following.

a compliant board of directors; certified mail; a notary; to undertake a curious task; to fiddle the figures; accounting fraud; a
paper trail; double-digit earnings growth; to omit material facts; CPA; to infuse real transparency; one-time charges;
(un)recurring costs, asset write-downs; a skeleton in the (corporate) cupboard(s); to misrepresent the company's results;
mutual funds; legal loopholes; a ban on subsidized personal loans; a charge; liabilities to preferred creditors; to treat stock
options as expenses; institutional investors; white-collar crimes

Exercise 2. Find the English for the following combinations.

подтвердить под присягой правильность финансовой отчетности; защищать права акционеров; тяжкое преступление;
«лазейка» в законе; балансовый отчет компании; начисленная сумма расходов; умышленное введение в
заблуждение; осуществлять надзор над корпорациями; иметь основания для увольнения, голосовать по
доверенности; зарегистрировать компанию; обеспечивать прозрачность отчетности; дипломированный бухгалтер;
кредиторы, имеющие преимущественное право требования; рассматривать фондовые опционы, предоставляемые
служащим, в качестве статьи расхода
Exercise 3. Translate the following paying attention to the structure of the sentences.
Executives at companies suspected of engaging in financial shenanigans are often sued by the Securities & Exchange
Commission and aggressive plaintiffs' law firms.
Not long ago a small group of law professors asked the SEC to change the situation. Their aim of forcing lawyers who learn
about a corporate fraud to address it gained support from several prominent senators after Enron imploded, generating
evidence suggesting that lawyers employed by the firm had endorsed dubious transactions.
Ford Motor Co. has launched an extraordinary effort to settle all pending individual suits in the US over injuries and deaths
from rollovers in its popular Ford Explorer, offering victims and their families generous settlements while instructing its
lawyers to apologize on behalf of the company for equipping the vehicles with tires made by Bridgestone/Firestone Inc.

The court issued injunctions against both the director and the company formed by him to restrain him from using the
invention made by the director and the patent acquired by him.
Following Sarbanes-Oxley, and assuming the SEC is not lobbied into loopholing the new rules into nothingness, company
lawyers will have to report any knowledge of illicit behaviour first to management and then, if that fails to get a proper
response, to push the issue as far as the company's board and then the SEC itself.

• Text 2
Holier Than Thou
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 European sanctimony over American accounting scandals is misplaced
EVER since the bankruptcy of Enron, European accountants have been quietly congratulating themselves. It couldn't have
happened here, they say. American rules on accounting and auditing are clearly not all they were cracked up to be. Some
officials even hint that Europeans have better morals. American businessmen, they believe, with their corporate jets and stock
options, are simply greedier.
However, now that the Sarbanes-Oxley act has reformed America's accounting regime, Europe's systems for ensuring the
accuracy of company accounts look full of holes. Accounting firms in America are now banned from undertaking many types
of non-audit work for audit clients. In Europe, by and large, there are few such restrictions. America has a new, independent
body to oversee auditors. In Europe, many countries leave accountants largely to regulate themselves, and auditors' work is
seldom checked independently. Only rarely are companies forced to restate their accounts after they have flouted accounting
standards. Chief executives with compliant auditors can get away with publishing questionable numbers.
Britain is trying hardest to catch up. Yet, whereas America's Securities and Exchange Commission (SEC) has made 1,200
companies correct their audited accounts in the past five years, Britain's equivalent, the Financial Reporting Review Panel,
has demanded only 15 restatements in the past dozen. It has just one full-time accountant and investigates only if there is a
complaint about a company's figures. In most of its 67 inquiries since 1991 it has let companies off in return for promises not
to sin again. Now die main financial regulator, the Financial Services Authority (FSA), says it will start searching actively for
dodgy accounting, although the panel will remain in nominal charge.
The government has also announced plans for a more independent regulator of auditors. However, its measures stop short of
an outright ban on non-audit work, leaving the decision to the new regulator. British auditors have taken to adding disclaimers
to their opinions, saying, in effect, that only shareholders (not banks or other creditors) can rely on their work. The SEC is
said to be considering prohibiting such weasel words from the accounts of British firms listed in America.
In German accounts, says Liesel Knorr, secretary-general of the German Accounting Standards Committee, "there is quite a
bit of small-time cheating and there might be big cheating as well." Because nobody checks, she says, you cannot tell. On a
visit to the SEC in 1999, Hans Havermann, the committee's chairman, complained that German companies and their auditors
were ignoring domestic standards. When the companies listed in America, he asked plaintively, could the SEC please try to
get them to behave?
The SEC did its best. It refused to accept the accounts of Deutsche Bank before it listed on the New York Stock Exchange in
2001. It said that the way Deutsche treated some of its stakes in other companies disobeyed international accounting standards
(IAS), which the bank claimed to follow. Rather than suffer the embarrassment of correcting its LAS figures, Deutsche listed
in New York using American GAAP. In six European Union countries, there is no enforcement of accounting rules at all,
says the European Federation of Accountants. Only Britain, France and Italy are thought to have effective scrutiny.

ET, the extra-territorial

The SEC's past experience of European accounting and auditing partly explains why the Sarbanes-Oxley act was extended to
cover European companies listed in America and their auditors, to the annoyance of European regulators, who grumble about
extra-territorial laws. The European Commission is trying to soothe American worries. It wants EU countries to have national
overseers of accounting standards and auditors by 2005, by when all listed European companies are meant to be using IAS.
Besides Britain, so far Germany, Ireland and the Netherlands have made changes or announced plans.
The British think they stand a good chance of securing an exemption from the Sarbanes-Oxley act this year for their
companies and auditors, because Britain's accounting and auditing regime is strong by European standards. The commission
would prefer the EU to make its case as a block. But it could take years for the quality of, say, Italian and Greek auditing —
judged poor by accountants farther north — to improve enough to satisfy the SEC.
One fix for auditing in Europe, thinks the commission, would be for all countries to apply the same audit rules, as devised by
the International Auditing and Assurance Standards Board. However, experts on both sides of the Atlantic think these rules
are too lax at the moment. "You could drive a Mack truck through them," says Lynn Turner of Colorado State University, a
former chief accountant of the SEC.
Reform cannot come too soon. Because international accounting standards are mostly tougher than the old national ones,
companies will try harder than ever to find ways around them once they come into effect. Already, French and German banks
are campaigning hard against a new standard on financial instruments. Unless there is proper oversight soon, says Ms Knorr,
European accounts will in future be full of what she calls "lAS-lite," meaning that they will pretend to obey international rules
but in fact will not.
Behind all the prosaic initiatives for new rules and watchdogs lies a deeper struggle. American and European accountants are
championing their respective sets of rules as the world's single accounting language. American GAAP is bound to lose
importance in coming years, claims one European proponent of international rules. Soon, after all, some 7,000 European
companies will be using IAS. But poor European enforcement and auditing, if it continues, may undermine the new standards.
Unless Europe gets its act together, argues another fan of IAS, American accounting standards may win in the end.
The Economist

Note
ET, extra-territorial - перефразирование названия известного фильма ET - extra-terrestrial («Инопланетянин» 1982 г.)
американского режиссера Стивена Спилберга
Vocabulary
disclaimer п юр. отказ от права (на что-либо);
отрицание; отклонение, непризнание (иска,
права): опровержение
disclaim v отказываться (от права); отрицать; не

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 признавать (иск, право)
to disclaim all responsibility отказываться от ответственности (за что-
либо)
to disclaim all intention of категорически отрицать намерение что-л.
doing smth сделать
to rely on 1) полагаться на кого-либо;
Syn. to count on, to rest on 2) основываться, основывать на чём-
либо
to rely on the accounting полагаться на стандарты бухгалтерского
standards учета
enforcement n принудительное применение (права,
закона); обеспечение правоприменения в
судебном порядке
lax a 1) вялый, нестрогий, нетребовательный;
2) неточный, неопределенный
watchdog n контрольный, ревизионный или
Syn. regulator наблюдательный орган
Useful Words & Phrases

to stop short of smth отказывать от чего-либо; не делать чего-

to make one's case
to rule out
to flout (standards, rules)
либо
доказать свою правоту; обосновать свою
точку зрения; приводить аргументы в
пользу своего предложения
исключать
пренебрегать, не выполнять

Exercise 1. Translate the following into Russian.

to send a disclaimer to the press; lax law enforcement; proper oversight; to champion one's own set of accounting rules; poor
enforcement and auditing; to refuse to accept the accounts of the bank; to list the company; to disobey the international
accounting standards; to ban accounting firms from undertaking non-audit work for audit clients; to be forced to restate one's
accounts; to flout accounting standards; to let smb off; the main financial regulator; weasel words; watchdogs

Exercise 2. Translate into English.

обеспечить точность бухгалтерской отчетности; осуществлять надзор над аудиторскими компаниями; регулирующий
орган; вводить прямой запрет на предоставление консалтинговых и юридических услуг; нарушать правила
бухгалтерского учета; осуществлять проверки; обеспечение исполнения правил бухгалтерского учета; создавать
новые стандарты; освобождение от действия закона в порядке исключения; доказывать свою правоту; нестрогие
правила; представлять опционы в виде статьи расхода
Exercise 3. Translate the text.
The Nine Lives of Lou Gerstner The last American corporate hero comes under scrutiny
WHY, in an age of fallen corporate idols, does the Lou Gerstner legend endure? As the reputations of other retired hero
bosses shrivel, the man who saved IBM strides from one triumph to the next. An autobiography has fared well in a hostile
market, and in January the Carlyle Group, a powerful, secretive buyout firm, picked Mr Gerstner as its new chairman.
Yet Mr Gerstner's record is by no means squeaky clean. The latest evidence: this week's news that IBM's accounts, from a
time when Mr Gerstner was in charge, are under formal investigation by the Securities and Exchange Commission (SEC).
Judging by the skimpy information that IBM has put out, the SEC's interest may be confined to Big Blue's "retail store
solutions" business, whose cash registers, bar-code scanners and the like make up less than 1 % of annual sales.
Yet interest in one area can lead to interest in another. Rival consultancies marvel at the fat, recession-proof margins of IBM's
consulting business. Ominously, Wall Street's ever-bullish analysts are making soothing noises. In the 1990s, along with the
likes of General Electric and even — yes-Enron, IBM came to be valued for the fast, steady and remarkably reliable way it
raised its earnings per share. Also, like GE and others, the firm's occasional detractors argued that this owed more to its boss's
genius for financial engineering than to his legendary management skills.
As the boom fizzled, and demand for IBM's hardware and services slowed, these critics said that Mr Gerstner used the usual
bag of tricks to cover up the evidence. He extracted paper profits from the corporate pension fund, lashed the firm's tax rate,
timed the realization of profits from asset sales to meet analysts' forecasts, and so on. As for disclosure, one well-timed asset
sale (making the firm $340m) was not even mentioned in the relevant quarterly earnings report. After correspondence with
the SEC in 2001, IBM agreed to give more prominence in its reporting to the way its pension funds padded profits. Due, in
part, to more generous assumptions about future rates of return, IBM's pension funds that year earned the firm over $1.5
billion — 13% of profits, indeed, about half of the rise in IBM's annual profits in 1996-2001 came from its supposedly
overfunded pension funds.
Things have been different since Mr Gerstner's departure. In April 2002, its new boss, Sam Palmisano, issued IBM's first
profit warning in ten years. Its tax rate is rising again, and its expectations about the performance of its pension funds have
fallen. Indeed, IBM is paying $3 billion to plug a sudden hole. Yet IBM remains loyal to Mr. Gerstner. That may owe
something to his intimidating ways: he is still addressed at the company as "Mr Gerstner," in contrast to his successor, "Sam."

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 And he does seem to have left the firm in good shape, accounting notwithstanding.
But LBM refuses to bow to shareholder demands that it strip pension income from profits when totting up executive bonuses,
though GE and Verizon have done so. Meanwhile, much of Mr Gerstner's fortune remains tied up in IBM shares and
unexercised in-the-money options. That should be some comfort to investors now wondering what, exactly, the Gerstner
legacy has bequeathed them.
The Economist

Exercise 4. Translate the text in writing.

Revenge of the Bean Counters
No longer frail in the face of fraud, accounting firms are thriving on new U.S. laws that give them real clout
THERE'S A JOKE IN THE ACCOUNTING trade that the difference between a wobbly grocery cart and a corporate auditor
is that the cart has a mind of its own. Very funny, unless you had invested in MCI (formerly WorldCom), which recently
announced that the pretax income it reported for 2000 and 2001 was just a tad off — $74.4 billion less than it had said, after
write-downs and adjustments. Outside auditors have signed off on bogus earnings reports and balance sheets at American
companies from Rite Aid to Xerox; a U.S. subsidiary of Dutch retail giant Ahold slipped false accounts past its auditor; and
don't even start with Italy's Parmalat. In some cases, auditors dealt with corporate brass intent on concealing thievery;
WorldCom's ex-CFO, Scott Sullivan, recently pleaded guilty to fraud and conspiracy charges. In other cases, auditors simply
lacked spine: again and again, they failed to police the books aggressively for fear of losing the client, along with consulting
gigs that brought in higher profits than standard audit work.
The tables have turned. Strengthened and emboldened by the Sarbanes-Oxley Act, which overhauled accounting
responsibilities, the bean counters have taken off their kid gloves and snapped on mbber ones. With their government-issued
mandate to look for trouble, America's accountants no longer have to take a company's word that its audit policies are legit.
The accountants have the power to challenge corporate ledgers with impunity — and they're " raking in money doing so.
"Auditors and audit committees are now in the catbird seat," says Harvard Business School professor Jay Lorsch. Companies
no longer feel free to dump their auditors, for fear of sparking a public spat; no one wants to spook jittery investors or
provoke shareholder lawsuits or another regulatory crackdown from Washington. "There's more respect for the auditor," says
Julie Lindy, editor of Bowman's Accounting Report. "Companies no longer think the audit process is about creating the
illusion that they're jumping through hoops."
The change in the relationship is largely because of Sarbanes-Oxley', known in the trade as Sarbox or Sox. The 2002 U.S. law
stiffens accountants' spines in part because it places them under a new federally chartered watchdog agency that will soon
start spot-checking their work. That agency, the Public Company Accounting Oversight Board, also has an industry moniker
(Peek-a-Boo) and recently issued a stricter set of rules detailing how auditors should evaluate internal controls. Companies
must test these controls regularly, and such controls may not be designed by the company's outside auditor, to avoid conflicts
of interest. Europe, too, is changing. In Brussels late last month for meetings with EU. internal-market Commissioner Frits
Bolkestein, Peek-a-Boo's chairman, former New York Federal Reserve Bank chief William McDonough, hailed a framework
for greater cooperation between U.S. and European regulators as "a done deal"—welcome news to investors after the collapse
of Parmalat, the Italian firm that concealed 15 billion euros in debt. The E.U. is also considering proposals aimed at shoring
up auditor independence and oversight-mirroring some provisions of Sarbox — by next year. And last week, the London-
based International Accounting Standards Board finalized rules that will bring financial reporting within the E.U. closer in
line with U.S. practice from 2005.
Whatever the rules, the bottom line remains the same: be nice to your accountants — or else. Outside auditors answer to an
audit committee made up of at least two independent board members; previously they might have dealt only with a chief
financial officer, and "it would not have been unusual for CFOs to try to limit the scope of an audit," says Scott Green, head
of compliance for the law firm Weil, Gotshal & Manges. The new measures have "put the fear of God" into corporate bosses
and their employees "to make sure that auditors get accurate information," says Edward Nusbaum, CEO of Grant Thornton,
the sixth-largest accounting firm in the U.S.
So the fee meter is running. The death of the Arthur Andersen firm, which dissolved after being found guilty of obstructing
justice in the Enron case, reduced America's Big Five accounting firms to the Final Four. That in part is why audit fees for
Fortune 500 companies are expected to climb 38% this year, according to a survey by the Public Accounting Report. Top
lines for accounting firms already look healthier. Ernst & Young booked a 17.4% revenue increase in its 2003 fiscal year, to
$5.3 billion. Grant Thornton booked a 21% increase, to $485 million.
Of course, with the bean counters cashing in, the expense side of the ledger is going up for clients. The largest U.S.
companies will typically spend more than $4.6 million each to comply with just one section of the law, according to Financial
Executives International. In Europe, one major energy firm listed in the U.S. market puts the annual cost of complying with
Sarbanes-Oxley at over $100 million. And large companies complain that the get-tough accounting regimen is draining
resources. Paul Schmidt, controller for General Motors, says GM's chairman and CFO are spending more time on accounting
and certification issues, "instead of on strategy." And it could get harder, if more governments follow suit. "One of the
problems two years down the road is the danger that we're going to have a proliferation of several country codes," warns Rod
Armitage, head of company affairs at the Confederation of British industry, "For a company with multiple listings, this is very
costly."
Watchdog groups, on the other hand, say some of the changes imposed by Sarbox are toothless. When Congress was drafting
the law, "the accounting firms worked hard to minimize its scope," says Barbara Roper of the Consumer Federation of
America. Unlike the mutual-fund and securities industries, she says, "the accounting profession never really acknowledged
that there was a serious problem with the way it did business."
But having paid out huge settlements to die angry shareholders of their crooked clients, accountants know whom they really
work for. And now they really have something in common with wobbly shopping carts: they're both hard to push around.

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 Time

Exercise 5. Translate the text orally.

Half Measures
IN THE three years since accounting shenanigans at Enron first came to light, followed quickly by accounting seams at
WorldCom, Parmalat and others, the auditing profession has been trying to sort itself out and steer clear of trouble.
But accounting scandals continue to surface - most recently at America's giant mortgage company. More trouble may be
brewing: in die newest twist in America's unfolding insurance-company scandal, regulators have recently launched
investigations into companies' use of certain insurance products to "manage" earnings.
Should they unearth dodgy doings, the auditors who signed off on company accounts could find themselves in hot water.
Indeed, Deloitte & Touche, the world's biggest audit firm, faces a lawsuit of up to $2 billion for its audit of Fortress Re, a re -
insurance firm that allegedly used certain insurance products to inflate profits.
The continued inability of auditors to thwart accounting trickery means that, even after the flood of reforms put in place after
Enron's collapse, the industry remains a problem. The concentration of the industry into the "Big Four" accountancy firms
that now audit the lion's share of the world's large, public firms heightens these concerns.
Given the implosion of Arthur Andersen, Enron's auditor and once the fifth-biggest accountancy firm in the world, after a
criminal indictment for obstruction of justice, there is a real question about how aggressively regulators can now pursue the
surviving four big auditing firms for any future misconduct.
The Economist
Exercise 6. Translate the text orally.

Bad for CFOs, Good for Investors

It has been a tough year for Perot Systems Corp. In April, die Piano (Tex.) tech-services company said it was taking a $29
million charge and lowering its earnings targets. The reason: The Financial Accounting Standards Board had a new rule in the
works that would rein in a common corporate practice of booking expected revenue from some long-term contracts years
before the bill has been sent.
Three months later, the company's auditors, PriceWaterhouseCoopers, got a look at the rule’s final wording, and it was bad
news. They told Perot to restate its results for the first and second quarters and to take another charge, this one for $14
million. The timing — right after the company's second-quarter earnings presentation — was terrible. After that, its shares
went nowhere before finally picking up this month. For Chief Financial Officer Russell Freeman, the rule change has been a
"tremendous headache."
"Healthy change" in fact, in industries ranging from media to telecom, CFOs are reaching for the aspirin. The rule will make
earnings and share prices more volatile for businesses that depend on contracts with more than one type of revenue — such as
the one-time payments that Perot collects when it finishes building a corporate computer system and the continuing fees it
gets for running it. In these cases, companies can no longer book revenues long before they arrive in order to offset high up-
front costs of fulfilling a contract, such as hiring workers or getting equipment and supplies.
Business Week

Exercise 7. Suggest the Russian for the following.

Хранители прозрачности или слуга двух господ
О новой функции финансового директора рассказал директор «Перекрестка» Виталий Подольский.
Какое положение должен занимать CFO в современной кампании?
Надо сразу отметить важную вещь. В современной компании не только генеральный директор, или CEO (Chief
Executive Officer), но и CFO несет прямую ответственность перед акционерами и, как правило, персонально
утверждается советом директоров. ЭТИМ подчеркивается независимость финансового директора и его подотчетность
акционерам за свои действия
Независимость от кого?
От генерального директора в частности. CFO не имеет права сказать совету директоров: «Я сделал то, что мне
приказывали, хотя я был с этим не согласен».
Но финансовый директор подчиняется генеральному.
Независимость не значит безответственность. Двойственная подчиненность означает личную ответственность перед
советом директоров за деятельность компании. В первую очередь — за прозрачность. Соподчиненность совету
директоров — необходимый элемент защиты независимости. К тому же совет директоров не управляет
деятельностью компании и менеджмента, его роль ограничивается узким списком ключевых вопросов, поэтому
конфликта задач или целей не может возникнуть в принципе.
Цель разграничения ответственности — разграничить «ответственность за деятельность» и «отчетность и контроль
над ее результатами». Спринтер не должен управлять секундомером.
Дарья Денисова Эксперт

UNIT 16

• Text 1
UP FROM THE ASHES
Amid a global wave of business failures, American firms are more likely to get a second chance. Unfair competition, or
a lesson for Europeans?
THROUGH European executives' eyes, American bankruptcies are perverse affairs. First, failed managers often hang on to

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 the helm well after their firms have officially gone bust. After companies seek safe harbour under Chapter 11, America's
famous insolvency law, banks swoop in to lend them even more money. Next, lawyers help the firm restructure older debts,
giving bosses months or years to run their businesses interest-free. Failure, American style, is nice work if you can get it.
This is caricature, of course, but it is easy to understand why European managers might feel hard-done-by. In Europe, where
moves are afoot to make life easier for troubled firms, such perks are much envied. Britain has toyed for years with plans to
relax its insolvency rules, and is now close to doing so. The European Commission, too, will put up ideas for bankruptcy
reform later this year.
For now, though, European executives can only look jealously at the likes of Covad, an American telecoms company, which
recently emerged debt-free from a four-month stint in the bankruptcy courts. It was able to erase all of its $ 1.4 billion in debt
in exchange for giving bondholders 15% of its equity. Creditors, management and shareholders agreed the deal outside of the
court. Their trip into Chapter 11 was but a formality. Covad even picked up new finance along the way.
Now consider the travails of Carrieri International, another telecoms firm, but based in Europe. It also ran into debt troubles
last year, and creditors balked at management's first offer of a debt-for-equity, swap. By the time the company came, up with
new terms, Europe's patchwork of national insolvency laws — some of which make directors personally liable merely for
letting an insolvent firm trade-made it impossible to carry on. The company has now been forced into administration; its
assets are being sold off.
More such collapses may be on the way. Earlier this month, Energis, a British telecoms company, failed to meet a debt
payment. It is now scrambling to convince its creditors to work out a deal before the administrators step in. But European law
generally gives creditors more power, and less incentive to strike a bargain, than American law, which favours borrowers
(perhaps, it is said, because some of the founding fathers fled to the new world to escape their creditors). Energis has only one
month after its default before it falls into the hands of administrators, who often sack senior managers and take a knife to
assets.
Quite right, some would say, especially those who see Chapter 11 as a prop for basket cases. This has been true of America's
airline business in the past, and arguably of its steel industry today. But most American bankruptcies in this latest downturn
have resulted in liquidation, as has historically been the case. Take Rhythms NetConnections, one of Covad's erstwhile
American rivals. It filed for Chapter 11 at around the same time. But unlike its rival, it was deemed unsalvageable and was
liquidated. More often than not only those companies with a good chance of returning to health emerge from Chapter 11 That,
say its supporters, shows that the law is doing exactly what it was intended to do.

Pre-packaged pain
Chapter 11 allows restructuring on three main fronts. First, companies caught out by disaster, legal liabilities or their own
mismanagement can be forced to file for Chapter 11 out of desperation. But increasingly they can, like Covad, work out a
deal in advance, and use the bankruptcy courts' tax and creditor-voting advantages — in some cases, approval is needed from
only two-thirds of the lenders — to get the deal signed.
Christopher Stuttard of BankruptcyData.com estimates that these so-called "pre-packaged" bankruptcies accounted for 8% of
corporate failures in 2000 (by asset value), up from 4% in 1990. Third, Chapter 1 l's abundant case law also encourages out-
of-court restructurings by letting borrowers and creditors know what to expect if they go to court.
While Britain is at die forefront in trying to emulate America's laws, much of continental Europe is still happy to rely on the
state's heavy hand rather than on bankruptcy procedures.
Holzmann, a German construction group, was saved from collapse two years ago by state aid. Now the company is in trouble
again. As The Economist went to press, it was preparing to file for insolvency. If it is allowed to go bust this time, Holzmann
would be Germany's biggest bankruptcy in decades — and the clearest sign yet that European governments are prepared to let
capital markets work out business failures on their own.
Nobody expects radical changes to the European system to come quickly. Shagun Dubey, an insolvency expert with Ernst &
Young, an accountancy firm, thinks that Europe will creep towards a hybrid of Chapter 11 and the current system, that would
give managers of troubled companies less of a free hand than in America — frequent reporting to a trustee may become the
norm, for instance.
The stigma of insolvency may be as big an obstacle as insolvency law itself. "Culturally, Britain is not sufficiently attuned to
using insolvency to return a restructured company to the hands of management," says Mark Hyde, head of the insolvency
practice at Clifford Chance, a law firm.
Few banks in Europe are willing to lend to insolvent firms. Suppliers and customers, meanwhile, tend to treat bankruptcy as a
scarlet letter.
Eurotunnel vision
For companies on both sides of the Atlantic, bankruptcy needs a clear goal. American firms are likely to fare far worse if they
enter Chapter 11 groping for a recovery strategy, rather than having a plan in advance, says Peter Kaufman of the Gordian
Group, an investment-banking boutique. In Europe, preparation for a financial solution is all the more important if default
means a halt to trading. One hope is that Europe's less litigious culture might make companies and lenders more likely to
plump for deals outside the courts. Britain, in particular, has some experience in this: Eurotunnel's reorganisation for example.
When the administrators step in, the European assets of only the biggest firms, such as Olympia & York, which built
London's Canary Wharf, tend to be rescued.
Changes to practice are sure to come before changes in European law. Federal-Mogul, an American car-parts company, filed
for bankruptcy in October, under both American and British insolvency laws. By co-ordinating its British bankruptcy with its
Chapter 11 process, the company was able to keep its British businesses trading while in administration, with an eye to
emerging as a single healthy company.
In the meantime, European firms need not feel too threatened by Chapter 1 l's advantages. When Chiquita, an American
banana company, filed a pre-packaged bankruptcy last year, it was able to continue to compete with Fyffes, an Irish rival. But

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 as Chiquita emerged from protection this week, its debt greatly reduced, a raft of companies lined up to make a bid.
Rumoured to be among them was Fyffes, which, if it succeeds, might yet profit from America's forgiving ways.
The Economist

Notes
travails [traevei] — тяжелый, мучительный труд; муки scarlet letter — символ позора
Vocabulary

unfair a несправедливый, недобросовестный,

нечестный
unfair competition недобросовестная (нечестная) конкуренция
bona fide (fair) competition добросовестная (честная) конкуренция, т.е.
конкуренция в равных условиях
unfair practices недобросовестность, недобросовестные
приёмы, методы, практика
insolvency n неплатёжеспособность, несостоятельность,
банкротство
balk (at) v остановиться, внезапно переменить
решение
he balked at the price цена заставила его внезапно изменить
Syn. stall решение.
swap n обмен; своп, обмен активами или
обязательствами
debt-for-equity swap обмен долговых обязательств на акции
one shouldn't change (swap) коней на переправе не меняют
horses in midstream
administration (in bankruptcy) конкурсное управление имуществом,
Syn. receivership управление конкурсной массой
liquidation n ликвидация
company in liquidation компания в состоянии ликвидации
administrator n receiver n управляющий конкурсной массой
salvage n v 1) спасение имущества (напр.от огня)
[спасать имущество];
2) расходы по спасению имущества,
компенсация за спасение имущества
unsalvageable a не подлежащий спасению, постановлению
legal liability юридическая ответственность, судебная
ответственность
case law судебная практика; прецедентное право
to file for bankruptcy объявить себя банкротом
(insolvency)
trustees доверительный собственник
litigious a 1) сутяжнический;
2) спорный; подлежащий судебному
разбирательству
litigious right спорное право
litigation n судебный процесс, судебное дело, тяжба
Legal Commentary Bankruptcy
State of insolvency of an individual or an organization, an ability to pay debts.
Legal proceedings for adjusting the debts of an individual or business unable to meet obligations to creditors. The debtor is
placed under control of a bankruptcy trustee, who manages the debtor's affairs for the benefit of creditors. Whereas most
debtors seeking protection from creditors have more liabilities than assets, a bankruptcy petition is not necessarily an
admission of insolvency, i.e., inability to pay debts as they come due. Corporations, in recent years, have used bankruptcy as
a strategy: filing a bankruptcy petition directs all pending legal claims to a single court — the bankruptcy court.
Bankruptcy courts deal with two broad types of cases: voluntary bankruptcy by debtors seeking a fresh start, and involuntary
bankruptcy filed by a sufficient number of creditors, who believe the debtor has committed an act of bankruptcy by
concealing assets or favoring one creditor over another. In both cases, the objective is a fair and equitable settlement of claims
and distribution of assets. Filing a petition initiates an automatic stay against further debt collection until a debt is discharged,
the petition is dismissed, or a repayment plan is accepted by creditors. Once a petition is filed, the bankruptcy remains on a
debtor's credit bureau report for a 10-year period.
The Bankruptcy Reform act of 1978, the first major revision in the bankruptcy code in four decades, brought about several
important changes: the new code simplified the procedures for filing petitions, modified the absolute priority rule giving
secured creditors seniority over other creditors, limited creditor rights to set-off claims against a debtor's assets, and expanded
the powers of federal bankruptcy judges to decide cases. Amendments to the code in 1984 curtailed some of the more liberal
provisions in the 1978 law dealing mostly with consumer bankruptcies. The Bankruptcy Reform Act of 1984 added an ability

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 to pay test to Chapter 13 debt repayment plans filed by individuals with income, gave bankruptcy courts the power to dismiss
so-called abusive petitions by debtors concealing assets, and also modified the status of bankruptcy judges.
The important chapters in the revised code are the following.
Chapter 7: called a liquidation, allows a court-appointed trustee with broad discretionary powers to distribute assets among
creditors and arrange interim financing. In general, the trustee represents the interests of the unsecured creditors, or general
creditors. If, however, there are no assets, the debt is discharged, and the creditors receive nothing.
Chapter 11: a reorganization, normally by a business, allowing the debtor (called a debtor-in-possession if no trustee is
named) to maintain operating control of a business, while restructuring debts and working out a repayment schedule
acceptable to a committee of creditors. Creditor loans to Chapter 11 debtors are permitted under certain conditions.
Dictionary of Finance and Investment Terms, Barron's
Exercise 1. Translate the following into Russian.
stock-swap merger; interest rate swap; debt-for-equity swap; to file for Chapter 11; arguably; to default; to strike a bargain; to
fall into the hands of administrators; to settle the case out-of-court; America's law-suit culture; to hold court hearings;
litigants; receivership proceedings; restructuring debts; a trustee; to pick up new finance along the way; to grope for a
recovery strategy

Exercise 2. Translate the following into English.

обанкротиться; иметь ясную цель; закон о банкротстве; спасать компанию; иметь свободу действия; прекращение
коммерческих операций; нести личную материальную ответственность за торговые операции несостоятельной
фирмы; доверительный собственник; государственная помощь; предлагать новые условия погашения кредита

Exercise 3. Find in the dictionary all word combinations which can be used to mean "обанкротиться" and fill in the
gaps.
to go b ;to_________br_________________;
to to the ll; to go r; to f p;
to go into 1 id ; to d e;
to e di s ed; to become i s l __________ t
to f l; to f________ for _________an _______у
Exercise 4. Translate the text in writing.
What if GM Did Go Bankrupt...
After weeks of listening to analysts and pundits beat the drum about the possibility of a General Motors Corp. bankruptcy,
Chairman and Chief Executive G. Richard Wagoner Jr. decided he had heard enough. On Nov. 16 he declared to his
employees that bankruptcy is "unnecessary." In other words, Wagoner was calling bankruptcy unthinkable. But despite
Wagoner's protestations, investors are clearly starting to ponder the unthinkable.
What would a GM bankruptcy look like? It probably would be the most massive Chapter 11 filing of all time — a watershed
moment in the history of American business, with far-reaching consequences for all of GM's stakeholders. While the direct
impact on the national economy would be relatively modest, the Midwest would be hit hard by the combination of job losses
at GM and its suppliers and benefits cuts for the company's retirees.
Plenty of observers believe that this suffering would be worthwhile, of course, if a stronger company emerged from
bankruptcy. As airlines and steelmakers have done, GM could use Chapter 11 to rewrite union contracts, potentially enabling
it to slash retiree benefits and close plants without having to pay furloughed workers. The auto maker could even dump
tarnished brands and get bankruptcy court protection from dealer lawsuits.

BusinessWeek

CHAPTER 4. BANKING.
STRONGER FOUNDATION

UNIT 17

• Text 1
THE COMING STORM

With markets apparently safer, banks are trading ever-greater amounts in search of higher returns. Expect trouble
IN THE autumn of 1998, at a conference organised by Credit Suisse First Boston in — appropriately enough —
Monte Carlo, Alien Wheat, then head of the investment bank, stood up after dinner and delivered a breathtaking mea culpa.
Some sort of apology certainly seemed in order given the huge sums the bank had just lost from extravagant gambles on the
Russian economy in particular and financial markets in general. The bets went spectacularly wrong after Russia defaulted,
financial markets went berserk, and Long-Term Capital Management (LTCM), a very large hedge fund, had to be rescued
by its bankers at the behest of the Federal Reserve. CSFB eventually admitted to losses of $1.3 billion. Before the end of
this year, the bosses of many big banks may face the same unpalatable task which confronted Mr. Wheat if, like him, they
have the courage to admit their mistakes.
The reason is simple: the size of banks' bets is rising rapidly. This is because returns have fallen as fast as markets
have risen. Yields on corporate debt of all types, for example, have fallen dramatically, and commissions for all sorts of
businesses have also dropped. So banks are having to bet more of their own money to continue generating huge profits. But

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 the amount that they have put on the table in recent months has become worryingly large.
So large, indeed, that the present situation "is not dissimilar" to the one that preceded the collapse of LTCM, says
Michael Thompson, a strategist at Risk Metrics, a consultancy that specialises in the kind of risk-management models
employed by the banks themselves. Like LTCM, banks are building up huge positions in the expectation that markets will
remain stable. They are, says Mr. Thompson, "walking themselves to the edge of the cliff." This is because — as all past
financial crises have shown — the risk-management models they use woefully underestimate the savage effects of big
shocks, when everybody is trying to get out of their positions at the same time.
Even the banks themselves admit that they are taking bigger risks. Though they do not divulge the size of their
positions, or in which markets they are concentrated, how much those positions have grown can partly be gleaned from
what they have to report in their financial statements.
So-called value-at-risk (VAR) models determine the amount of capital that banks must set aside against their trading
positions, and purport to show how many millions of dollars a bank might lose should markets turn against it. Banks report
this figure. If a bank's VAR is rising, it is taking more risk — and VAR have been climbing for nearly every bank active in
financial markets. The VAR at Goldman Sachs, which these days is widely viewed on Wall Street more as a hedge fund
than a bank, has more than doubled in recent years. One of the bank's senior traders was even told recently that he must take
still more risk.
Rest assured that he is far from the only one being told this at Goldman Sachs, or anywhere else for that matter, even
though it was only a few years ago that many banks specifically eschewed higher-risk trading as a good way to make
money. Earlier this month UBS, a big Swiss bank, said that "with markets and investor sentiment starting to improve" it
would gradually increase credit and trading risks.
Even Citigroup, which stopped explicitly trading for its own account a few years back, and HSBC, a bank that used
to think of trading as rather beneath its dignity, both announced recently that they too are increasing the amount of trading
they do with their own money. And Credit Suisse First Boston, having scaled back its own trading after its 1998 debacle, is
also now increasing the amount it devotes to trading, though it claims that it will no longer "bet the ranch." Allied Irish
Banks, which has had more than its fair share of trading fiascos — losing nearly $70om in 2002 thanks to the activities of
John Rusnak, one of its foreign-exchange traders — is trying to hire another 20 traders in Dublin.

VAR crash
Of itself, VAR provides a conservative guide to the huge size of banks' current positions. In simple terms, these
models assess the amount of risk that a bank is taking by looking at the volatility of the assets it holds and the correlation
between them (the less correlation the better). In that way, banks can see how much they might lose were these bets to sour.
Crucially, if markets become less volatile, banks can pile on more positions and still have the same VAR. With the
exception of Treasuries, markets have indeed become much less volatile — volatility has halved at least in many markets in
the past year-and-a-half. Equity markets are now less volatile than they have been for almost a decade. Roughly speaking, if
markets are half as volatile, banks' positions can be twice as large for the same amount of capital. But since VARs have in
fact risen, some banks' positions are probably three times what they were in the autumn of 2002.
In fact the situation could be still worse. For banks have been increasing their trading exposures in other ways, too.
The most notable is via direct investments in hedge funds, often those set up by traders who used to work for the banks
themselves. Chemical Bank, now part of J.P. Morgan Chase, started the trend 15 years ago. Now, almost all big banks
invest their own capital in hedge funds.
Citigroup may have shut down its "proprietary" trading operations five years ago (temporarily, it now transpires) but
it invested a few hundred million dollars of its money in a hedge fund set up by the traders that ran the bank's proprietary
trading. Earlier this month, Deutsche Bank leaked that it was also investing $1 billion in a hedge fund run by its erstwhile
traders. J.P. Morgan Chase is thought to be the most generous in doling out its cash, but Credit Suisse, Goldman Sachs,
Lehman Brothers, and BNP Paribas together invest hundreds of millions of their shareholders' money in hedge funds.
In total, banks have invested many billions of dollars in such funds. The reason, apart from an understandable desire
to invest money with good traders, is that the money that is invested in this way is counted as an investment not as a trading
position, and so is not included in the banks' own trading books. Most of the money that banks invest has gone into hedge
funds that specialise in bonds and other sorts of fixed-income instruments. Like the banks, hedge funds have been
leveraging up their exposures to markets.
This activity is splendidly profitable, as long as markets behave themselves. But the strategy puts banks and hedge
funds alike at huge risk if markets suffer a severe shock — a far more common occurrence than banks allow for. Their
models (and, yes, hedge funds use VAR models as well) assume a certain level of losses for moves of a given magnitude.
The problem comes for the tiny number of crises when markets move much more and, to add insult to injury, banks'
assumptions about the diversity of their portfolios are shown to be wrong. In other words, the models, says one regulator
with a chuckle, are of least use when they are most needed.
By regulatory fiat, when banks' positions sour they must either stump up more capital or reduce their exposures.
Invariably, when markets are panicking, they do the latter. Since everyone else is heading for the exits at the same time,
these become crowded, moving prices against those trying to get out, and requiring still more unwinding of positions. It has
happened many times before with more or less calamitous consequences.
It could well happen again. There are any number of potential flashpoints: a rout in the dollar, say, or a spike in the
oil price, or a big emerging market getting into trouble again. If it does happen, the chain reaction could be particularly
devastating this time. Banks and hedge funds have increased their exposures most to those markets that they are least able
to withdraw from. Think, if you will, of the extraordinary rise in the price of emerging-market debt and junk bonds. "I used
to sleep easy at night with my VAR model," said Mr. Wheat in his speech more than five years ago in Monte Carlo. Suffice
to say that he suffered a sleepless night or two when that model was found wanting — and that many a bank boss could be

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 in for the same.
The Economist

Notes
mea culpa — *'my fault" — лат. моя вина, виноват, зд. покаяние, признание вины
value-at-risk (VAR) — «сумма под риском» — одна из моделей, применяемая в управлении рисками
fiat — лат. распоряжение, декрет

Vocabulary

position п 1) позиция, обязательство;

соотношение финансовых активов
(«длинная» позиция) и обязательств
(«короткая» позиция) инвестора;
2) запас, портфель; 3) остаток, сальдо;
4) позиция, положение, должность
building (up) a position формирование позиции (покупка акций
для накапливания длиной позиции или
продажа акций при накапливании
короткой позиции)
unwinding of positions закрытие позиции (путем проведения
обратной операции)
to unwind (to close, to get out закрыть позицию
of) one's position
purport n v 1) содержание, смысл; 2) цель, намерение
иметь целью, претендовать
eschew v тщательно избегать, остерегаться (чего-
либо, кого-либо); воздерживаться или
отказываться (от чего-л.)
to eschew high-risk trading воздерживаться от высокорискованных
операций
explicitly adv положительным образом, в прямой форме,
Syn. expressly ясно, прямовыраженно
Ant. implicitly, indirectly
exposure n 1) степень подверженности риску, риск
потенциальных убытков (банка или
страховщика);
2) освещение в СМИ, реклама
proprietary a собственный, патентованный,
осуществляемый за собственный счет
assume v предполагать, исходить из чего-либо
to assume responsibility (risk, принимать (на себя) ответственность
debt) (риск, долг)
assumption n 1) принятие на себя (например
ответственности);
2) предпосылка, предположение,
допущение
on the assumption assuming исходя из предположения
that
calamitous a пагубный
calamity n бедствие, катастрофа

Exercise 1. Translate the following into Russian.

extravagant gambles; to go berserk; at the behest; unpalatable task; yields on corporate debt; piling on more
positions; to dole out cash; fixed-income instruments; to leverage up one's exposure to market: to reduce one's exposure; to
put up the bank at risk; to allow for smth; to assume debt; calamity; a spike in the price; suffice to say; proprietary product;
proprietary trading; proprietary right

Exercise 2. Translate the following into English.

получать огромные прибыли; признавать ошибки; признавать существование убытков; банковские комис-
сионные; отказаться от платежа по обязательствам; резервировать капитал; предоставлять полномочия в прямо
выраженной форме; неустойчивость цен; торговые операции за свой счет; портфельные инвестиции; прямые
инвестиции; тенденция; цена актива; снижать уровень потенциального риска; фонд хеджирования

Exercise 3. Translate the text into English in writing.

93 129
 Европа уходит за рубеж
Среди компаний, уводящих свои активы за границу, абсолютными лидерами оказываются европейские
фирмы. К такому выводу пришел инвестиционный банк «Голдман Сакс» (Goldman Sachs), опросив ведущие
компании в США, Европе и Азии. Опрос, цель которого — выяснить инвестиционные планы участников, показал,
что наименее патриотично ведут себя европейские компании: они больше других склонны инвестировать за
пределами Евросоюза, чтобы диверсифицировать валютные риски и снижать издержки.
Как утверждается в отчете «Голдман Сакс», подобная инвестиционная политика европейцев объясняет
странное противоречие между стагнацией в Еврозоне и хорошими финансовыми результатами многих европейских
компаний. По мнению аналитиков банка, объяснение заключается в том, что европейские предприятия все больше
инвестируют и производят за пределами Европы. Это позволяет им быть привлекательными для инвесторов,
однако мало помогает экономическому росту в европейских странах, особенно в государствах зоны евро.
Эксперт

Exercise 4. Translate the texts into Russian orally.

Goldman's German revolution

Anxious employees at Germany's huge retail drugstore chain Ihr Platz (Your Place) were braced for the worst a year
ago. The $840 million company, based in northern Germany, had seen its sales shrink by over 40% in five years and losses
mount as a new generation of family managers blundered and successive chief executive officers failed to stem the decline.
The 125-year-old retailer was technically insolvent — a condition that would normally doom a German enterprise to
liquidation.
But an unlikely rescuer appeared on the scene: Goldman Sachs Group Inc., the U.S. investment-banking giant. Ihr
Platz's woes had hit the radar screen of Goldman's London-based restructuring group, a 30-strong team formed two years
ago to develop a European business investing in distressed debts and turnarounds. Bv January of this year, a Goldman-led
consortium had snapped up all of Ihr Platz's $144 million in bank debt and, working with the shareholders' trustees, sent in
experts from Alvarez & Marsal, a New York turnaround specialist. When discussions with other creditors bogged down,
Goldman bought out the remaining bank debt and in May pushed Ihr Platz into insolvency.
Goldman's maneuver would hardly raise an eyebrow in New York or London. But in Germany it was revolutionary:
The American firm pioneering Germany's case of a Chapter 11-style restructuring under a little-used 1999 law — a test case
that could well spur many more such workouts and galvanize industrial overhauls in Germany. Unlike Germans, Americans
and British use insolvency as a strategic tool to implement a turnaround. They don't see bankruptcy as a stigma but as a
viable alternative if out-of-court restructuring fails.
Business Week

Have Fat Cats Had Their Day?

Outside the conference centre in London, where GlaxoSmithKline (GSK) held its annual meeting on May 19th, there
were activists protesting at the firm's drug-pricing policies in poor countries. Inside, for most of GSK's shareholders this
week, there was only one topic of real importance: the severance arrangements of the firm's gallic, magnificently haughty
boss, Jean-Pierre "J-P" Gamier.
Those arrangements, estimated to be worth $35.7m to Mr Gamier should he depart prematurely, have put GSK in a
bit of a spot. Under new rules, shareholders in Britain get to vote each year on their firm's executive-pay plans. GSK's
shareholders promptly voted against management.
This has left the firm's hapless board trying to balance shareholders' ire against its contractual obligations to Mr
Gamier. The chairman. Sir Christopher Hogg, promised a full review of GSK's pay policies even as Mr Gamier was hinting
that he and his lawyers might dig in.
It seems certain that the GSK vote will go down in history as a landmark in corporate governance. Some British
activists think it may mark the moment when British capitalism decided to stop converging with its American counterpart
— Mr Gander's pay package was like that of a typical American boss, not a British one. It might also mark the moment
when shareholders in British companies finally realised that they could not rely only on the separation of chairman and
chief executive to keep management on its toes, and had to do the job themselves.
The Economist

UNIT 18

• Text 1
STRONGER FOUNDATIONS

New proposals for regulating banks are both a step in the right direction and evidence of how hard it is to
monitor the riskiness of the banking system
America's banks have spent this week announcing disappointing results, thanks in part to losses from loans that have
gone sour. The start of a downturn in the credit cycle is an interesting moment to ask whether banks have enough capital in
reserve to cope with their bad loan problems - which, in a roundabout way, is what the Basle committee on banking
supervision did on January 16th when it unveiled proposals for new capital-adequacy standards for internationally active
banks. Reading between the lines, the answer is not completely reassuring.
The Basle committee proposes to transform the capital requirements that were introduced in 1988, when regulators
from G10 countries agreed that banks were woefully under capitalised, a conclusion duly confirmed by banking crises in

94 129
 America, Europe and Japan. The regulators aimed to force banks to hold adequate capital, yet their notion of adequacy was
simplistic. It assumed that the ratio of a bank's capital to its loans would reveal whether its capital was sufficient. Though
the original 1988 Basle standards were a step towards risk-based capital, with riskier loans requiring more capital to be set
in reserve, the definition of risk bore too crude a relation to the actual riskiness of banks' assets.
Basle required banks to hold capital equal to at least 8% of their risk-weighted loans to the non-bank private sector.
Government debt from OECD countries required no capital, because these supposedly bore no credit risk. Non-
OECD sovereign debt had some capital requirements, but fewer than for any private-sector loans. Loans between banks also
entailed modest capital requirements.
The assumption, crudely, was that a bank with less than 8% in capital reserves was under-capitalised, and one with
more than 8% probably had capital to spare. Nowadays, nobody thinks about bank soundness in such a simple manner.
With the use of derivatives, a bank with an 8% ratio of capital to loans can get rid of credit risk (i.e. the risk that a borrower
will stop repaying the interest or the principal of a loan), and thus end up with capital to spare. Or it might increase its
exposure to credit, and thus have not enough. Likewise, a bank might reduce the loans it has on its balance sheet by
securitising them. Yet potentially the bank may still be exposed to much of those loans' credit risk.
Securitisation and the more active management of loans are clearly in fashion. Banks used to make loans and keep
these on their books until they were repaid. Or, if things went wrong, the loans were written off. Now, banks increasingly
look to pass on the credit risk of the loans they originate, preferring to book only the loan-origination fees. In theory, this
should shift much of the credit risk of loans away from banks and on to investors in securitised loans. In reality, things are
not so simple. Depending on how loans are securitised much of the credit risk may remain with the originating bank, and to
an extent that can be fiendishly hard for anyone, regulators included, to discover.
Well-run banks do not need regulators to tell them to keep capital in reserve against credit risk: prudence in the long
run plumps their profits. Those big banks leading the charge to securitisation have developed risk-management systems
with the sophistication, they hope, to tell them how much capital to set aside. This has made it glaringly clear both to these
banks and to their regulators that the regulatory capital demanded of a bank often bears scant relation to what a prudent
bank manager would choose to hold in reserve.
Regulators have also seen how the existing Basle rules created perverse incentives that encouraged excessive risk
taking by banks. For instance, Basle's crude measures of classifying risk meant that banks had to put aside less capital
against a loan made to the government of a banana republic than to a blue-chip company like General Electric. Equally,
lending to a company with a just less-than-top notch credit rating required no more capital to be set aside than a loan to near
junk-status firm.

Pillars of the community

In June 1999 the Basle committee issued proposals for capital requirements that reflected the true credit risk of loans.
These were sound on principle, but weak on detail. Since then, regulators and banks have devoted much energy to fleshing
out the details.
There are to be three pillars: a minimum capital requirement, regulatory supervision and disclosure. Banks will be
able to choose among different methods of measuring credit risk. At one extreme is a much-improved version of the
existing approach. There are many more categories of risk, which allow for the possibility, for instance, that a loan to a
company from a developing country is less risky than a loan to that country's government. Certain approved banks will be
able to use their own sophisticated credit-rating systems, which attribute to each loan a default risk on historic data. There
are detailed new rules on how to assess the riskiness of securitisation; and on how much the risk attached to a loan is
reduced when it is backed by collateral. There is a powerful incentive, namely lower capital requirements, to use internal
ratings systems, though some banks complain that the carrot is not as big as it could be. Regulators remain wary about
seemingly sophisticated risk-modeling. They intend to monitor models' performance before relying too heavily upon them.
Similar, unspoken worries may lie behind a new requirement to set aside capital against "operational risk," such as
the possibility of losses because of computer failure, poor documentation or fraud. Some big banks reckon this will
simply allow regulators to impose unjustified capital requirements should the use of internal credit-rating models mean too
sharp a reduction in the capital at a particular bank or, indeed, a reduction in the banking system as a whole. In the end,
though, the fate of the new Basle rules will depend on how they are implemented. American and British regulators are
likely to be vigorous enforces, while Japan and Germany, as well as plenty of less-developed countries, will lag behind.
Certainly, the new proposals leave national regulators plenty of room to wiggle. Even the best regulators can be seduced by
those over whom they are supposed to watch. So the third pillar of the new proposals may well be crucial: market discipline
through disclosure. This is supposed to include details of how a bank's internal ratings system is working. If they live up to
the Basle committee's claims, disclosure rules should allow investors to throw their weight behind regulatory efforts to keep
banks safe and sound. The information now available to investors tells them little that is useful about the riskiness of a
bank's lending. The burden lies with regulators, and with rating agencies such as Moody's Investors Service and Standard &
Poor's. Given the poor performance of both of these in predicting banking crises in the past, any sunshine that disinfects
banks' inner workings has to be welcome.
The Economist

Notes
1. Basle — Basel — Базель
Basle committee — Committee on Banking Regulation and Supervisory Practices — Базельский комитет по
банковскому надзору и регулированию при Банке международных расчетов
2. G10 — Group 10 — группа 10 ведущих стран, принявших в 1962 г. обязательства по взаимному
кредитованию в рамках общего соглашения, занимается проблемами координации в кредитной сфере

95 129
 Vocabulary

bank supervision надзор над банковской деятельностью

Syn. oversight
supervise v осуществлять надзор
Syn. oversee
bad loan безнадежная ссуда
capital adequacy достаточность капитала
capital requirements 1) требования к собственному капиталу (со
стороны центрального банка);
2) потребности в капитале
minimum capital минимальная норма (ставка) обязательного
requirements резервирования
to be under-capitalized испытывать недостаток собственных
(резервных) средств
sovereign debt задолженность (суверенного) государства
Svn. government debt
sovereign risk риск неплатежеспособности (суверенного)
государства
bank soundness надежность банка
principal n основная сумма долга
securitise loans перераспределять риск по ссудам с помощью
выпуска на их основе ценных бумаг
securitisation n секьюритизация: перераспределение риска с
помощью трансформации банковских
кредитов и других активов в виде рыночных
ценных бумаг, предлагаемых инвесторам
to shift (to pass on) risk передавать риск, перераспределять риск
collateral n обеспечение (об обязательстве)
Svn. security
to furnish a collateral представить обеспечение
to lend on collateral давать ссуду под залог
to serve as a collateral служить обеспечением

Exercise 1. Translate the following into Russian.

actual riskiness of bank's assets; to write off loans; non-bank private sector; non-farm production; non-oil exports;
exposure to credit; to shift credit risk away from banks; securitised loans; regulators; prudent bank manager; a banana
republic; a junk status firm; a blue-chip company; disclosure; to keep banks safe and sound; to leave smb plenty of room to
wiggle; to throw one's weight behind smth; to live up to one's claims; doubtful debt; unsecured loans; a loan backed by a
collateral

Exercise 2. Translate the following into English.

проблемы безнадежных ссуд; резервировать капитал; нести риск; выплачивать проценты и основную сумму
кредита; списывать задолженность по ссудам; хорошо управляемые банки; собственная система кредитного
рейтинга; требования к капиталу регулирующих органов; иметь свободный капитал; надежный банк;
подверженность кредитному риску; чрезмерная рискованность; сомнительная задолженность; служить
обеспечением

Exercise 3. Translate the following paying attention to the underlined words.

New capital rules from the Basel committee of rich-country bank supervisors, enforceable from 2007 at the earliest,
will make them more sensitive to the true creditworthiness of their borrowers and to their credit ratings. They may then be
keener to make good profit.
The law (the USA Patriot Act passed in the aftermath of the terrorist attacks) is still hugely controversial. Civil
libertarians argue that it infringes on people's privacy by giving law-enforcement agencies more power to get customer
information from banks.

According to Moody's rating agency, German banks' "recurring earning power" — their ability to generate profits
year in, year out, without special measures such as asset sales — is far lower than that of American or other European
banks.
The case of Ishikawa Bank, a small regional bank, illustrates Japanese bank reform in practice. When the bank closed
its books for the half-year ending September 2000, it reported a capital-adequacy ratio of 6%, far above the 4% required for
domestically licensed banks. When the Financial Services Agency inspected the same accounts some months later it found
a capital shortfall instead. A second inspection, just months later, found more large holes, and led to the bank's collapse.

• Text 2

96 129
 Old Wounds A dispute over a bank failure finally comes to court
For many, the new year is a time to look forward. Not for the Bank of England. On January 12th Britain's central
bank will be in court, defending its record as the regulator of the Bank of Credit and Commerce International (BCCI), a
fraud-ridden bank that collapsed in 1991 leaving depositors across the world $10 billion poorer. The plaintiff is Deloitte &
Touche, the bank's liquidator, representing 6,500 depositors in Britain. It claims that the Bank "knowingly or recklessly"
failed to supervise BCCI properly in the 12 years before BCCI imploded, and is seeking Ј850m ($1.5 billion) in damages.
The case has come to court only after 11 years of legal tussling between the Bank and Deloitte. British newspapers
are already relishing the thought that three former governors of the Bank, as well as other officials, might have to give
evidence. Excerpts from 300,000 Bank documents, released to Deloitte on court orders, are expected to be aired.
Deloitte's task is not straightforward. The Bank is statutorily immune from suits based on negligence. So the case
against it is of "misfeasance" in public office, a rare allegation that legal experts say is hard to establish. Deloitte's lawyers
must show not just that the Bank acted unlawfully, but that it did so deliberately or recklessly, knowing that its decisions
would cause loss to depositors. "The legal hurdles to success are very high," says a senior partner of a leading British law
firm.
Deloitte, however, sets great store by the trove of documents released by the Bank and others, some of which were
not seen by the inquiry by Lord Bingham (now Britain's senior law lord) into the BCCI affair in the early 1990s. It thinks
that these demonstrate that the Bank acted in bad feith. The Bank, it says, licensed bcci to do business in Britain in 1979,
even though it knew bcci did not meet the proper criteria. Deloitte also says that the Bank did not regulate BCCI adequately
in subsequent years, despite evidence that shady dealings were afoot.
BCCI was founded in Pakistan by Aga Hassan Abedi, a savvy financier with a vision of creating a world-class retail
bank focused on the developing world. It set up shop in London in 1972, catering for immigrants from South Asia. Backed
by the ruling family of Abu Dhabi and Bank of America (which owned a 25% stake), and flush with petrodollars from
newly rich Middle Eastern investors after the oil embargo in 1973, BCCI grew rapidly. By 1979 it had 45 branches in
Britain alone; by 1982 it had 280 in 57 countries.
But some people became worried that BCCIs growth came with big risks. Bank of America, which had upped its
stake to 45% in 1977, began selling its shares soon thereafter, having become concerned about imprudent lending. Bank
documents show that some Bank of England officials were troubled by BCCI's over-reliance on Mr Abedi (an "essentially
slippery customer," according to one memo) and by its risky lending. But the Bank licensed BCCI anyway, relying on
assurances from authorities in Luxembourg, where BCCI had been incorporated in 1972.
Indeed, a critical piece of Deloitte's case is that the Bank consistently shirked its duty to supervise BCCI by claiming
that it was a Luxembourg bank, even though London was its "operational headquarters and administrative nerve centre,"
according to another internal memo. Deloitte points to memoranda showing that the Bank maintained this line even after the
authorities in Luxembourg themselves told the Bank that they could not properly oversee BCCI, and even as evidence
mounted that BCCI was, in the words of one Bank employee, "the financial equivalent of the ss Titanic." Deloitte believes
it can show that the Bank faced up to BCCI's sorry state and acted to close the bank only when American authorities
threatened to indict BCCI's auditor, Price Waterhouse.
The Bank of England admits that it made mistakes over BCCI. But were its decisions truly dishonest, or merely poor?
The Bank says that the reams of documents voicing concerns over BCCI's financial condition prove not misfeasance, but
the Bank's open process and seriousness of purpose.
Furthermore, the Bank argues, dealing with BCCI was no simple matter. By 1988, it had 1.3m depositors worldwide
and $15.7 billion in deposits. Whatever course of action the Bank might have chosen entailed considerable risks. Revoking
BCCI's licence would have meant shutting it down, in effect. Taking on a lead supervisory role would have made the Bank
liable for BCCI's Sprawling, murky operations from Colombia to Botswana.
So far, the liquidators have clawed back $7.8 billion of the money lost by depositors through lawsuits against BCCI's
auditors and the government of Abu Dhabi, although at a cost of $ 1 billion. Success in this case would mean recouping a
large chunk of the remainder, at a price: lawyers' fees on the two sides are expected to run as high as Ј100m. Whatever the
outcome, though, the case looks likely to make bank supervision look a lot less dreary than usual. Win or lose, this is
excitement the Bank of England could do without.

Note
law lords — судебные лорды (члены палаты лордов с судебными функциями)
Vocabulary
depositor n вкладчик
liquidator n лицо, ликвидирующее фирму
knowingly or recklessly заведомо или по (грубой) неосторожности
Syn. deliberately or recklessly
statutory a предусмотренный законом, законный
statutorily adv по закону, в соответствии с
законодательным актом
misfeasance n ненадлежащее совершение правомерных
действий; злоупотребление властью
misfeasance in office должностное злоупотребление
bad faith недобросовестность, нечестность
Ant. good faith
to act in bad faith поступать недобросовестно

97 129
 to set up shop начать дело, обосноваться
Indict v{indait} обвинять
recoup v компенсировать, возмещать
to recoup smb for losses возмещать кому-либо убытки

Exercise 1. Translate the following into Russian.

a fraud-ridden bank; a debt-ridden steel maker; to be immune from suits; to be immune from losses; to be immune
from prosecution; a savvy financier; to set great store on smth; to meet the proper criteria; in subsequent years, to cater for
the residents of the country; to cater to the demands of the giant car makers; to be flush with money; indictment; to shirk
one's duty; murky operations; shady dealings; to oversee a bank; to up one's stake; to rely on assurances; over-reliance on
the bank's founder; imprudent lending
Exercise 2. Translate the following into English.
халатность, поступать (недобросовестно; банк, обслуживающий население; отзывать лицензию банка; иметь
свободные средства; заниматься темными делами; контролирующий орган; нефтедоллары; обвинять аудиторов и
банк, осуществляющий надзор; юридические препятствия; неразумное кредитование; должностное
злоупотребление

Exercise 3. Translate the text orally.

Barings May Be Headed for the History Books With ING giving up, the royal banker is damaged goods
When ING Group, the Dutch banking and insurance behemoth, bought London's Barings investment bank five years
ago for a single British pound, it thought it was getting a great bargain. Barings had been nearly bankrupted by a rogue
trader in its Singapore office named Nick Leeson. ING wanted to use Barings' extensive international network as a base for
the global expansion of its own investment-banking business.
Yet on Nov. 19, ING in effect admitted that the entire enterprise had been effectively a disaster. The Amsterdam head
office announced that it was "exploring options" for selling off or closing down the U.S. operations of ING Barings, as its
global investment bank is now known, and that it planned to fold most of Barings' London-based European operation into
the parent group's wholesale-banking division.
As the reorganization is put into effect, it is likely that Barings will disappear as a banking name, turning into dusty
history a 238-year-old institution that has served as chief banker for several British monarchs, including Queen Elizabeth II.

"Betrayal"
ING'S decision to give up on its investment-banking venture, which includes the U. S. brokerage firm Funnan Selz,
surprised some analysts because it comes at a time when Barings had seemed to turn a comer. Under Chief Executive David
Robins, ING Barings earned $286 million in 1999 and will do better this year. Still, its return on capital for the first nine
months of this year was a paltry 5% compared with 22% for ING'S banking and insurance operations in Europe and 40%
for ING asset management. And improving profits and market share promise to be a hard slog, given the fierce competition
from ever-bigger investment banks both in the U. S. and Europe. At the same time, Barings' overseers in Amsterdam were
appalled at the ever-spiraling salaries and bonuses required to attract and keep top investment-banking talent.
Whether group CEO Ewald Kist will be able to salvage much from the wreckage of ING Barings is a question mark.
Finding a buyer for the U. S. business, which employs around 2,000 people, won't be easy.
In London, ING Barings' staff is demoralized and angry. Just four months ago. Barings bought British stockbroker
Charterhouse Securities in a move to propel it further up the league tables. "Now the doggies [the London staffs nickname
for their Dutch masters] have suddenly changed strategy," says one Barings senior executive. "There's a great sense of
betrayal here." Aid doubt about the competence of the Dutch: "Five years ago I thought ING could turn us into a global
investment bank," says another senior London staffer. "Now I look back, I see they had no idea what they were doing."
CEO Robins has spent much of his time since Nov. 19 arguing that the London office has a future. But Barings
staffers point out that without distribution power in the U.S., the European branch has few prospects.
What might happen if Goldman Sachs can't find a U. S. buyer? The grimly humorous speculation among depressed
Barings staff is that ING might sell it for a dollar. Even then it might not be a bargain.
BusinessWeek

Exercise 4. Translate the text into English in writing.

Английский характер
В случае с «М-Джи Ровер» (MG Rover) английское правительство не только не против передачи «жемчужины
национального автопрома» в руки китайцев, но и активно этот вариант продвигает. Оно, в частности, согласилось
выдать «М-Джи Ровер» стабилизационный кредит размером в 100 млн ф.ст. При этом одним из основных условий
выдачи кредита было наличие у компании четкого плана реструктуризации, сверстанного «под SAIG» (Shanghai
Automotive Industry Corp.). Объясняется подобная сговорчивость британских государственных мужей просто:
правительство уже сейчас несет значительные расходы на выплату социальных и отпускных пособий работникам
«М-Джи Ровер», уволенным в период отчаянной борьбы за сокращение издержек. Каждый лишившийся своего
места работник получил из казны 5000 фунтов. С учетом увольнений, намечающихся в компаниях-поставщиках и у
дилеров «М-Джи Ровер», количество потерявших работу может достигнуть 20 тысяч человек. Таким образом,
только на выплату выходных пособий государству придется заплатить более 100 млн ф. ст. В таком контексте
стабилизационный кредит не кажется неоправданной роскошью.
SAIG, долгое время считавшаяся единственным «белым рыцарем», способным спасти «М-Джи Ровер», в

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 апреле разочаровала британских правительственных чиновников, заявив, что «никогда не планировала
обязательного приобретения «М-Джи Ровер», обсуждалась только возможность создания совместного
предприятия». Китайцев смущает слишком требовательное трудовое законодательство Великобритании. Наконец,
представители SAIG говорят, что «М-Джи Ровер» может представлять для них интерес только спустя пару лет,
после того, как выйдет из процедуры банкротства.
Компания

Exercise 5. Make a report on one of the following topics.

Basel I and Basel II.
BCCI
The fall of Barings.
Operational risk — rogue traders.

UNIT 19

• Text 1
CONFLICTS, CONFLICTS EVERYWHERE
Was America wrong to scrap the laws that kept commercial and investment banking apart?
WHY did all the safeguards in American capitalism designed to stop fiascos such as Enron fail to do their job? One
answer is that many of those institutions or individuals who could have blown the whistle faced conflicts of interest that
may have compromised them. Dealing with these conflicts is likely to be a priority as politicians and regulators seek ways
to prevent similar collapses.
One area of scrutiny will be the role of Enron's bankers, notably J.P. Morgan Chase and Citigroup. These two
financial conglomerates exist in their current form, and provide the range of financial services they did to Enron, only
because of the abolition of the Glass-Stcagall act. This imposed statutory barriers between commercial banking, investment
banking and insurance, and was introduced in 1933 following public protests about conflicts of interest on Wall Street in
the aftermath of the 1929 stockmarket crash.
Rivals on Wall Street now whisper that conflicts of interest at these two banks may have played a role in Enron's
collapse. Travelers (with its investment bank, Salomon Smith Barney) and Citibank merged in 1998, to form Citigroup. J.P.
Morgan and Chase Manhattan merged in 2000. Since then the two have won market share in underwriting and advising on
mergers and acquisitions from traditional investment banks, such as Goldman Sachs, Morgan Stanley and Merrill Lynch.
They have done so in part by using their huge balance sheets to offer both loans and investment-banking services to clients.
Rivals complain that J.P. Morgan and Citigroup (as well as Bank of America and several foreign banks, such as
Deutsche Bank and Switzerland's UBS) have made loans at a loss in order to win more lucrative investment-banking
business. These banks, the rivals say. are able to avoid disclosing this, at least in the short term, thanks to favourable
accounting rules that do not require commercial banks to mark their loan portfolios to market.
Might J.P. Morgan and Citi have let their lending standards slip in order to win investment-banking business from
Enron, allowing the company to become over-leveraged? Did being both a creditor of Enron and an adviser create acute
conflicts of interest as the company approached bankruptcy? As creditors, the banks may have had an interest in preserving
whatever value Enron had left to maximise their chance of being repaid. As advisers, they may have had reason to promote
riskier strategies in a bid to keep Enron alive and stop its shareholders being wiped out.
Both banks vehemently deny lowering lending standards to win investment banking business. J.P. Morgan had lent to
Enron for many years. The banks also deny that they took advantage of their advisory role by getting Enron to pay off
unsecured loans to the company with money raised during a secured refinancing late last year.
Bring back Glass-Steagall? Enron's collapse has triggered a new debate about whether it was wise to scrap Glass-
Steagall. Even if it was not, more than the restoration of the old Glass-Steagall act would be needed to put things right.
Before its repeal, its force had been eroded by the Federal Reserve, which had allowed commercial banks to edge into
investment banking.
Moreover, other conflicts of interest that were not prohibited by Glass-Steagall might warrant inclusion in a new law.
A $l00m settlement this week by CSFB, an investment bank, over its handling of initial public offering suggests that the
firm exploited its own customers. One end to conflict there would be to separate Wall Street's investment analysts from the
underwriters of initial public offerings.
Yet does the existence of conflicts of interest really justify regulation or legal separation? Recent studies of Wall
Street's behaviour before Glass-Steagall was passed suggest that most of the abuses meant to have arisen from conflicts of
interest actually did not happen. Securities sold by firms that combined commercial and investment banking were not, by
and large, of a lower quality than those sold by pure investment banks. Any firms that fell foul of conflicts of interest would
lose customers. The argument for a legal separation of auditors and consultants is different: unlike financial advice or
lending, audit is a quasi-public statutory function that merits maximum protection.
Occasional blowups among banks provide an opportunity for market forces to show what behaviour is required.
Charles Calomiris, an economist at Columbia University, reckons that Enron's failure is part of a pattern in financial
innovation. The collapse of Penn Central in 1970 forced participants to improve governance of the market for commercial
paper. Likewise, Enron will encourage better oversight of the growing number of companies with supposedly sophisticated
financial hedging and trading.
As for the banks that serve future Enrons, says Mr Calomiris, if any new regulation is needed it should be to ensure
full and appropriate disclosure of information, not a return to Glass-Steagall. There are already signs that market forces are
addressing some other problems that arose after Glass-Steagall was abolished. Citigroup recently said that it will spin off

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 Travelers, its property-casualty insurer, presumably because expected synergies with commercial and investment banking
did not come about. "If we'd known that was going to happen when Citigroup was formed, Glass-Steagall might never have
been scrapped," says Kay Soifer, an independent analyst.
On balance, that would have been a pity. There is at least one positive message in Enron's collapse. Despite its big
losses on loans to Enron, J.P. Morgan's survival is not in doubt — unlike American banks in past crises. The bank's
revenues now come from a sufficiently diverse set of businesses that it can survive bad lending decisions with nothing
worse than a damaged share price and bruised self-esteem. For America's banks, that is progress.
The Economist

Note
Penn Central - a conglomerate formed in 1968 as a result of the nation's largest merger of the time. Penn Central
owned railroad and other businesses. It filed for bankruptcy in 1970 and stopped operating trains and conducting business in
1976

Vocabulary

safeguard n v гарантия; охрана;

предосторожность/гарантировать; охранять
to blow the whistle on положить конец чему-либо; сообщать о
smth нарушениях (в компании); поднимать
тревогу
whistleblower, n лицо, сообщившее о нарушениях; активист
компании
conflict of interest конфликт интересов
underwriting n 1) андеррайтинг, гарантирование
размещения (ценных бумаг);
2) страхование (морское)
underwrite v гарантировать размещение выпуска ценных
to underwrite an issue бумаг на рынке;
underwriter n андеррайтер, гарант размещения (ценных
бумаг), страховщик (морской)
to mark to market переоценивать активы или позиции в
соответствии с текущими рыночными ценами
secured a обеспеченный
Syn. covered
unsecured а необеспеченный
Svn. uncovered
repeal v отменять (закон)
to repeal an act
Syn. abolish, scrap
initial public offering первоначальное публичное предложение
(IPO) акций;
выпуск акций новой компании на рынок
property-casualty страховая компания, занимающаяся
insurer имущественным страхованием и
страхованием от несчастного случая

Exercise 1. Translate the following into Russian.

to deal with conflicts of interest; to address problems of unsecured loans; to repeal an accounting rule; lending
standards; to be over-leveraged; to require the banks to mark their loan portfolios to market; to make a loan at a loss; to
impose statutory barriers; to advise on mergers and acquisitions; a quasi-public statutory function; to encourage better
oversight; accident insurance, liability coverage; third party insurance; health insurance; IPO
Exercise 2. Translate into English.
необеспеченная облигация; страхование гражданской ответственности (перед третьими лицами); отменить
закон, разделяющего коммерческие и инвестиционные банки; создать в соответствии с законом препятствия для
проведения сомнительных операций; улучшить надзор и регулирование; вводить налог на эмиссию акций новых
компаний; предусматривать меры, гарантирующие соблюдение закона
• Text 2
Care To Buy Some David Bowie Bonds
In Europe, securitization is the hottest way to raise cash
Rock star David Bowie did it. Madame Tussaud's wax museum has done it, too, and so have hospitals, credit-card
issuers, and the folks that bring you the World Cup. What is it? Securitization. That's a way of hedging financial bets — and
raising fast money — by bundling assets and selling bonds backed by current and future revenue from those assets. Once a
financial strategy pretty much confined to the New World, it has caught on big-time in the Old Europe in the past few years
has become a hotbed of securitization, as companies from London to Rome look for innovative ways to tap the financial
markets.
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 Indeed, securitization has never been more popular, as banks become increasingly skittish about lending money in
today's volatile capital markets. On Feb. 12, British property developer Canary Wharf Group PLC issued $1.8 billion in
bonds backed by rental income from the company's portfolio of office blocks — including four buildings still under
construction — in London's Docklands. It's the fifth time in as many years that Canary Wharf has tapped the securitization
market, raising a total of $5 billion. The proceeds have gone to fund development, repay construction loans, and even return
cash to shareholders. "Securitization lets us more effectively manage our balance sheet," says Canary Wharfs managing
director of finance, Peter Anderson. "There's also a substantial pricing advantage."
Canary Wharf is just one of hundreds of companies jumping into the game. Last year, the European securitization
market grew 54%, with $117 billion in bonds issued. This year, new issuance is likely to exceed $155 billion, according to
Deutsche Bank. Once the sole province of banks that bundled mortgages and credit-card debt, securitization has become a
favorite financing tool for a broad range of companies, including telecoms, utilities, and retailers. Companies benefit
because they can often raise money at better rates than those offered by banks or the unsecured bond market.
In Europe, worsening economic conditions and rising debt levels are fueling the market's growth. For companies —
and even governments with assets generating predictable revenue, "securitization is a highly efficient way to lock in long-
term financing," says Ravi Joseph, head of European securitization research at Morgan Stanley Dean Witter & Co. in
London.
These days, anything is fair game for securitization. In the past three years, Telecom Italia has securitized future
receipts from telephone bills, London's Madame Tussaud's has securitized future admissions, and the international football
federation, FIFA, has sold bonds backed by sponsorship revenues from this year's World Cup. David Bowie's 1997 deal
was a typical one: He securitized the future royalties to his music, netting himself a cool, quick $55 million — though it
means he will lose the revenues from 300 of his songs.
Here's the way a securitization deal works: Rights to the assets are sold to a specially created company, which issues
bonds backed by those assets. By separating the credit from the original owner — who can no longer use the assets for his
own purposes — the new company earns a higher credit rating, allowing it to raise money more cheaply.
The surge in demand for securitized bonds is welcome news for investment banks in Europe, which have seen an
income drought from initial public offerings and mergers. The banks are pouring resources into the area in hopes that
securitization will open the floodgates to all sorts of other fee-generating deals, including leveraged buyouts, acquisitions,
and advisory services. A decade ago, Morgan Stanley had four people doing securitization in London. Today, there are
more than 50. Rivals Citigroup and Credit Suisse First Boston have seen the same growth. Others are quickly getting into
the act. Goldman, Sachs & Co. recently poached Citigroup securitization honcho Bill Young to co-head its own structured
finance team. The securitization market, he says, "has been stimulated by increased investor interest."
One prime target of the securitization push: European telecoms, which are so debt-ridden they are having trouble
raising funds at reasonable rates by conventional means. Last year, British Telecom securitized rental cash flows from
commercial properties it owns, raising $2.5 billion. France Telecom, Deutsche Telekom, and Telecom Italia all have
securitization deals in the pipeline for later this year.
European Union governments are also expected to tap the market in the coming year. The Italian government did
three big deals in 2001, securitizing future lottery revenues, government property rentals, and delinquent social security
contributions, in the process raising a total of $6 billion, indeed, Dresdner Kleinwort Wasserstein predicts that Eastern
European countries will use securitization to bring down their debt levels in order to qualify for entry into the EU.
That kind of creative financing, of course, ought to set off alarm bells. Analysts worry that the securitization craze
could get out of hand. The rule of thumb within the industry is that no company or government agency should securitize
more than 20% of its assets. But, says Ganesh Rajendra, director of European asset-backed research at Deutsche Bank in
London, Europe has a long way to go before reaching that saturation point. Moreover, the independent rating agencies are
watching the trend closely. "As with any financing innovation, companies need to be cautious that it doesn't weaken their
balance sheet," says Cliff Griep, chief credit officer for Standard & Poor's in New York.
Until some watchdog agency reins them in, however, the securitizers will continue to flourish. At least for now, the
only obstacle to the market's growth is the creativity and imagination of the investment bankers driving it.
Business Week

• Text3
Beautifying Branches
Instead of axing their branches, banks are inventing new ways to make money out of them
BANK branches in most parts of the world are home to ugly carpets, grumpy cashiers behind glass barriers, long
queues of customers and racks of dull leaflets. Most people visit such purgatories only when they have to; the notion of
impulse buying there is a cause for mirth. According to Abbey National, a British bank which filmed passers-by, window-
shoppers actually speed up in order to avoid bank branches.
For banks, this is a sorry state, since branches are horribly expensive to keep open. On average, branches and their
staff account for about half of the costs of a typical retail bank. Bankers at one stage hoped that they might be able to
persuade their customers to do business through the Internet, allowing branches to be shut down. But customers have since
made it clear that while they want the convenience of Internet banking, they also insist on branches. A public-relations
disaster at Barclays Bank, which closed 171 British branches on a single day last year, has made others very wary of trying
something similar.
When slashing costly branch networks is out of the question, banks are trying to find ways to generate more money
from their branches. One strategy is to transform them into enticing, shop-like places where people want to spend time and,
with luck, more money on financial products. After Portugal's biggest bank, Banco Comercial Portugues, bought Banco
Portugues do Atlantico, it hired a consultancy, John Ryan, to help revamp its outlets. "Atlantico used to be one of the

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 drabbest banks, with bad lighting and laminated 1950s furniture," says Linda Lockhart at John Ryan, whose retail training
was as a lingerie buyer for Bloomingdale's.
After the makeover, Adantico's branches emerged with honey-coloured wood panelling, awnings and financial
"theatres" where customers are educated about how to control their finances. The staff are now known as "retailers." Rather
than sit passively behind desks, they stroll around and talk to people.
Other financial institutions use more radical tactics. Abbey National in Britain, for instance, is trying a system in
which 64 of its branches are treated as quasi-franchises. Instead of a fixed salary, the eight managers of these branches are
paid, amongst a number of parameters, according to the volume of products they sell. The idea is not just that branch
managers will be keener to attract new customers; they are also likely to know better than head office what people want. If
the branches succeed in boosting revenue, and if Britain's Financial Services Authority gives the nod, Abbey National
intends to turn these branches into independent companies. So far, so good: the five geographical areas that Abbey National
chose for franchising have increased their sales by 20% more than its fully-controlled branches since August last year.
Fortis, a Dutch-Belgian provider of financial services, also uses a form of franchising: the head of each of its 400 smaller
branches is viewed as self-employed and paid about a quarter of the branch's revenues. Fortis says that the ratio of costs to
revenues is 10% better in these franchised branches than in the ordinary ones. Citigroup, which has already experimented
with franchising in Belgium, says that it is considering something similar for Germany.
Slippery
Most banks, however, fear the loss of control that franchising can entail. The main risk is to a bank's brand. The
people who run the franchised branches might, for instance, ramp up short-term profits simply by cutting comers and
reducing service. Colonial State Bank in Australia, another bank that decided to franchise its branches, found that while
sales leapt, so too did complaints, some of its 87 franchisees were removed. So far, Abbey National's franchisees have made
only small changes. They have got rid of the "Customer Services" badges that the branch workers used to wear. Instead,
staff wear their own names. In the centralised system, Abbey's head office simply issued orders to branches, which mean
that local knowledge went unheeded. "The boffins in marketing would use us for experiments," says Alf Langley, a
franchise manager in north London. "We felt like depositories for posters." Now the branches are less deferential. Alan
Thomas, a franchisee in Wales, sent back a load of posters and leaflets which advertised loans for houses valued at over
£200,000. In Merthyr Tydfil, he pointed out, no houses cost that much. Instead, Mr. Thomas created his own marketing
material, in Welsh.
If people are turned off by bank branches, another line of thinking goes, then put something else in them that they
actually enjoy In Japan, Suruga Bank has invited Starbucks coffee shops on to its premises, a trick also used by Wells Fargo
in America and Abbey National (with Costa Coffee) in Britain. The Bank of Yokohama offers McDonald's hamburgers
alongside its cash machines. The banks get rent for letting out their branch space, but their fonder hope is that people who
come in for an espresso will fancy something in the financial line. But it takes a leap, it scarcely needs saying, to go from
ordering a coffee to buying a mortgage.
Perhaps the most radical answer to the question of what to do with branches is a plan by two British mutual societies
to share their premises for day-to-day transactions. Between them, the Yorkshire Building Society and Britannia have 322
branches in Britain. By sharing, they will both in effect double the size of their network at no extra cost. Eventually, the
Yorkshire Building Society hopes, Britain's remaining mutual societies (all 65 of them) will join the network. If that
happens, the group could close overlapping branches and save money without annoying customers, because there would
still be a shared branch for them to use. Conventional banks could do the same thing, of course, but they are still too
suspicious that their customers might defect to the bank on the far side of the room.
The Economist
• Text 4
Coffee, Tea, or Mortgage?
BARCLAYS BANK PLC WAS long the dominant credit card player in the British market, until American rivals
showed up a few years ago with cutthroat pricing and direct-mail sales tactics.
Barclays had been getting more than 80% of its new customers the old-fashioned way — from application forms
stacked in piles at its local branches.
It needed to raise its game, but how? The storied lender fired up its data base of 10 million bank account customers,
augmented it with demographic and behavioral data and credit bureau information, and came up with a list of customers
who were inclined to sign up for more services. Then it started selling them stuff.
The strategy worked. "The future will be driven by customers who are signaling [what they want] through the
Internet and other areas," says Keith Coulter, managing director at Barclays U.K.
Ah, the Internet. That's where savvy shoppers call up the latest and best rates on any number of financial products
and services and sign up for them in a matter of minutes.
Add to that the emergence of peer-to-peer banking which cut out banks enti rely — and the possibility of Wal-Mart
Stores Inc. entering the business, and you have the perfect conditions for what industry people call chum, and what the rest
of us call defections.
That's why banks are in full-scale makeover mode, adopting sales strategies perfected by retailers.
The most forward-thinking banks are enlisting architects to redesign their sleepy storefronts, behaviorists to profile
customers, and high-tech consultants to rev up their 21st century marketing machines with high-tech gadgetry and systems.
Business Week

• Text 5
Life Branches?
THE selling of insurance by banks, and vice versa, is a simple enough concept in theory. In practice, though, as

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 Allianz and Dresdner may discover, it is often far from straightforward. In the case of Citibank, for instance, hopes were
high following its 1998 merger with Travelers Group that the latter's insurance products would be sold to the rank's
customers. In reality, however, there has been only limited integration of the organisation's insurance and banking
operations since the merger.
Lots of banks are keen to sell insurance in their branches, mainly because they need to flog as many products as
possible to their customers in order to cover the high fixed costs of maintaining their outlets. Insurance companies, on the
other hand, usually lack the physical means to reach customers, so they seek access to bank branches as an extra
distribution channel.
The natural home of bancassurance, the combination of banking and insurance, is in countries such as France and
Spain, where people are culturally accustomed to buying insurance from banks. In France, about 60% of life-insurance
products are sold through bank branches, according to PriceWaterhouseCoopers (PWC), and in Spain 80%. In the
Netherlands and Belgium, fund managers and analysts regard companies such as ING and Fortis as evidence that
bancassurance can work elsewhere too.
So far, though, it has failed to take firm root in any other country. In America, the 1933 Glass-Steagall act long
forbade banks and insurers from getting together. That law has now been repeated, but the new Gramm-Leach-Bliley act
restricts the sharing of customer information between banks and insurers. Ironically, the act's protection of privacy may
make it harder for banks to succeed in insurance, since it makes cross selling more difficult.
In Britain, the record of selling insurance and banking together has been patchy at best. The banks' share of the life-
insurance market is relatively small — about 15%, according to
RWC. Other distribution channels (such as independent advisers) continue to dominate the business. One explanation
for the difference between Britain and the rest of Europe, says Keith Baird, an analyst with Prudential Bache, is that outside
Britain people tend to place far greater trust in their banks. "They have a good reputation; they're not seen as rapacious rip-
off artists, as they arc in Britain."
Another difficulty is that insurance products are more complex than most banking services and are not easily sold by
low-skilled branch staff. In France, banks have solved this by marketing simpler products, making it easier to train staff to
give advice about them.
Those who believe in bancassurance often disagree about how to put it into practice. From a bank's point of view,
does it need to own the company that offers the insurance it sells? And does an insurer need to buy a bank to get its
distribution? Bank of Scotland, which has relationships with several insurers, believes that, as consumers become more
Internet-savvy and price-conscious, they will want the best insurance products, not a manufactured in-house brand. Some
insurance companies say that arm's-length alliances between banks and insurers are better than full-blown mergers. AXA,
for instance, a French insurance giant, has distribution agreements with five big banks in France. It says that banking and
insurance are far too different to co-exist within the same company. There was a time when Allianz thought the same.
The Economist Vocabulary

bankassurance банкострахование: предоставление банками Exercise 1. Translate the

услуг страхования following into Russian.
fixed costs постоянные (фиксированные) издержки: прямо in-house brand; Internet-sawy;
не зависят от объема операций (аренда и т.п.) price conscious; to take firm root to set
variable costs переменные издержки up shop; to flog one's products to the
privacy п неприкосновенность частной жизни customers; fixed costs of maintaining
cross-selling перекрестная продажа banks' outlets; fund managers; to share
arm's-length alliances альянс «на расстоянии вытянутой руки». альянс customer information; full-blown
между участниками, осуществляемый так, как mergers
если бы между участниками не было никаких
юридических или финансовых связей во Exercise 2. Translate the text
избежание конфликта интересов into Russian orally.
arm's-length отношения «на расстоянии вытянутой руки»:
relationship отношения между независимыми участниками Wal-Mart and Financial
Services

The world's biggest retailer edges into financial services

With little fanfare, the world's biggest retailer is starting to flex its muscles in financial services. The company says
little about numbers, lumping financial services into '"other income", which accounts for just 1% of revenue. But business is
growing fast, says Jane Thompson, head of financial services. Each week Wal-Mart processes more than a million financial
transactions. Money-orders, introduced in 2001, account for the highest number, but pay-cheque cashing, launched in 2004,
is the fastest-growing area. In February Wal-Mart joined up with Discover to offer a credit card with a 1% cash-back on in-
store purchases. Wal-Mart's British arm, ASDA, even offers insurance, although Ms Thompson says that is "not on our list
this year" for American stores.
In America, something bigger is afoot. In July the retailer applied to open an industrial loan company (ILC) in Utah.
ILCS were originally set up about a century ago to help industrial workers take out small loans. Now, they are a favoured
route for non-banks to get into banking while side-stepping federal restrictions on the separation of banking and commerce.
Thus far, regulators have agreed with the opposition. Six years ago the retailer tried to buy an Oklahoma savings
bank, but was thwarted by the passage of the Gramm-Leach-Bliley act of 1999, which strengthened the separation of
commerce and financial services.
Suppose Wal-Mart did want to move into branch banking, and that the regulatory hurdles were cleared: would the

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 retailer succeed? The nearest precedent is not encouraging.
The Economist

Exercise 3. Translate the text into English.

Гросс-банки сокращаются
Банки Германии сокращают персонал. Ведущий немецкий частный банк «Дойче банк» (Deutsche Bank)
объявил, что уволит около 14,5 тыс. служащих из персонала, насчитывавшего в 2000 году сто тысяч человек. По
тому же пути вынуждены идти и другие крупнейшие банки страны, руководство которых признало, что банковская
сфера переживает беспрецедентный кризис.
Причиной тому стали слабый рост германской экономики, падение индексов акций и волна корпоративных
банкротств, которые «съели» банковские доходы. Резкому ухудшению показателей в банковском секторе
способствовали также плохо продуманные инвестиции, безнадежные долги и катастрофические наводнения летом.
Например, «Дрезднер банк» (Dresdner Bank), третий по величине банк страны, признал, что отнес к недоходным 30
млрд евро своих займов (то есть чуть ли не каждый восьмой евро своих кредитов).
Нынешняя тяжелая ситуация усугубляется еще и тем, что германским банкам принадлежат огромные активы
в ряде ведущих компаний страны. Когда-то это считалось признаком силы, а теперь означает лишь, что банк
надолго привязан к своим должникам. И когда биржевые индексы поползли вниз, это обстоятельство стало
причиной их слабости. Так нереализованные потери четвертого по величине германского банка — «Коммерцбанк»
(Commerzbank) — от имеющихся у него активов оцениваются в 9 млрд евро. В результате, несмотря на
возобновление роста курсов акций на бирже, стоимость бумаг «Коммерцбанк» упала с начала года на 57%, «Дойче
банк» — на 45%, а «Хиповереинсбанк» (Hypovcrcinsbank) — на 46%.
Эксперт

Exercise 4. Answer the following questions.

What is securitization? Give examples.
What does the word "bankassurance" mean"'? What are advantages and disadvantages of bankassurance?
What financial services is Wal-Mart selling to its customers? What would you call this business mix—bundling,
cross-selling or diversification?
Are bank branches really important at the age of the Web?
What are the pros and cons of franchising in banking?
What marketing strategies do forward-thinking banks use today?

UNIT 20
Consolidation

• Text l
US in Loans Clamp

Suzanne Miller looks at why banks are signalling the end of cheap loan trade-offs by turning the screws on
potential credit risks
In late April, David Coulter, global head of investment banking at JP Morgan Chase, stood before a large gathering of
institutional investors and rattled off a shortlist of trouble spots that the bank is tackling, including the languishing cash
equities business, That was no surprise. But the fact that Mr Coulter included loan pricing in his target list should have
turned some heads.
It is no secret that US banks have done a poor job for years in pricing their corporate loans. The unspoken trade-off
between bank and borrower has always been cheap loans in exchange for lucrative corporate and investment banking
mandates. Now banks are starting to turn the screws on companies that pose a credit risk or have already become one.
Mr Coulter says the aim was to force companies to pay more for their loans if their credit rating went down - as an
historic number did last year or if they drew down on unfunded loan facilities. This is an emerging practice that bankers
have dubbed "relative value pricing."
A sure sign of trouble, bankers reason, is when borrowers start drawing down revolving loan commitments that were
intended to be undrawn and which are commonly put in place as backstops for commercial paper programmers.
Change is welcomed
Those who have long tracked the banking industry's fight to fatten pricing have welcomed the nascent change. "This
is one small step for bankers and one giant leap for bankerkind," says Meredith Colley, director of analytics at Loan Pricing
Corp.
The new pricing model will be linked to the bond market. "In other words, banks will be paid market rates for the risk
if risk increases considerably. A very rational step," Ms Coficy says.
As a result, a company will have to match the spread on a bank loan to that of a bond spread if, say. the bond spread
widens to 1000 basis points over the relevant benchmark. "It will be a tough sell," Mr Coulter conceded to the crowd. So
far, JP Morgan has tested this pricing model on just one corporate customer Dominion Resources, a Virginia-based gas and
electric holding company that cut its profit forecasts for 2003 last September. Bank of America is also a lead bank on that
financing, which was still being finalized in early May.
Only three other companies have agreed to similar terms: Tyco International, Teco Energy and Oncor, the Texas
utility group. They are dicier credits than Dominion, which means the practice could start spreading to more plain-vanilla

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 credits.
"People were surprised that JP Morgan did this with Dominion because the company is still relatively strong," says
the head of one major US syndications desk. "JP Morgan is trying to lead the market in increased pricing at a potential
sacrifice of market share."
If so, there's no bank better placed to lead the charge. JP Morgan Chase is the world's single biggest loan syndicator,
with some 16% of last year's global market share, followed by Bank of America and Citigroup. Leaders like JP Morgan
have long fought tooth and nail to preserve their market share, but a look at last year's bloodied trail of bankruptcies is
making key credit providers rethink the wisdom of being the biggest volume-runners.
Five banks now control roughly 70% of the loan syndications market, where global issuance was $1100 bn last year
compared with $234 bn a decade ago, according to Loan Pricing Corp. If it turns out that banks like JP Morgan are willing
to sacrifice market share for credit safety, life for non-investment grade companies could get tougher when Basel II kicks in
by 2007.
The new international capital accord will force banks to put more capital behind non-investment grade loans. In other
words, banks will weight non-investment grade loans 150% instead of the 100% weighting they now enjoy with investment
grade credits.
Banks fight blanket requirements Banks are fighting for the right to assign their own capital rating's rather than be
forced to adhere to this blanket requirement. If they lose the fight, though, the commercial loan spigot for a big part of the
market could run dry because some 35% of the commercial and industrial loan market in the US is now non-investment
grade. In 1970, it was a mere 5% or so.
"Clearly when you look at the borrower universe, more and more are moving into higher risk categories," says Keith
Leggett senior economist at the American Bankers Association. "If that's the case you may find that the cost of credit
becomes much more expensive under Basel II in serving lower credit quality.
"This is going to change the nature of that relationship between banks and borrowers because banks are going to
charge higher fees or demand more rights to be compensated."
Regulation concern This could make credit more scarce on the riskier end of the spectrum. "If you go back to 1991 or
1992, one of the reasons that recovery languished is because banks had to build capital in response to Basel I going into
effect," Mr. Leggett says. "That was a regulatory-induced lending crunch. One of the issues we're concerned about is this:
do the regulators shoot the economy in the foot?"
That is a question that many originating banks admit they have not considered yet. Certainly, JP Morgan and its
brethren never want to see another year with a scandal like that of Enron again. That will be a powerful incentive to dish out
more pricing ultimatums to historically recalcitrant corporate CEOs.
If that means tighter credit, it might also mean better discipline all around.
The Banker

Feeding Frenzy
On Jan. 23, a week after investigators from the Tokyo District Court Public Prosecutor's Office raided the
headquarters of Livedoor, the Internet company founded a decade ago, Takafumi Horie and three other executives were
arrested on suspicion of securities fraud. The 33-year-old tycoon has since resigned as CEO, leaving his company in
disarray, its stock down 80% since the raid. The question now: Will the rough-and-tumble style of capitalism that Horie
pioneered be another, more far-reaching casualty of this debacle?
In Japan, the homeland of Sony, Toyota and Toshiba, manufacturing is still widely regarded as the only honorable
industry. Organic growth is esteemed above all, and many large companies still disdain the idea of mergers and
acquisitions. To this day, there has never been a successful hostile takeover in Japan. Horie looked to smash these
conventions. Rather than expanding slowly over many years, he discovered he could generate outsized growth by rapidly
acquiring smaller, financially weaker prey, typically using Livedoor stock as the currency.
He cobbled together an empire by purchasing no less than 50 firms, often with the help of so-called special-purpose
entities, stock swaps, and other sophisticated financing techniques that are fairly routine in most mature economies, but are
still regarded as alchemical in Japan. With the growth his acquisitions provided, Livedoor's stock took off, enabling Horie
to buy more and bigger companies. Investment banks, always hungry for lucrative advisory work, helped out.
Horie's ability to turn his tiny company into a behemoth with a market value as high as $8 billion helped spark a
broader M&A boom. Rivals in Japan's go-go internet industry learned that they too could grow by gobbling up corporate
minnows. Terrie Lloyd, an M&A consultant, says he encounters more and more Japanese investors who are interested in
buying a motley batch of companies, pasting them together into mini-conglomerates with dubious business merit, and
flipping them via an IPO.
But as Livedoor's woes show, a get-rich-quick, growth-by-acquisition strategy can be rife with risk. Unable to
achieve fast enough growth through normal business operations, it allegedly misled the public in order to goose its stock,
sell some of its shares, then pocket the proceeds as profits.
The Livedoor fiasco has highlighted inadequacies in Japan's accounting rules, which are not equipped to handle this
brave new world of special-purpose entities, stock swaps and other financing arcane. But Tokyo is moving quickly to
correct these deficiencies and restore confidence in its regulatory stringency.
Time

• Text 3. Translate the text in writing.

Tough Questions for AIG's Auditors

Regulators are probing if PwC let the financial shenanigans slip through

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 Where were the auditors? Now that American International Group Inc. has admitted to a clutch of accounting
improprieties and its mulling whether to restate its past results, an all-too-familiar question is emerging: Why didn't the
auditor catch what was going on?
Were misdoings hidden from AIG's longtime auditing firm, PricewaterhouseCoopers, or did the firm turn a blind eye
to problems it should have seen? Indeed, some of the searing heat that has so far felled AIG Chief Executive and several
other execs could soon scorch the $175 billion accounting giant. "I'm sure they will be under suspicion," says Edward Ketz,
associate professor of accounting at Pennsylvania State University. Because of its role as a dominant force in auditing and
accounting for insurance companies, PricewaterhouseCoopers's work for the outfit is bound to get an especially close
going-over from regulators and shareholders alike. Certainly, the outfits were close.
More important, PwC was AIG's auditor through its long years of questionable dealings. AIG said that deals with
Barbados-based insurance company, for instance, may have been incorrectly accounted for over the past 14 years, because
an AIG-affiliated company may have been secretly covering that insurer's losses. If AIG has to unwind its dealings with the
Barbados company, it may be forced to take a big earnings hit.
More recently, PwC appears to have dropped the ball on the now-notorious reinsurance deals between AIG and
Berkshire Hathaway Inc.'s General Re Corp.
In its statement, AIG has admitted that some of its paperwork associated with the deals was improper - but it's not
clear whether the deals were illegal or how much PwC was told about them. AIG says much of the information only
recently came to light. And PwC could have been duped or denied information.
But given PwC's long-standing relationship with AIG, the thoroughness of its auditing over many years will surely
come under question. ''These seem like things you'd expect an auditor to look at," says New York attorney Gerald Silk, a
plaintiffs’ lawyer whose firm has brought cases against Arthur Andersen and other big auditing firms. "There are sufficient
red flags". PwC declined comment, citing client confidentiality requirements, although the firm is said to be cooperating
with investigators.
How vulnerable could PwC be? Already, institutional shareholders, who sued AIG last fall when its stock began a 21
% plunge amid the investigations, are considering roping the auditing firm into class action.
PwC's level of culpability could take years to sort out. Just what the firm knew, or should have known, is bound to be
a much-contested issue. Already, though, it is looking at a hefty blemish on its role as a leader in insurance accounting. The
growing tumult born of AIG's questionable accounting is just beginning.
Business Week

• Text 4. Translate the text in writing.

Watchdogs with Eyes Wide Shut

As investigators pore over the books of AIG, it's becoming clear that for years regulators failed to detect lapses
Where were the watchdogs? State and federal investigators are examining the accounts of insurance giant American
International Group Inc., drawing out super-investor Warren Buffet and sparring with ousted AIG Chairman and CEO
Maurice Greenberg.
But the feverish enforcement activity obscures the fact that AIG's admitted misstatements — so far worth, by the
company's estimate, $1.7 bn to shareholders — and other industry transgressions went undetected by many of the same
agencies, in some instances for 14 years or longer.
What's emerging from the probes is a portrait of failed regulation. Unlike banking or Wall Street, which answer to
federal regulators, the $1.2 trillion insurance industry is overseen by small, usually obscure state offices.
Outgunned by the insurance giants, state commissioners, interested in pleasing voters, usually focus on such
consumer issues as taking complaints on auto and homeowners' insurance.
Many admit that they're out of their depths on sophisticated financing deals with offshore reinsurers, like those that
fogged AIG's books and snarled Berkshire Hathaway Inc.'s General Re Corp. subsidiary in disputes from Memphis to
Melbourne. '"State regulators are doing their best but they are not equipped to police multistate or international scams," says
Jay Aughtman, a lawyer who represents insurance regulators in Tennessee and other states.
The obvious solution: national regulation. But even absent a strong new federal agency, current watchdogs can do
more. The Securities and Exchange Commission must use its broad authority to review filings of public companies to focus
on insurers' financial reporting until it's confident the industry has cleaned up its act.
Auditors, too, must become more vigilant. The suspect deals at AIG bear an eerie resemblance to special purpose
entities that brought down Enron. Like the SPEs, the reinsurers AIG used were supposed to be independent — but were in
fact closely linked to the parent company.
Accounting-rule writers must also move faster to clarify standards for ''structured finance" — a category that includes
off-balance-sheet SPEs and the reinsurance that AIG allegedly used to beef up its numbers.
Insurance is a devilishly complicated business, and the industry often plays by no-holds-barred rules. "Insurance is
like the Wild West — it makes Wall Street seem quite orderly and gentlemanly," says an analyst. It's also increasingly
sophisticated industry in which players take advantage of every international loophole available to move operations
offshore in order to decrease scrutiny and cut tax liabilities.
In this high-stakes business, regulators can't afford to be caught napping. When they snooze, investors lose.
Business Week

• Text 5. Translate the text orally.

Goldman's German Revolution

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 Anxious employees at Germany's huge retail drugstore chain Ihr Platz (Your Place) were braced for the worst a year
ago. The $840 million company, based in northern Germany, had seen its sales shrink by over 40% in five years and losses
mount as a new generation of family managers blundered and successive chief executive officers failed to stem the decline.
The 125-year-old retailer was technically insolvent — a condition that would normally doom a German enterprise to
liquidation.
But an unlikely rescuer appeared on the scene: Goldman Sachs Group Inc., the U.S. investment-banking giant. Ihr
Platz's woes had hit the radar screen of Goldman's London-based restructuring group, a 30-strong team formed two years
ago to develop a European business investing in distressed debts and turnarounds. By January of this year, a Goldman-led
consortium had snapped up all of Ihr Platz's $144 million in bank debt and, working with the shareholders' trustees, sent in
experts from Alvarez & Marsal, a New York turnaround specialist. When discussions with other creditors bogged down,
Goldman bought out the remaining bank debt and in May pushed Ihr Platz into insolvency.
Goldman's maneuver would hardly raise an eyebrow in New York or London. But in Germany it was revolutionary:
The American firm pioneering Germany's case of a Chapter 11-style restructuring under a little-used 1999 law — a test case
that could well spur many more such workouts and galvanize industrial overhauls in Germany. Unlike Germans, Americans
and British use insolvency as a strategic tool to implement a turnaround. They don't see bankruptcy as a stigma but as a
viable alternative if out-of-court restructuring fails.
Business Week

• Text 6. Translate the text in writing.

Another Year, Another Scandal

LESS than two years ago, the spectacular bankruptcy of Parmalat, a family-controlled Italian dairy group, sent shock
waves throughout Italy. It was the biggest scandal in European corporate history, revealing a E14 billion ($17 billion)
accounting hole that had grown over a decade of deception. The saga cast regulators, bankers and auditors in a desperately
unfavourable light for not spotting the fraud much more quickly than they did.
Europe's Enron offered a chance for the comprehensive reform of Italy's financial regulation titat it so badly needs.
Yet the growing scandal over the contested bids for Banca Antonveneta by Banca Popolare Italiana (ВРГ) and ABN Amro,
a Dutch bank, shows that this opportunity was instead comprehensively missed.
In the first weeks after the Parmalat scandal erupted, reforms were introduced at surprising speed. Just before
Christmas 2003, new insolvency legislation was pushed through, inspired by America's Chapter 11.
The government was also keen to improve financial regulation. Giulio Tremonti, the finance minister of the moment,
wanted to replace the existing hotchpotch — Italy has four financial regulators other than its powerful central bank, all
toothless and understaffed-with one strong super-regulator, an Italian equivalent of Britain's Financial Services Authority
(FSA). Mr Tremonti also tried to replace the central bank governor's current job for life with a term limited to seven years.
This provoked the first of a series of clashes between Mr Tremonti and Antonio Fazio, governor of the Bank of Italy.
Mr Tremonri criticised Mr Fazio for failing to spot the massive accounting fraud at Parmalat. The central bank could have
acted on warnings that bankers were financing a house of cards, he said.
Mr Fazio, though, gained the upper hand, and Mr Tremonri was forced to quit. His proposal was reduced to a draft
law calling for the replacement of Consob, the securities market watchdog, with an Authority for the Protection of Savings,
with various responsibilities and resources pinched from the central bank and the antitrust authority. A limit on the central-
bank governor's term remained in the draft law but the law itself is still pending in parliament.
Latest developments in the soap opera that the takeover battle for Antonveneta has become have revived discussion
of
Mr Tremonti's proposal. After ANP Amro announced in March that it would bid for Antonveneta, BPI raised its
small stake in the bank to 29% in several steps that involved allegedly illegal financial manoeuvres, now the subject of
investigation. The central bank approved each step.
At the same time, lawsuits and arrests related to Parmalat came as a timely reminder of the fallout of that gigantic
corporate scandal. Did nothing change, then, in Parmalafs wake to prevent this banking mess?
The Economist

• Text 7. Translate the text orally.

Digging out at Allianz

The German financial-services giant is back in the black — but still struggling
WHEN MICHAEL Diekmann took over as chief executive of Allianz last April, the sprawling Munich financial-
services empire was mired in its deepest crisis since World War II. The company's mainstay insurance business had been
hammered by payouts for claims related to terrorist attacks and natural disasters, its assets were withered by a plunge in
equity markets, and its Dresdner Bank subsidiary was swimming in red ink.
Critics questioned Allianz' financial stability after it posted a huge $1.45 billion loss. There were skeletons
everywhere. "Whenever they pulled open a drawer, they'd find anotiier problem," says Sven Janssen, who follows Allianz
for Metzier, the private bank in Frankfurt.
A year later, Allianz still faces huge challenges. But analysts say it's on track to emerge as a much stronger
competitor to global rivals. The U-turn comes after Diekmann & Co. cut $2.3 billion in costs by slashing head count,
auctioning off noncore holdings such as its stake in British insurer Ml. Assurance and AGF Life & Pension Brazil, and
revamping key subsidiaries such as U.S. property-and-casualty underwriter Fireman's Fund Insurance Co. Investors have
taken notice of the changes: Allianz' share price has risen 77% in the past 12 months.

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 "We have made significant progress," says Diekmann, 49. "And the capital market has acknowledged our efforts."
Business Week

• Text 8. Translate the text orally paying attention to the words relating to food. Can you explain the choice of these
words?

A Dedicated Enemy of Fashion

Most companies claim to run their business for the long term. Nestle is one of the few that really does
PETER BRABECK is used to the name-calling by now. Boring, lame duck, sleeping giant — he has heard them all.
Sitting in his office in Vevey, overlooking Lake Geneva, the chief executive of the world's biggest food company is almost
proud that Nestle has been dismissed as dull for much of its 136-year history.
What worries him far more are accusations that the Swiss group is swapping a consistent, long-term strategy of
controlled expansion for an unbridled acquisition spree to pep up its growth rate — and that it is doing so just when
dullness is back in fashion in the business world.
By any definition, Nestle is already a giant. It owns an array of global brands, including Nescafe, the world's
bestselling instant coffee.
The company is keen to grow even bigger, and acquisitions have a role to play. While most of its previous takeovers
were small, now Nestle has acquired a taste for big, expensive bites, and Nestle's finance chief, has even said the company
would sacrifice its cherished AAA credit rating for the right deal.
For Mr Brabeck, there is no contradiction here — and certainly no change in strategy. As he points out, acquisitions
have always been part of the Nestle way, with bouts of feeding usually followed by periods of digestion.
Nor does Mr Brabeck see anything wrong with a streak of opportunism, even at a high price, when a "filet mignon"
comes up for sale. "They are very rare, those pieces," he says. "When you have such an opportunity, it fits strategically and
you want to be a leader in that area, I don't see why you shouldn't act." By this definition, Ralston Purina was pure filet
mignon — as, he concedes without bitterness, was Bestfoods, which was snapped up by Unilever, his nearest rival.
He describes Hershey, perhaps a little disingenuously, as "entrecote" — a slightly inferior cut of meat. After all,
with a 43% share of American confectionery sales, it would give Nestle a big lead in the world's biggest chocolate market,
where the Swiss group is currently number three.
The Economist

Notes
filet mignon [filemi'njon]- Fr. a thick, round cut of lean beef tenderloin broiled
entrecote [antrekot] - Fr. a boned rib steak

• Text 9. Translate the text orally. Make a list of words and phrases used metaphorically to describe the company's
plight.

More Pain, Waiting for the Gains

Drastic action as GM's cash pile runs down
LESS than three months after announcing plans to cut 30,000 jobs and close five of its assembly plants — moves
described as "tough medicine" by Rick Wagoner, its chief executive — General Motors has gone back to the doctor for a
fresh prescription. And this time, it seems, few connected with the carmaker will walk away without feeling some of the
pain.
GM now plans to slice its dividend in half, while capping health-care coverage for some retired workers. Executive
pay will be cut by at least 10% — Mr Wagoner himself will lose half his pay.
There is also demand to "euthanise" several of the carmaker's most damaged brands, Buick and Pontiac
And while GM cuts dividends, jobs and benefits, Toyota keeps powering ahead. The Japanese firm is still gaining
market share in America from both GM and Ford, and recently reported a quarterly profit of more than $3 billion.
Alarmingly for GM, Toyota plans to boost its American sales by 5-10% this year. If GM's real ailment is competition
from the likes of Toyota, the fear is that no amount of surgery and liposuction will provide a cure. "It is clear now, more
than ever, that we have a shared fate," Mr Wagoner said of the union, after GM announced its new deal with the UAW. The
words have a slightly ominous ring to them.
The Economist

«Морган Стэнли» увольняет сотрудников, чтобы оставшиеся лучше работали

«Морган Стэнли» (Morgan Stanley) увольняет более двух десятков инвестиционных банкиров (примерно 7%
управляющих директоров, работающих в инвестиционно-банковском подразделении). Источники утверждают, что
таким образом банк хочет добиться большей отдачи от остальных сотрудников и повысить в должности молодых
банкиров раньше, чем их успеют переманить конкуренты. Некоторые считают, что сокращение рабочих мест
умерит аппетиты сотрудников, ожидающих бонусов по итогам года.
Руководство «Морган Стэнли» недовольно тем, как трудится часть банкиров, получающих немалые деньги,
как говорят, бонусов по итогам года. Масса людей, получая крупные компенсации, работает спустя рукава.
Неудивительно, что один банкир назвал увольнение в «Морган Стэнли» "хорошим стартом". Теперь другим
инвестиционным банкам, сталкивающимся с этой проблемой, будет проще расставаться с лентяями. «Морган
Стэнли просто опередил остальных», — говорит банкир еще одного инвестиционного банка. Пресс-секретарь
«Морган Стэнли» от комментариев отказывается, но источники, знакомые с этим планом, говорят, что сокращения

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 не касаются какого-то одного подразделения или региона, они призваны стимулировать сотрудников, а не
сокращать издержки.
В последнее время круг обязанностей инвестиционных банкиров меняется. Многие уолл-стритовские банки
стали требовать, чтобы банкиры, имеющие хорошие связи с высшим руководством корпораций, не ограничивались
организацией поглощений. Теперь им приходится заниматься продажей продуктов или услуг, доход от которых
идет подразделениям продаж и трейдинга. Часть руководства «Морган Стэнли» и раньше понимала, что реформа
инвестиционного банковского подразделения необходима, но из-за длившегося более трех месяцев конфликта
бывшего гендиректора Филиппа Персслла (Philip Purcell) с акционерами были сильны опасения, что банкиры
начнут переходить к конкурентам.
Проводить реформу выпало Мэку. Став гендиректором «Морган Стэнли» в июне, он немедленно начал
кадровую чистку во всех подразделениях. Мэк — знаменитый борец с издержками (за это получил прозвище «Мэк-
нож»). Но увольнения в «Морган Стэнли» он затеял с другой целью — чтобы избавить банк от балласта. "Все
задумано, чтобы мотивировать людей к продуктивной работе, а не для сокращения издержек", — говорит один из
сотрудников банка.
Верхнюю ступеньку в иерархии менеджмента «Морган Стэнли» занимает небольшая группа банкиров, от
которых банк получает наибольшую отдачу. Со временем они должны уступить место молодому поколению.
Руководство «Морган Стэнли» рассчитывает на то, что, уволив "непродуктивных" банкиров, оно сможет
сохранить молодые кадры после сезона бонусов, который уже не за горами. Конкуренты нередко переманивают
чужих сотрудников, которые недовольны бонусом, либо тех, кто готов уйти, как только получит вознаграждение
по итогам года. Предвидя это, Мэк потребовал, чтобы управляющие директора пообещали, что работать на новом
месте начнут не ранее чем через три месяца после увольнения. Если до 30 ноября они такого обещания не дадут, то
значительную часть бонусов получить не смогут.
Ведомости

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