This Wall Street Journal ($) story reports on Royal Dutch/Shell Group‘s reassignment of Frank Coopman, the former top financial executive in its exploration-and-production business. Before a shakeup earlier this year, Mr. Coopman was the chief financial officer of Shell’s business units that were primarily responsible for booking Shell’s reserves. Disclosures earlier this year about its reserve accounting have prompted U.S. and European securities regulators to open investigations into Shell and led to industrywide constroversy over how energy companies estimate their oil and gas reserves.
Mr. Coopman’s reassignment is the latest in a reshuffling of senior Shell management since Chairman Philip Watts and Walter van de Vijver, former head of Shell’s upstream division, were fired last month. Shell’s board ousted Sir Philip and Mr. van de Vijver after Shell disclosed that it would reduce by 20% the oil and gas reserves it reports in filings to the Securities and Exchange Commission.

Oklahoma City-based Kerr-McGee Corp. announced plans Wednesday to buy Denver-based Westport Resources Corp. in a $2.5 billion stock deal that will significantly expand Kerr-McGee’s oil and natural gas holdings in Texas and the Rockies. The newly-acquired properties will increase Kerr-McGee’s daily production volume by more than a third, and will extend Kerr-McGee’s current Gulf Coast property portfolio into the Rocky Mountain area. The deal is expected to close in the third quarter of this year.

This Wall Street Journal ($) article reports on a new General Accounting Office disclosure that more than 60% of U.S. corporations didn’t pay any federal taxes for the boom years of 1996 through 2000.
Corporate tax receipts have decreased markedly as a share of overall federal revenue in recent years. In 2003, corporate tax receipts dropped to 7.4% of overall federal receipts, which is the lowest rate since 1983 and the second-lowest rate since 1934. Collections from the federal corporate income tax rose from $171 billion in 1996 to more than $200 billion in 2000. Receipts fell over the next three years, bottoming out at $131.8 billion in 2003, which is the lowest annual total since 1993. They are projected to reach $168.7 billion this year.
Predictably, politicians are already attempting to gain political mileage out the GAO disclosures:

“Too many corporations are finagling ways to dodge paying Uncle Sam, despite the benefits they receive from this country,” said Sen. Carl Levin (D., Mich.), who requested the study along with Sen. Byron Dorgan (D., N.D.). “Thwarting corporate tax dodgers will take tax reform and stronger enforcement.”

Of course, Senator Levin fails to mention that corporations simply pass higher corporate taxes on to consumers through charging higher prices for the corporation’s goods.
And from the other side of the political spectrum:

Conservatives depicted the GAO report as an argument for tax-code overhaul for both corporations and individuals. Dan Mitchell, a fellow at the Heritage Foundation, a conservative think tank, also noted in corporations’ defense that they have an obligation to shareholders to pay as little tax as they legally can.

While this is closer to the correct response than Senator Levin’s, it artfully dodges the fact that the Bush Administration — even with a Republican-controlled Congress — has done precious little to overhaul the utterly absurd federal income tax code.
Until either political party gets serious about tax reform in this country, expect to continue having stories such as this treated as a political football that is put away once the political campaign is over.

This NY Times article relates some airline industry executives’ frustration with the glowing media reports that low-budget airlines such as Southwest Airlines and JetBlue have been receiving recently. The article is a good summary of where the airline industry stands at this point, and includes the following classic Warren Buffett analysis of the industry generally:

Now anyone who really, truly understands the economics of airlines is probably too smart, or unstable, to be working for either an airline or a newspaper. As Warren E. Buffett has often pointed out, if one tabulates all of the airline industry’s finances since the day the Wright Brothers bounced into the air at Kitty Hawk in 1903, one will discover that, cumulatively, there has not been a single penny of profit. (Mr. Buffett has also suggested that, in hindsight, shooting down the Wright Brothers on that beach would have been a reasonable financial, if not moral, move.)

That’s the case made in this article.
On the other hand, many folks in the Houston business community are asking themselves: “How many times have I heard THAT before?”

B2Day reports that former Compaq CFO Jeff Clarke, who gained the nickname “the Raccoon” for his tireless promotion of the Hewlett Packard-Compaq merger, has been named CFO at the troubled software company, Computer Associates.

The Wall Street Journal ($) is reporting today that the IRS intends to challenge transactions that KPMG structured to shift tax obligations improperly to tax-exempt organizations, including charities, and away from shareholders of certain types of closely held corporations. Earlier posts involving KPMG’s role in allegedly abusive tax shelters are here and here.
The strategy at issue is the same as a shelter that KPMG developed that was the subject of a critical Senate Permanent Subcommittee on Investigations public hearing in November. KPMG marketed the shelter as the “S-Corporation Charitable Contribution Strategy” — a/k/a “SC2.” By declaring such transactions to be abusive, the IRS is indicating that the transactions will probably be disallowed for tax purposes, and that participants could be held liable for unpaid taxes, interest and penalties.
Meanwhile, a Manhattan federal grand jury continues a criminal investigation into tax shelters that KPMG sold. KPMG says it is cooperating with criminal probe.

Floyd Norris of the NY Times writes this column today in which he makes several interesting observations about stock options, albeit without any empirical data.
According to Mr. Norris, perhaps the wild swings in federal budget deficits might have been averted, companies would owe a lot less money, and less wealth would have been transferred from shareholders to corporate executives had politicians not forced the Financial Accounting Standards Board (FASB) a decade ago to back down from its proposal to force companies to record as a compensation expense the value of stock options given to employees.
Mr. Norris does make the valid point that most companies that issued options were concerned that the options would cause dilution of the company’s shares on the balance sheet. Accordingly, many companies borrowed money to repurchase shares, transferring wealth to corporate executives while the companies were taking on more debt.
As noted, Mr. Norris’ observations in this column are speculation at this point. However, he is certainly asking the right questions as companies and Congress grapple with the issue of how to handle financial reporting of stock options.
Meanwhile, David Foster has this defense for not expensing options.

This NY Times article reports on Poway, CA.-based computer maker Gateway Inc. announcement yesterday that it would close 188 retail stores and lay off 2,500 employees next week. Gateway now plans to sell products through third-party retail stores as well as directly to customers over its Web site. In connection with its recent purchase of eMachines, Gateway acquired longstanding relationships with national retailers like Best Buy, Costco, Circuit City and Wal-Mart. Gateway has been struggling in recent years to compete with the increasing power of Austin-based Dell Inc., whose direct sales strategy has made it the leader in the PC market. In 2003, Gateway reported a loss of $1.62 per share on revenue of $3.4 billion, and sales of Gateway PC’s dropped 24 percent over the year before. The company opened its first retail store in 1996 and at one time had more than 300 stores nationwide.

This NY Times article reports on a consortium of seven major nuclear energy-related companies applying for a license from the Nuclear Regulatory Commission to build a new nuclear power plant. The most recent nuclear power plant that was actually built received its license in 1973. Prospects for new reactor construction have recently become more encouraging because of persistently high natural gas prices stiff environmental requirements for coal power stations.