Minimizing executive pay expense through consolidation of duties — instead
of the more-often-reached-for cut to front-line staff — is responsible for a
"significant" chunk of the net profits reported in RND's last quarterly
statement, says its COO turned CEO/COO.
Effected back in 2007, that corporate downsizing, specifically, the top
executive's move over to the chairman's seat and the transfer of his duties to
Kenneth Donathan — then the chief operations officer and now the company's CEO
as well — allowed RND to eliminate a senior executive salary expense. That was
without incurring any additional salary increases despite Donathan's extra
duties at the holding company, with both a commercial rental property division
and an electronic ticketing reservations unit.
"It was by necessity that we were forced to be ahead of the curve," Kenneth
Donathan told Guardian Business Tuesday. "And it is now being done by businesses
across the U.S."
The creative thinking is responsible for a "substantial" percentage of the
$82k RND was able to lop off of its administrative costs for the nine months
ended November 30, 2009, compared to the same 2007 period. Those results were
released just this month in a statement highlighting a net income jump of $213k,
again comparing year to year results. The gain is really a story about cost
containment, given revenue actually slid by about $15,000.
The gargantuan size of executive pay in the U.S. means that savings through
the consolidation of executive teams has been even more rewarding, that
according to an April issue of leading industry periodical BusinessWeek. It says
an increasing number of companies are taking a serious look at their CEOs and
the number of hours they log in a week. The examination suggests to some that
those top execs are essentially operating more as consultants and final arbiters
than taking on responsibility for the day to day stewardship of a company.
While some companies have chosen the same course as the publicly-held RND,
others have put their CEOs on the clock, paying them for the hours they actually
work. The latter is most often with the assumption those execs are then
contractually free to split their time between the company and their own private
business. In RND's case, its former CEO returned to his legal practice.
The scheme is not for everyone, or rather not every operation, but may work
best with small and medium sized businesses as well as those focused on one or
two divisions. It's also worth noting that Donathan stops short of recommending
it to others in The Bahamas now struggling to get a handle on their costs. It's
for each of them to decide for themselves, he says.
"It is gratifying to know that the plan we came up with is consistent with
plans being created in the U.S. as they put their own strategies in place to
deal with the challenging economy," Donathan told Guardian Business.
By VERNON CLEMENT JONES
Nassau Guardian Business Editor
Wednesday, June 24, 2009
RND anticipates value decline for Abaco property
RND Holdings is anticipating a positive end of a fiscal year-end report due
out in August - although waiting on the valuation of an Abaco property
expected to take a hit.
"It's because of the current market forces and I'm almost certain we are
going to take a hit," company CEO Kenneth Donathan told Guardian Business
Tuesday. "We're waiting on the valuation results."
He points specifically to the Abaco building the company constructed as a
movie theater but which now sits empty. Its rake seating and other cinema
infrastructure have been sold off, the company unable to find a renter in the
movie biz. The bigger problem has been finding a buyer willing to take on the
necessary internal construction needed to reconfigure the property from its
intended use as multi-plex to whatever it is they need it to be.
More recently, the recession and its effects on property value, particularly
in the Family Islands, has factored in to Donathan's expectations for a value
drop. The fears are not unfounded.
Last month, Guardian Business highlighted realtor assessments that Out Island
properties had suffered as much as a 30 percent hit over the last 18 months.
That coincides with a double-digit decline in air arrival numbers for the
destination.
A usually buoyant Abaco market has not been spared, with demand for its
commercial space also dropping. RND, a publicly held company with both a
commercial rental property division and electronic ticketing and reservations
unit, has been seeking a buyer for some two years now, said Donathan.
The likelihood of a negative reassessment of the Abaco building may be the
one dampening factor playing into year-end results due for release in August.
Still, the company has actually fared better than most.
For the nine months ended November 30, 2009 — results released earlier this
month — the company reported a net income jump of $213k, compared to the
year-ago period. Added to that, the company's property holdings in Nassau and
Freeport continue to perform, likely helping to compensate for any shortcomings
in Abaco.
By VERNON CLEMENT JONES
Nassau Guardian Business Editor
Wednesday, June 24, 2009