No doubt SARBOX and the fast rate of change at GM by Jerome York have both spurred Boards to finally take action on CEOS. For years many have been showered with bonuses even in the face of non performance. Now Page D1 10/1/06 of the Dallas Morning News reports that ‘some 1400 will get the boot in 2006, up form 1322 in 2005 and just 663 in 2004. For example the Bristol Meyers Board with nine independent directors just gave their CEO the boot for botching a deal to keep a generic Plavix off the market.
However I suspect there is another dynamic here suggested by Socionomics. Bull markets are inclusionary, rife with happiness and inclusionary moves. An example would be Oprah’s recent decision to fly all 1,100 of her employees to Maui for a week long vacation. At the same time as markets are approaching tops, however we are seeing this evidence of bear market behavior-firing CEOS that Boards are unhappy with. Firing is a negative and exclusionary event. And that wold typify the start of a bear market, not the continuation of a bull. Indeed, John Murphy of Stockcharts.com notes that only a few DOW Industrial stocks are making new highs. Yet the news makes it sound as if they all just hit new highs. This wold be a non confirmation of what is what is heralded as a new market top.
In the latest Forbes issue Garry Shilling suggests that homeowners have replaced saving with tapping into their home equity. He thinks that is coming to a screeching halt, by this December no less. He is predicting the recession will start by the end of this year for that reason.
A rash of negative feelings is no coincidence, the markets reflect negative as well as positive mood. Look for the mood to grow increasingly negative in the near term.
Dennis Elam
Professor Elam 
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