Anniversaries come and go, sometimes coinciding and even colliding. We’re putting this, our 25th anniversary issue of Business North Carolina, to bed three days after the nation commemorated the fifth anniversary of 9/11. I had asked Alex McMillan, who was on our editorial staff from 1994 to 1999 and is now a freelance writer in Hong Kong, to do a piece on Chinese workers as part of the package. He filled me in on what he’s been up to.

A native of Bristol, England, Alex came to BNC right out of Carolina, where he was a Morehead Scholar. He left for a job with what’s now the CNN Money Web site. “I spent two years in New York, reporting on the dot-com boom and crash and writing personal-finance features. We also covered the Y2K nonevent and partied like it was 1999. I remember getting worried about tech stocks being overhyped when a Sikh cab driver asked me about Cisco, which he’d bought the week before.”

In 2001, CNN sent him to Hong Kong to cover business for the Web site’s Asian edition. “I had never been here before and was startled on the way in from the airport to see the Chinese flag hoisted above many buildings. Even though I knew that Hong Kong now belonged to China, it was a revelation to see that manifested.” He followed Asian markets and companies and got to know the city. “I was sitting in what we call Rat Alley, a favorite little Thai restaurant off the main fray of the bar district of Lan Kwai Fong, when a friend at CNN called me to say a plane had crashed into the World Trade Center.

“That didn’t surprise me much — I had often gone up on the roof of my building in the West Village when I lived in New York and been impressed by the volume of air traffic in the sky. But when my friend called to say the second tower had been hit, I realized I would need to go to work.” He wrote some of the first coverage posted on the site, his main contribution a story on the reaction of governments around the world. “The next day, I wrote a piece pointing out how many people worked in the Twin Towers and which main companies were affected.”

With distance often comes perspective, and that’s what we wanted for this special issue. Publications, especially magazines, are accused of using anniversaries as an excuse for throwing orgies of self-congratulatory excess. We didn’t want to do that. Rather than traipse down memory lane — which we did in detail upon our 15th anniversary — we opted to try to tell how our economy got where it is and predict where it’s going. For the latter, we turned to another alumnus, Philadelphia freelancer Tim Gray, BNC’s former editor.

Alex, who left CNN in 2003 for freelancing, married a Hong Kong woman last year and became a father in February. The city, he says, is now home. “It’s hard to compare North Carolina with China, which often seems like a big factory, ready to make the world’s goods. It has been going through a rapid industrial revolution. But it’s facing pressure from lower-cost nations, with jobs moving to Bangladesh, Vietnam, Laos, Sri Lanka and the like. So China is changing, too, and I suspect will soon not just be the world’s factory but also its office, performing a lot of white-collar functions and creating an increasing number of service jobs.”

Maybe Holly Springs should hold a really big bake sale. But the town would have to sell a lot of cookies, brownies and cakes to make up the $11.8 million gap between what it has promised to spend on Swiss drug maker Novartis to land a vaccine plant and what it has on hand.

Town officials said in July that Novartis would invest at least $267 million to build a vaccine factory, which will create 350 jobs paying an average of nearly $50,000 a year. They also said in a statement that they had promised the company $8.3 million in incentives. What they didn’t mention was they also had committed to road and other improvements that brought the cost to $21.9 million.

Only about $10.1 million had been earmarked for the project by the town, state or other entities such as The Golden LEAF, the Rocky Mount nonprofit that disburses proceeds from half the state’s $4.6 billion share of the national tobacco settlement. It pitched in $800,000. “The town of Holly Springs is overextended and has significant gaps in meeting the demands of Novartis,” Town Manager Carl Dean admitted in a letter seeking $6 million from Golden LEAF, which anted up an additional $1.25 million. The town is asking for more state and federal funds.

Officials insist that the town of about 15,000 will keep its word, even if it has to borrow what it needs. “You’ve got us in a position where we have to say we need the money but also, at the same time, to say that we’re responsible and we’re not an 18-year-old out there with a brand new credit card,” Town Attorney John Schifano says.

Maybe not, but a town’s willingness to take such risks shows a flaw in economic-development policy, says Robert Orr, a former state Supreme Court justice and executive director of the Raleigh-based North Carolina Institute for Constitutional Law, which has sued the state to block incentives. “It certainly would appear to be a situation where a small municipality, in an effort to lure a large company to that particular location, was willing to get itself overcommitted without any real, adequate public oversight until the deal is done.”

Golden LEAF President Valeria Lee recalls one other town asking for help keeping promises it had made, but she wouldn’t identify it. “I don’t know anybody who would want to do it this way.”

The bloom may be off the grape in North Carolina. A worldwide wine glut left Yadkin Valley and other growers struggling this year to find buyers for their crop.

Not that they didn’t contribute to the problem. In 2001, there were 200 vineyards in the state, with 900 acres of grapes planted. Last year, there were 375 vineyards, with 1,300 acres planted. While Eastern North Carolina growers planted mostly native muscadine grapes, which are not part of the glut, others are growing European varieties such as chardonnay and merlot. Among them are farmers who had tired of the uncertainty connected with growing tobacco.

The increase in production, among other factors, had analysts predicting that North Carolina grapes from this year’s harvest, which began in mid-September, could fetch as little as $400 a ton, down from an average of $937 a ton in 2005. That could damage a burgeoning industry that contributed $79 million and more than 850 jobs to the state economy last year.

But Mark Friszolowski, who manages Childress Vineyards near Lexington, has another reason for the price drop: Most of the grapes aren’t very good. “Currently, there is a glut of mediocre grapes.” The winery grows only about half the grapes it uses and buys about 250 tons a year. Childress will pay at least $1,500 per ton when it finds a crop that meets his standards, Friszolowski says. Most Tar Heel grapes don’t.

The disbanding of the Old North State Winegrowers Cooperative in Mount Airy also fueled worries. It used grapes from 38 small growers to produce wine under one label, 38 Vines. Most of those growers were just learning the business, says former co-op member Tim Dowd of Flint Hill Vineyards in East Bend. The co-op ran out of capital in July before members had learned enough to produce consistently good grapes. But, Dowd says, “if you’ve got quality fruit, I think you can find a market for it.”

Even so, Flint Hill still is spending more than it makes, investing in equipment and outside expertise. “We haven’t gotten far enough in our business plan to see a profit,” Dowd admits. He hasn’t quit his day job as the owner of a machine shop. Low prices this year might not be enough to dissuade more farmers from planting vines. But, Friszolowski says, anyone caught telling farmers that grapes could replace tobacco as a cash crop “should be shot.”

He prowls the darkened warehouse at midnight, a jowly man whose heavy lids cover eyes that have seen gore, rotting flesh, the dead and the dead that won’t stay that way. In the dim light, Philip Morris moves with the Hitchcockian gait of a man who has beheld the unspeakable. But, wait, is that a gleam in those eyes? Yes. Halloween is near, the best time of the year if you’re one of the nation’s top 10 costume dealers and distributors. According to the Washington, D.C.-based National Retail Federation, $3.3 billion of sales waft around the holiday like a lovesick wisp of sewer gas waiting for an amorous spirit to drift by.

Morris, 71, is the patriarch of the Charlotte family that owns Morris Costumes Inc., which he and wife Amy founded in their basement in 1960. She started out renting and selling costumes he used in a traveling spooks-and-magic show, which often played movie theaters late at night. Even then, business was good. When phoning home that first year, he recalls, “I couldn’t figure out why I couldn’t get through. We were the only costume store between Washington, D.C., and Atlanta.”

One costume he sold — a $430 gorilla suit — may have made history, of a sort. He claims it clad a hoaxster in the famous 1967 film clip that purportedly shows a sasquatch — Bigfoot — strolling along a California streambed, stealing a glance over its shoulder before disappearing into the underbrush. In 1970, Morris Costumes opened a shop in east Charlotte and, in ’88, moved a few blocks to its 15,000-square-foot store, where it carries about 9,000 costumes for rent and 400 types for sale. Want a witch outfit? It’s yours for $48. A guy can turn into a chick magnet by draping a $28 red foam horseshoe, festooned with yellow polyester baby chickens, around his neck.

Here the surreal is real. Outside, traffic whizzes past on a busy commuter route. Inside, customers brush elbows with gaping ghouls and green aliens. Spider webs drape nooks where grinning corpses beckon with bony fingers. This time of year, few notice the tuxedos and dance apparel the store also carries. In October, its staff grows from nine to 15. Visitors fork over $15 apiece to roam the rooms in the back — Dr. Evil’s Asylum — where actors and animated props pop out of the dark. They might shiver at skeletons, but most never see the backbone of this business.

It lies 15 miles away in a cavernous suburban warehouse the company bought two years ago. Here, 40 employees shuffle the stock of 18,000 different costumes, wigs, accessories and masks, filling orders — about 250,000 items a month — for other retailers, most of them on the Internet. Morris won’t divulge revenue, but the store, which his wife runs, accounts for only about 10%. The warehouse is his lair, where he works with son Scott, 47, and daughter Terri, 48. Her sons Brandon, 16, and Sean, 20, pitch in.

As summer fades into fall, a rumpled Philip Morris haunts the aisles of the warehouse, resurrecting memories of his former lives. He and Amy were high-school sweethearts in Kalamazoo, Mich. Then she was his assistant in his magic show. Fifty-two years ago, he brought his bride to Charlotte, where he was a partner in a booking agency, all the while touring his Terrors of the Unknown Ghost Show and directing circuses. During the ’60s, he hosted Dr. Evil’s Horror Theater, a late-night frightfest on WBTV.

Memorabilia, pictures and posters from these incarnations line the walls and crouch in corners. A clown with the face of a rotting corpse rests in the lobby. A blood-splattered mannequin sprawls on a table. He works here from late afternoon to well past midnight — to avoid interruptions, he says. The eerie gloom is due to burning as few lights as possible to save money. Or so he says. There’s that gleam in his eyes again.

25 years made a world of change for economy

Michael Walden has monitored changes in North Carolina’s economy since joining N.C. State University’s faculty in 1978. A professor in the Department of Agricultural and Resource Economics, he prepares The North Carolina Economic Outlook, a semiannual forecast. In 2008, the University of North Carolina Press will publish The Modern North Carolina Economy: Origins and Prospects, his analysis of how it has evolved over the last 30 years.

BNC: What was North Carolina’s economy like in 1981?

Walden: It was very much dominated by tobacco, textiles, apparel and furniture. They made up 20% to 25% of the state economy.

How has it changed since?

Globalization has been very important. Deregulation of the economy has been important. Physical labor has become less important. Brainpower has been more important. The big four maybe collectively account for 5% to 8% of the state economy now. Industries like technology, pharmaceuticals, banking, food processing, vehicle parts and tourism have risen to take their place.

When was the tipping point?

In 1994. That’s when the North American Free Trade Agreement took effect and the General Agreement on Tariffs and Trade was updated. They dramatically impacted the traditional North Carolina industries. The protection that a lot of those industries, particularly textiles, had from foreign competition eventually ended. That’s been responsible for a lot of the movement of those industries.

How was deregulation important?

When the regulations limiting banks — both geographically and in terms of the services they offer — were removed, that spurred a tremendous jump in bank mergers. North Carolina banks, which had enjoyed some freedom within the state to operate, were well positioned to take advantage of that.

What in your research surprised you?

Two things. The conventional wisdom has been that globalization has hurt the North Carolina economy. Clearly, globalization has hurt the old North Carolina economy — tobacco, textiles, apparel, furniture. But many of the new North Carolina industries appear either to have not been adversely impacted by globalization or may have been helped by it.

The other surprise?

How prominent some of these new industries are. Banking alone accounts for 8% of the state’s economy. That’s a tremendously high figure. Another that comes to mind is vehicle parts. The press puts emphasis on South Carolina, for example, attracting foreign vehicle-manufacturing companies. North Carolina has not won any of those, but we have seen growth in parts production.

Why?

Those assembly plants in South Carolina have helped. Vehicle makers, generally speaking, want parts producers to be close.

What’s the downside of the economy relying so heavily on banking?

What if big discount retailers like Wal-Mart and Costco get that barrier between banking and commerce removed so they can move into banking? Wal-Mart is trying to do that. That’s a potential threat to our banks.

Many of the “big four” jobs lost were in rural regions. Any bright spots there?

Food processing, poultry and hogs. Those two at the farm level exploded over this time period. And those slaughterhouses are primarily located in the rural areas.

What about immigration?

It has helped the private economy by providing low-wage workers in sectors where there was a demand for workers. It has helped moderate prices for products. But the immigrants have been using more public-sector resources than they’ve contributed in taxes. Altogether, there is a net benefit.

Aside from education, what tools can the state use to adapt its economy?

The tax system is becoming more important to look at because we are in such a competitive environment. Businesses are much more footloose. Is the system one that encourages entrepreneurship and business location? At the same time, we need a system that raises revenue adequate to provide services like roads and education that business needs.

For Tom Pollan, owning a 2003 Ferrari 575 Maranello wasn’t everything it was cracked up to be. The $240,000 car demanded costly insurance and lots of maintenance. When he went to a shopping center, he parked at the far edge of the lot to avoid dings. “I found I wasn’t enjoying that car, and I wasn’t driving it very much. I’d go out in the garage and get in the old standby.”

He put only about 400 miles on the Ferrari in six months and then tried to sell it back to the dealer. That’s when he discovered reverse sticker shock. He learned that high-end cars depreciate about 15% a year.

Pollan kept the Ferrari. Still, he wondered if he could find a way for car enthusiasts to drive some of the world’s most advanced and expensive automobiles without the problems and worries of ownership. He knew of private clubs that gave their members access to restored classic cars. But the ones that turned his head were new, fast and glamorous.

His answer is Charlotte-based Privatus Ltd., which he founded last year. The company sells two-year memberships for $65,000, plus a $7,500 annual fee. Members can drive Privatus’ high-end automobiles for 50 days a year. They can choose the Ferrari that bedeviled Pollan or two cars that each cost more than $160,000 — a 2005 Ferrari F430 and a 2006 Aston Martin DB9. Privatus, which Pollan plans to expand to 50 members by next year, handles maintenance, insurance and storage.

Pollan, 48, caught the speed bug while growing up in Houston, where he raced motorcycles as a teenager. He earned a bachelor’s in finance and accounting from the University of Texas in 1982 and went to work for Chicago-based Arthur Andersen’s consulting division, which split off as Andersen Consulting in 1989. The next year, he was transferred from Houston to Charlotte, where he helped Bank of America and its predecessors integrate newly acquired businesses. But his love for cars kept growing. He even took race-driving lessons.

In 2004, three years after Andersen Consulting changed its name to Accenture, he gave up his partnership to look for a new career. Now, he’s focused on Privatus. He intends to buy new cars every two years — giving members dibs on purchasing the old ones — and hopes to build his fleet to 10. He has his eye on expansion to Atlanta, Dallas and West Palm Beach, Fla., but he has no timetable.

Privatus has five employees, but Pollan won’t reveal how many members he has signed up. He’s more forthcoming about the pleasures of exotic cars. There’s the thrill of power and acceleration, of course. But he says just sliding behind the wheel is a rush. “You can’t help but get … a big smile on your face.”

I am getting old. How I know is not the pink of my pate peeking through thinning thatch nor the persistent pain that predicts plastic and metal soon will replace gristle and bone in both my knees. No, how I can tell is by catching my reflection in the rearview mirror and not seeing a cell phone clasped to my ear like a wax-sucking remora.

Driving to and from work, both my hands grip the wheel, often as not the knuckles pearly white, while my mouth remains shut except to mutter curses, which, I confess, covers most of my commute. I know, I know: This kind of rage will kill me. But they — the cell-outs — likely will get me first, one of their two-ton mobile phone booths, its pilot engrossed in gabbing, weaving across the lane to smash into my truck. What is it these people talk about that is so fascinating? And why can’t it wait until they get out of the car? Or if it’s so pressing, why not pull over?

Cell phones are a valuable business tool, but most of these folks aren’t working. Even if they are, how safe is sharing the road with somebody whose mind is focused on making money? The other day, I pulled up to a stoplight between a woman in an SUV gesticulating with the hand not holding her phone and a guy in a company car, pen in his free paw poised over a notebook, both blabbing away. This had the makings of a sandwich, and since I didn’t relish the role of playing potted meat, I hit the gas at the first gleam of green. Predictably, neither of them noticed the light had changed until somebody behind them started honking.

I recall reading somewhere that research has shown talking on a cell phone impairs the ability to drive to the same degree as drinking enough alcohol to be charged with driving while impaired. I doubt that. Maybe it’s comparable with driving while lighting a crack pipe with a butane torch, but a boozer who would blow .08 is probably sober enough to at least try to drive so he doesn’t attract the attention of police. Some of these people driving under the influence of a cell phone are fearless. Or maybe it’s just that they’re oblivious, dangerous as somebody tooling down the road with a open bottle of vodka clutched between the thighs, especially here in Charlotte, where many of the streets resemble what a traffic engineer might design if he finished off a fifth before sitting down to work.

There’s MADD — Mothers Against Drunk Drivers — and I think we need DAMN — Drivers Against Mobile-Phoning Nitwits. The legislature made a good start this session, prying cell phones out of the hands of drivers until they reach 18. Let’s raise that to 80, which would be too soon for some of them.

A cruise aboard a state-owned ferry for politicians, economic developers and prospects ended as a public-relations shipwreck. The State Ports Authority wound up apologizing, and Gov. Mike Easley berated Department of Transportation officials who supplied the ferry.

Critics seem to forget that the authority, though a state agency, is expected to act like a business. Recruiters who helped sponsor the cruise July 1 note that representatives of Blue Hawaiian Fiberglass Pools were among the 200 guests. Later that month, the Largo, Fla.-based company announced it will open a plant near Rocky Mount. One reason was the $45,000 grant that the state offered, CEO Roger Erdelac says, but another was the hospitality recruiters showed them.

The authority had invited the VIPs to the Pepsi Parade of Tall Ships in Beaufort. To spruce up the Floyd J. Lupton, DOT took the ferry out of service on the Neuse River five days to paint it. Motorists complained that the smaller ferry substituted for it caused delays.

Most of the $30,000 cost of the cruise came from money the Ports Authority generates from docking and storage fees and other operations — it earned $11.7 million on $46.9 million revenue in its latest fiscal year — and from recruiters’ contributions. None of the $7.5 million of state tax money it received was used for the cruise. Ports Authority officials say it’s important to cultivate relationships with local and state officials and executives of businesses that ship by sea. But Chairman Carl Stewart apologized anyway, saying the cruise “probably wasn’t a good idea.” Some others disagreed.

“Aside from whether the ferry should have been taken out of service, was the activity going on legitimate? My answer is yes,” says Al Delia, president of North Carolina’s Eastern Region, a Kinston-based development group. John Gessaman, CEO of Carolinas Gateway Partnership, which recruits industry for Nash and Edgecombe counties, concurs. “Something like the cruise is a good opportunity to demonstrate the quality of life offered in Eastern North Carolina.” That helped tip Blue Hawaiian, says Dave Inscoe, executive director of the Carteret County Economic Development Council.

Because of such cases, ports officials aren’t about to abandon ship when it comes to marketing. But they’re drafting rules they hope will keep them out of hot water.

Tom Smith ran a big grocery chain for 13 years and was paid handsomely for it. In 1998, his last full year as CEO of Salisbury-based Food Lion Inc., he earned $3 million, according to the formula Business North Carolina uses to calculate executive pay. Adjusted for inflation, that would have been equal to about $3.6 million in 2005. That would put Smith at 20th on this year’s ranking of CEO pay at the 75 largest public companies in the state. He also starred in some of Food Lion’s television commercials, so couch potatoes around the state quickly grew familiar with — some, perhaps tired of — his boyish mug interrupting their favorite shows. Since retiring in 1999, he has dropped out of the public eye but not completely out of corporate boardrooms. These days, Smith helps set pay for executives at Concord-based CT Communications Inc. as chairman of its compensation committee.

He’s not unusual. Eight of the 10 highest-paid CEOs on the list — compiled by the Charlotte office of human-resources consultant Findley Davies Inc. — run companies where the compensation-committee chairmen are current or former CEOs. Four are, or were, CEOs of public companies. The theory is that few know as much about CEO compensation as CEOs. Few have reason to care as much. But is it wise to let CEOs, past and present, set their peers’ pay?

“There are two points of view there,” says Paul Hodgson, a compensation specialist at The Corporate Library, a Portland, Maine-based company that researches corporate governance. “One is that it is the fox guarding the henhouse and that they’re unlikely to be harsh with their fellow CEOs and say, ‘We need to be more modest about our pay levels here.’ Alternatively, they may actually have more authority in that situation and therefore be able to stand up to another CEO.”

Whether it’s the best practice, CEOs often are judged by their peers, and in any given year their pay could go either way. Twenty-three CEOs on our list took pay cuts in 2005, sometimes even when their company produced a positive total return, but 46 got a pay boost — seven even though their companies produced negative returns. The median pay change for CEOs at the state’s 75 largest public companies was 13.1% in 2005. That’s a smaller increase than the previous year but larger than the median total return in 2005 — measured from the first trading day of the fiscal year to the last — of 6.4%. And with a median pay package of $1.4 million, those CEOs won’t get much sympathy from their shareholders.

To get fat pay packages, though, CEOs don’t need shareholder sympathy, just their acquiescence and a strong demand for their talents. “Our system operates on the basis of the free market and of competitiveness,” says Bill Holland, former CEO of United Dominion Industries, a Charlotte-based maker of industrial equipment, and compensation-committee chairman at Lance Inc., a Charlotte-based snack maker. “Top-level executives command a lot of money. That’s just a fact.”

Setting CEO pay is a complicated process that usually takes several months and is part of a larger task of deciding what to pay all of a company’s top executives. “I do not like to see these incentives for the CEO much different than ones for the other top executives,” Smith says. “The amounts might be different, but the same things that guide him or her need to guide the other executives.”

At CT Communications — a local phone company that has branched into Internet access, wireless communications and long-distance service — discussion of CEO Michael Coltrane’s 2005 pay started in mid-2004. The compensation committee instructed Findley Davies to launch a survey of compensation at companies in the same industry — preferably eight or more. “The way I like it is if you can knock out the upper and lower extremes and still have a good listing of companies to balance out, because you never find a company that you can match up with exactly,” Smith says.

In most years, CT’s consultant presents the completed survey to the committee in September and fields questions about it. The committee may request additional information. In November, the full board of directors discusses the company’s goals. Around the first of December, the committee meets again and tries to translate those goals into a pay package that will motivate top executives and place them in the right spot on the industry spectrum. “If you’ve got a CEO and your company is doing average, I think you should pay him near the median,” Smith says. “But if you’ve got one that’s producing results better than those other eight, or better than seven out of the eight, then you should move the CEO higher.”

As at many public companies, CT’s Coltrane receives a fixed salary plus a bonus and other pay based on performance. In 2005, his annual bonus was contingent on the company hitting goals in, among other things, operating revenue; operating earnings before interest, taxes, depreciation and amortization; operating free cash flow; and customer growth. His long-term incentives were based on three-year growth in operating revenue, operating EBITDA, earnings per share and total shareholder return compared with a peer stock index.

The process varies from company to company. But many rely on consultants and try to peg CEO pay to company performance within its industry. The process is more detailed and defensible at many than it once was but still can produce results that are puzzling when pay is compared with company performance in the same year. Coltrane, for example, got a 57% raise in 2005, when CT’s total return was a paltry 1.4% and its net income dropped slightly. Most of the increase came from an option grant and long-term incentive payouts aimed at boosting future performance and weren’t influenced only by 2005 results.

Company performance can be affected by industry trends, long-term goals and extraordinary circumstances. CT’s bottom line was stagnant, but it’s in an increasingly competitive industry — with long-distance carriers, cell-phone companies and cable-television operators wanting bigger shares of local phone markets — and net income took a hit from the cost of laying more fiber-optic cable, which Smith says will help it compete long-term.

Likewise, it’s hard for outsiders to easily understand the deal Lance gave David Singer. He received about $6 million in 2005, ninth on our list. That’s more than six times what his predecessor, Paul Stroup, made in 2004 and more than seven times what Singer made in 2004 as chief financial officer of Charlotte-based Coca-Cola Bottling Company Consolidated. It was 35% more than Holland made in his penultimate year as CEO of United Dominion, though Lance is less than a third the size United Dominion was in Holland’s day, before it was purchased in 2001 by SPX, now based in Charlotte.

Lance didn’t exactly sparkle in 2005. Its total return was a minuscule 1.1%, and net income dropped 26%, though part of that decrease stems from the purchase of Tom’s Foods, a Columbus, Ga.-based competitor, for $38 million in October, Holland says.

Singer’s pay had to be big, in part, to lure him from Coke Consolidated, where he was CFO 19 years, Holland says. Besides, Lance historically hadn’t paid well. Most of Singer’s 2005 pay was in restricted stock that won’t vest for five years. “A great deal of his compensation was equity-based and will either pay out or not pay out. It’s valued at a point in time. But based on how the company performs, he may or may not earn that money.”

Although he once did the same kind of executive work as Singer, Holland is certain he can be impartial. After all, he answers not to Singer but to the company’s shareholders. “If a particular board or a particular committee is not in step with what their shareholders think they should be hey can kick them out. And that happens.” It’s more difficult at Lance than at some companies because its directors aren’t voted on annually, but staggered terms for directors also can help prevent precipitous purges by shareholders, Holland says.

Since it passed in 2002, the Sarbanes-Oxley Act has made boards and CEOs more accountable for corporate finances and more conscientious about explaining CEO pay. In July, the U.S. Securities and Exchange Commission issued rules that will force companies to clarify executive compensation even more. Among other things, they must report a dollar value for all equity-based compensation and a total compensation figure comparable with those at other companies. The new rules will close most loopholes companies have used to avoid disclosing full CEO compensation, Hodgson says, but he doesn’t expect them to give complete details about the performance measures used to set pay.

He would like shareholders to have a stronger voice in setting CEO pay, such as nonbinding votes on compensation-committee reports. A negative vote wouldn’t overturn the decision but would send a message to board members. Holland says such a vote could set bad precedent and blur the lines between shareholders, directors and management. “You could get down to saying, ‘Is the company setting the right capital-expenditure budget? Are they aggressive enough in their growth plans?’”

No matter how fully it’s disclosed, CEO pay isn’t likely to go down soon. People capable of running big public companies are in short supply, and heightened interest in CEO pay could, paradoxically, lead to more pay, says Hank Federal, principal and Southeast compensation-practice leader for Toledo, Ohio-based Findley Davies. “With the ever-increasing scrutiny around the businesses and what they do and how they pay these executives, they have less and less room for any kind of error. Therefore, it is contracting the pool of very qualified CEOs. When you’ve got people demanding and needing high-qualified CEOs and a shrinking pool, what does that typically do? It raises prices.”

Below is a partial breakdown of CEO compensation and company performance.

CEO Compensation v. Performance
(Top 10)

It might seem hard to believe as you’re glancing through the real-estate listings, but houses in much of the state are priced about right, says a national study by Global Insight Inc., a Waltham, Mass.-based economic forecaster, and National City Corp., a Cleveland-based bank. Median prices in Greensboro and Raleigh in the first quarter were about where they should have been, while houses in Charlotte were relatively cheap. Those in Wilmington and Asheville were the most overvalued. Dave Iaia is a senior principal at Global Insight.

BNC: What does it mean for a market to be overvalued?

Iaia: We calculate what we think the median price in that metro area should be, based on income levels and housing prices historically, and we compare that to where housing prices are right now. A metro area is overvalued when the actual median is higher than the median price that income levels in that area can support.

Who uses this study?

The home market is an area that a lot of people are interested in — economists, Realtors, bankers, other business people, homeowners. So much of people’s wealth is tied up in their homes. If the housing market fell apart, that would potentially mean bad things for the local economy.

Why is Wilmington so overvalued?

Wage growth has been fairly weak in Wilmington compared to other places in North Carolina. Also, in places that have a second-home market, you have outside demand driving up prices.

So the income of the nonresidents — second-home buyers — isn’t factored in.

The fact that we don’t have those income levels is a minus in our calculation.

Is it possible homes in Wilmington and Asheville aren’t really overvalued?

No. Those were really large overvaluations. There wouldn’t be enough outside demand to account for them.

Is now a good time to sell a house in Wilmington or Asheville?

We try to stay away from personal advice.

But you’d get a good price, given what the house is probably worth.

I wouldn’t frame it that way. When a market is overvalued, we would say that the conditions are favorable for price growth to slow down.

So to get the best price, you would sell now before prices start leveling off or going down?

Yeah. These markets have a greater risk of having price declines or flattening out than places that are undervalued or appropriately valued.

If you’re an investor, it’s probably not a good idea to buy a house in Wilmington or Asheville?

Yeah. I guess if you’re strictly an investor. Obviously, it varies from house to house, but those would be considered riskier markets.

Houses in Raleigh cost a lot, but you say they’re priced right.

Raleigh has a good job market. Jobs are being added at a decent clip, and they’re generally higher-paying jobs. When you have that, people can afford more expensive houses.

Charlotte houses are undervalued, so should investors buy property there?

It just means there’s less of a chance of the market turning down. It doesn’t necessarily mean the market is going to skyrocket up. But, yeah, it would be a more favorable market for investing.

How do prices in North Carolina metro areas compare with those in the rest of the nation?

Growth and prices have been unbelievable in the Northeast, Florida and California. Most of the rest of the country has not been as much of an issue. If you look at North Carolina’s four biggest cities — Charlotte, Raleigh, Greensboro and Durham — they are probably averaging out at the appropriate valuation, so North Carolina is about where it should be, which is good and which is abnormal.

Is the long-predicted burst of the home-price bubble nearly upon us?

We don’t think of a burst. We’re expecting a cooling and a slowdown. We’ve already seen some signs of that in spots around the country.

Because of higher interest rates?

Yeah. And people are concerned about there being a bubble, so that makes them antsy.

Do you expect any dramatic changes in North Carolina in the next year?

That depends on what happens to interest rates as the year goes on. Is the Fed going to keep raising rates, and what kind of pressure is that going to put on the entire real-estate market? Some people are concerned you might have increases in defaults and foreclosures. If that happens, it’s going to further increase supply, which will start to put more downward pressure on prices.