captioning sponsored by bt >> pl: its d-day for big bailed out banksnd automakers. the day their executive compensation plans were due shington. now pay czar k feinberg must balance what'sair to firms and to sreholders. we talk with an execute pay expert about what's at ske. >> suzanne: with earningseason winding down, we look at a growing divide in corpore results, earngs spurred by growth, and those fr cost cuts. >> paul: ford mor's boosting production as sh for cluers clears showroomsf new cars and trks. now the ministration says clunker uchers will be good for future purchases >> you he to be really smart out how you use your money nowadays, so coming here, it a better way to ve money. >> suzanne: th's jennifer, and

value is w she and millions of her freshman are staying clo to home for collegthis fall. >> paul: i'm paul kang. >> suzan: and i'm suzanne pratt. susie ghar is off tonight. this is "nightly busins report" fothursday, august 13. "nightlyusiness report" is made possible by:

this progr was made possible by contributions to yourbs statn from viewers like you. thank you. >> suzanne: go evening, everyo. toy is the deadline for seven lae companies to submit their executive compensation planso the obama admistration's pay ar. tomoow, kenneth feinberg will begin reviewing the pay plan for the rms still on government life suort, including tigroup and g.m. feinberg has 60 days taccept or reject e proposals. joining me now wh his thoughts on the hotopic of executive compensaon is charles elson. is a professor at the university of delaware and director of thweinberg center for corporate governance. lcome to the program. >> gd evening. good tbe with you. >> suzanne: you don like this ideaf the pay czar? tell me why you feel that way?

>> you hav totart with the term itself. czar isn't exaly a u. buness term. it connos somethingomeone fr the top dow telling folks how they should pay people. really up to the corporaon, it stts with the shareholders and the boa. you start with that sondly and moremportantly, i think he's an aolutely impossible sition. if he were to approve th pay as prented, then he'll take an awl lot of flack as will the blic in ter of the rat approved. if h turns down the reques and wers the amounts and the coanies don't perform, thell ble him saying the taxpayers have losbecause he didn't apove a comtitive pay structe. either way, it's -- i thi -- a bad idea. >> suzanne: considering theact he'sn a tou ot though, what do u think his liky findings are going to ? the metrics he uses probably ll be simar to the metcs the banks themlves used in creati the compensation packages. my guesss a lot of the stuff

gets approved. you have a bureaucraticrocess, if you will, for reviing the pay. it was cated by a bureaucratic process to begin th it's interesting, historicall, judges have always had the power that hs had to overturn pay yet th've almostnever used thatower because thr views, it's impossie to appropriately predic they, instead, ry on the good officeof the board of directors and focused inste on e board, whe they appropriatel stimulated and appropriately comprise in creating the pay pkage themselves. ey let the heavy lifting be done bthe board. same thingor a pay czar. it reay sort of puzzlese why you would create a pition to begin with. it wasn't congressionally authorized. 's sort of a n idea. paicularly using the word "czar" is a little scary especially for someone who i steep in.s. busines practices. >> suzanne: do youecognize this is highly politicized process th people are oraged by the levels of compensation in this country? so whas the soluti? ok, maybe it's not a pay czar

but howor should we limit executive compensation >> wel peoplehave a righto be angry. i'm one of them. i thinthe pay levels these institutions are appalng. it's a real problem. e question is how do you efctively solve it? the soluon, i think, comes om a very simple answe it has to do wit the board itself. you ve a board of directors of these institutionshat are, number one, indepdent of management and objective in viewing pay, numberwo, he lo of stock,ots of equity in the company so it's their own money that's beingaid, and, thirdly, are subject to a vibranelection process, that is if you don't likehat they're doing, get rid them. i think that's the appropriate respse. let the investorshemselves wi the boards work i out. and i think the lawas chang que a bit in theast few years to get us those goals. cots are very suspious of nonindependentoards. there's a al push for instors to haveboards holng lotsf equity. in delawe, for instance, in particular jt changed its corporatlaw as of august 1 to make t election process mor

brant by allowing dissident sharehder candidates to be reimbursed by the companfor their expenses in running agnst incumbent boards, which i think puts a lotof pressure on boards, vis-a-vis coensation to do the right things. >> suzanne: let me interrupt you for on second. is there an example of a company you can give u that has this sort of trul independent board that functions in the way that yowould like t see it function? >> oh, i think ther are lot of companies like thatoday, the thing is you d't hear about em because they're doing their jobs approprialy. you only he abt companies that get into troue. name a parcular company, i think, would aract all kinds strange attention to tm but i think you c be assured there e companies out there like that out the frankly, look, the system itself was problematic. we had lots of bores boards th weredominated by management. and thgoal has to be moving boards dominated by managers to boards that are dominated by the investors, the shareholds, and e think -- d i think the changes inhe law and investor pressure mns removing to that

direction. unilaterly, putting someone chge of revieng pay,uts the areholders out of the equation and subitutes a government autrity that i think will ultimately dohe wrong thinor result in pay that's ippropriate or more importantly yoll create subterranean p, that is pay where banks work their way around this examiner and create phantom pay that really will be rmful to transparencyy and ulmately shareholder interests. was a bad idea. suzanne: very interesting food for thought. thank you so mh for joining us us. thank you, good to be with you. >> suzanne: my guest this evening charles ellison. paul: home sales are starti to show some improvement, t foreclosures connue at a record pace. there were more an 360,000 foreclosure lings last month. that's up 7% from ju, and 32% higher than lastuly. as one ievery 355 households with a loareceiving a foreclosure filing. and ira rheingold of the national association of coumer advocates says few peoplare getting help, despite th

government's forecsure prevention efforts. >> the number of foreclores that are hpening in this country are historic. and it is not lesseng and i think at's the thing that is really shocking. the numberare not lessening despite effos to stop that. >> paul: foreclosure da firm realty trac says over ha of july's foreclosures camerom just 4tates: california, florida, azona and nevada. onall street, sellers took control in the ear going taking profits from yesterdas rally and shing disappointment over a dp in july retail sales. after 30 minutes of tradg the w was off 51 points and the nasdaq down nine points. an unexpted 4,000 rise in new jobless benefit claims cldn't keep stos in the red. the dow apped back with a 25

point gain at no. trading remain choppy througho the afternoon, but stocks tickeended higher anks to a well-bid 30-year t bond auction. the dow jos closed up 36.58 at 9398.19. the naaq gained 10.63 to 2009.35. the p 500 rose 6.92 to 1012.73. in the bond marketthe 10 year note gaid 30/32 to 100-6/32 puing the yield at 3.60%. >> suzanne: c.i.t. gup has been order to get its act togeth. the federal reservtoday called on the casstrapped lender to submit plans f maintaining sufficient capital and improng

its finances. capital plans ardue in 15 da, while the overall business plan is excted in 75 days. earlier this wk, c.i.t. warned it may be forcednto bankruptcy if bond lders don't accept a debtestructuring plan. the firm is one of t nation's largest small busiss lenders, rving hundreds of thousands companies. paul: almost all of the standard and poor'500 companiehave reported their cond quarter results. the number opositive earnings surises ran higher then usual. but as scott gury reports, it's hard toind consensus on wall streeas to where earnings are headed ithe quarters ahead. >> rorter: three out of four companies beat wall stre expectations wn they reported earningsor the second quarter. but there is considerabl disagreement on whher that is good or bad news. that is because w companies report an increase in sales. most managed to crease profit by cutting costs at generally meant laying of works and making those left work harder. many analysts argue there a limit to how far costs c be cut, and aa result, earnings

esmates for the quarters ahead have been lling. barry knapp of baray's capital says second quarteearnings quality was poor and forecas haven't fallen enoh. >> from ouperspective, those 2010 numbersre probably still too high and q-four estimate may be tooigh as well. so there was ait of sobering in spite of beatg expectations. the key ise from my perspective is iq-three is therany top line growth evident. >> rorter: but chris hyzy of u. trust has a different view. he sees profitimproving significantly inhe quarters ahead. >> most people wld say that the quality was low because t of it was driven by cost cutting. we think signicantly to the contrarywe think the quality was very, ve good. it's almost impossib to grow the top line bore you actually take care of the bottoline. so we're quite happyhat margins held in there and th goodositive story about all this is that they wento far. >> reporter: ty both can't be right.

if the cuts did gooo far companies would have to ve fast to add woers and ramp up production to meet demand. but athis point there is little evidence ofncreased demand there a huge dichotomy righ nobetween economist estimates of.d.p. for the recovery and analt estimates for earnings. analyst estimatefor earnings are thathis is going to be if anything a greater than norm cyclical recovery. whereas if you looat g.d.p. estimate, those are for much smalr than normal cyclical covery. so there's ainconsistency there th's a bit tough to reconcile. >> reporter: the tth may lie somewherin the middle. forward looking earnings forecasts may be too hh while g.d.p. forecasts are too low sct gurvey, "nightly business report," new york.

>> suzanne: volkswen-- europe biggest automaker, is about get even bigger. today, it agreedo pay nearly $5 billion for a 42% stake i poche. the al will create a group with 1car brands with expected sales aroundix and a half milliovehicles a year. it will also provi a boost for volkswag, which has ridden out the obal sales downturn better than its europn rivals. today's takeover enda months- ng process that started when porsche attempted to buy v.w and its pl backfired. >> paul: when it comeso u.s. auto sales, the obama administtion said today it will let consumers use "sh for clkers" vouchers toward future purchases. before today, buyers cou only purchase cars that were physical in showrooms.

the change in the bate program comes amid concerns deerships don't have enough cars on thr lots to make the incentiveery effective. meanwhe, that cash for clkers program has ford motor revvg up production. keep up with increased demand, ford now plans to ild nearly half a milln vehicles during the third quarter. that's an 18% mp from the same period last year. >> suzanne: cash for clunker may good for auto sales, but it failed to lift erall retail les last month. in jy, auto sales rose almost 2.5%. but factor that out,nd retail sales felly six-tenths of a percent. economists were excting a slight gain. americans cut spending on electronics, furniture and building materia. and departmenttore sales fell 1.5% percent-- tir biggest monthly decline is year. and,t was a bit of mixed bag today from wal-mart as the company issued its lest numbers. 88 cents a share, the retai gians second-quarter earnings were two pennies highethan expected. but wal-mart's sales fl 1.4%-- slightly more th predicted. e company attributed the

declinto cautious consumers buying only neceities. in response, the retaileplans to ramp up it co cutting efforts. despite the drop in les, wal- ma raised its full-year earnings outlook by a ckel. paul? >> paul: suzanne, wamart shares gained $1.37 to cse at $51.88. now let's ta a look at our stks in the news tonight.

>>uzanne: one surprising place whe you can see the effect of the receion: students' choice of clege. cheapeand closer to home seem to be the watchwords. and jeff yastine reports, that'seaching a lesson in owing pains for some schools >> reporter: long lis at the enrollment offic and long waits at the financi aid offi. they're a nereality for broward llege, near fort lauderdale, and many of th nation's oer community colleges. in this economy,ore new frhmen-- many more-- are choosing local sools like this one,nstead of traveling to traditnal and more expensive four year universies. nnifer jadotte would have preferred florida a& nearly 500 miles away, buopted for broward college instead. >> you he to be really smart out how you use your money nowadays, so coming here is a better way to save money.c >> reporter: classestart in about two eks, but orientation sessio like this one are already jam-packed.

broward college enrollnts have soed-- jumping about 12% this fallver last. with 60,000 studentscross nine campes, that's an unpredented level of growth ys college president j-david armstrong. >> last yearwhen we had a 6% enrollment increase with 60,0, we felt that w a challenge but this yeait's far more than that. and we're heing that throughout the nation. pecially in large urban area here in florida, orlando, mpa, jacksonvillereas are experiencing the same thin and around the natn-- the same things for commuty colleges. >> reporter: natnwide, there are near 1,200 community colles and for some enrollments have jumped by a much as 26%. but those swelling enrollmts are puing additional strains on the system. more stunts mean more clsrooms, more professors, and something else thas in short suly these days: more money. to cope, many community coeges arraising tuition and fees. and some, li broward college,

now offer fourear degrees in select, high-demd professions like education. presidt armstrong says broward college is also osting online clses to ease crowding. >> already about 15% oour enrollments are online crses or some form of learning. we are doing a lot of trning and upgrading the skills oour facuy-- new faculty-- to teach quity online learning. studentseem to prefer that more and more. >> reporter: online classeare like in the future for gina tino. ke so many other new freshme here, community college mes one thin it doesn't take a lot of moy out of your pocket and doesn't make youuffer financially. reporter: jeff yastine, "nightly business report," ft lauderdale. >> paul: tomorrow, our friy market monor guest is james stack,resident of stack financial manament and vestech research. >> suzannechemical giant dupont today unveiled ans to

streamlinets business. the dow componenis consolidating 23 businesses to 14-- part of aestructuring plan announced elier this year. dupont is also re-shufing its top manageme as its chief operating officeretires. the changes co as consumers are buying fewer pducts made with dupont'chemicals. >> pau it's being described as a new day between the feral aviaon administration and air affic controllers. both sides reached a ttative contract agreent today after years of antagonism. details were sparse,ut the contract includes more scheduling flexibility, a ne grievance revi process and a quote, "more equitable pay andard." the nation's 1000 controllers have been without a ntract since 2005.

>> sanne: here's a look at what's happening torrow. ly's consumeprice index is released alongith july industrial production. we'll alsoee quarterly results from railers abercrombie and fitch and j.c. penney. >> suzanne: banksset prices and real market valu night's "two ways to play" saysxpanding mark to market accounng could nip a recovery in the b. here's kevinepew of "myanville" and "minyanville's" vin depew. >> elier this year, the banking industry successfull

pushedhe financial accounting standards ard-- known as f.a.s.b.-- to relax so-cled mark-to-market rul, giving banks far more leeway inaluing assets on their balance eets. mark-to-market rules require banks to value these aets at current market pces, but during the financial csis the market for mansecurities simply vanhed. now, right as the financia crisis is ending, f.a.s.b. i considering plying mark-to- market rules to all financl assets. this would be nothinshort of disastrous, plunging banks rht ck into the hole they were i a year ago >> i agree, the expaion of mark-to-market aounting rules would almost certain push banks right back to the brinof insolvency, but the realitis yocannot use accounting changes to recalculate your y to prosperity. the probm is we have a vast amountf debt in our banking system. the governnt knows this, and in my cases is directly supporting this de while regulatory bodies, sucas fasb have aowed banks to over-value it. insolveninstitutions should be allowed to fail. banks ould be required to value their assets at realisc prices. but cause we have postponed reality for so long, it is doubtful we have theerve to

face it now. >> suzanne: that's "ghtly business rort" for thursday, august 13. i'm sunne pratt odnight, everyone and good night to you paul. >> paul: goodnig, suzanne. i'm paul kangas wishing all you the best of od buys. "nightly business report" made possiblby: th program was made possible by contributionso your pbs station from vwers like you. thank you. captioning sponsored by wpbt ptioned by media access group at wgbh access.wgbh.or