The Pantagraph from Bloomington, Illinois • Page 21

THE PANTAGRAPH Classified r(0 Advertising rr SECTION MONDAY December 30, 2002 Inside CORPORATE CLOSEUP BUS IN Rachel Beck Lending a Jiiancl 75 Vice president looks to make products more accessible i I nil I By Kathy McKlnney PANTAGRAPH STAFF Name: Carl Sneed Age: 57 Title: Vice president of residential lending for State Farm Bank Duties: Sneed is responsible for mortgage lending for the bank, which was founded five years ago at State Farm Insurance corporate headquarters. He also manages lending programs and provides support for the more than 16,000 State Farm agents who represent the bank across the country An average day can involve managing day-to-day operations, examining the development of new mortgage products and "looking for ways of making our products more accessible, particularly to low- and moderate-income families," he said. Sneed was born on Chicago's South Side and attended a church that was across the street from Comisky Park, home of the Chicago White Sox. His father was a Baptist minister and moved the family to Blooming-ton to head Mount Pisgah Baptist Church when the young Sneed was 13. "We left Chicago May 19, 1958," said Sneed.

"I remember that date because there was a big block party" in the neighborhood that day and he had to miss it. The move from Chicago to the downstate community of Bloomington-Normal was a major shock, he recalled. He started school in the seventh grade at Irving Elementary School with "no more than a handful of other African Americans attending that school. There was maybe one other African American in my class. So, it was a shock not only moving from an urban to a rural area, but in terms of the majority in the classroom," Sneed said.

"The kids in my class were very friendly, and I remember the teacher being very open," he said, so the transition was fairly smooth. Sneed received a bachelor's degree in finance and a master's degree in finance and public administration from Illinois State University. He also met a mentor who was to start him on his first career step. "I met Dr. Alice Ebel.

She was head of the political science department and head of the (McLean) county board as well. She got me interested in public administration and I got an internship with the Town of Normal." When he finished the internship under then City Manager Dave Anderson and Mayor Carol Reitan, Sneed was hired as the town's first assistant city manager, a position he held for five years. During his years with Normal, Sneed said he met with a number of Twin City executives, including a number of bankers. It was through two of them, Stan Ommen, now president of State Farm Bank, and Craig Hart, retired head of National City Bank, that he "had a chance to make a change in careers." SEE HAND NEXT PAGE i United's stock plan doomed from beginning United Airlines didn't have a chance. The struggling carrier was counting on its employee stock ownership plan to help lift it out of its financial mess eight years ago.

But how could it, when just about every aspect of the ESOP the design, execution, membership was all wrong? Now, United is the blueprint for what not to do when creating an ESOP. Too bad it failed, because history shows that employee ownership can be a key driver to a company's success. "It had some fatal flaws from the start," said Patricia Kelso, who heads The Kelso Institute, named after her late husband, Louis. He is credited with creating the ESOP in 1956. Louis Kelso believed that the capitalist system would be stronger if all workers not just executives and outside stockholders could share ownership of capital-producing assets.

His hope was that employee ownership would raise morale and productivity Some evidence shows he was right. Companies with employee ownership grow on average 2.4 percent faster than they would have without the ESOP, according to the National Center for Employee Ownership in Oakland, Calif. In a typical ESOP, a company creates a trust to which it makes annual contributions of stock. Then the stock is allocated to individual employee accounts within the trust. It was back in the early 1990s when talk first began about an ESOP at United.

At the time, the airline had huge losses and worries were rising about its future. While the pilots pushed the plan, other labor groups weren't so keen. But they felt it might be their only option to keep the airline alive. The deal went like this: United workers agreed to substantial wage cuts and work-rule changes in exchange for a $4.9 billion loan to buy a 55 percent stake in the company. The ESOP was launched in 1994, and was'one of the largest ever.

It was greeted with much fanfare, even lauded by the Clinton administration. But there were problems. Big problems. The ESOP was bad by design. "The United model was a poor model," Kelso said.

"It was a last-ditch effort to save jobs." To start, it wasn't a full employee buyout. The flight attendants did not join because of some wrangling with management, and that created factions among rank-and-file workers, which linger even today Tensions became more strained as a result of a time limit on the ESOP, which is not often seen in ownership programs. Contributidns to employees were only made through 2000, so anyone joining United after that couldn't participate. How the ESOP was funded was also troublesome. Workers were asked to give wage concessions, and that money was used to create the fund.

The usual way is to fund ESOPs through corporate profits. When times were good in the mid-1990s and the stock price soared, the sting of the salary cuts didn't seem as important. But then concerns were heightened by the bear market on Wall Street. Another problem: The ESOP was introduced at a turbulent time for United. "United was trying to save the company from bankruptcy back then with its ESOP," said John Menke, protege of Louis Kelso and president of a San Francisco firm that specializes in ESOPs.

"That's not the way ESOPs usually work." All those problems were only exacerbated by strains long brewing between management and labor. At first, it looked like the two sides might resolve differences. Employees were grouped in teams across different business functions, working together to boost efficiency and cut costs. Management seemed open to ideas from workers up and down the ranks. The initial efforts paid off.

Absenteeism was down, and productivity went way up. United was soon being touted as a turnaround story. But that together mentality soon fizzled, and the strife between sides resumed by the late 1990s when new management came in and the open relationship with workers ceased. Now, United's ESOP will likely be wiped out when it emerges from bankruptcy Workers will likely lose The PantagraphSTEVE SMEDLEY Carl Sneed, vice president of residential lending at State Farm Bank, posed at State Farm corporate headquarters in Bloominqton. Euro turns 1, but older currencies still live on I throng at Aachen's open-air Christmas market.

"But the customers this year are a little reserved," said Clasen, 59. "They are stopping to recalculate in the old currency." If the euro was going to find easy acceptance anywhere, it would be in Aachen. People speak several languages, work and shop across borders, and are proud that their city was the headquarters of Charlemagne, who united much of Europe as Holy Roman emperor in the 8th and 9th centuries. The euro was introduced on financial markets in 1999 and notes and coins followed last Jan. 1, in an unprecedented currency switch that went smoothly for the most part.

But the difficulties of adjusting are borne out in the latest European Commission poll, which surveyed 1,200 people last month in the countries that use the euro. Only about 12 percent think in euros for major purchases. About half say they still have trouble counting their new cash, though the degree varies widely: 72 percent of Irish (one euro equals 78 old pence) reported no difficulty, compared with only 36 percent of French (one euro equals 6.6 old francs). SEE EURO NEXT PAGE ASSOCIATED PRESS AACHEN, Germany People in this cosmopolitan German border town are the first to praise the euro. After all, the 12-nation currency freed them from the need for calculators and extra wallets to handle money from Belgium and the Netherlands, just a few minutes' drive away And yet, when Aacheners look at a price tag, visions of old money marks, francs and guilders still dance in their heads.

They still figure prices in extinct currency and often blame the euro for inflation. In Germany the calculation is easy divide the old currency by two. Italians also divide the lira price by two, but then have to lop off three zeros. And Spaniards find the conversion of 166 pesetas to the euro so difficult that many shops still advertise in the old currency The result is strangely mixed feelings over the euro. Even as people universally admit it has made life easier, they have found their first euro-only Christmas shopping season haunted by the ghosts of currencies past.

"For us, it is much simpler now. The euro is practical," said Ursula Clasen, who no longer has to sort through different currencies while selling marzipan and chocolate to the multilingual (0 Associated Press People shopped at the Christmas market in front of the historic town hall in Aachen in western Germany earlier this month. Rachel Beck is the national business columnist for The Associated Press..