In 2006, corporate America's players experienced many record highs, and some learned the hard way that what goes up can always come back down.
The past year in business welcomed a new class of winners and losers and was marked by record highs (both good and bad), the rise of alternative energy and continued scandal in America's corporate halls.
Investors, on a roller coaster for the first half of 2006, found themselves on a record-breaking locomotive called the Dow Jones industrial average. The index of the nation's 30 biggest companies, which crashed through one all-time high after another since achieving its first close above 12,000 on Oct. 19, traded as high as 12,529.87 before dipping to its close for the year at 12,463.15.
Corporate profits and a pause in Federal Reserve interest rate hikes fueled the Dow's impressive streak. The Nasdaq and S&P 500 also fared well, but did not match the industrial average's record run.
Roaring equity markets helped some executives reap some records of their own. CEO of financial giant Morgan Stanley, John Mack, took home a bonus of $41.1 million. But even that astonishing sum was soon eclipsed by Goldman Sachs' Lloyd Blankfein, who netted a bonus of nearly $43 million.
All in all, Wall Street passed out bonuses of nearly $23 billion.
Record Hurts … As in: "Ouch, My Wallet!"
Not all the records set in 2006 were positive. The American driver felt the heat – literally — during the summer months as record crude prices boosted the average cost of gasoline above $3 per gallon, making even a quick trip to the market cost more than the gallon of milk needed for dinner.
But, the costly crude wasn't a pain to all. Oil executives and shareholders benefited as their companies reaped record profits. In fact, in 2006, thanks to high oil and gas prices, Exxon Mobil (XOM) reported behemoth earnings of $10.4 billion for the third quarter. That number nearly surpassed Exxon's own record for profit at a publicly traded company, when the oil giant earned $10.71 billion the fourth quarter of 2005.
Winner: Alternative Energy
Another segment of the business world buoyed by higher oil and gasoline prices was the burgeoning alternative energy sector. When President Bush uttered that the U.S. is "addicted to oil," the public's attention quickly turned to the wonders of new energy, particularly ethanol.
Companies like Archer Daniels Midland (ADM) saw their share prices soar, and auto giants like General Motors (GM) and Ford (F) launched campaigns to market their eco (and geopolitically) friendly vehicles.
Toyota's in the Fast Lane
The only problem, it seemed, is that Toyota proved in 2006 that it again was a step ahead of the U.S. auto braintrust. Tried and true hybrids like the Prius and more economical standards like the Camry proved more appealing to American car buyers, and sales at the likes of GM and Ford suffered. By some estimates 2006 was the year that pushed Toyota into the driver's seat in the world market, and many expect the Japanese company to surpass GM as the no. 1 automaker on the world stage.
Losers: Skilling to Prison and Dunn's Done
There was a tie in the category of "biggest business loser of 2006." And the title is split between former Enron CEO Jeffrey Skilling and former Hewlett-Packard Co. (HPQ) Chairwoman Patricia Dunn.
Skilling was sentenced to 24 years in prison for his role in the scandal that wiped out $60 billion in stock and $2 billion in pension funds, guaranteeing a spot in history books as one of the biggest corporate scandals of all time. His partner in crime, ex-Enron Chairman and CEO Ken Lay, died before he could be sentenced for his role in the debacle.
After first being forced to step down from the HP board for her involvement in what has become known as the pre-texting scandal, Dunn pleaded not guilty in November to felony charges for spying on reporters and directors in a scandal that sullied the reputation of one of Silicon Valley's most venerable and respected companies.
What Goes Up, Might Come Down
Can a $9 billion hedge fund firm be basically wiped out at the hands of one trader? Yes. Just ask Brian Hunter, the trader who in 2006 made natural gas bets that drained Amaranth Advisors of $6 billion in one week. That makes him a close second — behind Dunn and Skilling — in the year's loser competition.