SANTA MEETS GOLDILOCKS

By Daniel Kadlec

NORTH POLE, INC.

SANTA CLAUS CHIEF EXECUTIVE OFFICER

To: Employees of North Pole, Inc. Re: Wages and other matters

This has been a truly great year. Our decision last December to stock nothing but stocks was more effective than even I had envisioned. We didn't just simplify our core business; we gave the people what they prized above all else and helped instill in them the boundless cheer and goodwill that come from being fully invested and watching CNBC all day. That goodwill inspired bountiful acts, such as Ted Turner's pledging $1 billion to charity and Al Dunlap's--the Grinch, to some--granting stock options to every last employee at Sunbeam Corp. Of course, we still have work to do. Managers of Oxford Health Plans padded their wallets by selling sleighfuls of stock this year, just before the price collapsed. That seems at odds with the giving spirit. O Ghost of Christmas Yet to Come, book some time with the HMO's execs in '98.

I'm pleased to note that the benefits of our restructuring and job cuts two years ago have kicked in, and we are now saving billions of dollars annually. Rudolph, you'll continue to guide my sleigh every year, not just foggy nights. We must remain vigilant on costs. But management--that's me--believes the days of wholesale downsizing are fast approaching an end for leading-edge companies like North Pole, Inc. At least for the next few years, our plan is to pursue profits the old-fashioned way: ship out more toys, not jobs. I've watched chronic cost cutting hamper production at the likes of Boeing and Union Pacific, and I will not allow our ranks to thin so far that we lose business to Toys "R" Us simply because we don't have the elf-power to stitch up enough Beanie Babies by Christmas.

And that brings me to compensation. Times are good. In fact, they are perfect. Elves, keep the presses running on those Goldilocks reprints, because I want to stuff one in every stocking as a memento of the "not-too-hot, not-too-cold" economy that has brought us rising stocks, full employment and low inflation. Incidentally, I've asked Fed chief Alan Greenspan to leave his board and join ours next year. He's a miracle worker worthy of our magical tradition. I'm studying his reply now. He says the odds are "not negligible" but that any "irrational exuberance" would be premature. I'll let you know whether that means yes or no--as soon as I figure it out.

In these glorious times, I pledge a generous new labor contract next spring. Our shareholders may cringe at those words. But I'm flat tired of losing my top talent to competitors. Our dollhouse team moved on to bigger things: building real houses in the Sunbelt. The Gap poached hundreds of our point-of-sale reps, signing them to lucrative deals to man its cash registers. Nintendo wooed away our Year 2000 computer debuggers to design next-generation Diddy Kong. In today's tight labor market, such skills are tough to replace. I've located a few jobless elves in Asia, but we're far better off giving up a little on the bottom line to keep our people happy here.

That said, I must caution against expecting too much. Raises won't be anywhere near the 30% threshold being doled out (again) to millionaire thirtysomething bankers and brokers. That's Wall Street. We at least pretend to live in the real world.