There are arguments–and vehement arguers–that home building should be a private company business only. Theory is, the three key constituent groups–home buyers, company associates/staff, and business partners and suppliers–are more than enough moving parts to bring any market condition, good or bad, into harmonious alignment. If a company is private, the courage of one's strategic conviction is then razor sharpened by having the principal's own skin in the game, as well as that of lenders that are entitled to be led into a risk comfort zone on a project-by-project basis.

Creating a corporate structure that supports going and staying public, accessing capital in the public markets, and remaining in compliance with Securities and Exchange Commission regulations is inimical to the spirit and culture of some of the nation's leading privately held home building companies.

John McManus There are probably days that management of the nation's largest residential construction companies, with their vaunted capacity to tap into less expensive money in the public equity and debt markets, might be inclined to agree. Like now.

We've hit a down cycle in real estate, and it may be that one of the important misplays to date among the publics' executive management teams has been their failure to keep shareholders reminded of how they must play hardball in a downturn. Veterans of home building express little dismay or surprise at how the business is going right now. But why, then, are so many of their stakeholders so taken aback by the turn of events? To further fuel their chagrin, 'tis the season of the announcement of 2006 executive officers' compensation packages.

As fast as the market is turning, it's difficult to separate the announcement of more grim guidance for 2007 performance from the conspicuously enviable compensation package for 2006. In most cases, CEO compensation plans triggered impressive bonuses and payouts that chief executives deserved based on terms and business assumptions developed late in 2005 and early last year.

What may be worth challenging, however, is whether there are alternatives to taking these bonuses for 2006 performance. On a case-by-case basis, leading companies could possibly spare firing some key divisional management talent if they defer acceptance of some of these bonus packages.

Given the the business' local nature, and the fact that a nationwide housing slowdown doesn't mean that operators can afford to be less effective on a submarket-by-submarket level, spreading the talent ranks thinner across the same or even more communities doesn't seem to make strategic sense.

The thing shareholders need to be reminded of is that CEOs and their brain trusts really earn their way in the hard times. It's not that executive comp shouldn't be more sensitive to earnings and shareholders' returns trends. But if a CEO can really lead, he or she is going to need to do it now. Best thing for executive management at the publics to do today is to move the compensation issue to the sideline and not let stakeholders continue to make it a noisy distraction as they lead their companies through the next 12 months.

The business reality we need to continue to refresh in our minds is this: Public equity and debt are not the tail wagging the dog, although that's the way many good operators and executives may still prefer to look at the arena. To look at best practices and smart strategy as mutually exclusive from the whims and fickleness of Wall Street investors is not just naïve but reactionary. Operational excellence, management brilliance, executional effectiveness, and plain old courage dwell in equal abundance among public companies as they do at privates.

The community-by-community nature of new-home building tends to accentuate the competing agendas of publics versus privates. The impatience of the money invested in one group plays ferociously against the patience of the money in the other. In harder times for all parties, the differing business models engender fiercer us-against-them tactics.

However, remember who you're really competing with: re-sales.