Flash! CEO ashamed of obscene
MILLER Syndicated columnist:
thought it impossible, but we may finally be getting a precise
measure of the outer boundary of corporate shame. It goes like this:
If you're a CEO who's already made $300 million from stock options by
cooking the books, then when the hoax is exposed and your wrecked
firm is taken over, a further $60 million severance payout makes even
one lesson to draw from the meltdown at Enron, the high flying
energy firm that turns out to have been a house of cards. The
business headlines make it sound as if CEO Kenneth Lay's decision to
waive his contractually guaranteed $60 million severance is the act
of a statesman, but a closer look suggests it's a signal of shame.
Enron as it grew from a pipeline operator over the last decade to
become the nation's largest energy trader, a business Lay basically
invented. But Lay's innovations apparently included some creative
accounting, through which Enron overstated its earnings in the last
five years by nearly $600 million, an inflation that helped boost
Enron stock. These were the same years when Lay exercised stock
options that gave him the bulk of the $300 million he's earned at the
Lay has presumably tucked most of those millions away in other safe
investments, Enron employees whose stock sits in 401(k) plans have
seen its value drop by 90 percent as the firm's woes have emerged.
between the boss and the rest no doubt helps explain the revolt that
took place the other day as terms of Enron's humiliating sale to
smaller rival Dynegy were being finalized.
word of Lay's severance package swept through the firm, "quite a
bit of concern was raised," said a corporate spokesman.
Translated, that means Enron's top traders the men and women
responsible for the bulk of the firm's profits-- screamed bloody
murder about the idea that the boss would make out like a bandit even
as the company went down the tubes. And so
Lay backed down. Unfortunately, however Lay's ethic of entitlement is
the norm in corporate America, as showcased in an underappreciated
Fortune magazine June cover story on "The Great CEO Pay Heist."
reporter Carol Loomis spoke to seven heavyweights who serve on the
compensation committees of big company boards of directors
many of them CEOs themselves. She promised them anonymity in exchange
for candid views on the state of CEO pay. Listen to what they said
and remember, these aren't left wing radicals talking, but major
scandal of what goes on ... is how much is paid in the many, many in
stances when it isn't at all deserved."
"People (board directors) understand …. they have to go
along with (what) management (proposes for its own pay), because if
they don't they wont be part of the club. You sort of get rolled by
the system even if you try to do well."
"There's no one representing the shareholders. It's like having
labor negotiations where one side doesn't care. That would be a
travesty, and this is too."
basically what's called a 'corrupt system' . . . where non evil
people do evil things. That's the real problem. If there are corrupt
people, you can do something about it. If it's a corrupt system, its
very difficult ... stockholders are going to continue to get
"There's something intrinsically wrong with some of these
amounts of money. I don't know that anything will stop that except
self control. But to ask for self restraint flies in the
face of human nature."
about today's war profiteers. As the Enron case shows, it's the
regular old peacetime profiteering that's so demoralizing and
corrosive for capitalism.
don't hold your breath for reform. "Government isn't going
change anything," said one of Fortune's cynical insiders. "We're
not going to turn into Cuba. When you've got some
smart lawyer (advising management) ... working against two members of
it's no contest."
Miller is a senior fellow at Occidental College in Los Angeles and
can be contacted via e mail at email@example.com. His
column appears regularly on editorial pages of The Times.
2001, Matthew Miller)