Saturday, November 11, 2006

Working Well With a Handicap

The New York Times today has an illuminating interview with Harold "Terry" McGraw III, chief executive of my alma mater, the McGraw-Hill Companies. Terry has run the company since 1993, and he began with a major disadvantage, at least from the standpoint of the skeptical writers at Business Week -- he was the scion of the founding famiy.

He got a lot of razzing for that from some people at BW, and it proved to be unfair. He has succeeded smashingly by pretty much any measure.

I had few dealings with Terry, directly or indirectly, and that's one of the best things any investigative reporter can say about a CEO. Not once did I ever hear about any effort to influence, through Terry, the content of any of the tough stories I had written or were in the pipeline.

In fact, he was a stalwart advocate in the stormiest of times.

I thought back on Terry during the recent controversy over Sharesleuth, Mark Cuban's insider trading vehicle. Whatever else one may say about Terry McGraw, it would have been inconceivable for he or his predecessors to have profited from upcoming stories in Business Week. Cuban, by contrast, has turned a taboo into a "business model."

It's also interesting to compare Terry's self-effacing manner with the bloviating of Patrick Byrne of, who also chose his parents well.

Overstock is gushing red ink, with some analysts questioning its future solvency and observing that Byrne is famously diverted by his kooky "jihad." In a mockery of corporate governance, his chairman-father -- and not Byrne -- quit over the moronic "jihad" shtick. (If that's not an example of the flaccidity of all too many corporate boards, I don't know what is.)

The market has been giving Byrne a shellacking, sending him on a dizzying tailspin that is sad to watch. Meanwhile, Terry McGraw and his shareholders have been rewarded for his good work by a share price that has beaten the S&P 500 in recent years.

The market is the great referee of corporate America. While it is heaping praise on McGraw, it is giving Byrne the same message conveyed by Morgan Freeman after beating up a thuggish fighter in Million Dollar Baby: "Get a job, punk."

If that's not corporate democracy, I don't know what is.

© 2006 Gary Weiss. All rights reserved.


Wall Street Versus America was published by Penguin USA on April 6.
Click here for its listing and here for more information on the book, from my web site.

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