Dow Jones Undercuts 'Integrity' Argument

David Pauly of Bloomberg has an excellent column on one of the less savory aspects of the Dow Jones-Rupert Murdoch struggle -- the golden parachute severance packages that have been awarded to Dow Jones managers, in the event of a takeover.

This is a far cry from the big Zilch Package that will greet rank-and-file Dow Jones employees, when (not if, when) Murdoch takes over and begins slicing away at staffing.

By doing so, Pauly writes, "Dow Jones has just shown a decided lack of integrity . . . or at least shown it was no different than any run-of-the-mill company."

I don't believe that this undercuts the view that the Wall Street Journal needs to be treated as a public trust. But I do believe that it is a cover-your-rump action that is poorly timed, as well as insensitive to the reporters and editors who face loss of their jobs.

Says Pauly:

Dow Jones stock traded as high as $77.31 in June 2000. While all newspaper stocks have been plagued by the Internet, Dow Jones executives haven't been able to distinguish themselves. Zannino and his crew proved their mediocrity when they voted to protect themselves if the family does sell.

Excuse me. If? You must mean, when the family does sell.

© 2007 Gary Weiss. All rights reserved.

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

Lloyd Blankfein is Turning Me Into a Commie

Someone sent me a link to this article in Radar Online, about how Goldman Sachs CEO Lloyd Blankfein is spending his $53.4 million 2006 pay check:

Now he's aimed his checkbook at the fabled "Old Trees" estate in Southampton and fired away, buying the place for a staggering $41 million. Not only is the 1911 estate located on swanky First Neck Lane, it's a spacehog, swallowing up 10.6 acres on Lake Agawam.

There's a clay tennis court and an ocean-view swimming pool with a heated walkway from the main house—exactly the sort of adult playground gear you'd expect to find in tony Southampton. But even the "cottage" on this estate has 13 bedrooms and a dining room that seats 60. Another guest house, the modestly named "Tulip Cottage," has three bedrooms and a heated pool of its own. The "barn," built in the 1800s, has three bedrooms, too, and massive entertainment space.

A nice beach house. Of course, he could divide it up into apartments and make it a nice dacha for the proletariat.

Sorry, I just had to say it. Excessive Wall Street consumption brings out the Commie in me. I know: it's not fair to say that, he earned every penny, he'll probably throw some rubles at United Way, blah blah blah.

© 2007 Gary Weiss. All rights reserved.

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

Bob Nardelli's $211 Million Parting Gift

I have a theory about why such corporate atrocities take place. Jack Welch believes CEOs are paid as they are because of they are scarce, like athletes and rock stars.

I quote another expert.

Read all about it in Salon.

© 2006 Gary Weiss. All rights reserved.

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

The Hedge Kings Are Rich, but Will They Be Noble?

Ben Stein raised that question in the New York Times over the weekend, in a thoughtful article. Here's the part I liked best:

They are stars in the financial firmament. But clearly their social utility to the nation and to the world is hard to see when compared with the social utility conferred by an Andrew Carnegie, an Andrew Mellon, a Henry Ford or a John D. Rockefeller, who genuinely built a nation and a world. Providing liquidity for different kinds of variable-rate mortgages simply does not compare, at least as I view it.

But there is a vast ocean of opportunity for these new plutocrats to make their marks. Four out of 10 Americans live modestly, at best. Tens of millions are in poverty. It would be a marvelous legacy of the hedge fund era if these players endowed the hospitals and art galleries and scholarships that made possible a better life for Americans with slower reflexes than theirs. Some are already doing it, and it’s a fabulous gift of their talent and decency.

© 2006 Gary Weiss. All rights reserved.

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

Take Up a Collection for This Poor Man

Jimmy Cayne, CEO of Bear Stearns, received a pittance for his annual bonus -- just $14.8 million (plus options). How can he survive on so little? Well, he is over 65, so there's always Social Security I guess.

© 2006 Gary Weiss. All rights reserved.

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

The Latest From Bonusland

A study out today from Alan Hevesi, the New York State Comptroller, shows that Wall Street bonuses hit a record $23.9 billion, surpasssing last year's $20.5 billion. A Reuters story on the subject is here.

I think it's great that the Street is doing so well. Really. But can't at least some of this largesse be generated to the shareholders, in the form of special dividends perhaps? Or maybe, God forbid, even the public? Just a thought.

UPDATE: I made much the same points tonight on CNBC's On the Money. Seems to be a popular subject -- the third time I've been on the air concerning this issue in less than a week's time.

Here's another take on the bonus issue, from Andrew Ross Sorkin.

© 2006 Gary Weiss. All rights reserved.

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

Dem Dweadddddful Bonuses!

I was on CNBC for the second day in a row tonight -- always a pleasure! -- this time On the Money to talk about bonuses on Wall Street, which are getting a bit out of hand.

I'm not begrudging all those great guys and gals at Goldman Sachs their rightful earnings, but jeez! Some of 'em are reportedly pulling in up to fifty to a hundred million bucks!

Can't Goldman set aside some of its fantastic earnings for a more worthwhile cause than the Wall Street BMW dealership?

© 2006 Gary Weiss. All rights reserved.

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

... and Speaking of Absurd Compensation....

Sam Antar, former chief financial officer of Crazy Eddie and a convicted fraudster, brings a keen eye to the always fascinating issue of executive wrongdoing and boardroom ineptitude.

Posting on Herb Greenberg's blog, he has been making perceptive observations on the famously passive board of directors of Overstock.com and its chef executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer/Worst CEO-wannabe Patrick Byrne.

In one comment the other day he analyzed Byrne's mastery of the "art of spinning":

1) Always make excuses as long as you can.
2) When you cannot defend your actions attack the messenger (such as financial analysts and short sellers)
3) Distract inquiry from your issues by pointing to tangential issues (attack the naked short sellers rather than discuss your business issues)
4) Show your credibility by pointing to good things you have done or ideas you have in unrelated areas (such as solutions for public schools in Colorado)
5) When you can no longer spin and are exhausted you shut up and offer no guidance to investors

Yesterday, Antar has made some worthwhile observations about the Overstock board of directors.

Byrne likes to portray his company as a victim of a monstrous short-sellers, and has been touring penny stock websites spinning nutty "stock counterfeiting" conspiracy theories. But the real problem (apart from Byrne, of course) seems to lie in the Overstock boardroom.

After expressing admiration -- "as a former criminal in a way I have to admire the way he stays around despite some his outrageous actions. He still gets people to drink the Kool Aid!" -- Antar turned to the Audit Committee of the Overstock board.

Antar observes that "there is a difference between legal and illegal. The really fuzzier area is actions that are legal but may be or may not be unethical. He seems to keep his actions just within legal bounds but in the area of legal/unethical."

Antar notes that Overstock board's Audit Committee members -- Ray Groves, John A. Fisher, Gordon S. Macklin and Allison H. Abraham -- each gets stock options from the company and one has 300,000 shares.

Antar continued:

How can these Audit Committee members (in substance) be independent and have the necessary professional skepticism and objectivity to fulfill their responsibilities as stated above if they have stock options? The auditors cannot own such stock and the so-called independent Audit Committee members who own stock are watching the auditors?

Audit Committee Members who own stock, receive stock options, and any earnings based compensation (in the company Board they serve on) simply cannot in substance be independent.

A valid point, I think. Antar continued:

With the exception of Mr. Groves the others have very nice looking educational backgrounds and resumes but in my opinion are not specifically suited to be effective audit committee members. I do not believe that a degree in economics is the proper educational background for such members. Macklin, Abraham, and Fisher would not give me any fear if I were a criminal today.

I'm not sure that even an independent audit committee would make much of a difference. As I pointed out in Wall Street Versus America, most of the late-trading mutual funds had boards with large majorities of independent directors.

In the months ahead, unless Overstock can reverse its march into oblivion, I am sure that the Overstock board of directors will be an object of much scrutiny.

© 2006 Gary Weiss. All rights reserved.

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

Those Obscene Bonuses

I'll be on CNBC's On the Money program tonight at 7 (eastern time) to discuss the recent spate of over-the-top Wall Street bonuses.

Charlie Gasparino revealed yesterday on CNBC that fifty execs at Goldman Sachs will be getting bonuses of $25 million each. More today from Roddy Boyd in the Post. The whole thing is nuts.

When is the Street going to draw the line on overpaying its people? Don't they have anything better to do with their shareholders' money?

© 2006 Gary Weiss. All rights reserved.

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