Wednesday, September 30, 2009

eBay Must Wring Out CEOs' Excess

Stock quotes in this article: EBAY , HPQ , YHOO , MSFT , AAPL , CSCO

NEW YORK (TheStreet) -- I've recently criticized Yahoo!'s (YHOO Quote) Carol Bartz and Hewlett-Packard's (HPQ Quote) Mark Hurd for excessive pay and perks, given their companies' performances.

My focus on Silicon Valley gluttony would be incomplete without discussing the perks at eBay(EBAY Quote).

After founding eBay in September 1995 and overseeing all aspects of the business for the first three years, Pierre Omidyar decided he had a tiger by the tail and needed some professional management. He hired Meg Whitman, a Harvard MBA with stints at Bain, Hasbro(HAS Quote), FTD, Walt Disney(DIS Quote), Procter & Gamble(PG Quote) and Stride Rite, as CEO in March 1998. The company went public six months later and has been a runaway success.

eBay is an incredible entrepreneurial story. Omidyar and his first employee, Jeff Skoll, deserve countless wealth for creating a multibillion dollar company from nothing. Along the way, Skoll -- who no longer holds any eBay stock -- cashed out equity worth $5.3 billion. Omidyar, still chairman, has cashed out about $3.5 billion to date, but his remaining equity stake is worth another $3.8 billion at current market prices. He now lives in Hawaii and is a philanthropist. And with as much wealth as they've created for themselves, Omidyar and Skoll have created more for others and should be celebrated for this success.

Whitman, who stepped down as CEO last year and now has ambitions to become governor in California in 2010, had a net positive record overseeing eBay. She rode a rocket ship of growth -- getting through the early days of frequent Web site crashes -- and ultimately got it to be a $60 billion company in late 2004; it's about half that valuation today.

Yet Whitman's final years at eBay leave her open to criticism. She promoted a drunken-sailor approach to acquisitions, always overpaying and making little effort to stitch them together. A culmination was the $4.1 billion purchase of Skype in 2005 (including all payouts), in which she took an auction and e-commerce site into the phone business.

Potentially more damaging in the long-run for eBay than overpaying was that Whitman didn't get the intellectual property associated with Skype. This has allowed Skype's founders to now come back and sue eBay for trying to unload the property recently at a valuation of $2.75 billion.

Although Whitman hasn't done as well as Omidyar and Skoll, she's been well-compensated for her time as CEO. According to filings with the Securities and Exchange Commission, Whitman was paid $47 million in total compensation between 1998 and 2008. Additionally, she sold eBay stock during that time worth about $732 million. She still owns stock in the company as of the end of last year worth another $500 million at today's valuation, as well as additional stock options that will have renewed value if eBay's stock gets above $31.

I believe Whitman deserves every nickel of compensation and stock sale proceeds she got between her joining the company in 1998 and Jan. 1, 2005. Since then, however, eBay has been in a tailspin with the stock down 59% vs. a Nasdaq decline of 3% over the same period. eBay's new CEO John Donahoe was hand-picked by Whitman because he used to work with her at Bain. He has spent the first two years on the job trying to give the company some sense of focus and direction, which it lacked under his predecessor.

Something happened in Whitman's last four years on the job in which her pay became dramatically disconnected with eBay's stock price and her perks started to go through the roof.

Based on my review of the company's SEC proxy filings, it appears that there were two big clues for investors that suggested, between 2005 and 2008, Whitman's interest had drifted away from increasing the stock price of eBay to increasing her cash compensation and perks. Had anyone seen these clues -- and, interestingly, perhaps Skoll did as he liquidated his entire eBay stake in 2006 -- they might have pulled the ripcord on owning the stock in 2006 or 2007 when it was trading at $35, before the bottom fell out in the stock and it hit its nadir below $10 this past March.

The first big clue that Whitman's eye was no longer on the ball as CEO had to do with her total annual compensation spiking in the last two full years of her tenure, even as eBay's stock price continued to decline. Peaking at $58 at the start of 2005, eBay's stock price dropped 43% over the next three years. Over that same period, Whitman's total annual compensation almost quintupled to $13.9 million from $2.9 million.

Meg Whitman's Total Annual Compensation

SEC Filings

One of the interesting coincidences, and perhaps not a coincidence at all, about the above figure is that Whitman's annual compensation is remarkably modest from 1998 through 2002. Over that time period, she averaged total annual pay of $412,000. During that time, there were three members of eBay's compensation committee: Philippe Bourguignon, ex-CEO of EuroDisney; Bob Kagle, general partner of Benchmark Capital and early eBay investor; and Howard Schultz, the Starbucks(SBUX Quote) founder who also is a venture partner in Maveron, an early eBay backer.

At the end of 2002, Schultz left eBay's board and compensation committee. He was replaced by Tom Tierney. Tierney was formerly the CEO of Bain Consulting and, indirectly, Whitman's old boss. Tierney would pass any stock exchange definition of an "independent" director. But for those of us who live in the real world, it is obvious that Whitman had a new friend on the small group deciding how she would be paid.

It should come as no surprise then that this committee immediately started loosening the purse strings, and for the years 2003 to 2007, just before she resigned, Whitman's total annual compensation averaged $7.6 million.

The second big clue that Whitman was no longer as focused on eBay's fortunes in her final four years as CEO was the amount of time she spent flying around the world on personal business in eBay's corporate jet, which was paid for by eBay shareholders.

As the chart below illustrates, eBay's compensation committee (again perhaps indirectly linked to Tierney's arrival) went from a practice of not granting Whitman any personal air travel on the corporate jet paid by the shareholders to almost $1 million a year in her final two full years on the job.

That $1 million includes tax gross-ups, meaning shareholders also paid Whitman's taxes on the benefit she received of making all those flights instead of the billionaire paying her taxes herself. These two years of lavish perks coincided with a time when eBay's stock dropped 22%, even though Nasdaq was up 17% in the same period.

Meg Whitman's Personal Aircraft Costs Paid by EBAY Shareholders

SEC filings

I took H-P's Hurd to task last week for spending almost $150,000 last year on personal air travel in H-P's jet and charging it to his shareholders.

So, I'm just flabbergasted seeing that Whitman spent more than $1 million on personal air travel in 2006. How do you do that? And how does Whitman and eBay's compensation committee justify trying to brazenly sneak that large expense report past shareholders, especially when the stock is tanking during the ginned-up, credit-fueled boom of 2006?

I don't follow California politics -- although I'm a fervent supporter of free market capitalism as advocated by Milton Friedman -- but I find it highly ironic and disingenuous of Whitman to portray herself now as a populist based on her time at eBay. According to a glowing Fortune profile of her political ambitions last March, the only "dirt" her critics have been able to dig up on her is that she voted in only half the elections for which she was eligible in the last decade. She explained it this way: "I was head down, building eBay, with two teenage sons and a neurosurgeon husband, and traveling half the time."

She was certainly traveling half the time -- for personal vacation jaunts, all paid by eBay shareholders.

In the last two years, perhaps self-conscious at just how embarrassing these numbers were, eBay decided to break up the personal air travel perks into two categories: purely personal travel and travel to outside board meetings. Whitman was on the boards of Procter & Gamble and DreamWorks Animation (DWA Quote) in the last two years of her tenure. So some of her million-dollar expense went to shuttling her to L.A. and Cincinnati several times a year for these meetings.

I can understand why eBay burnished Whitman's personal network to serve on those boards and rub shoulders with Steven Spielberg and other luminaries, but how did serving on those boards help eBay shareholders? They say that While Rome burned, Nero fiddled. At eBay in 2006, while the stock dropped and the Skype merger was a mess, Whitman flew to Hawaii and other locales on a private jet paid for from the shareholders' bank account.

So, a question to the eBay compensation committee: Who do you think you are? With the exception of H-P, no other tech company foists off this extravagant perk on its shareholders. Microsoft(MSFT Quote), Cisco(CSCO Quote), Intel(INTC Quote) and Apple(AAPL Quote) don't do it. Even Yahoo! -- the king of excessive compensation -- doesn't do this. What makes eBay so special?

Most troubling about this "CEO entitlement mentality" that Whitman adopted in her final years on the job is that she's passed the habit on to her successor. Donahoe racked up almost $280,000 worth of personal aircraft expenses in his first nine months on the job in 2008. I can't wait to see what he can do this year with a full 12 months.

I doubt he's ever had to answer to why he's indulging himself in this ridiculous expense. If asked, I suspect he'd look blankly ahead and say something like, "Well, Meg said it was OK."

It's time for eBay to grow up and stamp out these excesses. Just because you've always done something dumb doesn't mean you should keep doing it. Make your well-compensated execs pay their own way on personal trips using the corporate jet, and start linking pay for performance. Donahoe made $13.1 million last year for his nine months as CEO, while eBay's stock dropped 55%, far wider than Nasdaq's 30% loss in that same period.

eBay's board, particularly its compensation committee, needs to turn the page on the Meg Whitman era and get its executives focused on the tough task at hand in turning around the company instead of worrying about their next tee time.

-- Written by Eric Jackson in Naples, Fla.

t the time of publication, Jackson had no positions in the stocks mentioned.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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Tuesday, September 29, 2009

Maggie Wilderotter Quits Yahoo! Board

Maggie Wilderotter -- the most recent addition to Yahoo!'s board, joining in July 2007 (not including Carl Icahn and his band of merry men who joined last September) -- is now its most recent departing director. She gave the company notice last week that she plans to step down at the end of the year.

The fact that she's leaving is "not due to any disagreement with the Company on any matter related to the Company’s operations, policies or practices."

When asked if she quit because of new CEO Carol Bartz, Wilderotter added in an email exchange with the FT that
I think Carol is terrific." The lady doth protest too much.

Of course, it is true that Wilderotter has trouble on the homefront with the company she's actually still the CEO for: Frontier Communications (FRT). She has only been able to squeeze in a few hours for that job over the past few years, while she's been serving as a director for Yahoo (YHOO), Xerox (XRX), and Proctor & Gamble (PG) -- whose board she joined this year to take Meg Whitman's slot who is now seeking to become California's next Governor.

Wilderotter's directorships pay well. In addition to the $5.5 million she made last year in her real job as CEO, she made $400,000 as a Yahoo! director, $132,000 as a Xerox director and she'll likely get $250,000 this year as a P&G director -- what the average director last year made there. Why give up the money?

I generally don't like former CEOs sitting on boards, as they help perpetuate the "I'll-scratch-your-back-you-scratch-mine" attitude that dominates most boards when it comes to compensation and really challenging the CEO. If you've been a CEO yourself, you would feel sympathy for the current CEO on whose board you sat. You wouldn't want to show him or her up.

But if former CEOs are bad directors, current CEOs are worse. From a shareholder's perspective, they have a job to do and they should be eating, sleeping, and drinking that job -- not flitting off to board meetings across the country. CEOs take on these directorships to network and further their own careers -- not bring back insights from another company to their home company.

Wilderotter is a good example. She joined Xerox's board in 2006. There, she met Robert McDonald, then COO of P&G. They hit it off. When Meg Whitman stepped down from the P&G board and AG Lafley decided it was time to hand the keys of P&G to McDonald, he called his old buddy from the Xerox board, Maggie Wilderotter.

Yet, all this learning, monitoring, and advising that Wilderotter has done as a director in these past few years has not translated well to performance at Frontier Communications -- or for the companies on whose boards she sits. Since she joined Yahoo!'s board in July 2007, Frontier's stock is down 52%, Yahoo!'s is down 36%, and Xerox's is down 60%. The NASDAQ over this time is down 20% (and Frontier's direct competitors have outperformed Frontier's stock by about 20% over this time). (Yet, Wilderotter's total compensation is up about 150% in the last two years.)

So there is an argument to make that she needs to make time for turning around Frontier. Yahoo! would have to feel a little hurt though that Wilderotter seems to see Xerox as having a brighter future than the Web portal (as she's staying on the Xerox board).

However, I think there's more going on here. When you join a big-time board like Yahoo!'s, you don't grab your ball and go home after 2 years. You look like a quitter. Heck, becoming a Yahoo! director is like getting tenure as a Professor -- except it pays much much better. You can settle in for as long as you like at Yahoo! -- just ask Art Kern and Eric Hippeau who are about to embark on their 15th year as a director there.

I think it's obvious that Bartz and Wilderotter didn't see eye to eye on something. This is Carol's board now -- and, if you're not on her team, you're off (as would be the case on virtually every other board in America today).

Wilderotter has no business being on any outside boards when her own company's stock is going down the tubes. However, compared to others on Yahoo!'s board, she looked like one of the stronger directors. I specifically recall Chairman Roy Bostock going out of his way at the 2008 shareholders' meeting extolling Wilderotter's virtues as a director.

As bad as Wilderotter was as a Yahoo! director, the remaining directors are worse.

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Saturday, September 26, 2009

How to End Decoupled Executive Pay-for-Performance & Extravagent Perks

Over the past 2 weeks, I’ve criticized Yahoo!’s Carol Bartz and HP’s Mark Hurd for excessive pay and perks, given their companies’ recent performance. It’s been interesting to read the many emails I’ve received on the articles – mostly from employees of both companies.

A few emails – maybe 5% -- take the CEO’s side and make the case that paying our leaders a lot of money is part of our capitalist system. Their advice to me: get over it already.

However, the majority think it’s crazy that these leaders (more so Hurd because Bartz has only been there since February) have pushed through job cuts and slashed pay for workers and then pay themselves and their lieutenants gobs of money.

One reader who asked “why do people equate corporatism to capitalism?... Corporatism (what people ignorantly call capitalism today) transfers ownership of assets from the individual to the corporation. In pure capitalism, ownership of assets is predominantly held, and kept by, the individual.

One reader asked me, expressing shock and outrage at how HP’s execs could be flying around on private jets for personal trips on the shareholders’ dime when she knew several former employees now in food lines, “how can this happen that these executives get away with this?” There are many to blame here.

Not many journalists or retail shareholders go through a company’s proxy statement in detail, reading footnotes on each page outlining executive comp. When mainstream reporters cover an executive’s new pay package (like Bartz’ back in January), they typically vastly understate it. Why? Quite simply, it takes a long time to read through and digest all the variables to tabulate a true likely scenario of what someone’s going to be paid over the next year or few years. Most journalists want to pump out a story and move on to the next one – or frankly aren’t trained in how to read all the permutations of a comp table.

If journalists aren’t able to read through these comp tables, is it any wonder that most retail shareholders can’t or don’t?

And, although the SEC has tweaked the requirements for how companies need to report this information, you can’t say the agency has nailed it yet, if the goal was for shareholders to be able to understand the information and act on it when necessary.

There is one group smart enough to know what’s going on in the comp tables, and is in a position to call out CEOs for egregious pay: the analysts who cover the companies. Yet, they won’t, because it doesn’t do them or their employers any good. Even post-Henry Blodget, analysts don’t get bonused for antagonizing CEOs with comfy pay packages. So, they keep their heads down, pump out meaningless price targets, and ask innocuous questions of management during their quarterly calls like “I wanted to get a little more color on your day sales outstanding,,,” or “what assumptions should we make about your tax rate for next year” and – my personal favorite – the obsequious pat-on-the-back “great job, guys.”

The few activist investors left are only going to poke the few companies that they take positions in. They’re not going to call out large numbers of CEOs – especially if they don’t have skin-in-the-game.

Larger institutional shareholders like Barclays Global or Legg Mason or some of the larger pension funds could take this issue on – and sometimes will raise their voice. However, these investors typically have hundreds of holdings. Is it worth their time and effort to stop and publicly criticize Mark Hurd or Carol Bartz? They also tend to shy away from having their comments in the press. So they’ll discuss their views during private chats instead – unfortunately keeping the CEOs self-serving practices from the light of public scrutiny.

Who’s left? Employees, who definitely have a vested interest in seeing a company’s shares increase and calling out internal practices that are hurting a company’s long-term prospects. But these people will not speak up publicly – understandably so – for fear of their jobs.

Then there are labor groups like the AFL-CIO and AFSCME – or Michael Moore for that matter -- who bring up excessive executive pay. Entrenched and overpaid CEOs and their aiders and abeters have been successful in portraying these groups as extremist and thus marginalizing them.

So, how will this problem of enormous executive pay that’s delinked to performance change? After all, we’ve been talking about this problem since at least the early 1980s and it’s never, ever changed. In fact, it’s only become more delinked.

As someone who strongly supports a free market capitalist system – not crony capitalism or ‘corporatism’ as the reader called it – I think it’s the responsibility of shareholders to speak up and put a stop to this. The SEC can help by changing regulations to make it easier -- and closer to a free market ideal -- for shareholders to remove entrenched directors who are not representing their interests in overseeing CEOs and management (such as the proxy access initiative being considered at the moment, which is an improvement over the status quo, but certainly could go further). Yet, it must start at the individual level, with each shareholder -- large or small – speaking up and making their voices heard.

Shareholders who assume they can free-ride off of what Gordy Crawford of Capital Research does (or Carl Icahn or Eric Jackson or whomever) will be playing right into the hands of Hurd, Bartz, and other CEOs who want us all to look away from all the pay and perks they’re getting – whether or not they perform.

I don’t expect employees to be martyrs and sacrifice the financial futures of their families by speaking out. But, with the Web, it’s become easier than ever for people to anonymously – yet with credibility and impact – share their views on a particular topic.

Shareholders also need to learn that, when you gripe about some fat-cat CEO on a Yahoo! Finance message board or a disgruntled employee blog, nothing changes. You have spoken as 1 voice only, and it’s been lost as soon as the words have left your lips. However, when you pool your voices together and speak as a group, it becomes impossible to ignore.

I hope that HP and Yahoo! shareholders (whether employees, retail shareholder or large shareholders), as well as other shareholders being extorted by crony capitalist boards and CEOs, start to channel their voices and put sufficient pressure on them to change their ways. Decoupled pay-for-performance (and extravagant perks) won’t change until shareholders rise up and say “we’re mad as hell about this and not going to take it anymore.”

[Jackson’s fund owns no shares in the companies mentioned in this article at the time of publication.]

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Thursday, September 24, 2009

US News: Why CEOs Survive Recession Better Than Others

It's good to be CEO, even in a recession. Especially in a recession.

Hewlett-Packard's stock price

fell 29 percent in 2008, and the company announced plans to lay off 25,000 workers after it acquired Electronic Data Systems. But CEO Mark Hurd didn't feel the pain. Hurd earned $43 million in 2008, a 73 percent raise from his 2007 pay. Perks included $136,000 worth of personal travel on corporate jets, paid for by shareholders, and $7,472 in travel expenses for Hurd's family, according to an analysis of HP's annual proxy filings by shareholder activist Eric Jackson. Several other top HP executives earning multimillion-dollar pay got double- or triple-digit raises.

[See 10 gaffes by doomed CEOs.]

Hurd has been a strong CEO since he took over in 2005, generally credited with enhancing HP's profitability after a period of drift. But the big pay hikes during a dismal year are generating some of the toughest criticism of Hurd's tenure. "There are some very troubling aspects about how he, his management team and his board approach executive compensation and governance," writes Jackson. "Investors

should steer clear of this Silicon Valley icon until it gets its act together."

For all the talk of reining in CEO pay and enacting financial reform—even from some CEOs themselves—it's beginning to appear that very little has changed in the way companies are run and executives get paid. A new survey of CEO pay by research firm the Corporate Library finds that median take-home pay among more than 2,000 CEOs fell by 6.4 percent from 2007 to 2008, the first time on record that CEO pay has gone down instead of up. But that was in a year in which the stock market fell by 37 percent and the economy lost 2.6 million jobs. By almost every measure, the vast majority of companies performed far worse in 2008 than in 2007. "While the downturn has affected pay, the link between pay and performance remains weak," says the report. "Such a minimal decline in pay given the massive decline in shareholder value is hardly an adequate response."

A surprising number of CEOs didn't personally experience the downturn at all. Of 100 industries tracked by the Corporate Library, median CEO pay went up in 40. The 10 highest-paid CEOs included seven from the oil industry, which had a banner year as gasoline prices hit $4 per gallon. The others were Stephen Schwarzman of the Blackstone Group, Larry Ellison of Oracle, and Michael Jeffries of Abercrombie & Fitch. Schwarzman earned the most: $702 million. No. 10 Jeffries earned $72 million.

[See how to pay CEOs what they're worth.]

Reformers want to see much tougher rules linking executive pay to the long-term performance of their companies, and a few CEOs took a step in this direction. Lloyd Blankfein of Goldman Sachs endured a 97 percent pay cut in 2008, because the tony Wall Street firm rescinded bonuses for top executives. Jamie Dimon of JPMorgan Chase went without a bonus as well, resulting in a 92 percent pay cut. But both of those companies were big bailout recipients under the microscope of politicians and regulators. And both have paid back all their bailout money, which means Blankfein and Dimon will probably do a bit better in 2009.

[Get ready for the miraculous hollow economy!]

It's likely that overall CEO pay will bounce right back up in 2009 as well. Many CEOs earn a relatively low base salary, with the majority of their total compensation coming from bonuses, company stock, or options to buy stock. The plunge in the stock market last year means the value of CEO-owned stock fell as well, and many CEOs declined to exercise options to sell stock since prices were so low. That has changed in 2009, with the market up smartly. It could even turn out to be a record year for CEO pay raises, as they springboard off of last year's lows. At least somebody's getting ahead.

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Wednesday, September 23, 2009

Carol Bartz is "an Old Broad" and "can take criticism" about her Share Dumps

Shibani Joshi of Fox Business with 2 stories on Carol Bartz and her recent stock sales.

My favorite line from Carol's press conference yesterday, at which she was asked about criticisms about her dumping shares: "I'm an old broad. I can take it."

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H-P Hurd's Pay Troubling

By Eric Jackson 09/23/09 - 06:00 AM EDT

Stock quotes in this article: HPQ , DELL

NEW YORK (TheStreet) -- Mark Hurd was brought in to take the helm at Hewlett-Packard(HPQ Quote) in 2005.

He's well regarded by Wall Street for turning the company from a bureaucratic has-been to a market leader again. In the first 2 1/2 years of Hurd's tenure as leader, H-P's stock increased 137%. For the last two years, however, H-P's stock performance has been mediocre, dropping 5%. Although that was better than the Nasdaq, it tracked that index very closely over that period.

While Hurd deserves credit for turning this company around in the early part of his tenure by slashing costs and increasing focus, there are some very troubling aspects about how he, his management team and his board approach executive compensation and governance that suggest investors should steer clear of this Silicon Valley icon until it gets its act together.

Although H-P's performance has hit the wall in the past two years, Hurd's pay -- and the pay of his management team members -- has dramatically increased. For 2008, Hurd's total compensation reached $43 million, which made him the fourth highest paid CEO in America for 2008. Hurd's total compensation increased 73% from his $25 million in 2007, even though H-P's stock price declined 29% in 2008.

On his senior management team, the sharp compensation increases in 2008 were also noteworthy. CIO Randy Mott's total compensation went up 400% last year to $28 million. Imaging EVP VJ Joshi's total compensation jumped 83% to $22 million. Personal Systems EVP Todd Bradley's total compensation jumped 263% to $21 million. Technology Solutions' EVP Ann Livermore enjoyed a 31% bump in total compensation to $21 million. And CFO Catherine Lesjak got a 49% increase in total compensation to a more modest $6 million.

What also raises eyebrows about these sharp executive raises, aside from it happening in the face of a sharp stock price drop for the year (and the general market uncertainty which remained at the end of the year), is that 2008 was also a year in which these same leaders imposed mandatory 10% pay cuts for other executives and 5% cuts for the rest of H-P's workforce. It hardly seems like this select group is shouldering the pain like the rest of the employees.

At Dell(DELL Quote), the magnitude and the general direction of total compensation were far different than H-P for 2008. Michael Dell's total comp dropped 9% in 2008 from the previous year to $2 million. Other senior executives on Dell's management team decreased or modestly increased to an average total compensation for the year of $9.5 million -- or less than half of what their H-P counter-parts took home for the year.

But what should be most rankling to H-P shareholders -- and a very good reason to avoid the stock in the near term, as it speaks to the values by which this board and management team operate -- are the perks these executives are asking for and receiving from the board.

For example, last year H-P shareholders paid $7,472 for travel expenses related to Mark Hurd's family accompanying him to business meetings. Expenses for Hurd's security service roughly doubled to $256,000. Shareholders paid $500,000 combined in 2007 and 2008 for legal fees associated with bringing over CIO Randy Mott from arch-rival Dell. All senior executives availed themselves of about $18,000 worth of financial advice in 2008 (about four times the amount Dell senior executives received that same year).

Perhaps the biggest bonus for being an H-P senior executive is getting access to the fleet of corporate jets for personal use. Shareholders forked over $136,000 for Mark Hurd's personal use of the aircraft in 2008. Todd Bradley's personal use of the aircraft cost $128,000 in 2008, which was actually down from $327,000 worth of personal travel in 2007.

H-P explains in its proxy filing that for "purposes of reporting the value of such personal usage in this table, H-P uses data provided by an outside firm to calculate the hourly cost of operating each type of aircraft. These costs include the cost of fuel, maintenance, landing and parking fees, crew and catering and supplies."

I think it's completely unacceptable for shareholders to pay for this personal use perk. However, this explanation left me with more questions about these numbers. Who is this outside firm that provided this estimated hourly cost? What in fact was the hourly cost? How do shareholders know that the hourly cost was a fair market rate? Finally, what were these personal trips?

I'm not even sure how it's possible for Todd Bradley to have racked up $327,000 worth of personal travel in 2007. Did he have time to show up for work that year? Call me a conspiracy theorist but isn't it possible that this outside firm vastly under-stated the actual (fair market) hourly cost of using these aircraft for personal use? How will shareholders actually know unless the company releases the flight logs and numbers?

Dell and his senior executives charged no personal use of their aircraft to its shareholders.

A later footnote in the proxy filing for Hurd's personal travel says that the first 25 hours of personal travel are included and are "grossed up." Hurd owes taxes on the value of that perk, but H-P's board has decided that HP shareholders should pay Hurd's taxes instead of Hurd.

The same footnote later says that if Hurd's spouse is "requested by H-P" to travel with Hurd, then the company "grosses up" that amount, too. The internal process that goes on in determining the company request is not described. It could be as simple as Mark Hurd leaning over and saying to his assistant: "I'd like to go play golf in Hawaii this weekend with the CEO of one of our clients on business. Can you write me a quick email saying that, on behalf of H-P, you're requesting that my wife fly with me?"

And don't forget the minor scandal the erupted last January, when blogger Michelle Leder of Footnoted noticed that H-P had "grossed up" Hurd $79,814 for taxes he paid on meals involving his family. (Ann Livermore and VJ Joshi also got "grossed up" $10,000 apiece for meals with their families.)

Michelle estimated that, to receive a "gross-up" of this amount, Hurd and his family would have had to run up food bills during the year of more than $243,000.

H-P protested, saying it had made an error in its calculations and even refiled its proxy with the SEC. Magically, Hurd's "gross-ups" for his family meals shrunk to $3,285.

H-P's error and refiling could have simply been a decision on its part, based on the angry reaction of employees and shareholders, for Hurd and all executives to simply cover these meals and their taxes themselves. Let's face it: It wouldn't have been a hardship for any of them based on their compensation last year.

I don't mind pay for performance. I do mind pay for non-performance and I mind perks for breakfast, lunch, and dinner. And in a year of across the board pay cuts? Where is their shame?

The board is equally or more to blame of course. After all, they approved all this. I was particularly surprised to note that Ken Thompson has served on the HP board for three years now. Thompson is one of the most disgraced CEOs coming out of the financial crisis.

He ended up destroying the fifth largest bank in America, Wachovia, by pushing it heavily into the area of subprime mortgages. When you destroy a company with $8 billion in annual profits, you shouldn't have the right to continue serving as a director and get $300,000 a year for doing so.

It was announced last week that Web pioneer Marc Andreesen would join H-P's board. I hope he can help reform the company's governance, but I don't think it's likely. In 2006, Andreesen sold his company Opsware to H-P for $1.6 billion -- making him indirectly beholden to Hurd and the rest of the board for his payday. That means Andreesen will likely be another voice around the table tacitly approving whatever Hurd wants to do and pay himself.

-- Written by Eric Jackson in Naples, Fla.

At the time of publication, Jackson did not hold any positions in the companies mentioned.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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Tuesday, September 22, 2009

Are these Disclosures Conflicts of Interest for Yahoo!?

If I told you that Yahoo! had made a charitable contribution to an American University in the last year, which one would you guess? Stanford University, where Jerry and David dreamed up the company in the computer labs more than a decade ago? Cal? San Jose State? Try Duke.

You probably weren't familiar with a long fabled relationship between the Silicon Valley-based Internet company and the fine academic institution on the other side of the country on Tobacco Road. Let me connect the dots for you. Yahoo!'s Chairman, Roy Bostock, and fellow director, Gary Wilson (both appointed by former CEO Terry Semel), serve on the board of the Fuqua School of Business at Duke.

Unfortunately, we don't know exactly how much Yahoo! gave to Duke. I don't see why shareholders shouldn't know the amount. The fact that it's the only university named in Yahoo!'s most recent proxy filing as having received such a contribution from Yahoo! last year, when there is this obvious relationship with two directors, calls for more disclosure -- not less.

It's also strange that the only other non-profit institution receiving a charitable contribution last year was The Partnership for a Drug-Free America, for which Mr. Bostock is also a director.

These donations are fully disclosed in the proxy under "Related Party Transactions" but are they right and proper? I don't think so. In my view, Mr. Bostock shouldn't be able to leverage his job as Chairman (which paid him $568,449 last year in total comp) to access the company's Treasury (the shareholders' money -- not his) for his pet causes.

Full disclosure: I don't think Mr. Bostock is fit to serve as the Chair of this dysfunctional board. He led the charge in the famously disastrous Microsoft merger negotiations last year. Then, he spoke at length at the 2008 shareholders' meeting, about just how hard Yahoo!'s board had worked to secure a deal. His words to the audience dripped with condescension.

I attended the meeting and asked him if he thought he deserved to make $500,000 for his Yahoo! job. He told me he didn't make that much money in the prior year and I had my facts wrong (they were the facts). I followed up by asking him to resign off the board based on how nearly half of shareholders had voted against his re-election at the prior year's shareholder vote. He told me I was a guy who looked at the glass half-empty and he saw the glass half-full with the number of "for" votes he did receive.

Given Mr. Bostock's rose-colored glasses, I have no doubt he saw no problem in seeking out a charitable contribution for his two affiliated non-profit organizations. How much were the contributions, Roy?

Perhaps more troubling for Yahoo! shareholders is that, in that same section of the proxy filing, there was the following disclosure:

- Transactions in the ordinary course of business between the Company and entities for which the following directors served as an executive officer, employee or substantial owner, or an immediate family member of an executive officer of such entity: Mr. Icahn, Mr. Joshi, Mr. Kotick, and Mrs. Wilderotter.

VJ Joshi runs the printer division at HP, so I can imagine that Yahoo! bought some ink cartridges from them last year. Bobby Kotick runs Activision, so maybe the company bought some recreational copies of "Guitar Hero" for the senior officer and director lounge. Maggie Wilderotter runs Frontier Communications which sells cheap phone and DSL service in upstate New York and the surrounding area. So, I have a harder time understanding Yahoo!'s need to do business with them -- although maybe there are some remote workers in Rochester who can't get AT&T access (with whom Yahoo! has a large strategic partnership).

It's the Carl Icahn connection that I have a harder time understanding. Certainly there shouldn't be any business dealings between Yahoo! and Icahn's hedge funds, where he's an executive officer and employee. Do his hedge fund investments qualify as him being a "substantial owner" even if they're relatively small? Even still, did Yahoo! do business with Blockbuster, Lions Gate Entertainment, Motorola, American Rail Car Industries, Biogen, Federal Mogul Corp., PSC Metals, or Endzon Pharmaceuticals? The company should more completely spell out the business dealings between Yahoo! and Carl Icahn. How much were they? To whom? And for what?

Later in the same section, they state:

- Relationships and transactions in the ordinary course of business involving aggregate payments greater or equal to $10,000 with companies and their applicable subsidiaries, for which the following directors served as non-employee directors during all or part of 2008: Mr. Biondi, Mr. Bostock, Mr. Burkle, Mr. Hippeau, Mr. Kozel, Mrs. Wilderotter, and Mr. Wilson

We've discussed the ties of Roy Bostock and Gary Wilson to Duke and The Partnership for a Drug-Free America. Now, we've expanded the relationships where Yahoo! paid these directors' companies to include Mr. Kozel (no longer on the board), Mr. Hippeau who makes investments for Softbank and took a job earlier this year for the Huffington Post (in which he's an investor), Mr. Burkle who is on the boards of Occidental Petroleum & KB Home, as well as the Frank Lloyd Wright Building Conservancy, and Mr. Biondi (friend and colleague of Carl Icahn) who is a director for Amgen, Cablevision, Hasbro, and Seagate.

Again, shareholders should fully understand the exact amounts of the payments being made and to whom they are being made in these related-party transactions.

Maybe these payments are all legitimate and above board. If they are, let's disclose them and let sunlight be the best disinfectant.

[Jackson's fund holds no position in YHOO at the time of publication.]

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Monday, September 21, 2009

How Microsoft Will Save Us from the Housing Crisis

Kudos to Michelle Leder at Footnoted for spotting another distasteful perk paid for by hapless shareholders. This one was at Microsoft (MSFT) -- which is a long holding of mine.

Microsoft has earned some praise recently among those who promote good corporate governance practices for blogging (I guess that demonstrates openness, but what's the big deal?) and proactiviely allowing a triennial (once every 3 years) shareholder vote on executive compensation. I guess every dog has his "say on pay" day -- once every 3 years, at least.

This last disclosure came out late Friday in Microsoft's preliminary proxy.

Michelle studiously noticed that in that same filing, Microsoft disclosed that it may outdo the Fed and the Obama administration in saving the country from the current financial mess. Specifically, they are going to focus on the housing mess and try to stabilize the market one Bay Area executive mansion at a time.

When they hired Stephen Elop away from Juniper Networks as COO in early 2008 (where, coincidentally, Microsoft's former head of its rudderless Online Services Business Kevin Johnson decided to take the top job later), Microsoft disclosed that they took the rather unusual step of buying Elop's Silicon Valley mansion.

The reason for this was that Elop apparently couldn't sell it. Therefore, using bizarre executive comp logic, he hired 3 independent appraisers to peg the value of his home and got Microsoft's shareholders to pay him that amount for the home. This was all to "induce" him to take the job of heading up Microsoft's Business Services Division in Redmond. I know it rains more in the winter in Seattle, but that's quite an "inducement." I guess the "war for talent" is brutal -- even in the biggest recession since the Great Depression.

There's no disclosure on who these 3 appraisers were or what value they assigned to the house -- or how much they were paid for their assessments and who paid them (though you have to assume again it was Microsoft's shareholders).

Then, come some more details in the filing:

We also agreed with Mr. Elop that if the appraisal resulted in a loss on the sale of his prior home, we would pay him the difference between his home purchase price (adjusted for improvements) over the appraised value. Because of the precipitous decline in the California housing market over this period, the price at which the house ultimately sold was significantly below Mr. Elop’s purchase price adjusted for improvements.

What was the damage for Microsoft shareholders and the purchase of the mansion and making Mr. Elop whole on his original purchase price and home improvements? $4.2 million.

Adding insult to injury, Microsoft then decided to "gross up" Mr. Elop $1.2 million for these additional benefits, so they wouldn't cost him a dime with the IRS and the State of California. Microsoft shareholders will again happily pick that up.

When did you say I'll get a vote to say how I feel about these perks? Oh right, 3 years from now.

It doesn't end there. The proxy filing also goes on to say that Microsoft has flipped houses for its corporate executives before, specifically for current CFO Chris Liddell, when he decamped from his CFO job at International Paper in Memphis, TN, for the rugged Northwest. The kiwi (Liddell is a New Zealander) got a $2 million relocation expense paid for related to buying and then selling his house (and only a $30k "gross up").

Other interesting tidbits from the Microsoft proxy filing:

  • Microsoft spent $472k with Corbis Corporation on digitized images last year. Corbis is owned by founder Bill Gates. However, Corbis spent $370k on Microsoft software in the same year.
  • Ray Ozzie's brother works for Microsoft; as does Robbie Bach's nephew. Both relatives earn more than $120,000 a year -- although no more details are provided.
Although I've seen other companies with more egregious perks for their execs than this, these disclosures are still distasteful and the expenses (and taxes) should be covered by the executives themselves -- not shareholders.

If Elop couldn't sell his house in the Bay Area and he didn't want to carry the mortgage on it while moving to Seattle, that's his decision. As a shareholder, I'd say let's find some other executive who does want this exciting opportunity. Enough with the "that's what we had to do to get this talent" logic. There are many talented people that would have jumped through hoops for this job.

It's too bad Elop and Kevin Johnson couldn't have coordinated their plans to switch jobs at Microsoft and Juniper Networks. They could have saved shareholders a lot of expense by just doing a house swap.

[Jackson's fund holds a long position in MSFT]

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Wednesday, September 16, 2009

Bartz's Pay Package Egregious

09/16/09 - 07:00 AM EDT

By Eric Jackson


Yahoo!(YHOO Quote) CEO Carol Bartz didn't get the "boatloads of cash" for her shareholders from Microsoft(MSFT Quote) as she vowed in May, but she'll take home a boatload of cash herself out of Yahoo! for her work in 2009.

A review of her total compensation plan reveals that Bartz is on track to make $20 million to $30 million this year in cash and stock (depending on if the share price rises 13% by December and stays there for the rest of the year or not); and $187 million for her first four years on the job, assuming the stock can get back to $25 by then.

In last week's Activist column, we shined a spotlight on the large amount of insider selling which has occurred at Yahoo! in the past two years (based on our study of the Securities and Exchange Commission filings leading to other media reports on this topic), including Bartz dumping $2 million in shares in March and June.

Since that column appeared, Bartz, Yahoo!'s PR SWAT team and Bartz' defenders have claimed that there was "no story here," as these were "routine" share sales made to pay taxes on generous Restricted Stock Unit (RSU) grants. Bartz went so far as to say "I didn't sell anything" on television and there have also been vague references to her shares being "reacquired" again. They have not - as the actual Form 4 SEC filings show. They state only "disposals" of $2 million in Yahoo! shares, which of course immediately lower the company's earnings per share.

Contrary to what any PR flak says, these kinds of tax-related share dumps when RSUs vest may be common at lower levels of the company, but they are not at the highest level, where executives have more than ample means to pay their taxes out of their own pockets. Bartz made $45 million in 2007 alone just from exercising her Autodesk(ADSK Quote) options, so she could have easily scratched together $2 million to pay the tax man if she'd wanted to hold on to her Yahoo! shares.

It turns out that, when you start to peel the onion around Bartz' CEO employment contract, there are many interesting details which Bartz would likely not want discussed. Prior to negotiating with Yahoo! for the top job, Bartz hired an unnamed financial advisory firm to help her. Later, when the deal was done, she got Yahoo!'s board to agree to Yahoo!'s shareholders paying "up to $150,000 for advisory fees" for her use of that savvy firm (which is outrageous and she should immediately reimburse Yahoo! shareholders for that with interest).

That negotiated agreement is a good one for Bartz, as this analysis shows. Making reasonably conservative assumptions, Bartz should get $187 million for her planned four years of work at Yahoo!

One small part of that agreement is something Yahoo! calls the "Make-Up Grant." Because of "forfeiture of the value of equity grants and post-employment medical coverage from" leaving her old executive chairman job at AutoDesk, which has one-fourth of the market cap of Yahoo!, Yahoo!'s board said she was due $10 million.

As part of that grant, she'll get $2.5 million in cash this year and 639,386 RSUs (or shares). The cash and shares vest at a rate of 25% quarterly in 2009. By the end of this year, those shares and cash will be worth about $12.5 million (not the $10 million grant date fair value; see this breakdown for more detail .

Yahoo! states later that they are providing "post-employment medical coverage for Bartz, her spouse and eligible dependents" on top of her grant, so that should not be linked to the value of the "Make-Up Grant." Therefore, the only thing to be made up for is the value of her unexercised AutoDesk equity options.

Yet when you go back and review the unexercised options she possessed in the 2008 AutoDesk proxy statement and the ones she subsequently exercised and sold in share sales through the rest of last year, I calculate Bartz' value of her unexercised equity grants at far less than $10 million.

On the date her Yahoo! employment agreement was announced (Jan. 15, 2009), AutoDesk was trading at $16.14. That means, her remaining 250,912 $11 strike price, her 36,420 $8 strike price, and her 993,056 $14.40 strike price unexercised options had a fair value on the date she took the Yahoo! top job of $3.3 million -- not $10mm.

This major "Make-Up Grant" discrepancy between what Yahoo! chose to award Bartz and what it appears -- according to her AutoDesk SEC filings -- she was in fact walking away from should be explained to shareholders immediately.

Setting this problem aside, Bartz -- like any other employee who gets RSUs -- has to pay tax on stock grants whenever she receives them. To pay the tax, Bartz must make a choice to write a check to the government from her personal account to cover this or sell part of these Yahoo! shares from the RSUs. In the first and second quarters, Bartz sold $2 million in Yahoo! stock to pay her taxes. It's very likely she'll do this again later this month and in December, when the rest of her "Make-Up Grant" shares vest.

Which brings us to the core problem: given her leadership role at Yahoo! and given her generous Yahoo! compensation and sizable wealth she's amassed from her time at AutoDesk, why would she dump Yahoo! shares instead of paying her tax bill herself? It sends the wrong message to employees and shareholders that she wouldn't be kicking and screaming to keep every last Yahoo! share in her possession.

I think there's a simple answer to this question: Carol Bartz is used to getting generous tax gross-ups from companies she works for and likely she (or her high-priced advisors) negotiated this in as part of the deal.

A tax gross-up is when an executive wants to receive a certain amount of compensation award or benefit but knows they'll have to pay taxes on it. Rather than pay that tax bill themselves, the executive asks the company to bump up the value of the award in the amount of any taxes they would otherwise have to pay. They end up getting the amount of money they want tax-free -- with taxes paid for by the company's shareholders rather than the executive.

For an example, let's go back to the 2008 AutoDesk proxy statement : "During fiscal 2007, Ms. Bartz's other compensation included post-employment health and dental benefits with an actuarially determined present value of $631,986 plus a $421,324 tax gross-up, and a Company gift for appreciation of years of service as CEO costing $67,500 plus an associated $33,889 tax gross-up." Have you ever heard of a gross-up on a gift for years of service?

Tax gross-ups are completely unacceptable and any well-governed company doesn't allow them. If you make money or a benefit of some kind, you should pay tax on that -- not the shareholders who gave you the benefit in the first place. To use one of Bartz' favorite words, tax gross-ups are stupid.

Bartz has clearly become used to tax gross-ups at AutoDesk and likely she or her high-priced advisors were thinking of this "Make-Up Grant" in the same way. They might have negotiated her $3.3mm fair value (as of mid-January 2009) unexercised AutoDesk options into a $10mm make-whole grant from Yahoo! That's a tax gross-up and then some.

Yahoo!'s compensation committee is to blame here. First, they pay Terry Semel over $570 million for his six years as CEO; then, they award Bartz a four-year $187 million pay package with up to $30 million in year one; then, they see their ineffective incentive plans lead to Yahoo! insiders selling $233 million in stock over the past two years versus insider purchases of only $103,000. Now, we learn of these discrepancies in the reasoning for different elements of Bartz' pay.

Where is Carl Icahn in all this? It turns out he was right at the negotiating table when all this went down. His colleague, Frank Biondi, has served on Yahoo!'s compensation committee since joining the board in September 2008. He directly oversaw the design and approval of Bartz' pay plan, which, in my view, wasn't in the shareholders' interests.

Of course, Bartz is at fault here too. She's gotten too used to high pay and tax gross-ups over the past few years -- both for herself and for CEOs she has socializes with.

Examine this table below for a comparison between the average annual total compensation for several popular tech CEOs vs. ones in Bartz' social network. Bartz doesn't suffer fools -- or CEOs who don't bank a lot of coin.

Popular Tech CEOs
CEO Most Recent Avg. Annual Total Compensation
Eric Schmidt, Google $500,000
Jeff Bezos, $1.3mm
Steve Ballmer, Microsoft $1.3mm
Steve Jobs, Apple $1
Carol Bartz' Network of CEOs by Employment or Directorship
CEO Most Recent Avg. Annual Total Compensation
John Chambers, Cisco $11mm
Paul Otellini, Intel $12mm
Dan Warmenhoven (Ex-CEO), NetApp $5.7mm
Carl Bass, AutoDesk $7mm
Carol Bartz (when Executive Chairman), AutoDesk $4.5mm
Source: Company proxy statement SEC filings

Several things should be done to fix this mess:

  • To avoid these questions about her commitment, Bartz should put some skin in the game. I think she should buy stock in Yahoo! that represents a significant chunk of her net worth. I would suggest at least half the value of her 2007 exercised options from AutoDesk or $23.5 million. This is not that large relative to the upside she should make from her 4 years at Yahoo!
  • Bartz should immediately pay back the $150,000 to Yahoo! shareholders for her financial advisors who helped her negotiate a $187 million four-year deal for her.
  • The Comp Committee (Art Kern, Ron Burkle, and Frank Biondi) should all resign off the board. Enough is enough.
  • Someone else from Yahoo!'s board should explain why Bartz' $3.3 million in unexercised AutoDesk options had to be "made up" for by Yahoo! shareholders to the tune of $10 million.
  • Yahoo!'s board should also provide much more transparency on Bartz' employment contract. For example, what cash flow and total shareholder returns targets does she exactly need to hit in order to receive her 4 times base salary annual bonus and other equity grants and options. If shareholders can't trust the details around the "Make-Up Grant," why should they trust the board's decisions on these other compensation matters?
  • Yahoo! should change their comp plans going forward for all executives and directors so that base and target bonuses are quite low -- even lower than the often cited "peer group." How will they attract people? Load up the incentives on the back-end. And, instead of having those incentives be triggered by 20 consecutive trading days at a certain stock price level (as Bartz' are), require that the stock stay there for two years (with clawbacks in case it drops back done). This will eliminate short-termist thinking.
  • Finally, Bartz should refrain from going on TV in the future saying she "didn't sell anything" after she has sold $2 million in shares.
At the time of publication, Jackson had a net long position in Microsoft.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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Tuesday, September 15, 2009

How Can a Free Market Capitalist be Against Management?

In response to my recent criticisms of Carol Bartz, her management team, and board at Yahoo!, I've had some people ask me "How can you be against management? Don't you support business and capitalism?"

When did it became assumed that anyone pro-management was pro-capitalist and anyone pro-shareholder rights was pro-socialist?

When I respond that I'm a free market capitalist in the vein of Milton Friedman and Ayn Rand, they seem surprised. I suppose they think that any CEO or executive would be a supporter of Friedman's conservative views - not a pro-shareholder person. Typically, on SEC votes, Republicans line up on the side management and Democrats on the side of shareholders. Isn't that the way it works? No.

I think that any individual -- CEO or shareholder (or Republican/Democrat for that matter) -- is self-interested. That's the whole basis of Friedman's views on the power of individual choice. Yet I don't think of most CEOs/boards/execs in America today as true free market capitalists -- at least in how they govern themselves and hang on to power. I think of them as crony capitalists -- not unlike the robber-barrons.

I don't think any of these individuals are inherently good or bad people, but they operate in a system in which they have found how it can be exploited for their self-interest -- especially when it comes to compensation and keeping the system for nominating replacements to the board as closed as possible. Welcome to Club Crony.

Since the beginning of the corporation, the board of directors was to have supposed to represent the will of shareholders. Yet Berle & Means showed that this intent quickly got side-tracked by management self-interest over the interests of the shareholders. The board was always supposed to take the long-view for the interests of its shareholders -- not do the work of management or make executives decisions by frequent referenda of shareholders. If the board wasn't taking the interests of shareholders in mind, the intent was to allow replacing directors until they did properly represent shareholders' interests. Both Friedman and Rand both recognized this.

Yet, in practice, what's happened is that board members became selected by CEOs (who often revamped the board when they took the job in order to be governed by "their people"). If I put my friend on the board, then promote him to the Compensation Committee, he might qualify for whatever definition of "independent director" you like, but he's still going to be my buddy and probably more generous to me in my compensation than if he was some 3rd-party.

Besides picking my directors to govern me as CEO, I can influence the compensation they receive. Therefore, if I wish, I can ensure they get paid a lot. If they're happy with receiving a lot of comp, maybe they will keep paying me a lot. It becomes a mutual admiration and back-scratching society.

The slate of directors runs every year unopposed. Most shareholders (especially retail) are apathetic and don't vote anyway.

If a shareholder wants to run a proxy contest against us, they have to pick up the tab for doing so, while we can use our shareholders' money. If a shareholder wants to sue us, our D&O insurance protects us from any liability (paid for again by shareholders) and the shareholders will also pay our top drawer NY lawyer fees.

This wasn't how it was supposed to be. Management's insulation from being held accountable to shareholders promotes waste, not efficiency; mediocrity, not innovation; wealth-destruction, not wealth-creation.

The solution before the SEC on proxy access isn't perfect, but it will probably do more to bust up crony capitalism and promote truer free market capitalism than any other piece of regulation they've introduced in the last 30 years. Let's hope it passes as is.

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