Clang, clang, clang goes the lockdown
The play ends as a tragedy. All three of the major characters lived a morally reprehensible life that doomed them to Hell; when they are given a chance to escape from Hell, they choose to remain, knowing that there is No Exit from their evil natures. For them, life on earth was no different than life in Hell; at least in their present circumstance, they have only each other to torment.
"No Exit" by Jean Paul Sartre
Many years ago the late reporter and editor Mike Kelly recited one of the rules of life passed on by his father and his grandfather before him. "Never stick up a candy store," Kelly's forebears counseled.
The kooky crooks in today's headlines that ran major American corporations--and then ran them into the ground--mystify me.
They did not stick up candy stores.
With hubris, chutzpah, chicanery and insatiable greed they made millions, stole billions, ruined tens of thousands of lives, pleaded ignorance in court and will soon meekly surrender to authorities to spend the rest of their lives in jail.
The overriding question: How did these guys lose touch with reality?
A Quick Look at the Players (in Alphabetical Ordure)
Bernard Ebbers, age 63, about whom CBC News said, "he was regarded as the ultimate Christian businessman." His net worth at one time was put at $1 billion. Ebbers was found guilty of ordering his CFO, Scott Sullivan, to perpetrate the $11 billion accounting fraud at WorldCom. From CBC News:
Around the same time, Ebbers bought a toy, a huge yacht he named Aquasition (http://www.waterfantaseas.com/mega/mega8_20.html) in honour of all his deals. And he began diversifying his WorldCom wealth, buying half of a yacht-making shipyard in Savannah, Georgia, a high-tech lumber mill in his home of Brookhaven and back in Canada, the Douglas Lake Ranch in B.C., the largest working ranch in Canada, with 20,000 head of cattle (once owned by the Woodward retailing family). But his biggest investment was in 460,000 acres of timberland in Mississippi, Alabama and Tennessee.
Dennis Kozlowski, 58, was convicted of defrauding Tyco out of $150 million. From 1997-2001 he was paid $400 million in compensation and benefits. He spent $17 million to buy and restore the 130' J Class sloop Endeavour (http://www.jclassyachts.com/endeavour.html), commissioned in 1934 to compete in the America's Cup. The $1 million Roman bacchanalia on Sardinia, paid for out of corporate funds to celebrate his wife's birthday, included vodka being dispensed from the penis of an ice replica of Michaelangelo's David. Kozlowski is also accused of buying $12 million worth of museum quality art, including a Renoir and a Monet, and defrauding New York State out of sales tax. Dennis Kozlowski faces 30 years in prison.
Ken Lay, with a Ph.D. in economics and a former professor at George Washington University, now age 63, presided over the Enron debacle in which investors lost $66 billion, while 20,000 employees lost their jobs and were financially wiped out. Collateral damage was the crash and burn of the Arthur Andersen accounting firm, sending 25,000 employees into the streets. Lay, who is accused of improper manipulation of stock--including the sale of 500,000 shares by his wife just days before the company went bankrupt--was reportedly once worth $400 million. In the go-go years, Enron had seven corporate jets valued at more than $100 million on which Lay's family traveled at company expense, with $125,000 once spent to bring his daughter back from Europe. Lay faces a maximum of 175 years in prison.
John Rigas, 80, and his family borrowed around $2.3 billion from banks and guaranteed the loans with stock of Adelphia Communications, the cable-TV company he founded. He and his family are accused of using the company as their "personal piggy bank." Included in the SEC complaint:
Since at least 1998, Adelphia used fraudulent misrepresentations and omissions of material fact to conceal rampant self-dealing by the Rigas Family. For example, Defendants forced the public company to pay for vacation properties and New York City apartments used personally by the Rigas Family, develop a golf course on land mostly owned by the Rigas Family, and issue over $772 million of Adelphia shares of common stock and over $563 million of Adelphia notes for the benefit of the Rigas Family.
How Did These Guys Lose Touch With Reality?
When a person has access to virtually unlimited money and is reveling in such emoluments as vast homes all over the world, private yachts, private jets and a legion of scared underlings frightened of losing their jobs, doesn't a sense of total invincibility take over?
For example, Lyndon Johnson's press secretary, George Reedy, wrote "Twilight of the Presidency," in which he described life in the White House surrounded by unbelievable comforts, toys and goodies and where a fawning staff satisfies every presidential wish and whim. Reedy concluded that no man could be president of the United States for very long and maintain his psychological balance. The crash and burn of recent American presidents validates Reedy's observation: Lyndon Johnson and Vietnam, Nixon and Watergate, Carter and the Iran hostages, Reagan and Iran-Contra, Clinton and the Lewinsky impeachment.
What these enormously rich, high-powered corporate CEOs did was make decisions that turned out badly and instead of coming clean and making things right, they broke the law by trying to cover up what they had done.
Astonishingly, they pleaded ignorance. Bernard Ebbers articulated it on the witness stand:
I know what I don't know. To this day, I don't know technology, and I don't know finance or accounting. I always thought I was a good coach, and supervising marketing and sales people is like coaching. I focused on an area I thought I could handle.
But as former federal prosecutor Fahy Choi was quoted as saying in The New York Times, "To have someone making millions and millions of dollars saying 'I was disorganized; I wasn't paying attention' is something that jurors just can't understand."
Ultimately, these guys lost sight of the fact that they were running publicly-held corporations rather than private fiefdoms. The collateral damage of their misdeeds has been substantial:
* The Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) was passed by a House vote of 423-3 and by the Senate 99-0. It puts explicit personal responsibility on a corporation's board of directors and the CEO and CFO. Compliance with this new law is costing American industry hundreds of millions of dollars and crippling many small businesses, although it is presumably a gravy train for accountants.
* Because of Sarbanes-Oxley, many capable and gifted executives are opting not to become board members of public corporations because of the personal liability risk. The eventual result will be second- and third-rate board members who can be manipulated by greedy, charismatic CEOs who have the ethics of a snake.
In short, plus ça change, plus c'est la meme chose.
Web Sites Related to Today's Edition
US v. Bernard Ebbers
Ebbers Yacht Aquasition
SEC v. Ken Lay
Arthur Andersen Folds
SEC v. Dennis Kozlowski
New York State v. Dennis Kozlowski
Kozlowski Yacht Endeavour
SEC v. John Rigas
Letters to the Editor
In response to, "The Train(ing) Wreck of America," which was published 6/28/05:
Denny, your article about Army training is the best one you've written so far that I've read. You raised a very good point: that business doesn't train enough.
Our company pays for employee education (i.e., junior college courses, seminars) so long as the employee receives a passing grade.
--Arnold Howard, with Paragon Industries, L.P.
Denny, I agree with you on this one. As a result of spending a yr in SE Aisa in 1969 and 2 yrs 8 mo 13 days of domestic service, the GI Bill paid for my 4 yr college education. Our military provides the best training for life there is.
--John Kennedy, with Hammerstone Direct
Great article on the Army. I, too, was a product of the Army. I went thru Fort Dix NJ, "The home of the Ultimate Weapon" (the infantryman). I believe a great many aimless, self-indulgent spoiled young people, who will drift thru a non-productive existence, could be saved by a stint in the military.
And you're also right as it applies to the business world. Keep it coming.
--Bob Mellon, with Creative Response Marketing
I agree with about the army training good man in years past, but I strongly disagree with you on anybody's ability to train and retain good employees in today's environment. Especially when the government pays people to sit on their behind and play dumb. In my business I have seen many an employer get screwed for hiring people. Today's employees will lie, steal, and outright defy you to get your money's worth from their work. The work ethics have eroded on both sides of the equation: Employers and especially big business, and employees. For 25 years I saw work ethics erode and slip. What is even more distressing is the inability of entrepreneurs to take advantage of all that is at their disposal in libraries and from government agencies to avoid failing and making bad and costly decisions.
Even if you wanted to make a good employee out of a recruit, the odds are against you succeeding. Most trade magazines and self-help publications list many businesses who can barely get one good "apple" out of every 100 applicants. We can debate this subject for days and never resolve the situation, but hopefully enough people will join together to make a difference. Good luck to them they're going to need it.
No disagreement with your conclusions, but believe you have overstated the odds of being killed or wounded in Iraq. While the force level is indeed about 130,000, the force is on its third rotation, and includes National Guard and Reserve component forces as well as active Army, so I'd guess that upwards of 300,000 troops of all services have served in Iraq.
That lowers the odds pretty dramatically.
--Robb Ruyle, with Powderhorn Industries
Cheating is not the way to increase our armed forces. If the rules are too restrictive, and we need to loosen them, let's do that. We got into this mess that is killing and maiming our fine young men by avoiding the truth and bending the rules. It doen't make anyone proud of their achievements to know that they were made by breaking the rules. We would not have problems meeting our quotas if there were continued support for this war.
--Nancy Fiers, with Mountain Maples
Here's another "Stupid Marketing Ideas" played by huge corporations against their best interests.
1. Cellular companies pay billions in incentives and rebates to get customers to sign 2-year contracts.
2. The stock market and acquirers value cell companies primarily on the number of customers they have.
3. When the contracts are up, they offer expiring customers renewals at far less attractive terms and prices than offered new customers--or than competitors offer to "switchers".
When people had to change phone numbers to switch companies, these strategies made some sense, but no longer. Reminds me of the old adage that generals always prepare to fight the last war, but only idiots would fail to see that current policies are self-defeating.
What do you think?
--Sid Bursten, with Catalogixx LLC