If your father is a CEO, here’s a gift idea that transcends a bad mug/tie/card/12 pack of golf balls (you should be mailing that today if you haven’t by the way). Believe it or not, aside from the golden (but literal) showers of lavish wealth, CEOs are crappy fathers, which is what prompted Tom Stern, the CEO of LA-based recruiting firm Stern Executive Search, to write CEO Dad: How to Avoid Getting Fired by Your Family, published by Davies-Black. Stern used to be a former comedy programmer for HBO and has guest blurbs from pals Jerry Seinfeld and Jay Leno. Fortune’s Anne Fisher interviewed Stern about the book. What follows is the (slightly embellished) wackiness that ensued:
Q. Why do successful executives so often fall short when it comes to personal relationships like marriage and parenthood?
A. It’s not that CEOs are cold and uncaring [they’re cold, uncaring megalomaniacs] – it’s just hard to bond with a kid via e-mail [unless that email is StiffyMail and your son is a teenager]. And those bedtime memos [One Memo, Two Memo, Red Memo, Blue Memo]! Not good! And of course, if you used to work at Enron, well, you tend to drift away from your family while you’re in prison [unless you’re Lou Pai and your family consists of mutant shark humanoids on skis with laser beams surrounding your Colorado compound].
But seriously, a lot of executives have a driving desire [the Rolls-Royce Phantom] to be admired, which is why [they can listen to the Cardigans’ “Lovefool” on loop] they’re drawn to roles of authority in the first place [although many are submissives on weekends]. Children don’t care about your title [Lord Supplebottoms]. You have to relate to them in a totally different way [unless your safeword is “Barbie”], and it’s a hard adjustment [to make a leather mask that small].
Also, at work, everything is quantifiable [how much you suck, in joules per second]. But with your family, you can’t measure and control things [you can’t know the speed of a small infant and his exact location at the same time, because Heisenberg was a really shitty dad]: It’s much more amorphous, and that can be frustrating. And then there’s pure ego, the need for power and recognition [isn’t that the id?]. Work is the place to get those things [you can’t do a Juniper Networks pitch without going through me, the spreader of the enterprise networking comps], so work becomes all-important.
I know. I used to be the kind of guy who would be texting clients [Lady Supplebottoms] while riding the Matterhorn at Disneyland with my daughters [if Dante were alive today what circle 8 would consist of]. It was nuts.
Against all odds, the story of Overstock continues to get worse. The company has been a laughing stock to almost anyone who can be bothered to think about it anymore. It’s the focus of an SEC investigation. It is run by a chief executive whose name—Patrick Byrne—long ago became synonymous with wacky conspiracy theories. It regularly deploys nasty tactics to defame reporters who dare mention its deterioration. An it’s bleeding directors.
The latest news hit on Thursday when Ray Groves resigned from the board. Groves, who once ran Ernst & Young, was the head of Overstock’s audit committee. He was, in the eyes of some observers, the last and best hope the company had to maintaining a sense of credibility. His departure comes as only the latest of a series of resignations by board members. The past year has seen also seen departures by directors John Fisher and John Byrne, the CEO’s father. When your father bails on your company, you know you are in trouble. Or rather, you would know. Patrick Byrne seems to think it’s a sign of his company’s strength. Or something. We’ve long ago given up trying to figure out anything about what goes on inside of Byrne-the-younger’s brain.
But other’s have not. After we took off for the long-weekend, Gary Weiss, Sam Antar and Herb Greenberg all looked into the latest resignation. What’s behind the latest departure? Well, the same thing that was behind the departure of Fischer and Byrne-the-elder: the CEO’s ridiculous “jihad” against the “sith lords” on Wall Street he claims are behind a naked shorting conspiracy that is depressing his company’s stock price.
“In a letter contained in an SEC filing this morning, Groves told the company, ‘My resignation relates to the company’s prime broker suit.’ That’s Overstock’s suit alleging that prime brokers are somehow involved in a naked shorting conspiracy,” Greenberg reports.
[But is it more than the Overstock’s lawsuit against prime brokers? Read more after the jump.]
Are you a CEO (who found his/her way over here from SuperMogul)? If so, drop the blow, dead hooker and, for those of you driving, the bottle of Jack. Your shareholders may try and use these things against you! CNBC reports that—in addition to Forbes.com employees, research analysts, and Kamikaze pilots—turnover among chief execs is high, especially the compulsory, by vote of the board kind. In a study by Booz Allen, it was found that from 1995-2006, the annual turnover of CEOs grew 59%; the number of CEOs who left their companies as a result of conflicts with the board increased from 2 to 11% during that period. In ’95, only one in eight CEOs were forced to leave office, versus last year’s one in three.
And, to add insult to injury: while in ’95 underperforming CEOs were permitted to stay in office just as long as their high(er)-performing colleagues, last year, the guy with above average returns was “nearly twice as likely as one delivering below-average returns to remain CEO for more than seven years. In 1995, underperforming CEOs stayed in office as long as their high-performing colleagues.” Those fascist shareholders want moral and performance accountability? What’s next, mandatory monthly drug tests and a bible in the nightstand? This is unconstitutional. CEO Turnover Remains High As Boards Get Tougher, Survey Says [CNBC.com]
Eddie Lampert may be betting that former US Treasury Secretary Robert Rubin is poised to take over as chief of Citigroup, according to a former colleague of both Lampert and Rubin. Earlier this week, Lampert’s ESL Investments disclosed that it had accumulated a 0.3% stake in Citi, setting off speculation about Lampert’s intentions. Speculation ranged from notion that Lampert might view Citigroup as cheap relative to it’s banking peers—this came from an unnamed banker who happens to work at Citigroup—to the idea that he might be poised to take an “activist investor” stance and agitate for change. Shares of Citigroup role 4% following the disclosure of ESL’s position.
“Lampert is tight with Rubin. He loves the man. Idolizes him. He may think that Rubin’s about to become a lot more involved at Citigroup, maybe even to take over for Prince,” the source said, referring to Citigroup chief executive Chuck Prince.
Rubin rose to Wall Street at Goldman Sachs before being appointed to the Treasury position by Bill Clinton. He is now the chairman of Citigroup’s executive committee. Early in his career Lampert worked under Rubin when he was an arbitrage trader at Goldman Sachs. This morning’s Wall Street Journal described Rubin as one of Lampert’s “leading role models.”
Yesterday CNBC’s Charlie Gasparino said that there was pressure for Rubin to take a more active role in the management of Citigroup. His position at the head of the executive committee brings him a hefty paycheck—reportedly $17 million—but some have said he doesn’t exercise much responsibility for the management of the bank. At least one banker employed at an investment bank described Rubin as “a relationship guy” whose job mainly involved using the connections he has made during his long career in finance and government to win business for the bank.
Prince’s tenure at the top of Citigroup has not been a happy one. The bank has been under-pressure from investors to change its management and some have even suggested that it spin off some of its constituent businesses. Prince is widely seen as unwilling to fundamentally change the structure of Citigroup. Will Chorus Grow at Citi? [Wall Street Journal]
A key question in the great brouhaha over backdating—dating stock option grants on days when the stock was at a historic low rather than the date they were actually granted—has always been whether or not it matters to shareholders. Was backdating a trivial accounting matter that potentially increased compensation for those receiving the backdated options but had no serious effect on a company’s bottom line? Or did it represent something more serious that investors should have known about?
On Friday, a federal judge overseeing the trial of a former executive accused of fraud stemming from backdating declared that backdating was “material” to investors. But the way he arrived at this result has some legal scholars scratching their heads.
[We get scratchy after the jump]
We’re edging closer and closer to a tabloid culture for corporate executives, where every flaw and foible gets dragged mercilessly before the public until they are hounded from office. This was probably inevitable, as we’re already using this system to replace democracy for selecting our leaders and to replace talent to select our music and film celebrities. Last night DealBreaker’s John Carney went On The Money to debate whether the private lives of CEO’s should be matters of public concern, and he wound up defending the pretty much indefensible answer: ‘yes.’ His reasoning–so to speak–is that on occasion we can learn about the character and judgment of a corporate executive from what we know about their private lives. Although something might not affect their job performance immediately, neither do minor issues like small-time embezzling. But we throw embezzlers overboard nonetheless. So sometimes we know that character matters. Unrelated: John Carney is the editor of Dealbreaker.com, an online business tabloid and Wall Street gossip site that covers the personalities and culture that shape the financial industry, offering original commentary, news and entertainment.
Earlier today we mentioned Graef Crystal’s column speculating about why the pay packages of Wall Street’s chief executives were so similar despite notable differences in the size of the institutions they manage. Crystal’s question is fair, especially since CEO pay largely tracks that of the firms they manage. Why should this pattern break down on Wall Street?
Crystal posits a couple of image—the smoky backroom, the circled wagons—none of which are very flattering to our leading financial institutions. His idea is that there is safety in numbers—if they all pay around the same thing to the top guys, who’s going to complain?
That’s not such a bad answer, really. And may well explain some of the psychology of the compensation committees. But it is, of course, just speculation. And it’s not clear that this is the only explanation available, or the most obvious.
In fact, if you understand why CEO pay is positively correlated with firm size you can quickly grasp why this doesn’t work out so well on Wall Street. In the broader corporate America, CEOs of larger companies are paid more not because there is some metaphysical connection between the size of a company and the size of a paycheck but because the biggest companies are in fierce competition to attract the top talent. Whether or not CEOs really are what make or break companies, the boards of directors of American companies believe this is true and are willing to pay up for this belief.
Which brings us to Wall Street, where the competition is fierce to hire top CEOs across the range of firm sizes and faith in the leadership principle is stronger than ever. Bear Stearns might be playing catch-up with the larger Lehman Brothers but the two banks are still competitors. Just because Bear Stearns is smaller doesn’t mean it can afford to hire a second-rate CEO on the cheap. The size-comp relationship breaks down on Wall Street, in other words, because the little guys need to constantly worry that the big guys will poach their executives.
There are big fish on Wall Street, and there are bigger fish. But they’re all swimming in the same pond, and to catch them you’ve got to use the same bait. And around here we have a word for the special bait used: it’s called “money.” Earlier:
What Are They Smoking? The Wall Street Executive Pay Problem [DealBreaker.com]
The pay packages for Wall Street’s highest executives is coming under a new sort of scrutiny. This time what seems to have attracted attention is not so much the huge amounts of money the chief executives received by chief executives of investments banks—but the strange similarity in the pay packages. We noticed this a couple of days ago when Bloomberg’s otherwise measured reporting on the compensation of Bear Stearns chief executive James Cayne—who was reportedly paid $40 million for last year—was interrupted by a not-so-subtle implication that there was something odd about the fact that so many of the guys running Wall Street’s banking firms took in similarly sized pay packages despite the variety in the size of the firms. Why does the head of Bear Stearns get paid as much as the head of, say, Lehman Brothers?
Today Bloomberg columnist Graef Crystal drops the “subtle” and “implication” part and comes right out and says that he thinks there is something fishy going on. “Is Goldman, Lehman Pay Set in Smoke-Filled Room?” his column asks.
So why, when there is so much disparity in sales and net Income, is there so little difference in pay?
Is it just coincidence? Possibly. Although total pay packages have become more and more similar, there is still some healthy variation in different forms of pay, such as base salaries and annual bonuses, as well as free stock and option awards.
I have an alternative theory that takes its page from the Old West: circle the wagons. If you’re going to pay more than any other industry and by a substantial margin, it helps if you can justify your compensation by holding up the numbers of your industry peers.
So is it a smoke-filled room? Circled wagons? Is the fix in? Or is there perhaps less than meets the eye? More on this later today. It’s way too early in the morning to start talking about wage curves and positive correlations. Is Goldman, Lehman Pay Set in Smoke-Filled Room? [Bloomberg]
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