… everytime I hear your name, I almost Cry. — Bill Monroe & His Bluegrass Boys.
The one real big mover today was E*Trade, whose shares shot up 25 percent on speculation that it might get bought out by Ameritrade or Schwab. The last two weeks for this company have been as volatile as any other we can remember. It currently trades at $5.33, though earlier this year it was as high as $26.00 and it was over $10 just a couple of days ago.
If the company does disappear, it’ll bring with it some fond memories. Our all-time favorite BusinessWeek article was a February 7, 2000 (!) piece called “Tricks of E*Trade”. This stuff is beyond classic:
KOOKY? To manage that tricky combo, (Christos) Cotsakos has become the Mikey of Silicon Valley–he’ll try most anything. To make executives move faster, he organized a day of racing Formula One cars at upward of 150 miles an hour. To create a loose atmosphere, he has employees carry around rubber chickens or wear propeller beanies (emphasis added). And to bond his team, he had his managers attend cooking school, where they had to depend on one another to whip up a gourmet dinner. ”It’s all about getting people excited about how they can make a difference as a person and as a team,” says Cotsakos.
The next line is the creme de la creme though:
These techniques may sound kooky, but management experts say Cotsakos may be on to the company culture of the future.
Simply awesome. Beyond awesome, even.
Rubber chickens and cooking school aside, you might be surprised that we were/are really big Christos Cotsakos fans. Why? Because the easiest money we ever made (by far) was investing in E*Trade at its depths, knowing it would shoot up when he and his $100 million salary were finally pushed out.
So that old BW article was when the company was at is year 2000 peak. Now here’s BW in Spring ’02, when the company was at its depths:
Investors cried foul on Apr. 30 when E*Trade Group Inc. (ET) disclosed it had paid out a $77 million compensation package for Chief Executive Christos M. Cotsakos in 2001 — a year in which the financial-services company lost $242 million. When Cotsakos pledged on May 10 to return $21 million to E*Trade, the din hardly subsided. After all, his remaining $56 million compensation still topped the combined pay of the CEOs of Charles Schwab, Goldman Sachs, J.P. Morgan Chase, and Merrill Lynch — all vastly larger and more profitable firms. Perhaps Cotsakos’ pay package shouldn’t have been that shocking, for it could well be asymptom of greater corporate-governance issues at E*Trade now coming to the fore. Start with the question of director independence: It turns out director David C. Hayden, chairman of E*Trade’s compensation committee and most responsible for Cotsakos’ pay package, has close business ties to the CEO. Plus, Cotsakos is a general partner at a venture-capital firm bankrolled in part by E*Trade, positioning him to personally profit from E*Trade’s investments and influence. These new questions may be having an impact on E*Trade stock value. Its shares have dropped 9% in the six days since the CEO compensation disclosure, closing at $6.88 on May 15. And one of E*Trade’s larger shareholders says Cotsakos’ decision to return a slice of his compensation package should be the beginning of several changes. “We would hope that the corporate governance would improve. If it doesn’t, we will have to reevaluate our outlook,” says Brian McMahon, president of Thornburg Investment Management, which owned a 2% stake in E*Trade as of December.
Anyway — for anyone who loved to watch contrarian indicators, BW and E*Trade were a dream combo. There hasn’t been much recently, but we’ll be sad if the company disappears.
Tricks of E*Trade [BW]
E*Trade: CEO Pay Isn’t the Only Problem [BW]