Is Corporate America run by Morons?
June 16, 2008
Many of us watch Saturday Night Live to get a good laugh and unwind after a week of hard work. Comedy is essential for all of us, if we want to get past the drudgery and tedium of our work life.
Not quite so for the billionaire financier Carl Icahn. He says that all he has to do is to go to corporate board meetings to get a substitute for watching Saturday Night Live*. In a commencement address at Drexel University on Saturday he further commented that: "Sooner or later, we're all going to be run by morons."
To call a corporate CEO moron could be a bit of a stretch; then again, maybe not. Carl Icahn, of course knows better than most of us. He is successful, has a far better understanding of how companies should be managed than any CEO and in our opinion has done much more for corporate American than any CEO.
CEOs in corporate America and Wall Street do not particularly care for company that they run or for the shareholders who own that company. They have only one objective in mind: to maximize the amount of money they can put into their pocket. So you really cannot fault them. One would imagine that this is a very difficult job - i.e. to put as much money in your pocket as possible, regardless of what happens to the company and especially when the company goes to hell in a hand basket - and would require great skills and acumen. Apparently not, because you have a very friendly and a totally ignorant board, members of which have an even less interest in running the company.
No, we don't think CEOs in Corporate America and Wall Street are morons. Quite a few of them are very smart. They just don't have to exercise their brains. They don't need to.
One guy, however, was not smart at all; Chuck Prince, the former Chief Executive of Citigroup. And one guy, it seems, was excessively smart; Vikram Pandit, the current Chief Executive of Citigroup.
In 2006, Prince and company were desperate to buy a hedge fund run by Vikram Pandit. The hedge fund was called Old Lane and was co-founded by Mr Pandit only a year ago. Actually, Prince & Co. did not have any interest in the fund but they were in fact, desperate to get Vikram Pandit and his other ex-Morgan Stanley executives on board the Citi bandwagon. For some reason, Citi was completely besotted by Pandit and Company. So they bought the hedge fund for US$800 million and brought it under the Citi umbrella. Mr Pandit made a personal gain of US$165 million from the sale; not bad at all for just a year's work**.
So Pandit became an employee of Citigroup, thanks to Chuck Prince and got paid $165 million for that. A signing bonus, one can say. And then what? Chuck Prince's ass got kicked and he was thrown out of Citi. And who becomes the new Chief Executive? Vikram Pandit.
And in even as Citi reported a net loss of US$9.83 billion for the fourth quarter of 2007 and took a charge (net loss) of US$5.1 billion in the first quarter of 2008 and prepared to layoff a record number of employees from its payroll, it awarded it CEO, Vikram Pandit, US$102 million in cash, stock and options in January as a part of his compensation.
Is this bizarre or comic? Don't know, but if you ask anyone in Citi they will most likely say, "blame it on the board, mate."
Perhaps, the reader can now understand why Carl Icahn gets so much entertainment and laughter from board meetings in America.
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