Skip to comments.Executives in top US collapses made $3.3bn
Posted on 07/30/2002 5:53:07 PM PDT by shrinkermd
Top executives and directors of the biggest US business collapses amassed billions in salary and share sales while the stock market was still booming, according to a Financial Times survey.
In just three years, they grossed about $3.3bn before their companies went bust, having wiped out hundreds of billions of dollars of shareholder value and nearly 100,000 jobs.
The survey backs the words of Alan Greenspan, US Federal Reserve chairman, who two weeks ago attacked the "infectious greed" that distorted American capitalism during the late 1990s - an era in which achieving long-term corporate success was not necessary for managers to reap vast personal rewards.
Among the biggest winners were the former executives of Enron, Global Crossing, and WorldCom - the telecoms giant that last week became the largest ever US bankruptcy.
Executives and directors at these and other failed companies have been attacked by politicians and activist shareholders for making personal fortunes at the expense of their company's long-term success.
In the three years from 1999 alone, Ken Lay of Enron grossed $247m while Gary Winnick of Global Crossing - the survey's top-earning baron of bankruptcy - grossed $512m.
Such cases are fuelling Congressional efforts to reform corporate America, most notably the accountancy and corporate fraud reforms that President Bush signed into law on Monday.
The legislation creates a new board to oversee the accounting industry and increases penalties for executives who commit fraud.
Although there is no evidence that any of the executives broke any laws, the sums involved have led to calls for directors to be forced to hand back gains made shortly before companies fail.
Other winners among the barons of bankruptcy include less well-known figures such as K.B.Chandrasekhar, an entrepreneur who founded Exodus Communications and sold more than $131m worth of shares before the company collapsed.
The FT's survey, the first systematic study of executive gain at companies that went bankrupt amid the recent economic downturn, covers the 25 largest US companies to go bust in the past 18 months. It includes salaries and proceeds from share sales between 1999 and 2001. Of the 208 executives and directors included in the survey, 52 individuals grossed more than $10m, 31 more than $25m, 16 more than $50m, and eight more than $100m.
The survey also examines the often controversial ways in which executives made their millions, including severance and retention bonuses, dividends on shareholdings and forgiven loans.
This seems to be more of a moral rather than a legal question. How can you force CEO'S to be moral?
I dunno. I'm sure the thieves and crooks in Congress will provide the answer, though. If we're lucky - they'll saddle us with more regulations while lining their pockets.
A failed Broadway producer realizes that he has always been good at raising funds, just lousy at making hit plays. So, gauging his strengths and weaknesses correctly, he deliberately creates an overcapitalized flop.
Similarly, in a glutted market with no product differentiation, Worldcom execs realized that their chances of getting rich were better with manipulation of their overvalued stock than in actually making profits. They knew they had one shot to strike it rich before the roof fell in.
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