Our intrepid Cantiste steps into his Time Machine in order to repair a rift in the Cant continuum... alas, he is screwed.
Is it wrong that the officers of Ariba cashed in their options to the tune of a billion dollars as investors hold stock that now hovers around three dollars, about $170 off its high?
Part of me says "no". Capitalism is a gamble. Everyone has a chance to win or lose. The more you wager in terms of time, sweat, and cash, the bigger the possible reward. The larger the risk, the great the potential payout. Treasury bills, guaranteed by the U.S. government, pay a rather staid return. Throwing all your chips into a start-up can have spectacular results as attested by the real estate in Silicon Valley or Redmond.
Part of me says "hell yes". Capitalism is not a gamble. At a certain level, folks are not only more adept at playing the game, they're able to write their own rules or at least leverage the rules in their favor. As a coworker mentioned today, one of the secrets to winning a lot of money at craps is to bring a lot of money to the table (and be very good at craps). Very few executives' individual contribution to a business is worth the compensation they receive here in the U.S. Our cult-of-personality culture places undue emphasis on the effect of an individual. Yes, a CEO can influence the corporate culture and the market perception enough to turn a company around or lead it to new peaks of profitability, but is it worth hundreds of millions of dollars in the search of that magic individual?
What is even more galling is the golden, sometimes platinum, parachutes that deadbeat executives use to leave a sinking ship. These folks are hired to do a job, fail miserably, and then are rewarded. Witness George Shaheen of Webvan infamy. $375,000 for life on retirement. Quite a deal. Of course, Shaheen left Andersen who was shoveling money on him to the tune $4 million a year and now Shaheen needs to get in line with all the other creditors. Still, Industry pundits try to remind us that we have to "put it into perspective," that we "have to understand the caliber of executive Shaheen is." I guess Webvan proved that even the most godlike, four-million-dollar man is not invincible. I also learned that "during the first week of May, Webvan also allowed Shaheen to repay a $6.7 million loan with only $150,000 worth of Webvan stock." That's like paying for a Lamborghini with a roll of toilet paper. Shaheen used the loan to soothe the pain of alternative minimum tax (AMT) on a purchase of Webvan stock. Because the loan was secured by the stock purchase, Shaheen was able to tender the shares back to Webvan and meet the terms of the loan. Quite a deal. He didn't even have to give up his summer home to pay his AMT.
But Shaheen and Webvan weren't really making their own rules. The real slimeballs are the executive who were given, or should I say "gave themselves", the opportunity to nullify their option purchases. Once the going got rough, they were able to pretend as if nothing had happened. You can bet that the same deal wasn't available to the average investor.
Right or wrong, this is the game we play. You shouldn't be surprised when your township exercises their right of eminent domain in order for a developer to build a strip mall. You shouldn't be outraged when some spotty-faced teenager pays cash for a house in your old neighborhood that you would have to triple your income to afford. Don't let your guts writhe too much when you read about Mr. Shaheen. I would rather deal with these minor injustices than pay a Turkish cop his bribe in a currency that is inflating at 60% a year. I would much rather live with the spectre of a pink slip than a neighborhood sniper.
Utopia doesn't exist, despite whatever the Jehovah's Witness sell you. Make the best of what you've got. If what you've got is a $375,000 pension, all the better.
Pakeha
Reference: http://www.newsfactor.com/perl/story/9804.html