Corporate THE GREEDY BUNCH

Boomers International Board: Boomers' Issues & Concerns: Corporate THE GREEDY BUNCH
Top of pagePrevious messageNext messageBottom of pageLink to this message  By yydd on Monday, August 12, 2002 - 07:29 pm:

Well HEY! some of them are boomers ~~

http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=209015

You Bought. They Sold.
All over corporate America, top execs were cashing in stock even as their companies were tanking. Who was left holding the bag? You.
FORTUNE
Monday, September 2, 2002
By Mark Gimein

Over the past months, the public has been treated to an ever-lengthening parade of corporate villains, each seemingly more rapacious than the last. First there were the Enronites, led by the now disgraced Kenneth Lay, Fifth-Amendmenting their way through the halls of Congress. Then there was Global Crossing's Gary Winnick, with his Drexel Burnham resume and hundreds of miles of useless undersea cables. And of course there was Tyco CEO Dennis Kozlowski, who, despite having made hundreds of millions of dollars from Tyco stock options, stands accused by the government of shipping empty boxes out of New York to avoid the sales tax--the sales tax!--on his million-dollar paintings.

These people and a handful of others are the poster children for the "infectious greed" that Fed chairman Alan Greenspan described recently to Congress. But by now, with the feverish flush of the new economy recognizable as a symptom not of a passion but of an illness, it has also become clear that the mores and practices that characterize this greed suffused the business world far beyond Enron and Tyco, Adelphia and WorldCom.

With assistance from Thomson Financial and the University of Chicago's Center for Research in Securities Pricing, FORTUNE set out to answer an obvious question: As Lay, Winnick, Kozlowski, et al. were dumping their shares and getting rich, what were the rest of America's top executives doing? Gary Winnick, we all now know, sold some $735 million in stock as his company was hurtling toward bankruptcy. But was this really the ultimate in millennial avarice?

In a word: no.

The not-so-secret dirty secret of the crash is that even as investors were losing 70%, 90%, even in some cases all of their holdings, top officials of many of the companies that have crashed the hardest were getting immensely, extraordinarily, obscenely wealthy. They got rich because they were able to take advantage of the bubble to cash in hundreds of millions of dollars' worth of stock--stock that was usually handed to them via risk-free options--at vastly inflated prices. When the bubble burst, their shareholders were left holding the bag. But, hey, they had theirs.

How much did they take in? We'll get to that in a second, but first we need to explain the criteria for the list that accompanies this story. First, we looked at companies that had hit a market cap of at least $400 million--and fallen by at least 75% from the highs they reached during the bubble years. Second, we counted insider stock sales from 1999 onward. (That's why Gary Winnick's tally comes to "only" $508 million on our list; he had sold a ton of Global Crossing stock before 1999.) And third, we included only stock sold by top executives and board members; the quick profits made by the venture capital firms that funded the dot-com boom were excluded. (Also excluded in all but a very few cases--largely because it's impossible to track--was stock sold by company officers after they left their jobs. For the same reason, we did not include the cost of acquiring the shares; in most cases option prices were so low that including that cost would hardly affect the totals.) What we cared about, ultimately, was a simple, straightforward thing: How much cash did the top executives at America's Losingest Companies reap by selling their shares to the investing public?

Even with these fairly narrow parameters, the numbers are astounding. Executives and directors of the 1,035 corporations that met our criteria took out, by our estimate, roughly $66 billion. Of that amount, a total haul of $23 billion went to 466 insiders at the 25 corporations where the executives cashed out the most. Those are the companies that make up this list.

The top 25 include some big and obvious names: Cisco (CEO John Chambers: $239 million), for instance, and AOL Time Warner, parent of FORTUNE's publisher (chairman Steve Case: $475 million). But they also include companies you would be surprised to find on a top-25 list of any kind. Executives and directors at a software maker called Ariba raked in $1.24 billion even as its stock was falling from $150 to around $3. Yahoo executives reaped $901 million in stock sales while the company's shares fell from $250 to about $11. InfoSpace, once touted by its founder, Naveen Jain, as on its way to becoming the first "trillion-dollar" company, makes the list. In early 2000, by which time Jain had already taken out more than $200 million, he protested to FORTUNE that "investors ... know I am committed to our long-term success." Now Jain's "trillion-dollar" company has a stock price of around 50 cents and a market cap around $145 million--and meanwhile, its founder has sold an additional $200 million or so. i2 Technologies, which makes supply-chain management software, now has a total market cap that is less than CEO Sanjiv Sidhu's haul of $447 million. Peregrine Systems is a deeply troubled software company that is on its third auditor in six months, has announced that it will restate years of revenues, and faces delisting from Nasdaq. Its stock is below 40 cents. But not to worry. Back before anyone realized that its revenues were misstated, chairman John Moores cashed out $646 million, enough to cover the losses of the San Diego Padres, which he also owns, for the next 85 years.

Reporter Associates: Eric Dash, Lisa Munoz, Jessica Sung

Greedy Bunch - Full List:
http://www.fortune.com/insiders/companies.html

Cash out Kings~
http://www.fortune.com/insiders/execs.html


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