|  | | Price | 8.280 | | | Change | +0.090 | |
Research Wizard
Add to MSN Stock List
Message Board
|  | | Price | 25.420 | | | Change | +0.140 | |
Research Wizard
Add to MSN Stock List
Message Board
Jubak's Journal
Recent articles:
• The only indicator that really matters, 4/1/2003
• Fewer warnings could spell relief for investors, 3/28/2003
• Economic smoke may not clear for months, 3/27/2003
More...
| | Jubak's Journal
Reformed? Doesn't look that way
Calls for reforms on everything from accounting to executive pay rang out last year. But the latest corporate proxies indicate it may just be business as usual.
By Jim Jubak
No more WorldComs (WCOEQ, news, msgs), no more Tycos (TYC, news, msgs), no more Lucents (LU, news, msgs) no more Electronic Data Systems (EDS, news, msgs).
That was the investor demand a year ago. Change the rules so that management didnt have incentives to lie about their numbers, as at WorldCom. Give corporate boards some backbone so that they would put a stop to sweetheart loans and CEO robbery, as at Tyco. Make the accountants really count things, as they didnt do at Qwest (Q, news, msgs).
Congress also passed Sarbanes-Oxley. The Securities and Exchange Commission won more money for enforcement and a new leader. In addition, accountants got a new oversight panel. But has it made any difference?
Not much, according to the proxy statements filed by companies before their spring annual meetings. Too many companies still just dont get it.
CEO pay still staggering
Motorolas (MOT, news, msgs) stock continued its nose dive in 2002, sinking another $42 after falling 25% in 2001. But Motorola CEO Chris Galvin had a much better year. He collected $15.63 million in 2002. According to Motorolas proxy, thats $1.28 million in salary, flat with 2002, and $1.5 million in bonus and $12.85 million in other compensation. Thats double what Galvin received in 2001.
Michael Zafirovski, promoted to president in July, did even better. His total package, including 5.5 million shares of restricted stock, came to $47 million, plus options on 800,000 shares.
Motorola lost $1.09 a share last year, better than the $1.78 a share loss for 2001. Just imagine what management will get paid if it actually produces a profit for 2003.
How about my options?
Of course those payouts at Motorola seem positively piddling compared to the $275 million in stock options cashed out by John Sie, CEO of Liberty Medias (L, news, msgs) Starz Encore pay-movie network.
Sies option payout dates back five years -- but theres no evidence that the flow of stock options, which dilute the holdings of existing shareholders, is slowing. Or that companies are inclined to let shareholders vote on the grants, as some investors have demanded.
Texas Instruments (TXN, news, msgs), for example, has set aside 240 million shares of its stock for options for its workers, according to its recent proxy. Thats 14% of existing shares. And the company is doing it without asking for a shareholder vote.
Thats despite new rules proposed by the New York Stock Exchange that would require such votes. The SEC is expected to approve those rules sometime this year.
Institutional Shareholder Services, an advisor to many of the large institutional investors who together own almost 70% of Texas Instruments stock, has recommended that its clients withhold their votes for directors at the companys annual meeting.
Old corporate governance habits die hard
Youve got to hand it to the board at Sprint (FON, news, msgs) they were sure on the ball last year. The company gave CEO William Esrey a 57% increase in salary and bonus in 2002, according to the companys proxy. And President Ronald Lemay received a 48% increase in salary and bonus.
Thats despite the continuing decline in the companys market share; a stock that gained exactly nothing in 2002; and an IRS audit looking for abuse of personal tax shelters that led the company to ask both men to step down from their jobs.
Old habits die hard, it seems. The board at ETrade (ET, news, msgs) did manage to give former CEO Christos Cotsakos a $4 million bonus in 2002 for reaching performance goals. Thats plus the $4 million severance received by Cotsakos, who resigned in January as a result of continuing protest over the size of his compensation package.
Those old familiar accounting scandals
This week new figures showed that accounting fraud at WorldCom added up to $11 billion.
The scandal unfolding at HealthSouth (HLSH, news, msgs) isnt likely to match that number, but its still pretty impressive since, according to the SEC, it involves just about all of the companys accounting stretching back to its first days as a public company in 1986.
In neither case did the companies accountants catch the deception.
Those looking for reasons public accountants dont catch fraud more frequently point at the conflicts of interest at accounting firms that make far more money consulting for the companies they audit than from their actual audit work.
According to Nextel Communications (NXTL, news, msgs) most recent proxy, for example, Deloitte & Touche was paid $19 million for non-auditing services by Nextel in 2002 and just $2.1 for auditing work.
But thats actually progress from 2001. That year Nextel paid out $35 million for non-auditing services.
Investors looking for reassurance that the consulting payments wont compromise the bean-counting can, of course, find it right there in the proxy: the payment to Deloiotte & Touche for non-auditing work, Nextel says, is compatible with maintaining their independence.
With that kind of proof, who needs reform?
Editor's Note: A new Jubaks Journal is posted every Tuesday, Wednesday and Friday. The Wednesday edition stems from Jim's appearance on CNBCs Business Center most Wednesday nights at approximately 5:45 p.m. ET. Selected CNBC stories can be found in the TV Reports index.
At the time of publication, Jim Jubak owned or controlled shares in none of the equities mentioned in this column. He does not own short positions in any stock mentioned in this column.
|
