Just count the number of well-known and formerly well-respected CEOs who have fallen on their swords after revelations that they were involved in the practice of backdating stock options.
The benefactors of their ignominious actions have been co-inhabitants of the executive wing. Misguided corporate titans have seduced the best and brightest to join their companies with the lure of a guaranteed fortune from “opportunistically” dated options. And in too many cases, they have been driven by egregious personal greed.
When the first few incidents of backdating options surfaced, some thought they were isolated cases, perhaps attributable to a CEO using a malfunctioning PDA that randomly transposed dates or dropped a digit or two. Initially, apologists for corporate America donned their rose-colored glasses and said, “No big deal, this too shall pass.”
But it didn’t pass. Instead, it became painfully obvious that the practitioners of this new calendar math seemed to multiply exponentially to epidemic proportions.
How could this be? Aren’t CEOs supposed to be captains of our free enterprise system, who not only inspire and innovate but also lead by example, disseminating their advice to subordinates while holding themselves to an even higher standard?
It may have started with a few executives justifying that they were simply trying to find an economical way to hire or keep top performers. With the equivalent of getting a sneak peak at tomorrow’s stock prices today, they picked an option grant date that guaranteed new riches to the recipients.
At first, a misguided CEO thinks, “I’m doing this for the good of the company. So what if it is a little on the gray side? What counts are the end results.”
Dozens of similar scenarios have no doubt been played out in the run-amok executive’s mind. However, none would pass my “Mother Rule.” Forget Sarbanes-Oxley; if you wouldn’t want your mother to know you did something, then it’s gotta be wrong.
The crack-cocaine addiction in Corporate America doesn’t always involve a white powder sometimes, it’s just the stroke of a pen. How could reasonably intelligent executives get themselves into so much trouble? It has to do with their super-sized sense of self, incessantly fueled by the yes-men whose full-time jobs are to pave the way for the boss. The CEO starts to think he’s omnipotent because he has the power to make things happen.
There are antidotes to stem these illusions and keep managers on the straight and narrow. The most effective is a simple reality check that keeps you grounded and curbs rash impulses to take the first bite of forbidden fruit. Don’t isolate yourself and only hang out with people who are suck-ups.
You must regularly talk one-on-one with employees on the lowest rung. Get off your derriere, go to the cafeteria and break bread with the troops. These sessions will be an eye-opener. You’ll quickly realize that your employee’s problems are strikingly similar to your own. They just want to do their job right and take care of their families.
Most important, you’ll learn that they hold you and your abilities at a very lofty level. Although it’s a frequent favorite American pastime to criticize the boss, in truth, most employees think their bosses, particularly the CEO, are much better leaders than they really are.
Your reality check will kick in when you realize that bad actions trickle down and can have devastating effects on every employee. If you make a bonehead decision, or are ever tempted to cross the line between right and not-so-right, think twice about the consequences, not just for you but for your people.
It’s your duty as the boss to ensure that your employees and investors are first in line before you. If you follow this path, you’ll often wind up with a bigger payoff for yourself, be it economically or in personal gratification or the increased esteem of your associates.
The Wall Street saying describing the greedy is, “There are bears, bulls and pigs.” For those with questionable motives, I would propose, “There are bears, bulls and crooks.”
CEOs who backdate stock options and commit other acts of malfeasance prove that so few can do so much damage to affect the perception of so many who always try to do it right. The good news is that most executives follow their own words by doing themselves what they ask others to do, without ever taking a PDA out of their pocket.
MICHAEL FEUER is co-founder of OfficeMax, which he started in 1988 with one store and $20,000 of his own money, along with a then-partner and group of private investors. During 16 years as CEO, he grew the company to almost 1,000 stores with sales approximating $5 billion before selling it for almost $1.5 billion in 2003 to Boise Cascade Corp. In 2004, Feuer launched another start-up, Max-Ventures, a venture capital operating firm that focuses on buying control and/or making substantial investments in retail-oriented businesses and businesses that serve retail. Reach Feuer with comments at firstname.lastname@example.org.