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Are technology CEOs overpaid?

CEO compensation. That's all you have to say to get some people jumping up and down, screaming, and sputtering like raving lunatics. Me, I'm not sure how I feel about executive pay. After all, I was an executive, even a CEO, however briefly. But don't hold that against me.

In any case, I'll try to come up with an objective position by the end of the post.

In the meantime, let's take a look at some CEOs of high-profile, publicly traded technology companies. To be sure, these folks have some things in common. They shoulder a great deal of responsibility and risk; they have really tough jobs; and like it or not, they make tons of dough.

Do shareholders always get their money's worth? Well, not exactly.

Let's start with Mark Hurd of Hewlett-Packard. In fiscal 2006, Mark's total compensation--including equity-based compensation--was at least $19 million. That's a lot of money, right? Let's reserve judgment for the moment.

HP's performance during that time frame was $92 billion in revenue, $6 billion in net income, and $2.18 earnings per share. The stock responded accordingly; shareholders were treated to a market cap gain of $28 billion. For every dollar earned, Hurd returned roughly $1,500 to shareholders. I'd say he earned his keep.… Read more

Good news, bad news at Dell

As reported, Dell recently concluded a year-long internal investigation into its accounting practices. As a result, the company will restate its financials for four fiscal years (2003 through 2006) plus the first quarter of fiscal 2007. The good news is that the cumulative decrease in net income will be between $50 and $150 million - peanuts compared with Dell's reported profit of $12 billion during the restatement period.

The bad news, however, is contained in a rather heavily wordsmithed paragraph of Dell's press release:

"The investigation identified evidence that certain adjustments appear to have been motivated by the objective of attaining financial targets. According to the investigation, these activities typically occurred at the close of a quarter. The investigation found evidence that, in that timeframe, account balances were reviewed, sometimes at the request or with the knowledge of senior executives, with the goal of seeking adjustments so that quarterly performance objectives could be met."

It appears that certain senior executives had a chronic case of end of quarter madness, a relatively common disease among executives of publicly traded companies.

Confirming what was evident from Dell's announcement, CFO Don Carty said in a conference call with investors, "We did find evidence of fraud." But neither Carty nor Michael Dell - who reclaimed the CEO role in January - would divulge the identities of the senior executives referenced in the company's release.… Read more

Is there a smart home in your future?

About 25 years ago, a coworker and I brainstormed about designing home automation into new home construction. I think one of us did a paper on it for business school, or maybe we worked on it together; I can't remember. What I do remember is that I couldn't stand accounting and quit the MBA program. Maybe that explains why I only got to be a CEO for seven months.

At the time, computer and network technology was all big iron, so robust, cost-effective home automation was a long way off. Nevertheless, we had hopes and dreams, and one of mine was to someday build my dream home with lots of cool technology built-in.

Fast forward 25 years. My wife and I are near completion of a custom home. We put our hopes and dreams into this house, which my wife designed. Our architect and builder had a mastery of every aspect of the process, except for one: smart home technology. That kind of left me in charge of dealing with that aspect of the home.

Since I'm somewhat of a computer geek, I didn't have too much of a problem with that. After all, I knew what the technology was capable of, I knew the tradeoffs, and I knew what I wanted. I also knew when a contractor was blowing smoke up my butt, which came in handy.… Read more

Rambus' board and the CEO's wife

Rambus needs more controversy and scandal like the Internet needs more bloggers and porn. As mired in legal trouble as this company is, you've really got to do something egregious to get noticed.

According to a story by The Recorder, a California legal paper, the wife of Rambus CEO Harold Hughes did just that. Nancy Hughes anonymously posted 170 messages on a popular investor message board over a 10-month period. In her posts, clarissamehitable--alias Nancy Hughes--vigorously defended her embattled husband, and criticized current and former members of the company's management team.

Nancy's posts were so obviously those of a Rambus insider that they aroused not only the suspicion of other posters on the board, but company officials, as well. Rambus brought in outside legal counsel to head up an investigation, which ultimately turned up none other than Hughes' wife.

According to a company spokeswoman, Rambus' board of directors concluded that there was no wrongdoing on the part of either Hughes.

What's troubling is that Nancy was pegged as an insider for good reason. If some of her posts were not inside information, they certainly appear to come razor close to crossing the line. And there's evidence that someone may have removed some of her posts from the message board.

Full disclosure: I was an executive officer of Rambus from 2002 to 2003 and I am a shareholder. I have never posted on an investor message board and neither has my wife...as far as I know.… Read more

What motivates rich, powerful CEOs to commit corporate fraud?

What do Bernie Ebbers, Walter Forbes, Martin Grass, Dennis Kozlowski, Sanjay Kumar, Ken Lay, Joe Nacchio, John Rigas, Jeff Skilling, and Sam Waksal all have in common?

They were all CEOs of prominent public companies, convicted of big-time corporate fraud and sentenced to lengthy prison terms. They were all also fabulously wealthy (we're talking hundreds of millions of dollars and up) when they committed their crimes.

Who among us hasn't asked themselves, what would I do with $100 million? You get all kinds of whimsical answers to that question, but one thing you never hear is, "I'm going to risk the money, my family's well-being, and my freedom to be a high-powered CEO and defraud thousands of shareholders."

That's because nobody thinks that way and these ten CEOs were no exception. Nevertheless, they risked their careers, families, reputation, wealth, power, everything. And for what? What motivates rich, high-powered CEOs to unnecessarily risk it all against all logic and ethical principals?

Maybe it isn't even about motivation. Perhaps there's something deeper going on here, something in their circuitry that's hard-wired for exceptional success followed by devastating disaster. Or is it just probability? Maybe x% of highly successful, super-wealthy CEOs of prominent public companies will turn out to be dysfunctional crooks.… Read more

Wanted: ethically challenged workers for executive positions

Ever wonder where your career is heading? Well, let me ask you this:

Are you capable of moral flexibility? Good at covering things up without getting caught? Know what plausible deniability is? Then you just might be a candidate for executive management.

Or, are you in a complete state of denial about your future, a goody two shoes content to let management use you for toilet paper for the next 10 or 20 years?

Want to know what the future holds for you? Then get out your pen and paper and take this quiz, if you dare. Scoring is at the end. Hey, no cheating!

1. Corporate fraud happens: a) rarely b) more often than you think c) sooner or later d) whenever the greedy SOBs can get away with it

2. Executives who defraud shareholders should be: a) slapped on the wrist b) fined c) fined and imprisoned d) forced to watch reruns of The Anna Nicole Show

3. Greed is: a) what I live for b) for lack of a better term, good c) fine in moderation d) the sin of capitalist dogs; long live Karl Marx and the revolution

4. Most board directors: a) have shareholders' interests at heart b) do a reasonably competent job of oversight c) are bought and paid for by the CEO d) are tired old farts that are desperate to be relevant

5. Executive compensation in corporate America: a) is reasonable, CEOs deserve what they get b) is a little hard to swallow, sometimes c) is excessive and out of control d) inflames my hemorrhoids every time I read a proxy statement

Socialtext CEO taps social network for new CEO

Now that's transparency.

Ross Mayfield, CEO and co-founder of collaboration software company Socialtext, on Thursday used his blog and the social-networking site LinkedIn to find a replacement--for his own job.

"It is time for Socialtext to be taken to the next level, and for that, I want to openly recruit the CEO 2.0 for Socialtext," Mayfield wrote in his blog and apparently to his LinkedIn contacts.

Socialtext, one of several Web 2.0 business software companies, makes wiki-based collaboration software. And clearly Mayfield wants to use social-networking tools even for even big decisions like finding a … Read more

Can Jerry Yang fix Yahoo?

Imagine this: a company has a $35 billion market cap, a P/E of 50, annual revenues of $5 billion, annual profits of $500 million, 60% gross margins, and about $3 billion in the bank.

Nice fundamentals, right? Now imagine the same company being characterized as "embattled." What could possibly be so wrong with this picture that an outcry from investors got the CEO booted?

The company in question, of course, is Yahoo. And what's wrong is that archrival Google has figured out how to mint money with search ads and now boasts a market cap of $170 billion and $3 billion in annual profits. The bad news for Yahoo is that advertising, for the most part, is a zero-sum game. Google's good fortunes spell boohoo for Yahoo.

It doesn't help that, in 1998, Chief Yahoo and co-founder David Filo encouraged Google's founders to start a search-engine company. Or that, in 2002, Yahoo had a chance to buy Google for $5 billion and passed.

The irony of those missed opportunities isn't lost on anyone; every Yahoo employee and shareholder has felt its demoralizing effects, not to mention Yahoo's deteriorating share price. All it took was a whopping $71 million executive pay package for CEO Terry Semel to put investors over the edge.

Less than a week after the company's annual shareholder meeting, Semel was out and Chief Yahoo and co-founder Jerry Yang was in. Until then, Yahoo had employed seasoned executives at the top--first Tim "TK" Koogle and later Semel. Still, founders Filo and Yang have remained actively involved in the company's evolving business strategy and technology.

But Jerry Yang as a turnaround CEO? I admit--I didn't see that coming.… Read more

How Jobs dodged the stock option backdating bullet

In researching this post, I came across a number of recent reports on Henry Nicholas III, the once high-flying CEO and cofounder of Broadcom. The allegations of illicit sex, drugs, and rock and roll reminded me of the 60s ... or was it the 70s? Funny, I can't remember.

While the story was enthralling, I didn't understand what any of it had to do with a federal investigation into stock option backdating. Sure, Broadcom had to take a $2.2 billion charge to fix the accounting mess left by the company's former executives. But how does that relate to hiring prostitutes and drugging customers without their knowledge?

Said another way, do the feds really need to dig that deep to find enough rope to hang executives with? After all, stock option backdating is all the rage these days. You'd think they'd be up to their eyeballs in rope.

I count no fewer than 38 top executives at 19 high-tech companies that have bit the dust over this stuff. We're talking top executives at big-name companies like Apple, Altera, Broadcom, Brocade, Cirrus Logic, Comverse, KLA-Tencor, Maxim, McAfee, Rambus, Sanmina-SCI, Take Two, Trident, Verisign, and Vitesse. And we're just getting started.

That's serious fallout considering that options backdating is legit as long as the company reports it and accounts for it accurately. You see, if you backdate stock options to a date when the price of the stock was lower, then the options are "in-the-money" when granted. That means the company incurs an expense equal to the difference in the share price between the two dates.… Read more

Classic CEO quotes for a sunny Sunday

Bob Bailey, CEO of PMC-Sierra, at Semico Summit 2004: "Our industry is made up of geniuses that act collectively like idiots." I don't recall what Bob was referring to, but whatever it was, the audience appeared to agree with him.

Jerry Rogers, CEO of Cyrix, commenting on the company's sales team at an employee luncheon, c. 1996: "We've got more salesmen now than we've ever had before. We've got so many salesmen that I think they're out there bouncing into each other and getting lost. I don't think they know … Read more

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