Volume CCXXXII, Number
24 August, 2002
Page 2
How dare they!
PAULSON TO CEO'S: YOU'RE NOT ME AND DON'T EVEN PRETEND
Henry Paulson, shown here surrounded by flunkies, thinks that CEO's are overpaid, except for him
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By Samuel Insull Financial Editor President Bush's hypocritical reaction to the continuing scandals on Wall Street produced guffaws from those who have suffered real losses in the uncontrolled yet rigged game that is 21st Century capitalism. (By the way, how many of you – other than Hillary Clinton – have been bailed out of losing stock positions just when you needed to raise cash by a mysterious unsolicited buyer who called your broker asking to buy your wallpaper? Too bad you're not the son of a former defeated President of the United States!) In defense of George (not that he needs one, as the SEC didn't even bother to interview him before whitewashing the Harken investigation), he's far from the only CEO who's trying to close down the casino while holding onto a fistful of chips. Recently, the investing public has been treated to the deep thoughts of Henry Paulson, beloved CEO of Goldman Sachs, the Wall Street colossus that made big bucks pumping out worthless Internet IPO's back in 1999 and 2000, when suckers would line up to buy the shares that the favored institutional customers flipped on the first trading day. Hey, the Goldman analyst rated it a strong buy, and a firm as respected as Goldman would never try to pump and dump, right? Henry has caught on that for some reason or another, there's a loss of investor faith in Wall Street, in pretty much the same way that New Yorkers have a lack of faith in the wisdom of crossing Morningside Park at 3 a.m. with a deck of fifties. Usually, it only takes one mugging. He wouldn't be the Chief Executive of Goldman Sachs though if he didn't offer from the goodness of his heart his pious advice and criticism. We can dispense with his purported "reforms" designed principally to shift responsibility from Wall Street hustlers to the managers and director of public companies and their accounting firms. But he saved some of his harshest criticism for – CEO's. Some of these CEO's, says Henry, were making too much money. According to Henry, when compensation it exceeds performance, it really stands out. It does indeed. What motivates CEO's to demand and get huge paychecks from their supine boards, anyway? You'd think these CEO's want to make as much money as – Henry Paulson. Much was made that Paulson's compensation for 2001 declined by a substantial amount, from over $19 million in 2000 to a measly $12 million or so in 2001. Before you send Henry a food basket, though, you might want to keep in mind that man, or at least this man, doesn't live by salary alone. No, Henry has substantial "motivation" to keep Goldman's profits healthy. According to Goldman's last definitive proxy statement, ol' Henry was sitting on $292,450,774 worth of Goldman stock (based on a closing price of $73.15). And what has Henry done lately to justify his $300 million pile? Not making money for the poor fools who actually bought Goldman Sachs stock. If you bought $1 million of GS in the first quarter of 2001 at $118.62, you'd have today about $643,000. Of course, if you bought into their Iridium or Enron deals, you'd have as Henry Paulson might say, bupkis. And no matter what you bought, Henry would still have his $292 million. But, his coat-holders might point out, all of that $292 million is at risk. They might also add (but probably won't) that Goldman, especially with the IPO and M&A gravy trains derailed, is pretty much a leveraged hedge fund trading for its own account. Of course, they're right: Goldman stock is down around 14% over the last year. At this rate, Henry will be down to his last $100 million – in six and one-half years. Talk about risky business. | |
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SOMEHOW, WE'RE NOT SURPRISED |
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A Boston Globe reporter whose series on grade inflation at Harvard University led to sweeping changes was honored with the Livingston Award as one of the nation's best young journalists.
The award ceremony took place in the Yale Club in New York City – The Boston Glob, June 4, 2002 at B8 |
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