There were several suitable candidates for the Outrage this week. A Harvard educated MBA trained as an accountant, who founded a center to deal with governance issues in global financial institutions, claimed to be befuddled by both accounting rules and good governance practices. RIM co-CEO Jim Balsillie spun quite a story to escape any suggestion of wrongdoing over stock options he and others backdated at that company.
Then there is the role of the Ontario Securities Commission in all of this, which is becoming quite a loser in enforcement cases. A conviction in a major stock tipping case was thrown out on appeal. The Bre-X trial has taken years without result. They dropped a case altogether last week in the middle of the trial. And there is the regulator’s perpetual tardiness in adopting rules to protect investors and give them more clout long after they have been approved in the United States.
Since last September, the OSC has given RIM extension after extension for the filing of financial statements. They even allowed company founders to exercise more than 750,000 stock options during this period. This week, they extended their extensions until June. There is not the slightest evidence to suggest that the OSC sees anything terribly wrong with a company that repeatedly fails to provide investors with the audited information they are entitled to by law, which along with its embarrassingly inept enforcement record, leaves many to conclude that the OSC must be the most dysfunctional securities regulator in the G7. Does the OSC even have files marked Livent or Nortel any longer or is justice to be a casualty there as well?
Worthy as these incidents are for this weekly slot, they pale in comparison to revelations that certain U.S. companies exploited the terrorist attacks on America by backdating stock options to that horrific time in order to further line their pockets. When the full extent of this disgraceful conduct emerges, it will shock and outrage Americans in a way that previous abuses in CEO pay have not.
Much has been said and written about the generation that fought a world war against oppression, saved democracy and built the foundation for today’s prosperity. They have been called the Greatest Generation. This was the generation of my father and mother. The grandchildren of this generation carry on that tradition on battlefields far away in Afghanistan and Iraq, where they courageously fight to bring peace to lands too long in the grip of tyrants and the intolerant. I have opposed the war in Iraq and, more particularly, the manner of its commencement and execution by the Bush administration. But I have never for a second doubted the heroism of those answering their country’s call.
At home, however, we see time and again leadership of a different kind: a world where no CEO can be left behind. For many, there is never enough. They believe the world owes them tens, and sometimes hundreds, of millions just for showing up. They need to be motivated, so the conventional boardroom wisdom goes. And the money just pours into their laps. Thus we see, both in the United States and in Canada, reflections of the Greatest Generation and what I call the Greediest Generation: young men and women struggling and dying for a cause that is greater than themselves; CEOs amassing unparalleled fortunes for a cause that is so often singularly about themselves.
And now we have some that have used the tragedy of 9-11 as an opportunity to gain even more. It doesn’t get much worse than that in the boardroom. Which takes this growing scandal of stock options backdating into an entirely different ethical sphere that should appall responsible investors and thoughtful individuals. It is a story we will be hearing much more about in the weeks and months ahead and is, without doubt, the Outrage of the Week.