Tag: Bear Stearns

In a classic fiddling-while-Rome-burns story, the Wall Street Journal traced the activities of James Cayne, the CEO of Bear Stearns Cos. this summer.

While units of Bear Stearns, an investment and banking powerhouse, were collapsing because of the crisis in the subprime mortgage market, Cayne was out of the office on several occasions, according to a story in the Journal on Thursday.

Not surprisingly — he’s a CEO after all — Cayne was incommunicado at times on the golf course, the Journal said.

But at other times he was, hold on to your hats, playing bridge.

(He might also have been puffing on a joint, the Journal implies, but that’s a whole other issue.)

Cayne shot back at the Journal, saying in a memo to employees that the article “alleges I engaged in inappropriate behavior and includes a number of other inaccuracies and personal slurs.”

Regardless, he is an avid bridge player, though his devotion to the demanding card game may sound a bit old-fashioned.

But other moguls are drawn to bridge, as well.

Bill Gates, the richest man in America, according to Forbes magazine, loves bridge, as does Warren Buffett, the second richest man.

But Cayne, who didn’t make the list of America’s 400 richest people this year but was 384th in 2005, is at a much higher level in the card-playing world than Gates or Buffett.

He’s ranked 611th the world and has been a top bridge player in the U.S. for years.

For sure, bridge opened doors for Cayne at Bear Stearns.

Alan “Ace” Greenberg, the head of Bear Stearns when Cayne was rising through the ranks at the company, also played bridge, as the Journal noted.

The club at 15 East 67th St. in New York City was described this year by New York Times bridge columnist Phillip Alder as having “the highest standard of play in any club in the world, certainly more than a century ago.”

While skill at bridge would appear to be advancement plus at Bear Stearns it may not trump concern about work habits.

Warren Spector, who until this summer was co-president of Bear Stearns, is also a competitive bridge player, ranking 10th in the U.S.

Both he and Cayne were at the same bridge tournament in Nashville this summer when all hell was breaking loose at Bear Stearns.

Cayne went back to New York before Spector and he later asked for, and received, Spector’s resignation.

“Mr. Cayne was annoyed that Mr. Spector was away from the office during the fund crisis,” the Journal reported.

Since the crisis, Bear Stearns has laid off 800 people, though 15,000 remain, the paper reported.

Cayne, who is 73, remains on the job, presumably analyzing his hand and deciding which card to play next.

The cushioned exit of Stan O’Neal as CEO of Merrill Lynch & Co. this week was proof again that nothing succeeds at the top levels of business like not succeeding.

O’Neal is to receive a reported $161.5 million in stock options and retirement benefits. He was ushered out because he had lost favor with his board after announcing that the company had a $2.24 billion quarterly loss.

While $161.5 million seems like enough to get by on, it doesn’t equal amounts received by other dismissed executives.

In January of this year, Robert Nardelli, CEO of Home Depot, was given a $210 million severance package. That figure, according to the New York Times, “quickly made him the standard-bearer for failure-based pay.”

Nardelli, like O’Neal, was said to have a harsh management style, a style that might have been tolerated if Home Depot’s stock hadn’t been in the doldrums.

However, it may be a style that’s in demand. Nardelli became chairman and CEO of Chrysler in August.

In 2006, Hank McKinnell, CEO and chairman of Pfizer Inc., exited his job ahead of schedule. He received close to $200 million in severance.

McKinnell was certainly not alone. Citing a report by James F. Reda and Associates, the New York Times reported that 35 dismissed CEOs took away a total of $799 million in 2006.

Among that year’s golden parachuters was Jay S. Sidhu, chairman and chief executive of Sovereign Bancorp Inc. He received a package worth $73.56 million when he resigned in 2006.

The terms of these severance packages simply reflect the realities of the market place, analysts say.

CEOs are in demand. Therefore, they can negotiate the plush terms of their firings at the times of their hirings.

But, not surprisingly, the resignation packages do prompt criticism from the public, from shareholders and from politicians.

That happened after Walt Disney Co. dismissed its president, Michael Ovitz, in 1996.

Ovitz, who had been on the job for 14 months, was given $140 million in severance pay. Shareholders filed suit, but a judge ruled in 2005 that Disney had not violated its fiduciary duty.

A severance package given to Carly Fiorina, CEO and Chairman of the Board, Hewlett-Packard Co. drew a shareholder suit that is yet to be settled.

Her company dismissed Fiorina in February 2005. She received $21.4 million.

Shareholders have pointed out that should the company’s stock improve, Fiorina also stands to make millions more by exercising stock options.

Fiorina’s severance had other perks, including $50,000 in financial counseling. She also got to keep her personal computer equipment and receive free tech support for three years.

Jill Barad, chief executive of Mattel Inc., received $37 million when she resigned in 2000 after the company reported a loss.

As a part of her package, the company forgave a $3 million home loan and sold her a company car at “a nominal price.”

Like some of the other executives who lost their jobs in the most public of fashions, Barad and Fiorina have landed on their feet.

A website lists Barad’s speaking fee at $50,001 and above. Fiorina has signed on with the soon-to-air Fox News business news channel.

Brinker International, the Dallas restaurant company with $4.3 billion in annual revenue, pays members of its board of directors well, more than $200,000 a year in cash and stock, according to the company’s proxy statement.

And it gives them a complimentary dining card for use in company restaurants, which currently number about 1,800 in 49 states, Washington, D.C., and two dozen foreign countries. Brinker’s outlets include Chili’s, Romano’s Macaroni Grill, On the Border and Maggiano’s Little Italy.

The dining card is a great perk for motivating directors to learn first hand about the company’s business and its products. Wonder how many of Countrywide Financial’s directors and their families hold some of the exotic mortgages that are now causing chaos in the credit markets? Or, how many Mattel directors and their families have toys with lead paint in their homes?

A few of Brinker’s directors did not make use of their dining card, as first reported by footnoted.org. Among them was Robert Gates, who left the board late last year when he became Secretary of Defense.

George Mrkonic, the retired president of Borders Group, and John Mims, co-founder of Cypress Ridge Partners, also did not use their cards.

The remaining outside directors did make use of their cards, some of them, apparently, liberally. In its proxy, the company listed only the tax gross up amount paid to each director, related to use of the dining card. That amount would be much less than the value of the meals received.

Ron Kirk, former mayor of Dallas and a partner in the law firm of Vinson & Elkins, received a gross up of $1,022. Rosendo Parra, a retired Dell executive, received $528. Erle Nye, chairman emeritus of TXU, the giant utility company being acquired by private equity firms, received $415. And James Oesterreicher, the retired chairman of J.C. Penney, received $250.

Keep in mind that the average meal (food and drinks) at Chili’s, Romano’s and On the Border generates less than $15.50 in revenue, according to Brinker’s 10-K. The average meal revenue at Maggianos is $25.80.