The Apologist’s Fund: a 9/11 Options Grantee Investment

One of the tools available to investors when determining where to put their money is the ability to evaluate corporate management.

For this purpose, a Crisis can be a wonderfully telling thing. Under pressure, without all the slick IR and PR folks around, people’s behavior can be quite revealing. Their true colors come out in these situations in moments of wonderful clarity. There are rarely better occasions to watch how corporate management behaves than in an actual crisis

We had that critical moment of national crisis — during 9/11 when the US was under attack. It was rather revealing to see how a small subset of CEOs and CFOs, and their do nothing, overpaid, lapdog Boards of Directors behaved.  Did they demonstrate a strong respect for their shareholders? Were their thoughts of God and Country? Were they men and women of courage and character?

Unfortunately, the answer for this group of 511 executives at 186 companies was a resounding no. In a moment of terror, their initial unguarded instinct was to make a money grab for cheap — and may I add, dilutive — options. They were not only not patriots, but they were not shareholder friendly either.

As an investor, perhaps you do not care that they failed to step up as Patriots; That is your right. That they were not great Americans, willing to put their own dollars to work in the market, to reassure nervous shareholders and the country in the great tradition of JP Morgan (and others) may not matter much to you.

But as shareholders, you ignore this revealing behavior at your own peril. I am someone whose job often entails making judgment calls about people — in particular, analysts, fund managers and corporate executives. I will admit something to you — I am too trusting and naive. Someone looks me in the eye, and with a golden and practiced tongue, lies their asses off to me — I tend to believe them. That’s why I almost never meet corporate management. I learn nothing useful, and often come away with bad information and a misleading spin. That’s why my preference has been for quantitative data and technical analysis (amongst other tools). I choose not to rely on what people say, but rather what they do. And that’s revealed in both the numbers and their behavior.

And, oh, what they did: The apologists for this group can try to spin it however they like — but the executive behavior speaks quite loudly. There was a golden opportunity to step up and this group of CEOs whiffed.  What they revealed through their behavior is that they are not worthy of my investing dollars. Until these Boards are sacked, and these CEOs/CFOs replaced, they won’t get dime one from me, or my fund, or my managed accounts.

However, there seems to be a small group of apologists — primarily Law Professors, but others included — who don’t see anything particularly wrong with what happened. Disagreeing with my ire over the 9/11 option grantees are several deservedly well-respected people: Professor Bainbridge, Larry Ribstein, Eddy Elfenbein.

That is their option. However, I say its no longer time for talk, its time for action:  I will not invest in these companies — lets not call it a boycott, but rather, an investment choice –  because I believe that the judgement, ethics and respect for shareholders is extremely important. I want corporate management that creates and not destroys shareholder value. 

As someone who gets "marked-to-market" everyday, my raison d’etre is performance. So I elect not to put money with people who I do not believe will respect my dollars, nor give me a lot of confidence in their ability to make me money.

But for others — the apologists for this contemptible behavior — I hereby propose that you should invest.

Let’s assemble the 9/11 Options Grantee fund (that’s a catchier title than the "Apologist Fund").  Then, I propose that  Bainbridge and Ribstein and Elfenbein put their actual money at risk with this collection of fine, fine human beings and outstanding corporate executives.

I say less talk, and more actual money at risk.

Its time for the chattering class to step up and prove they have the right stuff. Few things focus the mind like hard earned cash at actual risk. Under those circumstances, will the apologisms somehow become less glib than the what we have seen so far? (That’s my suspicion).


Gentlemen: Are you willing to put your monies where your opinions are (Hey, I do everyday)?

Or, is all this just so much empty theoretical chatter?   

What say ye?


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More on “Special” 9/11 Stock Option Grants



The request went up (in comments) for a who’s who list of the post 9/11 stock option granters and grantees.

I put in a request to the WSJ journalists on the story; Meanwhile, the best I can offer up are some excerpts from the WSJ sidebar (with graphics).

Kudos to the Journal for another terrific piece of investigative journalism. Now if you guys would only stop burying killer stories on Saturday . . .


The short list of egregious offenders is after the jump.

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