Man Without Qualities

Saturday, June 22, 2002

Options II

The predecessor to this post discussed a highly confused Thursday front page Wall Street Journal article by David Wessel:

"The article, among other confusions, repeats criticism offered now by many who should know better, including the Wall Street Journal."

Well, to the Journal's credit, at least its editorial page - which I understand is run by quite a different team than those who determine what goes onto the front page - does know better, and in large measure said so.

Indeed, the Journal's editorial page perhaps seems embarrassed by that front page article. While not expressly identifying that article, Holman Jenkins produced on Friday (the day after Mr. Wessel's effort appeared) a screed that repudiates much of Mr. Wessel's efforts in all but name [Mr. Jenkin's article has been reproduced in today's OpinionJournal]. For example, after coyly asking whether corporate venality has increased, Mr. Wessel casts off his pretense and says such venality has increased, offering a silly pat pseudo-answer:

"The answer, put simply: A stock-market bubble magnified changes in business mores and brought trends that had been building for years to a climax. The victims: the very shareholders the executives were supposed to be serving. .... [T]he abuses of the 1990s can't easily be dismissed as the fault of a few flawed human beings. "The professional gatekeepers were greatly compromised by finding they could make tremendous profits by deferring to management," says Columbia's Mr. Coffee. But not one of the instances of egregious abuse of shareholder interest could have occurred if the CEO had simply said, 'No!' The climate made it commonplace. The incentives were perverse. The watchdogs were sleeping."

So one can rather guess as to whom Mr. Jenkins refers when he writes:

"A mythology of the moment holds that law enforcement has been sleeping while white-collar criminals run amok. The mysteries of individual CEO behavior aside, there isn't much new in the news. Coming up soon are the trials of two top executives of Cendant, whose blow-up was the Enron of 1998. A surprising number of software, food and apparel executives are doing time already, unheralded on any news show. On a single day in 1999, the SEC brought civil actions against 11 CEOs and 57 other senior officers, including Fran Tarkenton, the former NFL god and head of a software company. (He settled for six figures without admitting or denying wrongdoing.)"

Seems like that "mythology of the moment" happens to be the very same mythology that appeared in Mr. Wessel's front-page article the day before. Mr. Jenkins also takes on some of the other myths Mr. Wessel repeats - such as the fiction of increasing CEO dominance of the board of directors. In fact, Mr. Jenkins adduces evidence that the balance may have swung too far the other way - with the CEO taking on a role more like that of a star athlete rather than a true leader.

Now the Journal editorial page should hire somebody to repudiate the even more dangerous myth spread by Mr. Wessel that executive options are always pernicious - a point Mr. Jenkins sadly does not address in his article.

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