By Jerry W Markham

This significant new reference for college students, school, and execs of yankee company governance, smooth monetary background, and securities legislations starts off with an exam of the cave in of the Enron company and different monetary scandals that arose within the wake of the industry downturn of 2000. Jerry W. Markham, writer of the award-winning monetary heritage of the USA and previous SEC guidance, offers context and research to the fashionable period of company curruption.

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Made $706 million on his options in a year when the company’s share price dropped by 57 percent. Michael Eisner at Walt Disney Co. exercised options in 2000 worth some $60 million and was holding additional options valued at $266 million. That was chump change to Eisner; he made $575 million in 1998, and his compensation at Disney through 2003 was over $750 million. Sanford Weill at Citigroup bested that figure with a total of almost $1 billion. Michael Dell of Dell Computer made $233 million in one year.

Scott McNealy at Sun Microsystems weighed in at $140 million, and Irwin Jacobs at Qualcomm made $96 million. Wayne Calloway of Pepsi Co. held options worth a comparatively paltry $64 million. Excessive compensation became the norm in the 1990s. , was given a bonus of $102 million in 1996 and total compensation of $200 million during his tenure, leaving a ruinous $20 billion of subprime loans on the company’s THE STOCK MARKET BUBBLE 33 books. Those high-risk loans were motivated by a desire to take advantage of accounting rules that allowed the company to report large short-term profits, while creating a time bomb that threatened the long-term prospects of the company.

Options give executives the right to buy a specified amount of the company’s stock at a specified price. If the price of the stock rises above that price, the executive obtains the stock by exercising the option and then sells the stock for a profit. “The use of stock options as a form of THE STOCK MARKET BUBBLE 31 compensation grew out of the ‘shareholder value’ movement of the 1980s. Options, it was said, made the interests of managers and the interests of shareholders the same. ”8 Reformers, who included Michael Jensen at the Harvard Business School (who is now repentant of that position) and Kevin Murphy at the University of Rochester, argued that an executive given only a salary had no incentive to raise the price of the company’s stock, which is what shareholders most desire.

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