Pirates on Wall Street
Team Latte
Jul 13, 2005
Consider an imaginary situation:
A group of people want to control a large investment bank on Wall Street and run it as their fiefdom but they face resistance from a rival group which has been recently ousted from the bank. The G-8, as the ousted group is informally called by some, strike back and launches an all out media warfare and want to come back in. In the meantime, an impotent Board simply sits and does nothing while the shareholders of the bank continue to suffer. The shareholders in turn get split into camps and draw up their own agendas. And while all this is going on, the group of guys who are at the helm of the troubled bank start to hedge their bets - they coerce the Board into getting outrageous pay packets just in case they get kicked out instead. Finally, enters a Man, and ex-employee of the bank, a charismatic leader on Wall Street, chosen by the Board of the bank and blessed by the shareholders of the bank, who would eventually clean the bank of all the politics and purge the rivalries by taking control himself. And on the first day of his job he draws up a guaranteed salary contract for himself, whereby in a few years time he would make hundreds of millions of dollars.
Well, this never happens in real life. Does it? CEOs of Investment Banks aren't exactly Enron material and they are leaders who guide and lead others and they don't live to simply make hay for them.
While reading this morning's Financial Times, we were startled to read, on the front page, that a guy named Stephen Crawford, a co-President, has quit Morgan Stanley pocketing $32 million awarded to him under a controversial new contract revealed by the Wall Street bank last week. Apparently, the pay agreement that Stephen Crawford had with the bank, gave him a guaranteed payout of $32 million over two years and - and this is the really amazing part - allowed him to walk away with the money (the entire amount) even if he left the firm within a month.
Stephen Crawford, as it turns out and as reported in the media, was in the inner circle of Philip Purcell, the embattled ex-CEO of Morgan Stanley, who was forced to quit from his post a few weeks ago. And, Mr. Purcell, it seems, got $44 million himself to resign from the firm.
And moreover, it is revealed that the guy who joins Morgan Stanley as the new CEO, John Mack or the 'Big Mack' as TheStreet.com calls him, is also going to become fabulously rich (as if he isn't rich enough).
FT's The Lex Column calls Morgan Stanley's Board of Directors a laughing stock and Graef Crystal, a Bloomberg News columnist uses the adjective "spineless" for the Compensation Committee of the bank. Read the Bloomberg article (link given below) to check out in the end who were in that compensation committee. And as we read it, we wonder why would five very senior and mature professionals (well, one is a Director of London School of Economics and Political Science) be held hostage to the ransom demands of a few pirates on the Wall Street?
  
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