Thursday, January 22, 2009

Holy Agency Costs Bat Man

Wow. Talk about your agency cost problems.

$1.2 Million Spent On John Thain's Office:
"Amidst everything else going on at Bank of America (BAC) and its boneheaded decision to buy dying Merrill Lynch, Gasparino reports, for the Daily Beast, that John Thain had a ridiculous amount spent on his own perks, including a redecorating of his office.

According to documents reviewed by The Daily Beast, Thain spent $1.22 million of company money to refurbish his office at Merrill Lynch headquarters in lower Manhattan. The biggest piece of the spending spree: $800,000 to hire famed celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000.

The other big ticket items Thain purchased include: $87,000 for an area rug in Thain's conference room and another area rug for $44,000;"
The list goes on, but enough is enough....

Which surely reminds others of the problems at Tyco about 6 years ago. Don't remember? Here are some of what I wrote about it at the time in the old FinanceProfessor Newsletter in August 2002:
"...the ex-CEO of Tyco has pulled the wool over investors’ eyes more than anyone knew. It is reported that he received approximately $135 million from the firm that was above and beyond any reported pay. How? $18 million for a plush NYC apartment plus over 2 million to furnish it (where would one find a $6000 shower curtain?!?),
forgiven loans, the payment of the taxes on the forgiven loans, foreign
trips, and even birthday party for his wife that featured a concert by
Jimmy “don’t call me Warren” Buffett. (It seems he was a real world
version of Brewster from Brewster’s Millions!)
and then again in September 2002.

"Tyco: It seems Tyco had more problems than originally thought. Not only did Dennis Kozlowski get many unreported perks from the firm, now reports indicate that others at the firm also partook in the excess. Some had loans forgiven and some rather extravagant (and unreported at the time) perks including $15,000 for dog umbrellas and $2900 for hangers! (Can you imagine the size of the closet?!) One theory behind this lavish spending is that Kozlowski was trying to “buy off” those who knew what he was doing. All told over $170 million may have been taken from the firm. "
In case you were wondering, Kozlowski did end up in jail.

See his 60 Minutes inteview from 2007. It is definitely worth watching and very good. I had never seen it until now. (sorry I can not embed it. Click here.)

A much shorter (and not as good IMO) version with Katie Curic is here:

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