A Classification of American Wealth
History and genealogy of the wealthy families of America - Sponsors

 Part 1 : Colonial and Mercantile America  Part 2 : America in the Gilded Age
 Part 2 : America in the Twentieth Century  Encyclopedia of American Wealth

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  Part III-Chapter 18 : Hail to the CEOs  >   Index and Introduction  :    « Previous  1 2 - 3 - 4 - 5  Next »

Borderline cases abound and thus company founders and active heirs could not be eliminated just because of their (or their forebear’s) role in the inception of a corporation. William P. Lauder (Estee Lauder) and Harold W. McGraw III (McGraw Hill) are third and fourth generation heirs of their respective companies’ founders, yet they hold considerably less than 5% of the stock which was obviously accumulated by exercise of their stock options, more than by inheritance. They thus qualify for the list, whereas other heirs, including Jeffrey Lorberbaum (Mohawk Industries) and Willard Marriott obviously gained their wealth mostly through inheritance.

Some actual company founders made the list because their wealth was built up through the exercise of stock options and other compensation rather than through the appreciation of their initial (founding) shareholdings. Henry Silverman founded Hospitality Franchise Systems in 1990 but lost most of his original wealth after its merger with Comp-U-Card, as a consequence of accounting scandals affecting the latter in 1998. He subsequently recovered almost $700 million through the exercise of Cendant stock options which were awarded on the basis of the depressed values. Other founders who owe their present wealth mostly to their executive functions are Scott McNealy (Sun Microsystems) and Steve Case (AOL).

Billionaire CEOs (or ex CEOs) John Morgridge (Cisco Systems) and “Meg” Whiteman (eBay), who received their stock options mostly as sign-up bonuses, also make the list. Not so Microsoft’s Steve Ballmer, who received the bulk of his stock as a signup bonus back in 1980, before the company went public, twenty years before he became CEO.

With CEOs being paid so well, the question legitimately arises, whether they are worth it. This questions inexorably leads us to put executive compensation into relation with the return to a corporation’s shareholders during a given CEO’s tenure. Using such a model, Forbes has been rating US CEOs since 2002 with some surprising results.

Interestingly, some of America’s best paid CEOs are among the worst rated, while many of the best rated CEOs do not make our list of the richest ones. If even such notorious wealth creators as Michael Eisner (Walt Disney) and Reuben Mark (Colgate-Palmolive) get “F” ratings by Forbes, the quality of our top executives is highly controversial. This tends to underline our suspicion, that US CEOs get excessive compensation, as a result of a systemic flaw, rather than because they are doing so well for their shareholders.

In recent years, this impression has been confirmed by an increasing number of scoundrel CEOs, who took shortcuts to deliver their results and thereby compromised the very existence of the companies they directed. Enron’s Kenneth Lay and Jeff Skilling, WorldCom’s Bernie Ebbers and Tyco International’s Dennis Kozlowski are just the most prominent examples. Blinded by their greed and unchecked in their power, these CEOs committed multiple corporate crimes, ranging from option backdating and insider trading to misappropriation of funds and accounting fraud, depriving their shareholders, and to a large extent their employees, of the bulk of their life savings.

Hail to the CEOs  >   Index and Introduction  :  « Previous  1 2 - 3 - 4 - 5  Next »

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