investors

What do Bernie Ebbers, Walter Forbes, Martin Grass, Dennis Kozlowski, Sanjay Kumar, Ken Lay, Joe Nacchio, John Rigas, Jeff Skilling, and Sam Waksal all have in common?

They were all CEOs of prominent public companies, convicted of big-time corporate fraud and sentenced to lengthy prison terms. They were all also fabulously wealthy (we're talking hundreds of millions of dollars and up) when they committed their crimes.

Who among us hasn't asked themselves, what would I do with $100 million? You get all kinds of whimsical answers to that question, but one thing you never hear is, "I'm going to risk the money, my family's well-being, and my freedom to be a high-powered CEO and defraud thousands of shareholders."

That's because nobody thinks that way and these ten CEOs were no exception. Nevertheless, they risked their careers, families, reputation, wealth, power, everything. And for what? What motivates rich, high-powered CEOs to unnecessarily risk it all against all logic and ethical principals?

Maybe it isn't even about motivation. Perhaps there's something deeper going on here, something in their circuitry that's hard-wired for exceptional success followed by devastating disaster. Or is it just probability? Maybe x% of highly successful, super-wealthy CEOs of prominent public companies will turn out to be dysfunctional crooks.… Read more

Back in 1990, my wife and I went to Europe to explore the land of our forefathers (and foremothers) by car. The first thing I noticed when we got in our Audi rental was that it didn't have air conditioning. It was August; what were these people, barbarians?

Then I turned on the radio. The display had all this text information that identified songs and other stuff. Now that was cool. I was sure that, before long, American broadcasters would adopt similar technology.

Seventeen years later, I'm still waiting.

Last year I was asked to do a minuscule amount of consulting for iBiquity, the developer and exclusive licensor of digital radio technology in the U.S. I was dying to find out what had delayed my ability to identify a Jane's Addiction song on the radio, not to mention hear it in CD quality. Here's what I learned, but first, some background.

In 1991 CBS, Gannett (publisher of USA Today), and Westinghouse (which is now owned by Toshiba, in case you didn't know) formed USA Digital Radio Partners. I'm guessing it was some sort of joint venture. In 1998, a Westinghouse executive and former McKinsey consultant named Bob Struble led the company's spinoff with backing from a horde of broadcasting companies. Two years later, the company merged with Lucent Digital Radio and iBiquity Digital was born.

iBiquity calls its product "HD Radio." No, HD doesn't stand for high definition. It originally meant hybrid digital, but the company now claims that HD doesn't stand for anything. That's probably because it's easier to get a trade mark if the term is a name as opposed to a generic term. Intel did the same thing with MMX technology, which originally stood for multimedia extensions, although you couldn't get anyone at Intel to admit that now.… Read more

This is part two in a series on founding CEOs. Part one, in which I did get a bit carried away with a rotting fruit metaphor, proposed that founding CEOs typically stick around longer than they should. It went on to discuss the role and effectiveness of boards of directors in this process.

This post attempts to provide a logical framework for the key conclusions reached in the earlier post. Check it out:

Life is full of obstacles. Sometimes they're external, like earthquakes, competition, or pain-in-the-ass neighbors. Oftentimes we create our own problems. We call that being our own worst enemy. In any case, everyone faces barriers that are challenging to overcome. Sometimes we succeed, more often we don't. That goes for CEOs and companies, too.

This concept isn't limited to human behavior. It happens to animals and plants, even to planets and galaxies. Disease, draught, global warming, and intergalactic collisions are examples. In life there are biological factors, to be sure, but if you go deeper still, you find that the underlying cause is physics - thermodynamics, to be specific. It's called entropy.

Entropy - known in the human world as "s--t happens" - is actually a truth that goes far beyond car accidents and getting caught cheating. It describes an ever-increasing randomness that creeps into everything and can wreak havoc on otherwise organized systems.

Now, let's apply that to CEOs and companies. Executives spend most of their time working to meet operating goals. Time is precious and not much of it is spent anticipating and assessing external and internal strategic threats - that's consultant speak for the s--t that inevitably happens to companies.

While understandable, this means that executives often-times fail to recognize strategic threats or are not able to overcome them in time, i.e. before something bad happens that impacts operating results. That goes for both external events - such as changes to the competitive landscape, and internal issues - like technology development challenges.

Sometimes this is a one shot deal. Fine. Other times the behavior appears to be more systemic. In other words, for whatever reason, the CEO's decision-making or ability to rise to the challenges of office appear to be consistently, or at least often, ineffective. It doesn't matter why, only that it indeed happens, in fact happens to all of us. The only difference is that we are not all in a position to impact jobs, 401Ks, and shareholder value. In any case, boards are supposed to oversee CEO effectiveness and step in when that appears to be compromised.… Read more

Last week, Opti Technologies announced a patent infringement lawsuit against a bevy of chip companies: Advanced Micro Devices, Atmel, Broadcom, Renesas Technology, Silicon Storage Technology, SMSC, STMicroelectronics and Via Technologies. At issue are two patents for "Compact ISA-Bus" technology.

Opti had recently sued Apple and AMD over three patents for "Predictive Snooping" technology used in some computer chips. And, in August of last year, Opti settled with Nvidia for $11 million plus up to $9 million more if nVidia continues to use Opti's technology in its products. The nVidia action included all five of the above-mentioned patents.

Silicon Valley faithful will remember Opti as a once-respected chip company that fell on hard times. Is the company's recent patent litigation rampage the death-throws of a desperate company or a promising new business model? Let's go through it.

At present, Opti has but one full-time employee, CEO Bernard Marren. And, according to the company's 1995 proxy statement, Marren gets a cut of everything he brings in to shareholders on a sliding scale that starts at 5 percent and ramps down to 1 percent. Mike Mazzoni, the company's part-time CFO, appears to have the same deal.

Do the math; it's not bad work if you can get it.

I had lunch with Marren a few weeks ago. The 71-year-old industry veteran seemed excited about Opti's prospects and he may have reason to be. Marren isn't new to executive management. He's a former founder and president of electronic distributor Western Micro Technology and the Semiconductor Industry Association (SIA). He sits on a number of boards, including Microtune, Infocus and Unipixel. Marren knows his way around the negotiating table.

For better or worse, patent infringement litigation is business as usual in the chip industry. If not for broad cross-license agreements, chip companies might spend more time suing each other than developing products. Nevertheless, some companies have carved out significant niches by developing and licensing technology. ARM, Qualcomm, Rambus, Tessera, even IBM and Texas Instruments, make a solid business of it. But, for the most part, these companies develop technology with that business model in mind. Believe me, they prefer to negotiate than to litigate.… Read more

The other day, an associate asked me, "Why don't investors diversify when virtually every investment professional on the planet says they should?"

"I haven't a clue," I said.

Those who know me are probably in shock right now. You see, I've got an answer for everything. Not that I always know what I'm talking about; I just act as if I do. I know, it's a gift.

My wife, who is much smarter than I am, actually knows about a lot of the stuff that I so callously pull out of my ass. It drives her crazy.

Maybe that's why I do it.

Anyway, I got to thinking, why stop there? I mean, why just diversify your investments? Life is risky business. Why not diversify everything? I mean, if you have just one job, the company might go under or you might get fired. Become a consultant, like me, and work for lots of companies. Problem solved.

Have a bunch of kids. If one turns out to be an a-hole or a druggy, just write him off. There's plenty more where he came from.

Cat got hit by a car? No problem, you've got three more to rub up against you and purr.

Instead of remodeling your home, get a second one, just in case the first one burns down or your wife kicks you out.

All your PCs run on Microsoft operating systems? You're just asking for trouble.… Read more

The Enron and WorldCom scandals set the bar for white collar crime pretty high. By comparison, other corporate misdeeds seem like small potatoes. Corporate criminals everywhere are crying out, "What does it take to get a little attention around here?"

Looting Tyco of hundreds of millions of dollars did the trick for former CEO Dennis Kozlowski and ex-CFO Mark Swartz. Or maybe it was the little things: a $2 million toga party for Kozlowski's wife, evasion of $1 million in sales tax, or a $30 million pied-?-terre in the city, whatever that is.

I'm sure investors were captivated by the $100 billion (that's billion, with a b) of Tyco's market cap that was wiped out in a matter of months.

It's hard to top newsmakers like that, but for my money, the Rigas family of Adelphia Communications pulled it off and then some.

Adelphia - which means "brothers" in Greek - used to be one of America's largest cable companies. John Rigas founded the company and served as CEO and chairman. John's number one son Tim was CFO, and Tim's brothers, Michael and James, were VPs. All four were board members, along with John?s son-in-law Peter Venetis. That gave the family five of the board's nine seats.

The Rigases also had 100% ownership of class B super-voting shares, which gave the family majority voting rights. That's how they maintained control of the board even after the company went public.

To say the board and voting configuration was dysfunctional is a gross understatement. That alone should have triggered big red flags for institutional investors. But nobody paid attention to red flags during the tech bubble.… Read more

Eric Jackson helped lead an investor revolt at Yahoo that presaged last month's resignation of former CEO Terry Semel. Don't look now corporate America, but Jackson is again poised to launch his own brand of Web-powered investor activism on a new target.

The CEO of a Naples, Fla.,-based consulting company, Jackson is not ready to disclose which company he's setting his sites on next, but he said Tuesday he plans to announce the name in coming weeks. This much is certain: The man, who challenged Semel during a recent stockholder meeting by asking him to apologize … Read more

Online video network Joost has received $45 million in funding from a group led by Index Ventures and Sequoia Capital. Also investing were: Li Ka-shing, chairman of Hutchison Whampoa and Cheung Kong Holdings; Viacom; and CBS. The two media companies also are providing content to the site.

The money will be used to "accelerate product development, global expansion, localization and service offerings," according to a statement from Joost. The company was launched by Janus Friis and Niklas Zennstrom, the founders of Skype and Kazaa.

Carl Icahn has lost his bid to win a board seat at Motorola, according to a preliminary count of votes Monday evening.

Motorola issued a press release at the end of its annual shareholders meeting held in Chicago stating that early results indicate that the stockholders had re-elected Motorola's current board of directors and that Icahn, who had launched a proxy fight earlier in the year to win a seat, was not elected.

"On behalf of Motorola's Board of Directors and management, we thank all of our stockholders for their continued support and confidence," Ed Zander, … Read more