Dysfunctional executive watch

This is Train Wreck's new recurring post: Dysfunctional Executive Watch.

Steve Tobak
View all articles by Steve Tobak on CBS MoneyWatch »
Steve Tobak is a consultant and former high-tech senior executive. He's managing partner of Invisor Consulting, a management consulting and business strategy firm. Contact Steve or follow him on Facebook, Twitter or LinkedIn.
Steve Tobak
3 min read
Steve Tobak

Here's the first installment of Train Wreck's first recurring post: Dysfunctional Executive Watch. It'll show up whenever there's enough material. Enjoy the lunacy, and let us know if you've got something to report.

You've got fraud
On Monday, the Securities and Exchange Commission filed civil charges against eight former executives of AOL Time Warner for fraudulently inflating online advertising revenue by more than $1 billion. Four of the executives agreed to pay millions in fines and return ill-gotten gains. Charges against the other four, including former CFO John Michael Kelly, are still pending.

The company had previously agreed to fork over $500 million to settle civil and criminal charges brought by the SEC and the Justice Department.

Options Backdating: they just keep going, and going, and going...
Last week, the SEC charged four current and former senior executives of Broadcomwith fraudulently backdating stock options that resulted in more than $2 billion of restated expenses. Chairman and CTO Henry Samueli, general counsel David Dull, former CEO Henry Nicholas, and former CFO William Ruehle were all slapped with civil--not criminal--charges.

I can't even keep track of all the high-tech executives that have gone down for fraud relating to stock option backdating, but last summer the count was 38 executives at 19 companies, according to this post.

The ironic thing is that, five or six years ago, nobody thought anything of this stuff. Then, in 2005, generally accepted accounting procedures (GAAP) began requiring companies to expense stock options. Suddenly, backdating stock options became fraud if the company didn't account for it properly.

The bigger they are, the harder they fall
In April, Samsung's long-time chairman, Lee Kun-hee, resigned his position at the helm of the 59-company conglomerate following an indictment on tax evasion and breach of trust charges. If convicted, Lee could spend the rest of his life in prison.

Lee--who took over from his father, Samsung founder Lee Byung-chull, over 20 years ago--is credited with transforming the company into an electronics powerhouse and one of the world's top brands.

This wasn't Lee's first brush with South Korean prosecutors, but it will likely be his last. Nine other Samsung executives were charged, including Samsung's No. 2 executive, Vice Chairman Lee Hak-soo, who also resigned his post.

This watch wouldn't be complete without a rant on the Yahoo fiasco. If you think it all began with Microsoft's unsolicited bid, you're wrong. It began almost a year ago when Yahoo's board replaced former-CEO Terry Semel with the combination of Jerry Yang and Susan Decker.

Since Yang and Decker were both new to the whole "running a company" thing, they failed to come up with a decent plan for a turnaround, which led to Microsoft's bid, which led to Yahoo botching the deal, which led to Microsoft CEO Steve Ballmer walking away, which led to embarrassing remorse from the Yahoo camp, which led to investor Carl Icahn buying a boatload of shares and threatening a proxy battle, which led to Microsoft's third go at this.

You know what they say, three's a charm. But if Yahoo's board screws this up, they're going to need way more than a charm to regain the confidence of shareholders...and not end up in the Dysfunctional Executive Watch hall of fame.

Well, that's it for this installment. Tune in next time for more zany corporate shenanigans.