NEW YORK (AP) PeopleSoft Inc.'s former chief executive lied to Wall Street analysts about the company's business. So what happened to him? He got to keep his job for a year, and when he was finally fired, he walked away with a huge severance package.
This isn't the first time such nonsense has gone on in corporate America, and chances are it won't be the last. It doesn't seem to matter what top executives do wrong, they keep getting paid big bucks when they are shown the door.
Things should only be so good for the rest of us. If they are lucky, average employees who work lower on the corporate ladder get severance packages based on the number of years worked. But some companies only offer as little as two weeks pay, according to a study released earlier this year by Aon Consulting and the trade group WorldatWork.
Now consider what happened at PeopleSoft, the business software maker currently the subject of a hostile bid from rival Oracle Corp. The two companies are currently awaiting a judge's decision in recently completed Delaware trial challenging PeopleSoft's implementation of an antitakeover defense commonly known as a ''poison pill.''
PeopleSoft CEO Craig Conway was ousted about a month ago, in part because of his clashes with other senior managers. But there was also a big lie that got him into trouble.
Conway played down the effect on PeopleSoft's business when he was asked at a September 2003 meeting with Wall Street analysts whether customers were holding back purchases because of a potential sale to Oracle.
''The last remaining customers whose business decisions were being delayed have actually completed their sales and completed their orders. So, I don't see it as a disruptive factor,'' Conway said during that discussion with analysts.
And while the board knew those comments were wrong, the company only omitted his answer in a corrected version of the meeting transcript that was filed with the Securities and Exchange Commission, not in a supplemental press release or anything of the like.
The directors, though, believed that Conway made his statements unintentionally. That is, until they recently got a look at a deposition that Conway gave in the poison-pill case, where he admitted that he knew his statement to analysts wasn't true, but said it anyway because he was ''promoting, promoting, promoting,'' according to court transcripts.
That, in part, led to Conway's termination, but he still will walk away with as much as $50 million in severance and other benefits. The ultimate value of the package depends largely on how much he realizes from the millions of PeopleSoft stock options that were included with a $16 million cash payment.
That's certainly no small change for someone who misled Wall Street analysts, no less investors who pushed up the stock in the weeks after his bullish comments last year. Conway profited from that, too, when he sold more than 200,000 shares in October 2003 for a profit of about $4.3 million.
How those ''golden parachutes'' as the fat severance deals are called happen has to do with the fact that most employment contracts often loosely define what constitutes ''cause'' in a termination.
Just doing a bad job isn't cause, nor is being under investigations or a misdemeanor conviction. It may take something like a felony conviction, but lawyers could even challenge that. And lying to analysts and shareholders? That, too, seems to be questionable, at least in the PeopleSoft case.
Given the attention excessive severance payments have gotten in the wake of all the corporate scandals, you would think companies would start to broaden such definitions in employment contracts. But that hasn't happened.
''Sooner or later CEOs leave, and companies need to start thinking about an exit strategy as much as they think about hiring them,'' said Anthony Sabino, an associate professor at the Peter J. Tobin College of Business at St. John's University. ''They need to consider what is it going to take to get them out, and the definition of that needs to be expanded.''
Maybe the only good news in all of this is that some companies are dumping their contracts, which means fewer guarantees for departing executives. About 40 percent of companies in the Standard & Poor's 500 index don't have written CEO contracts vs. about 30 percent five years ago, according to Paul Hodgson, senior research associate at The Corporate Library, a governance watchdog group.
Among those companies: scandal-plagued Marsh & McLennan Cos., which has been rocked by accusations of bid rigging and using a questionable fee structure. That means Jeffrey Greenberg, who stepped down last week as CEO of the insurance giant, won't likely be getting a super-sized severance payout like many of his peers, though he won't walk away penniless thanks to his large lot of stock options.
In some other cases, disgratment and the one it replaces included charges of conspiracy and wire fraud, but the new indictment lists just 15 counts of wire fraud six fewer counts than the previous one.
The U.S. attorney's office said the new indictment, filed in September, was necessary due to sentencing concerns raised by a recent Supreme Court decision. Tom Connell, spokesman for the U.S. Attorney's office, said that while it's the government's position that the decision does not apply to federal sentencing guidelines, ''in the event that the courts may rule that it does, we are incorporating in charging documents any potential factors that might affect sentencing.''
The new indictment accuses the defendants of conspiring to pay the law firm of McKinnon & Harwood up to $4 million over five years. Previously, the government alleged the total payment was up to $4.5 million.
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