The Character of Chief Executive Officers
Author's Note from 'Dirty Rotten CEOs' by W.G. Flannagan (2003)

Wall Street never likes to dwell on its fiascos. When its miscreants are caught, they usually admit nothing, yet promise never to do it again. They pay some fines, lop off a few heads, then everyone gets back to business as usual.

But the latest corporate scandals have created too much carnage to allow a quick return to normalcy. Tens of millions of investors were badly burned; trillions of dollars evaporated; hundreds of thousands of jobs vanished. Not since 1929 have Americans had their faith in corporate America rocked so severely. Don't expect them to flock back into the stock market any time soon.

It wasn't just a market cycle that caused all this damage. It wasn't the popping of the bubble. It wasn't the slowing global economy. It was the cupidity and stupidity of CEOs who were out to make themselves billionaires. Screw everyone else, from stockholders to employees to regulators, the business leaders seemed to be saying.

Like dispatches from the front, the press reports of the corporate scandals were filled with grim numbers as one major corporation after another fell dead or was gravely wounded. Enron. Arthur Andersen. Global Crossing. WorldCom. AOL Time Warner. Tyco. Adelphia. Qwest. Even Citigroup, the largest bank in the world. For months we were bombarded with stories of fraud and recklessness that involved bankers, directors, brokers, analysts, consultants, politicians, and lawyers, as well as the chief executives themselves.

It became hard to tell the players without a scorecard. (The Forbes List of Highest Paid CEOs could have served as one, however.) In the end, it all became a blur for many readers and investors. Newspapers, magazines, and TV hammered the scandals until they became as depressing as opening up your 401(k) statement. Readers welcomed the comic relief of Tyco's Dennis Kozlowski and his $6,000 shower curtain, Adelphia's John Rigas and his $13 million private golf course, and the laid-off Women of Enron posing in Playboy to pay the rent.

But the evil these men did shouldn't be simply swept into history's dustbin (the one marked "recycle") and forgotten until the next time. We need to view slow-motion replays of some of the ugliest moments in American capitalism so that they won't be repeated.

If you go beyond the headlines, it becomes clear that what happened was, sadly, inevitable. The outrageous award of stock options was the common denominator in all of these grim tales. Wave enough money in the faces of enough CEOs, and too many of them will do anything to get it. Couple that with puppet boards of directors, greedy moneylenders, ignorant investors, and sleepy regulators — and presto! you have the critical mass for disaster.

What can you do as a hapless investor? Read this book, remember its lessons, and in the words of the Albert Finney character in Saturday and Sunday Morning, "Don't let the bastards grind you down." You have stockholder rights; use them. You have brains; think before you invest. You have votes; don't waste them. You should be mad as hell, not only because most of these dirty rotten CEOs will get away with what they did. They robbed you blind. Don't take it anymore. Stop them before they steal again.