Three years after the Internet bubble burst and nearly two years after Enron did, CEOs, investment bankers, and analysts have been mocked, pilloried, and occasionally indicted. But they have very rarely been sorry. The post-boom tristesse has been marked by a disheartening lack of apologies. From Enron’s Jeffrey Skilling to WorldCom’s Bernard Ebbers, executives have refused to concede that they made mistakes, that they violated the public’s trust and their fiduciary duties. (The recent Wall Street research settlement, for example, was notable for loud crowing by top executives that their firms had gotten off easy—gloating that prompted SEC head James Donaldson to chastise Morgan Stanley CEO Philip Purcell and call for greater contrition.) To encourage CEOs to don hair shirts and beg forgiveness, Moneybox inaugurates the Contrite Executive Watch, which will rate CEOs and others when they do manage to apologize for their business sins.
Contrite executive: David Bell, chairman and CEO, Interpublic Group, the world’s second-largest advertising firm. Bell joined Interpublic in 2001 as vice chairman and became CEO in February 2003.
Venue: Interpublic’s annual shareholder meeting, May 20, 2003, New York.
The road to contrition: Interpublic has been a slow-motion train wreck in the past few years. It made ill-timed acquisitions, added debt, and dived into unfamiliar businesses of dubious synergistic value (motor sports) just as the global media industry began to slow down. Earnings disappointments were compounded by a series of accounting problems, which have triggered an SEC investigation. Since last August, IPG has restated earnings three times, by more than $180 million.IPG’s stock, at about 13, is off 60 percent since May 2002, and Fitch has lowered Interpublic’s credit rating to junk.
Words of contrition: At the annual meeting, as first reported by Stuart Elliott of the New York Times, Bell said: “For all of us to deliver on our promise, we must have the courage to look in the mirror. … I’ve chosen to lead by example.”Through a spokesperson later that day, he said:“I have repeatedly stated that I believe financial accountability must be a priority for Interpublic. To that end, I have chosen to lead by example and give back to the company a substantial number of options.”
Deeds of contrition: Bell,his predecessor John Dooner (architect of many Interpublic’s ill-fated deals), and several other executives will collectively return options on 1.2 million shares of stock. Bell alone is returning 210,000 options with strike prices in the low 30s. Some of the options will be redistributed to lower-level employees. Bell also canceled for three years an incentive plan that gave top managers cash for long-term performance. In addition, Bell and Dooner said they would place 85,000 and 780,000 unvested shares of restricted stock, respectively, in escrow until the stock rises above $20.
Effectiveness: Forswearing cash bonuses and access to the restricted stock will have a real impact on the top executives’ wallets. Bell also earns points for not blaming the firm’s problems on regulators, the media, or his predecessors. On the other hand, the options he forfeited are so far underwater even James Cameron couldn’t locate them—hardly a real sacrifice. What’s more, Dooner, the responsible party at the time of the accounting problems, was re-elected to the board, remains eligible for a lucrative pension plan, and stepped on his successor’s words by patting himself on the back. “I feel it was appropriate for David and I [sic] to return the options,” he said, ”and I feel good about that.” (Contrition is supposed to be good for the soul, but not that good.)
Overall grade*: 6
*Graded on a 1 to 10 scale, where 1 is a full-denial Jeffrey Skilling and 10 is a ritualized tearful Japanese CEO resignation.
Send your nominations for the Contrite Executive Watch to moneybox@slate.com.
