Mr. Kozlowski wanted a new house. So he took a loan. The loan was for $19 million. He took it from his company.
With that money, he built a 15,000- square-foot Mediterranean-style mansion that featured, among other lavish touches, a $6,000 shower curtain.
And then, as if by magic, the loan was forgiven. Wiped out. Gone. He never even paid interest. In fact, the company also paid $13 million of his taxes on his gift. The shareholders were never told.
Mr. Kozlowski — Dennis to his friends — was the CEO of Tyco International. He quit his job the day before he was charged with evading taxes. Tyco’s stock is now in the toilet, and the company is being investigated by the SEC.
No word on the shower curtain.
Linda Wachner used to run Warnaco, which produced, among other things, Calvin Klein underwear. The company, under Wachner, sank last year, and the stock dropped to just over a dollar a share. Saddled with debt, it filed for bankruptcy, and the board asked Wachner to resign. She did. Now she wants a severance package: $25 million.
Oh. And she wants to be paid ahead of the other creditors, thank you. A check will be fine.
The corporate gods
Tom Wolfe, in his brilliant book “Bonfire of the Vanities,” described the mind-set of super-rich Wall Street types: “Masters of the Universe.” That was how they saw themselves. Privileged. Entitled. Forced to share their greatness with the unwashed masses who actually punched a clock. Masters of the Universe!
The only problem with that characterization is that it doesn’t go far enough. The CEO in America has been elevated from master to god. His arrival at a company is often celebrated with religious fervor, giant-screen projections, multimedia productions. Books are written detailing the CEO’s secrets. His seven steps to success are studied by would-be imitators the way young clerics study the Bible.
And somewhere along the line, these people have bought into the myth. They honestly think they are entitled to more, to better, and, most sadly, to a different set of rules.
So a man like Kozlowski can ring up $11 million worth of art and antique purchases and charge it to his company. Or a guy like Kenneth Lay from Enron can make sham deals that show a phony $60 million worth of profit — just so he can hit his bonus numbers and collect millions in compensation — yet his wife weeps on TV that they have nothing.
There is a crisis in American business, all right. But it’s not because shareholders don’t know what they’re investing in anymore. It’s because they don’t know whom.
Their just deserts
Corporations, like football teams, are not that hard to figure out. The grunts may do the work, and the staff may handle the details. But the head coach sets the tone, sets the rules and knows what’s going on. Whether it’s Arthur Andersen, WorldCom, Enron, ImClone, Halliburton, Tyco or any other big company, the people at the top are the people running the show.
And when they think it’s OK to indulge, so does everyone else.
So I don’t blame the recent spate of lawsuits seeking damages not just from deceitful corporations but also from the people who ran them. After all, if a CEO thinks he and the firm are so interchangeable that it can pay for his suits, his homes and his shower curtains, then why shouldn’t he pay for its transgressions?
Perhaps the biggest sin of our 1990s indulgence is that we so separated the rich from the poor — or even the middle class — that they stopped thinking of them as people. They were shareholders, thereby rubes, thereby less than Masters of the Universe, thereby fair game to be toyed with, lied to and dismissed.
Usually, when they say “it’s not the money,” it’s the money. This time, when you consider these CEOs’ behavior, the worst part really isn’t the money.
It’s the gall.
Contact MITCH ALBOM at 313-223-4581 or email@example.com. “The Mitch Albom Show” airs 3-6 p.m. weekdays on WJR-AM (760).