By Amey Stone
These past three years have been woeful for investors. They have suffered through pain and punishment as stocks fell, top corporate chiefs were revealed as greedy louts, and corruption and conflicts of interest plagued the financial world. But just as in 1621, when the Pilgrims finally had a successful harvest after a tough time in Plymouth, investors now have cause to celebrate. The economy is humming, the stock market is up 20% this year, and it looks like at least a few of the investing worlds' miscreants are getting their just desserts.
In the spirit of the season, BusinessWeek Online is unveiling its first annual Thanksgiving Awards. They come in two categories. Our Pilgrim's Pride Awards go to five individuals who have fought for shareholders' rights. At risk of sounding shrill and holier-than-thou, these folks were fierce advocates for investors long before we knew we needed them.
Because the era of corporate and financial scandal hasn't gone away, however, we've come up with a second category of award: The Roasted Turkeys. Unfortunately, this was the far more competitive category -- and our apologies if we left your favorite huckster off out list. For us, the turkeys symbolize greed, foolishness, and a tin ear for ethics that's beyond the pale in the post-Enron era.
So without further ado, the Pilgrim's Pride Awards go to:
• Eliot Spitzer, for having the guts to take on the Wall Street establishment when the securities regulators we thought were on the beat in Washington were actually on permanent coffee breaks. First Spitzer's office led the charge against conflicts of interest between Wall Street firms' research and investment-banking divisions. Now he's uncovering a swamp of corruption in the mutual-fund industry. Criticized for overstepping his bounds -- after all he's "just" New York's Attorney General -- Spitzer is still proving that it often takes someone from outside an industry to come in and clean it up.
• Mercer Bullard, for being the caped crusader of the mutual-fund world. From his unpaid, self-appointed perch as founder and president of nonprofit shareholder-advocacy group Fund Democracy (he's also a finance professor at the University of Mississippi's School of Law and served an assistant chief counsel at the Securities & Exchange Commission during the late 1990s), Bullard has worked tirelessly for stronger fund boards, lower fees, and more frequent disclosure of holdings. He fought market-timing's spread in mutual funds long before Spitzer took up the cause, and his take-no-prisoners style makes Spitzer look like a pussycat. If the industry didn't see him coming, they all know him now.
• Nell Minow, for being the queen of good corporate governance. As chairman of the Corporate Library, an investment-research outfit that focuses on corporate-governance issues, she never hesitates to critique some of the most powerful boards in America. Most recently, she called for an overhaul of the New York Stock Exchange board following its $140 million payout to former Chairman Dick Grasso. "He should resign, and the board should resign," she said in September, when Grasso's inflated pay was revealed. With a biting wit, Minow's words and writings expose conflicts and abuses of power by some of the most senior -- and, she often argues, overpaid -- executives in the country.
• Jack Bogle, for founding a mutual-fund company that puts shareholders first. Vanguard could still be implicated in the scandal spreading through the mutual-fund world -- but we sincerely doubt it. The outfit, which now manages $550 billion in assets, was founded more than 25 years ago by Bogle to provide low-cost, conflict-free investing options for small investors. By Amey Stone Since he retired in in 1999, Bogle has continued to advocate for small investors through books, speeches, and ready availability to the press. "Bless Jack Bogle for having the courage to speak out for what's right," Don Phillips, president of fund research firm Morningstar (and a runner up for a Pilgrim's Pride himself), told BusinessWeek Online recently. We couldn't agree more.
• Arthur Levitt, for being a lone voice in the wilderness of the late 1990s bull market crying out that accounting at public companies was going seriously awry. Levitt fought valiantly for better disclosure to shareholders and against conflicts of interest at accounting firms while the SEC's chairman from 1993 to 2000. He was only half-successful in his calls for reform until Enron and WorldCom came along to show us all how right he was.
The Roasted Turkeys are awarded to:
• Dennis Kozlowski, for apparently taking corporate greed to almost unfathomable levels. The former Tyco chairman is now on trial for allegedly bilking shareholders out of millions. Prosecutors allege that he used corporate funds to furnish his New York apartment with items like a $6,000 shower curtain and a $2,000 umbrella stand -- and also to throw his wife a lavish birthday party at a cost of $2.1 million, complete with good-looking models paid to dress up in togas. Now that's a T&E report for the history books.
• Dick Grasso, for squandering his legacy as the New York Stock Exchange's chairman for money alone. Grasso's big turkey move was not realizing that, in 2003, a $140 million payout would strike the public as a little excessive for his job as chief administrator (oh yeah, and top regulator) of the most important stock exchange in the world. With his career now on ice, he now has lots of time on his hands to ponder that one himself.
• Richard Strong, for apparently abusing the trust of small investors who stashed their savings in funds he founded. Remarkably, the former Strong Funds chairman doesn't seem to understand why he shouldn't have made himself a little extra dough -- at a direct cost to shareholders in his own funds -- by trading in and out of the funds his own firm managed. Even though he promises to reimburse the funds for the extra costs, and has resigned from his role as chairman of those funds, he did the turkey one better by failing to step down from his post at Strong Capital Management, a division which hires portfolio managers for the funds. He should be basted.
• Martha Stewart, for allegedly trying to get out of a stock while the getting was a little too good. The domestic diva allegedly sold her shares in ImClone (IMCLE ) after being tipped off by friend and ImClone founder Samuel Waksal in late 2001 (Stewart, a former broker, should have known better.)
Nearly two years later, her efforts to wangle her way out of the mess are still getting her deeper in the soup. Most recently, her lawyers tried to get one of the charges in her upcoming criminal trial thrown out by claiming First Amendment protection. No such luck, ruled the judge on Nov. 18. The temperature grows.
• Ken Lay, for taking credit for everything going right at Enron, right up to the point that everything went wrong -- and then claiming none of the blame. So far Lay has done an amazing job avoiding criminal charges related to his former role as Enron chief, but investors can't forget that he was the captain steering the ship that went so disastrously aground. Where was Lay? With the guilty pleas of several of his colleagues starting to rack up, we can only hope we will soon find out.
Stone is an associate editor of BusinessWeek Online and covers the markets as a Street Wise columnist and mutual funds in her Mutual Funds Maven column