Memo to CEOs: Give It Up

Investors want them to return gains from hot IPOs

The shareholder revolt is gaining steam. Top execs at Disney (DIS ), Qwest (Q ), eBay (EBAY ), and Ford (F ) now face demands from investors that they return to their companies profits they pocketed from hot initial public offerings.

These latest moves spring from probes begun earlier this year by Congress and New York Attorney General Eliot Spitzer into the rich IPO grants investment banks gave to their best clients in the booming '90s. In September, Spitzer sued five telecom execs to force them to give back some $28 million they banked from IPOs. The argument: The money belongs in company coffers since the execs got to buy the shares only because they held influential jobs with important banking clients.

Now investors are using those same arguments to try and win money back from the corner office. They say Disney Chief Executive Michael D. Eisner, Ford CEO William Clay Ford Jr., and several eBay Inc. executives, including CEO Margaret C. Whitman, received hot stocks from Goldman Sachs Group Inc. (GS ) Salomon Smith Barney (C ), investors say, funneled IPOs to ex-Qwest Communications CEO Joseph P. Nacchio for the same reason.

Disney, Ford, and eBay say their execs have long had personal relationships with Goldman and did nothing wrong. Still, Disney and Ford have asked independent board members to investigate. Qwest says it plans to review the complaint while Nacchio, Goldman, and Salomon all declined comment.

Investors are vowing to go after CEOs at other companies. "This practice has been going on unchecked for too long," says shareholder lawyer Robert E. Curry, a senior partner at Kirby McInerney & Squire LLP in New York. Legal experts say the current cases could succeed if investors can prove that companies would have bought the IPO shares had they been given the chance. Win or lose, the investor backlash from the go-go '90s will surely carry over into 2003 and beyond.

By Linda Himelstein in San Mateo, Calif., with bureau reports

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