Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

10 Cheshvan 5767 - November 1, 2006 | Mordecai Plaut, director Published Weekly










Produced and housed by
Shema Yisrael Torah Network
Shema Yisrael Torah Network

Opinion & Comment
The Modern World: A "Land Full of Chomos"?

Dr. William McGuire, the former head of the UnitedHealth Group Inc., built up the company, which was near bankruptcy when he took over, into the second largest insurer in the United States. The stock price rose from two dollars when Dr. McGuire took over to 60 dollars, though it has fallen back to around 50 dollars.

Dr. McGuire was compensated very well for his efforts. Last year he made $8 million in salary and he also had no less than $1.6 billion worth of stock options.

What is more, his luck was extraordinary as well. The stock options that he had that were awarded in 1997, 1999 and 2000 were given to him at the lowest price for the entire year. In 2001 his options were awarded near the bottom of a sharp dip. According to the Wall Street Journal (WSJ), the odds of such a winning pattern occurring by chance are 200 million to one! To put some perspective on just how lucky Dr. McGuire was, consider that the odds against winning in the US Powerball lottery are "only" 146.1 million to one. But the largest Powerball jackpot so far was worth $365 million. Dr. McGuire's options from 1999 alone were worth $717 million as of last February.

There were other lucky corporate leaders. The top officers of Affiliated Computer Services had such good fortune that the WSJ calculated that the odds against it were 300 million to one.

So far at least 153 American companies have announced internal investigations of their past corporate practices in stock options. But a report released a few days ago by Glass Lewis & Co. said that the backdating scandal has only begun, and they expect it to enter "its second act" soon.

A study entitled, "What fraction of stock option grants to top executives have been backdated or manipulated?" by Randall A. Heron and Erik Lie which studied the timing of stock option grants and the motion of the stock prices around the date of the grants, found that 2270 (29 percent) of the 7,774 companies that they studied "manipulated grants to top executives at some point between 1996 and 2002."

At least 46 executives and directors have been ousted from their positions so far, including at least nine CEOs, seven finance chiefs and seven general counsels. Companies had to lower their earnings by more than $5 billion so far as a result of this exposure.

This is only the most recent scandal. In other recent cases such as Enron, Worldcom, Tyco, and Adelphia, high corporate officers were convicted of lying and looting their companies. Even the Federal National Mortgage Association ("Fannie Mae"), a corporation sponsored by the US government, was exposed as having cooked its books in order to boost the bonuses of the top managers. These were all highly successful people who had real accomplishments — but they were corrupt. It is astonishing and disturbing that such widespread corruption exists among the business elite of the leading nation of the world. What we have described here is only a small sample of what is already known to have happened.

In parshas Noach the world is described as being full of chomos. Rashi explains this to mean gezel, theft. However the Vilna Gaon, while agreeing that chomos is a crime that fits under the general category of theft, gives a more specific definition (quoted in Chumash Hagra, Bereishis 6:11). He says that in contrast to "shode which is true theft, . . . chomos is behaving improperly, like giving money" for an object that the owner does not want to sell.

That is, the Gaon says that "chomos" refers to people using improper practices to get something that does not rightfully belong to them, but not outright theft. That seems an uncanny description of what is going on in America at the highest levels. There is no outright theft, but there are extensive successful efforts on the part of the best and the brightest of America to acquire wealth that really belongs to others. America is no island, and its influence is exported worldwide in this age of globalization.

Unfortunately, it seems that if we would want to understand well the description of the world in parshas Noach, a land full of chomos, we need look no further than our own generation. Hashem yeracheim.

Our personal task is no doubt to ensure that we stay as far from this as possible.

All material on this site is copyrighted and its use is restricted.
Click here for conditions of use.