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.
