John Hancock shenanigans
In reading the latest news reports of uncontrollable corporate greed, I recalled the cover of Fortune Magazine about 2 years ago which headlined the runaway compensation packages of the big corporate bosses and why nothing would be done about it.
Also recalled was the Business Week cover story in the year 2000 titled “Too Much Corporate Power?” which this leading magazine answered yes! yes! yes! in a long article. The editors took a poll and found 72% of the responders believed that corporations had too much control over their lives. And that response was before the corporate crime wave (Enron, Worldcom, Tyco, Wall Street, etc.) that looted or drained trillions of dollars from tens of millions of small investors, workers and pensionholders!
Now comes Jason Adkins, the leading attorney challenging self-enriching conversions of mutual insurance companies to stock companies, to report on the John Hancock shenanigans. With apologies to the American patriot, John Hancock, whose name this company seized and slandered, here is what the top executives pulled off.
First, they rammed a bill through the Massachusetts legislature on a sea of illegally wining, dining and golfing key lawmakers, to allow the giant mutual to convert to stock. The company bosses rejected assertions that they were readying the stage for enriching their coffers.
In 1999, Hancock converted the mutual to a stock company. Before 1999, Hancock could have merged with the Canadian insurer Manulife Financial when both companies had been mutuals and avoided siphoning off tens of millions of dollars to management. But why choose this approach when unctuous avarice beckons over the horizon?
After a series of backroom dealings, Hancock’s officers and rubber-stamp board of directors instead converted and approved the sale of this mutual insurance company to the Canadian firm. Adkins’ summary of the wealth transfer that he is challenging in federal court on behalf of a share-holder, Aaron E. Landy, Jr. is worth quoting:
“The top 10 executives of John Hancock stand to make an extra $60 million if the proposed sale of the company to Canadian insurer Manulife Financial goes through. Dozens of other executives will reap additional millions. Alone, Hancock’s CEO and chairman, David D’Alessandro, will make a reported $22 million from the deal. This is an addition to his $21.7 million compensation in 2002, which was itself up from his $3.1 million pay in 2000.” By the way, $22 million amounts to almost half a million dollars a week, not counting perks, benefits and expenses!
Hancock’s executive greed is also retroactive. Former Hancock CEO and chairman Stephen Brown made $6.7 million in 2002 despite having retired in May 2001, says Adkins. So busy were these executives scheming for themselves that the net income and the company’s stock price-to-book-value were down significantly in 2003.
Just read the Wall St. Journal every day and see just how out of control companies like Haliburton (overcharges, bribery and pay-and-play deals are, or the natural gas industry driving up your heating bills big time even though, as Senator Joseph Lieberman points out, these “dramatic increases” come despite relatively stable supply and demand.
It was left to Automotive News’ editorial writers to show just how devastating executive greed can be to losses of jobs by workers at the former Chrysler corporation. When Daimler’s CEO, Juergen Schrempp came shopping for Chrysler in 1998, Robert Eaton (Chrysler’s CEO) cut a personal compensation deal for $70 million and sold the company to the German autogiant.
As Automotive News wrote: Bob Eaton and Juergen Schrempp cared more about getting the deal done than they cared about the aftermath and its impact on the company and stakeholders. [Schrempp] eliminated skilled Chrysler executives such as Tom Stallkamp after they questioned the wisdom of the deal and the cumbersome bureaucracy that resulted. Eaton took his $70 million and ran.”
Is it any wonder that polls are showing more and more demands by the American people for a crackdown on corporate crime, fraud and abuse? Though working longer hours than 30 years ago, American workers are increasingly angry that the economy and the corporate workers are increasingly angry that the economy and the corporate bosses in control are not working for them.