An op-ed in today's Wall Street Journal wonders (subscription required) whether Eliot Spitzer's high-profile demands for change at AIG (NYSE: AIG) and Marsh & McLennan (NYSE: MMC) did more harm than good: "In both cases, Mr. Spitzer issued ultimatums to the company boards that they had to replace their CEOs, or else he'd indict the company," the paper says. "Both companies have struggled ever since."
Before we get on Spitzer too hard, it's worth noting that almost all companies see their stock prices go down following the announcement of investigations and charges. News items like this generally reflect serious problems at the company -- and mark the first time investors become aware of certain issues that the company hadn't previously disclosed. If regulators worried about driving down share prices by launching investigations, they wouldn't be able to launch any investigations! Ultimately, investors are protected by zealous enforcement of the law.
However the notion of an Attorney General essentially installing at executives at public companies is frightening one and hopefully the failure of Mr. Cherkasky -- his resignation as CEO prompted a 5% run-up in the stock -- will put an end to experiments like this one for a long time to come.
Ideally institutional shareholders would lobby for strong upper management replacements in the face of scandal.
Reader Comments (Page 1 of 1)
3-03-2008 @ 12:22PM
Roger Steele said...
This piece is so poorly written I can't make sense of it!
3-03-2008 @ 11:24PM
Tony said...
Spitzer is without a doubt one of the biggest idiots in American History.
He manages to destroy two companies, the rank and file from the mailroom to the board room, the investors of the company who were innocent and every pension plan and mom and pop who hade their savings and 401K's and retirement plans in the company.
He had destroyed the lives and savings of innocent people who have worked their entire lives.
There a 1000 different way that this could have handles but he took the approach that would get him the most press before his election.
The poor boys on that lacrosse team were abused by a out of control persecutor but that was NOTHING compared to the ten's of thousands of people lives and tens of billions of dollars in the life savings of honest people that have been destroyed by this egomaniac.
Now he runs with the same ego in New York State and his own corruption, ego and greed go unchecked.
Did Elliot Spitzer destroy AIG and M&M yes he did and for no good reason but to get press for his election.
He should be in jail held accountable for the extortion, blackmail and destruction of honest people’s savings.
Was there no other way than to hurt those who did nothing?
This man is evil personified.
3-04-2008 @ 11:00AM
Larry Barton said...
The “selective” destruction of institutions may be an Eliot Spitzer hallmark, even in the non-profit arena. Attorney General Spitzer, with a May 2, 2003 press release, took over the Harlem-based Black United Fund of New York and installed his handpicked roster of five Black Republicans! –four from Long Island and one from parts unknown. "Our goal here is to help BUFNY flourish. The interim board ... will breathe new life into BUFNY, and help shepherd its finances and programs," Spitzer announced. http://www.oag.state.ny.us/press/2003/may/may02a_03.html.)
Spitzer had formally begun what is now an “investigation” of the Black institution of over 64 months, without any charges against its terminated executive management or findings of criminal activities and/or wrongdoing of any kind whatsoever. No Assurance of Discontinuance (of the investigation) has been issued. This is in stark and insidiously discriminatory contrast to his investigations of the World Jewish Congress and its American Section, and the Gloria Wise Boys and Girls Club, including its dealings with Air America Radio -which together yielded serious criminal violations of law (felonies); gross financial mismanagement, improprieties and deceit; and complete absence of board oversight. The Chronicle of Philanthropy, Feb. 23, 2006, called the treatment of the WJC et al “overly lenient”; NYC Department of Investigations Commissioner Rose Gill Hearn characterized the crimes at Gloria Wise as, "disgusting (and) the worst case of wrongdoing by a non-profit contractor she's seen since taking office.” Jail time was even assumed. Everyone, essentially, got off scot free to see another day!
BUFNY was completely destroyed. Its headquarters replaced by another Harlem “bar”. Its multi-millions in real estate assets in Harlem and Brooklyn distributed, like plunder. Its ready-to-go radio station (WCKL in Catskill, NY) evicted and the equipment discarded. Its hi-tech centers (Kinko’s-type replicas) closed. It files, historical records, and the personal belongings of it founder and former CEO from over 25 years discarded like garbage. Yet, No one has had to or is willing to answer the questions: Why was BUFNY destroyed and who benefited?
The other very troubling question amidst some curious “coincidental”(?) circumstances, based on a read of the published players (all Jewish names) involved in the WJC, Gloria Wise, and Air America scandals and what happened to these organizations is: Did Spitzer, as then attorney General in charge, grant or “engineer” favorable and obvious lenient treatment for everyone?
Please!
Don’t even try to bring the “anti-Semitic” red herring game out. I’m not buying it!
3-15-2008 @ 10:33PM
win said...
Apparently at Marsh the new CEO was a Spitzer friend and campaign contributer.
This article goes into even more - how he used a law that had never been used before to go after the companies. Basically made it impossible for the companies to fight since evidence, etc were all secret.
www.objectivistcenter.org/showcontent.aspx?ct=1542&h=53