Join the United Shareholders of America: The Icahn Plan

One of the biggest problems we face today is the egregious mismanagement and reckless incompetence of many American corporate boards which utterly fail to do their primary job of holding managements accountable.

Many board members are often beholden to managements for lavish pay and perks they get for very little work and oversight. The credit crisis we find ourselves in is a direct manifestation of board members' lack of oversight. Alarm bells should have gone off in board rooms as crisis loomed, but many boards looked the other way.

Our economy has floundered for nearly two years because boards allowed their companies to make vast leveraged investments into faltering mortgage-backed securities. These investments vaporized trillions of dollars in shareholder value and left the banking industry in crisis. Boards gave permission to CEOs to take these risks, which often times they misunderstood, which is like giving the fox permission to guard the henhouse.

Incredibly, some board members make as much as $10,000 a week and soak up expensive trips to the Super Bowl and Augusta aboard corporate aircraft - simply to go to four or five board meetings a year.

Many of these same boards and managements are members of such groups as the Business Roundtable and the U.S. Chamber of Commerce, which annually spend huge sums of money in Washington to pass laws favoring managements and boards. These laws are often at the expense of shareholders, which are the true owners of America’s corporations.

We need an aggressive plan to combat this, which is why I am launching United Shareholders of America – a voice for large and small shareholders. We must have a strong voice in Washington to combat the pro-management forces.

United Shareholders of America will aim to push back against board entrenchment and make it easier for shareholders to promote change in companies they own. I am asking that you join this cause by signing up on my website, the Icahn Report, www.icahnreport.com.

It is easy to point fingers at those who may be responsible for our current crisis. But we are seeking long-term changes. And the only way to make these changes is for large numbers of shareholders put pressure on lawmakers. Remember, shareholders vote.

As I have said, a lot of people die fighting tyranny. The least we can do is vote against it. If our country is to get back on its feet, we as shareholders should stand up and demand changes to laws that insulate managers from shareholders.

It is sometimes difficult for outsiders to see the sheer extent of this mismanagement. Granted, there are a lot of good boards and managements. But in my 40 years in the financial markets and service on many boards, I have observed first-hand the egregious blunders and ineptitude of over-paid and self-serving boards who have little loyalty or accountability to shareholders. For sheer entertainment value, board antics rival skits on Saturday Night Live, but this value destruction is not entertaining.

On a regular basis, we see:

- Board compensation committees that approve ever-higher pay packages to top-level executives allowing them to walk off with millions of dollars even when the companies later fail due to bad management decisions.

- Boards that cozy up to managements so they can enjoy $300,000 annual salaries and perks like the use of the corporate jets and golf junkets in return for a few hours of work each month to rubber-stamp management proposals.

- Timid boards that fail to ask or research the relevant questions over risks a business faces for fear they may incur the wrath of a CEO and be forced to resign.

- Boards that approve decisions that thwart stockholders from proposing candidates to company boards and having a say in company decisions, even when a majority of stockholders approve.

- Board chairmen who fail in their fiduciary responsibility to act in the interest of stockholders and demand that managements be held accountable for financial performance.

- Boards that use every means at their disposal to thwart shareholders from placing resolutions for vote at annual meetings.

- Boards that allow managements to place the blame elsewhere for their dismal performances.

- Boards that refuse to allow their shareholders to decide for themselves if they wish to accept an offer for their shares that is well above the selling price of the stock.

- Boards that vote to enact anti-shareholder devices like poison pills and staggered board elections designed to aid in their entrenchment and power.

- Boards that approve millions of dollars in signing bonuses that can’t be taken back when a CEO leaves after a short period, even when the company collapses.

The list goes on and on.

Now consider the recent costs of this board neglect and malfeasance:

Besides the financial services industry, others are teetering or in crisis: airlines, automobiles, homebuilders, real estate, textiles, retail – to name a few. Manufacturing has largely moved overseas. Government deficits are soaring. Unemployment and inflation are rising.

America is losing its economic hegemony as evidenced by a falling dollar, vast trade imbalances, millions of jobs lost, an eroding manufacturing base, a financial industry in shambles and out-of-control government spending.

It doesn’t have to be this way. We as a nation can – and must – do better.

In an ideal business world, shareholders in faltering companies could simply vote out incompetent and crony-ridden boards and managers that helped create this mess.

Unfortunately, there are mountains of state and federal rules favoring managements that were supported by years of work by pro-management groups like the U.S. Chamber of Commerce and the Business Roundtable, a powerful group composed of 160 or so CEOs of the nation’s biggest corporations.

It is time for a change. A big change.

United Shareholders of America aims to create a grassroots movement of large and small shareholders who are looking to press boards to be more responsive to stockholders.

My campaign is designed to change state and federal rules that favor entrenched boards that allow executives to receive bloated compensation packages for lackluster performance and perpetuate themselves indefinitely in office.

Millions of shareholders will benefit from this campaign.

The list includes public pension funds that invest working peoples' money, institutional investment funds that manage corporate pension funds, endowments that fund college educations and the legions of retail investors and other stakeholders in our economy. In short, it is in the self-interest of all that we see a campaign to make business run better succeed.

This is why I am asking you to join us and support us. Like my friend Boone Pickens who is running a campaign for national energy independence and my friend Pete Peterson who is running a campaign to cut down on our staggering national debt, I am determined to make this campaign succeed. But I need your support.

In coming weeks, I will be outlining our plans to press lawmakers, policy makers and others for changes that we are advocating. I will also ask for your ideas, feedback and input in this. We are looking to create a grassroots movement - it is long overdue.

Let's not forget the most salient point: we all rely on business for our livelihoods and standard of living. Business and entrepreneurship are the engines of America's growth. We must not let this great nation’s economy erode as it has in recent years due to self-interested and incompetent corporate managements.

Please join in supporting this call for action.

Comments

[Randell Young]

Fantastic!

Sign me up!

[Eric Adair]

Dugg. Signed up.

-Eric
http://www.linkedin.com/in/ericadair

[Maryanne]

Thanks for taking up this cause. It is long overdue. Perhaps we can preserve capitalism.

[don p]

carl,

thank you very much ... you have my support.

don

[Ryan Freund]

Signed up. Let's take the power back.

[Maria Stefan]

Mr. Icahn:

Congratulations to you and Boone Pickens for using your visibility, influence, money and clout to give voice to important issues that will shape the future of our great country! I saw your interview on CNBC and given my experience in working with boards of directors, I agree wholeheartedly with you! They need to be revamped and recruit people who are not retired friends of friends that get "taken care of". We need strong professionals with diverse experience in leading and managing organizations across the political, social and economic front, so as not to give away the ship from lack of interest, understanding or accountability. Look forward to hearing more about the plans for United Shareholders of America and how we can make a difference on the professional, as well as grassroots level, in the corporate boardroom. Regards, Maria

[Dean Munson]

I totally agree with the content of this article. I saw the same kind of conflicts of interest and what I call corporate incest at the local level where I worked on more than 75 annual reports over the course of forty years as a graphic designer.

The only thing I would add is that our congressional oversight committees had to be either complicit or incompetent not to have done something to prevent this. Instead, under multiple administrations and both parties' majorities, they did away with the protective regulations which the Great Depression taught us were needed to prevent this kind of rampant greed and fraud.

As I watched the House Oversight Committee testimony of Fuld yesterday it occurred to me this is really the House Hindsight Committee.

I enthusiastically and wholeheartedly wish to add my name to the membership.

[Taymaz Rastin]

Dear Mr. Icahn,
You have my support.

[DomainDiva]

I'm in! Let's get to work!

[Richard Grim]

It is encouraging to see an effort like this starting. Go for it!

[Robert Banks, Jr.]

I appreciate the cleverness of the suggestion that this should be called the "House Hindsight" Committee and it makes a valid point. But before we really get to the root of the problem we need a majority of voters (and not just an infintestimely few) to recognize that it should more accurately be called the House Misdirection Committee and vote according to the best interests of the country as a whole where integrity is concerned. There will be no meaningful legislative reform or effective administrative oversight until we throw out all of these crooks and quit sending people back just because they do things for our favorite interest group or legislative district.

I'm sure there an equal number of Republicans (probably few in either party are clean) with the same taint, and if I subjected myself to the mainstream media I'd probably know who they are. But anyone who thinks the SEC or anybody else can effectively regulate with the Rangels and Dodds sitting between the public interest and the regulators has reality issues.

I buy everything Mr. Icahn is selling. But he is a doer and I can't imagine meaningful getting being done by Congress without cash changing hands in a way that only feeds the current sickness. Forget about "educating" or "influencing" them. Throw them out and start fresh.

[Stunned and Bewildered]

I totally agree with your thoughts Carl on the waste of corporate management. I worked as the Assistant General Counsel of a publicly traded company for six years and handled all of their SEC filings. I can't believe the incompetence of the Company's management and board. It is there where I learned the Peter Principle where you are promoted to the level of your incompetence. Our CFO often fell asleep on conference calls and the Company's General Counsel didn't even know how many subsidiaries we have. The Treasurer used the Company as a piggy bank to pay bonuses to the CEO's employees at his other company. The Company paid $100,000 a year for the CEO's US Open box where he used for his other business. He flew around the globe looking for deals even though our credit facility did not permit us to invest in any joint ventures. They even hired a new President who was an alcoholic and everyone knew it but no one said anything. When he left, they wrote him a check for $1.5 million. Can you believe it??

Also, Management didn't have earnings conference calls for the five of the six years I was at the Company. Officers were promoted as long as they agreed with the CEO and the Board basically rubber stamped everything the CEO wanted. I was amazed that the Company was so mismanaged. It was disgusting. The Company's stock has gone from $23 a share to 99 cents a share in the past two years. I am just waiting for some smart stockholders to bring a derivative action. I don't know why they haven't so far. Where are all of the derivative litigators?

[Arthur Cortis]

Carl,

This is a path few attempt to transgress. A warrior, unburdened from politics, has chosen to navigate this treacherous trail. Thank You!!!

[Keith]

Can I get an AMEN? This is long overdue! I watch CNBC's Fast Money every night and I'm glad they allow you Carl to come on the program and don't knock you for promoting this plan as vociferously. Greed got us to where we are today and it's greed and arrogance in corporate America that may very well keep us from correcting the sins of our past.

[David Merkel, Alephblog.com]

Count me in. I think a randomly chosen bunch of CFAs would be able to turn around any board. Get the focus back to the shareholder, and eliminate self-aggrandizing management teams, unless they are genuinely worth the dough.

[Henry S. Putz Jr]

Ok Carl, I'm in. I hope this post constitutes "signing up."

[RFRANCIS]

I HAVE BEEN EMPLOYED AS MID MANAGEMENT FOR OVER 30 YEARS IN THE FINANCIAL PROFESSION FOR FORTUNE 500 COMPANIES. I AM NOT SUPRISED THAT
OUR LEADERSHIP WITHIN CORPORATE RANKS
HAS ESSENTIALLY CREATED AND/OR ALLOWED
ALL OF THE MISREPRESENTATIONS AND
OUTRIGHT FRAUDULENT ACTIVITIES TO
PERPETUATE THROUGHOUT THE ENTIRE ECONOMIC SYSTEM.

IT IS APPARENT TO ME THAT FANNIE MAE & FREDDIE MAC WERE BOTH DESIGNED TO PUMP BILLIONS INTO INVESTMENT GROUPS HANDS AND ULTIMATELY INTO MANAGEMENTS PERSONAL BANK ACCOUNTS. THE REAL ESTATE WORLD, AT THE BUILDER LEVEL, SHOULD NOT BE HURTING AT ALL CONSIDERING HOW MUCH THEY HAVE GAINED FROM THIS FREE WHEELING SYSTEM.

I HAVE NO SYMPAHTY FOR ANY OF THE PEOPLE CONNECTED WITH THE REAL ESTATE
PROBLEMS.

IF THEY WOULD HAVE SAVED MONEY OR INVESTED CORRECTLY THEY SHOULD BE SITTING ON TOP OF THE WORLD RIGHT NOW.

[Andrew Meyer]

Mr. Icahn,

you have my support and I also want to add that as a member of the Zebablog Consortium for Corporate Governance, you have our backing. In fact, last week we published a working paper on the Seven Things Business Leaders Must Know about Corporate Governance.

http://tinyurl.com/7ThingsCorpGov

To succeed, this is effort should come both from the top (shareholders) down and be accompanied by appropriate grass roots understanding by people doing the real work in corporations.

There is just as much frustration at the worker level with overpaid executive management and boards as there is at the shareholder level.

Andy

[Michael Gath]

It's time. Sign me up. I have dibs on Chicago!

[Scott Mugan]

This is long overdue. Sign me up as well. I want to know when exactly the "Captains of Industry" became the "Captains of 'What's in it for me?'" What we really need in all areas of American business and industry is leaders - people who have a vision beyond themselves and can articulate that vision to the smart and hard working people below them so it can become a reality. Leaders take responsibility for the bad as well as the good. Only with true leadership can we rebuild this great country. Boards and CEOs need to be held responsible for the decisions that they make. I have never understood why upper management gets bonuses for meeting their goals. Isn't that what their salary is for? Bonuses should be given when targets are exceeded and the company does well.

[Bonnie Shover]

Perfectly stated. Where has personal accountability gone?

[Margaret Fraser]

Thank You Carl!
You said it best... "We can't have a fox watching the hen house."
Everyone spread the word that the party is over and sign up with Carl.

[Francisco]

It would be a good idea to establish the United Shereholders of Spain too!

[Paul Appleton]

I suggest that Carl be sure to regularly appear on Bill O'Reilly's show to make this point about inept, corrupt boards. I would add that in 30 years in medicine, one must ask (as to why health care cannot become efficient or even be called a system) the same question about boards....who are your local hospital board members and why are they there!!!

[Jeffrey Fissel]

Thank You Carl!!! Lee Iacocca's book laments
our loss of leader's. It's clear we have had no elected leadership in the last 30 years. The current downturn will be a great blessing because leaders such as yourself, Gates, Buffet and Pickens will emerge from the ashes in a grass roots campaign to rebuild America. We still have the greatest people in the world and we will eventually
prevail. Thanks for your leadership.