CAPITAL FOCUS; CEO takes stand, but using same corporate feet of clay
Ted Bunker
08/12/2002
Boston Herald
All Editions
Page 029
(Copyright 2002)
A CEO worthy of a medal?
When you consider the man-bites-dog story of Ken Potashner, until last Thursday the chief executive of Rio MP3 player and ReplayTV maker Sonicblue Inc., you might be inclined to pin something on his chest.
Potashner reportedly challenged his board of directors to pay back nearly $600,000 in company loans, fearing they would raise investor concerns, especially if forgiven. For his trouble, Potashner says, the directors fired him.
In these days of billion-dollar bookkeeping errors and outright corporate fraud, Potashner seems to stand in stark contrast to that poster boy of executive-suite misbehavior, L. Dennis Kozlowski.
Tyco International directors ousted Kozlowski as chairman and CEO just days before he was charged with tax fraud in New York. That opened a Pandora's box of tales of corporate excess at Tyco, from multimillion-dollar "loans" to officers and directors to stunning outlays for personal junkets - all of it apparently institutionalized at the tax-dodging "Bermuda" firm run out of Exeter, N.H.
Word has it that Kozlowski's final days at Tyco were accented by a yachtsman's weekend bash in Miami last spring that would have made Caesar blush. Champagne flowed like water - and often went into the drink, a source who was there reports.
Posh Miami Beach and Fisher Island clubs were rented out for the night, ostensibly to entertain crowds of Tyco customers - yet reportedly few showed up. Chartered yachts were said to have been handed over to the hired help for the day, as were pricey rooms in fancy hotels.
Kozlowski is said to have shunned $5,000-a-night rooms rented for him in ritzy hotels, leaving them empty as he stayed in other luxury digs. In all, the yachting weekend is said to have cost Tyco $340,000.
Where Kozlowski apparently orchestrated excess, Potashner sought to curtail it - or so he says. Potashner was reportedly upset that the directors, who included Terry N. Holdt, a former company chairman, and two outside directors, Robert P. Lee and James T. Schraith, might have their loans forgiven while a similar $261,000 loan he had taken might not be.
But Holdt, the Sonicblue vice chairman who is paid as much as $10,000 a week for consulting services to the company, told The Wall Street Journal that the loans to directors would not be forgiven. He said they would be repaid on schedule next year.
And before you shed a tear for Potashner, here's a few sobering details: The self-styled renegade CEO, who was 44 in April, got paid $1.5 million in salary and bonus last year, when the company he ran lost nearly $748 million as sales shriveled. And he was handed Sonicblue stock options potentially worth $5 million.
Of course, with a current share price of 39 cents and falling, Potashner's options may never be worth anything.
Will that appease Sonicblue shareholders? Doubtful. The stock traded at $24 in March 2000.
Nor will Potashner's severance deal, as described in its April proxy statement, comfort investors. He gets $108,333 a month for the next year, plus his $650,000 salary, if terminated without cause.
Potashner apparently got religion when it came to loans to directors, though. At Sonicblue , "loans" that became gifts are nothing new.
John Todd, chief financial and chief operating officer, got a $150,000 loan. It is to be forgiven after 18 months of employment, the proxy says.
Paul G. Franklin, until last September Sonicblue 's vice president for business development, had a $250,000 loan from the company forgiven. And he's paid $11,184 a month as a consultant.
So pin something on Potashner, but not a medal. He's no hero. |
