Oregonians who read the New York Times probably noticed the picture of Dr. Jayant Patel on the front page today. I was more interested in the story to its left, about the recent convictions of three lavishly-paid top executives of public companies. Dennis Kozlowski, the former head of Tyco, was convicted on Friday of grand larceny and conspiracy. Within the last few months Bernard Ebbers, the former head of WorldCom, was convicted of accounting fraud, and John Rigas, the former head of Adelphia Communications, was convicted of conspiring to loot the company. (The Times, not given to strong language, uses the word "loot" appropriately considering the sums involved; Mr. Rigas caused Adelphia to guarantee more than $3 billion of loans to his family.) In 2002, Mr. Kozlowski was paid (I don’t want to say he earned) $70 million, and Mr. Ebbers was paid $11 million. In each of these three trials, the defendants said in various ways that they were not really involved with what happened at their companies: Mr. Kozlowski said that he was a slipshod manager who didn’t pay taxes on his money because he wasn’t paying attention; Mr. Ebbers (who had borrowed $400 million from WorldCom) said that he wasn’t that familiar with the financial circumstances of his company; Mr. Rigas argued that at his age (79), he was simply too old to understand the finances of his company. The three juries rejected each of these arguments.
Mr. Eichenwald quotes a former federal prosecutor, Robert A. Mintz, who sums up nicely one of the problems a highly-paid president faces when professing ignorance: "One of the perils of being paid an enormous amount of money is that people will ultimately conclude that you’re worth it." Another former federal prosecutor, John J. Fahy, is quoted in similar vein: "Most people on juries aren’t business owners. They are employees, and their bosses would never tolerate those kinds of excuses. To have someone making millions and millions of dollars saying ‘I was disorganized; I wasn’t paying attention’ is something that jurors just can’t understand."
It’s fascinating, in a ghoulish way, to watch executives who a few years ago justified their high compensation with the L’Oreal argument — "Because I’m worth it" — defend themselves in court by arguing that they really weren’t. I hope they haven’t done too much damage to their self-esteem.