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Shake-up At SonicBlue
InfoMinister writes "Good story at SiliconValley.com. The lead tells the tale: "In a boardroom drama rivaling its courtroom battle with Hollywood, SonicBlue's chairman and chief executive, Kenneth Potashner, was ousted Thursday after he demanded board members repay more than a half million dollars in loans they gave themselves to buy stock in an affiliated company.""
I hate to point this out to the ten mature adults who are in chage of SonicBlue but this market environment is really not a good time to be having public popularity contests and fights over control of the company. Investor confidence is at an all time low and people will tank your stock and your market cap and avaelable funding base if you pull stunts like this. Dont you tyhink they could keep this figt under wraps?
Pants are optional, but recomended for you.
I hate to say it but with all the news I have seen lately about large corporations this is not a big surprise. When someone tries to reform their company so it does not look as bad as the rest they get stomped on by those who benefit. Companies shouldn't give out loans to board members, thats what banks are for. If someone can't get a loan from a bank why would it be a good idea to give them that loan instead? The only reason these people have for taking the loan from the company is that they hope they can get away without repaying it or get little or no interest on the loan. This cannot be good for the company and it just shows that all the board members care about is their personal wealth and not the interests of the shareholders. Shareholders must unite and let the boards know they will not tolerate these practices.
The illegeal activites going on in this country are getting out of control. I don't mean to single out the US, but this is where I live and work, and this is supposed to be a great country. Instead, all I hear of are large companies that are literally ruining its loyal employees. I was taught in school that america was founded on the principal that if we all work together, we can all be happy, productive, and (hopefully), somewhat wealthy. Instead, the top 1% are really screwing the rest of us with illegeal activities, fraud, lies and cheating. It really makes me sick.
The loans given to the board members were completely legal and were not hidden in the financial statements. Some investors came to the CEO and asked about them.
He then requested that the three board members, who had taken out legal loans, repay them immediately (instead of at their due date, of June 2003) or to resign.
Now which of these actions is worse, really? Allowing somebody to take out a loan, then demanding they either accept a major change in the terms of the loan or they resign. Or to oust the guy who just renegged on a perfectly legal deal that he had previously agreed to.
I hate boardroom shenanigans as much as the next guy, but there's no story here.
In the case of Sonic Blue, apparently repayment is not a legal necessity. The board voted that they would not be held personally liable for failure to repay the loans, which means that the company is left holding the bag if anyone defaults.
If I was working at Sonic Blue right now, I wouldn't be by the end of the day. An action like this means that the board of directors can rape the company cashpile and not have to do a thing to replace it. It's legalized theft.
For whatever criticism the CEO may have endured in the past, right or wrong, he was definitely right to call in those loans and when they fired him, he was definitely right to call "shenanigans" and inform the press.
To celebrate the occasion of my 1000th post, I will post no more forever on Slashdot. Goodbye.
Ken isn't an angel. He has caused a lot of problems for S3/SONICblue due to his management style.
I suspect this row was caused by the new law that makes him (and other executives) criminally liable for fraud and errors on financials. Without that he wouldn't have cared.
NOTE: I am biased. For a decade I worked for a company that became part of SONICblue and still own a lot of now worthless stock. I have several friends who are still there, all are worried about their jobs. The only reason the company is still alive is the large amount of UMC stock they own from a very old investment. Whenever the cash reserves get low they sell UMC shares. At one point they had almost a billion dollars in UMC, between sales and the market slide it's around a tenth of that.
Anyone see a huge problem in the legal system that allows any corporation to pretend it's a bank, without having to follow the same rules as banks? I think the law Bush recently signed should have barred loans to all execs and board members. No if, and, but about it.
A corporate board voted to give themselves a no-recourse loan from corporate coffers to purchase stock. Explain to me how this was ever in the company's interest? Wasn't there a better use of the funds more in tuned to the *corporation's* interests? And where were the checks-and-balances to prevent this sort of crony-ism?
This sort of thing was common place in during the freewheeling days of the Internet bubble, when everyone expected a big payoff for little work. We (i.e., our economy) is going to be paying for those decisions for a long time to come.
And it is precisely this scenario (and Enron, MCIWorldcom, etc.) that I'm going to use as a counter-point to my laizze-faire free-market friends who claim that government has no business in then business of business. When corporate officers can't be trusted to act in the long-term best interests of their company over their own short-term self-interest, how can we reasonably expect them to make decisions that are in the best interest of society at large?
Any supposed free-market capitalist who is not opposed to these practices is actually merely a supporter of the aggregation off personal wealth, not competitive business.
---anactofgod---
"Equal opportunity swindling - *that* is the true test of a sustainable democracy."
Obviously something is very broken with the system then. We have CEOs running companies into the ground and bailing out with tens and hundreds of millions in bonuses and exercised stock options just before the company tanks. They get away with it all too often too. If they have such a duty to shareholders, why are these bastards getting huge bonuses as the company fails? Oh yeah, because it's one big circle-jerk in management. They know that the company is dead, so they approve bonuses for each other and bleed the company dry, often leaving nothing for the regular employees.
It's not enough to bash in heads, you've got to bash in minds. - Captain Hammer
Only because the shareholders allow it, and guess who the share holders are: you and me. Do you vote your proxies? Most /. readers (at least in the US) own stock in some form, often in their 401k funds. Make sure you vote. In most of the proxies I've recived, from both funds and stocks I've found something that when I read closely was an attempt by management to screw me over. However because it was management, they recomended I vote for it, and many sheep just up and did that. It is amazing how few things that management requests gets voted down. Please, I know there are many share holders reading this, so make sure you vote. Your vote isn't much, but it counts.
If you read the next sentence in the report, you'd see that Potashner's loan was *not* "non-recourse", and in fact he was (is) personally liable for it. The board members certainly were looting the company, though.
rant on...
Remain calm! All is well!
But, the board has civil liability. There is a mechanism in place to resolve this. The shareholders can and should sue them for far more than they stole.
So, what should the government do to correct this? Make all procedings of the board open to shareholders? Require extensive reports of corporate financial activity? Require board members to be elected by the shareholders? Guess what...they already do? So, my point still stands. What should change? In what sense should this be "illegal"?
Knee-jerk responses such as your don't really deserve a response, but I was feeling generous.
I'd point the finger at an event that precedes Reagan's administration by a couple of years: the 1978 Supreme Court decision that defined corporate contributions to political campaigns as "free speech" that could not be restricted. This decision gave the corporations, particularly Big Media and Big Oil, free reign to buy the 1980 Presidential election wholesale. And the five subsequent Presidential elections, of course.
Yes, well, now that CEO's are responsible for the quality of financial data in their reports, I'm sure that CEO's who make a stink will get the axe, and the others who don't will be greatful at the huge salaries they're given, to take the risk that someday, they're going to have to take that one way midnight flight on their lear jet to the Cayman Islands.
You can live like a fucking KING for the rest of your life in Mexico for $15 million. And you probably won't even have to learn to speak Spanish.
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
capitalism is fine and dandy as long as people don't abuse the system.
I guess you can say the same about dictatorships as well.
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
But I think that even the minority shareholders have the right to sue for damages, if only for not having the same loan "opportunities" made available to them. The board is reponsible to represent the best interest of ALL of the shareholders, not just their buddies.
It looks very very bad. Any judge/jury would be sympathetic. It just takes an excuse of a lawsuit and the board will be wiped out. The real problem is for employees of that company. How would you like to find out that the captain of your ship is drilling holes in the hull?