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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.""
Potashner, who also received a $261,232 loan in December 1999 to purchase RioPort stock, said the board members voted last December to make their loans ``non-recourse,'' an accounting term that meant the directors would not be personally liable if they failed to pay.
How do I get one of these loans? Sounds an awful lot like free money...
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.
Greg Ballard was former CEO of 3dfx before it crashed. 3dfx is a terrible story of mismanagment of manager abuse. As a company, 3dfx existed to make money for it's managers, and for no one else--and Mr Ballard was at the helm then for 3dfx, and now for SonicBlue. Do the words Golden Parachute mean anythign to you Mr Ballard? If anyone is investing in SonicBlue, I'd pull out...
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.
It's a good thing this sort of illicit loaning only goes on in the corporate world... Wait a sec, you mean it happens in government too?
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.
I'll tell you what's being taught:
Parents:
"Son, get your MBA. I'm proud of you and want you to make scads of money."
Friends:
"MBA? You're so smart. You'll make so much more money than I will with my BA in Art History, which I enjoy very much."
Business Administration:
"In times of decreased customer expenditure, it is often appropriate to reduce resources to appease the stockholders."
Business Ethics:
"Humans are our greatest resource."
Marketting:
""
Accounting:
"Payroll is the most expensive operating expense of any business."
Business Frat Poster:
"Win real money in our fantasy stock game! Each person gets $10k to play the market and the person with the most cash after just 30 days is the recipient of a $1000 datek account thanks to Takka Alla Profits"
Smart folks are filling in the blanks, mate. Customers are not always right -- they're the morons who fell for our marketting. Employees? Get the best we can get for the shit we're paying...young folks especially, and train them to work 10 hour days. Your only boss is the stockholders, and these guys will believe anything that shounds like it will make them money.
Lying? Don't get caught. Stealing? Give it a nice name. Executives have privilidge, or else they wouldn't be executives, eh? We're better than those 30k plebians. Offer them 28k and we'll get Mexican -- how does Mexico sound? Shit, we should move our corporate office there...cheap work, no taxes, and thanks to NAFTA no bloody tariffs.
Hey freaks: now you're ju
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."