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Oracle?s pursuit of a hostile takeover of People Soft has turned into hand-to-hand combat. Deception has emerged as one of the more unsavory weapons in the bruising struggle.
The People Soft board of directors fired its CEO, Craig Conway, in October after it became clear that Conway had lied to financial analysts. A year earlier - in September of 2003 - analysts had asked Conway if Oracle?s bid was affecting adversely its corporate sales. Conway denied that was the case.
In a court deposition earlier this year, however, Conway admitted that his remarks were ?absolutely not true.? He attempted to justify his deception, saying under deposition that he simply was ?promoting? the company, thereby hoping for a ?self-fulfilling prophecy.? The fact that Conway sold some 200,000 shares of People Soft stock at a personal windfall of $4.3 million one month after his infamous public fib leads me to question whose interest he actually was ?promoting.?
I suppose we can be grateful that Conway finally spoke with candor under deposition. He is describing a game that all too many executives of public companies play. Rather than laying out the real performance of a company over the past quarter, or year, they pull out every possible trick to paint a rosy picture. Good news generates more good news, just like bad news leads to more of the same. Executives are therefore highly motivated to alter reality. They call it ?perception management,? but it is actually downright lies.
People Soft?s board received a record of Conway?s deposition from Oracle?s lawyers. Conway was bitterly opposed to Oracle?s takeover bid, and had helped to devise an unconventional poison pill provision that promised clients up to five times what they paid for their software if Oracle would acquire the company.
Oracle?s attempt to take the moral high ground in this dispute should ascend no higher than a mole hill. A few years back, Larry Ellison, Oracle?s CEO, got away with pretty much the same stunt that turned out to be Conway?s demise. During the first quarter of 2001, Ellison took a much-publicized shot at Microsoft for lowering its earnings forecast. Ellison crowed that Microsoft?s products, and not the economy, were to blame. One month later, Ellison made his first sale of company stock in nearly five years, for a personal gain of almost $900 million. Fast-forward yet another month, and there was Ellison, back on stage, now announcing that Oracle would not meet its own profit estimates. The stock dropped 21 percent in one day.
It turns out that linking executive rewards to the company?s stock price can have the opposite effect of what was intended. Corporate heads have an incentive to pursue every possible path to improve the earnings (or overall financial picture) they report, regardless of its impact on company health. The obsession with short-term numbers, and its link to executive compensation, turns executives into market manipulators. Such behavior did not begin, nor end, in Houston. In a court deposition earlier this year, however, Conway admitted that his remarks were ?absolutely not true.? He attempted to justify his deception, saying under deposition that he simply was ?promoting? the company, thereby hoping for a ?self-fulfilling prophecy.? The fact that Conway sold some 200,000 shares of People Soft stock at a personal windfall of $4.3 million one month after his infamous public fib leads me to question whose interest he actually was ?promoting.?
I suppose we can be grateful that Conway finally spoke with candor under deposition. He is describing a game that all too many executives of public companies play. Rather than laying out the real performance of a company over the past quarter, or year, they pull out every possible trick to paint a rosy picture. Good news generates more good news, just like bad news leads to more of the same. Executives are therefore highly motivated to alter reality. They call it ?perception management,? but it is actually downright lies.
People Soft?s board received a record of Conway?s deposition from Oracle?s lawyers. Conway was bitterly opposed to Oracle?s takeover bid, and had helped to devise an unconventional poison pill provision that promised clients up to five times what they paid for their software if Oracle would acquire the company.
Oracle?s attempt to take the moral high ground in this dispute should ascend no higher than a mole hill. A few years back, Larry Ellison, Oracle?s CEO, got away with pretty much the same stunt that turned out to be Conway?s demise. During the first quarter of 2001, Ellison took a much-publicized shot at Microsoft for lowering its earnings forecast. Ellison crowed that Microsoft?s products, and not the economy, were to blame. One month later, Ellison made his first sale of company stock in nearly five years, for a personal gain of almost $900 million. Fast-forward yet another month, and there was Ellison, back on stage, now announcing that Oracle would not meet its own profit estimates. The stock dropped 21 percent in one day.
It turns out that linking executive rewards to the company?s stock price can have the opposite effect of what was intended. Corporate heads have an incentive to pursue every possible path to improve the earnings (or overall financial picture) they report, regardless of its impact on company health. The obsession with short-term numbers, and its link to executive compensation, turns executives into market manipulators. Such behavior did not begin, nor end, in Houston.
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