A few weeks back, we discussed the meltdown of Hollinger
The deals cost Black his position, but not without complications. Black has a controlling stake of Hollinger, which, through a subsidiary, owns the Chicago Sun Times and the Jerusalem Post, and he's not going out without a fight. Disagreements over Black's actions while chairman have devolved into a suit and a $200 million countersuit to recoup monies paid to Black and other entities he controls.
After reading about Black's attitude toward shareholders this past weekend in The Washington Post, I can only say that I hope the man loses for every penny.
Following Mr. Black's departure, a special committee of directors began to search corporate documents to find evidence of wrongdoing for the lawsuit. They unearthed this statement from Black:
We have said for some time that [Hollinger International] served no purpose as a listed company other than a relatively cheap use of other people's capital.... We think [shareholders] are a bunch of self-righteous hypocrites and ingrates who give us no credit.
Unbelievable. Certainly there are plenty of other executive offices which hold shareholders in contempt. Before the IPO bubble of the late 1990s, many corporate executives considered the stock market to be a "funding source of last resort," mainly because of the hassles of dealing with droves of shareholders, many of whom know little about the inner workings of the companies they own.
But did Mr. Black really need "credit"? The credit he so desired came in the form of these shareholders entrusting him with their capital in the first place, in spite of the myriad sweetheart deals he cut for himself. Credit?!? Here's $200 million dollars and a lifestyle that few will ever even dream of! Does that help?!? Want me to send a shareholder in to fluff your pillow?
Pah. You just cannot make this stuff up. Shareholders are responsible for their own money, for their own allocation decisions. But it should go without saying that executives who seem to have forgotten just who they are working for are to be watched much more closely. Just because a distributed shareholder base is unable to stop a management team from doing something doesn't give them carte blanche to just do it. Black has obviously forgotten this, if he ever knew it in the first place.
There's a cost for bad management. There's also a cost for management that treats shareholders in the way Black suggests. Finding and avoiding the budding emperors can be crucial to your long-term results.
