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 user 2008-07-17 at 12:11:56 pm Views: 78
  • #20169

    With friends like these …
    KONG – You can tell a lot about people by the friends they choose. For
    candidates in the United States presidential race, that goes double for
    their political friends. Last week, Republican nominee-in-waiting Senex
    hp ceo carly fiorina ator John McCain got a double whammy from two key
    allies he has chosen.

    Former Texas senator Phil Gramm and former
    Hewlett-Packard chief executive Carly Fiorina both shot off their
    mouths inopportunely. Gramm declared the US is in a “mental recession
    … we’re becoming a nation of whiners”. McCain said he completely
    disagreed and suggested that Gramm, touted as a  potential McCain
    administration secretary of the Treasury, was more likely to be
    banished to an ambassadorship in an obscure former Soviet republic.

    griped about insurers not covering birth control and told women voters
    McCain would change that. But McCain has voted against that very item
    on at least two occasions. When questioned about it, McCain was struck
    speechless before pleading memory lapse on the votes. Even painful to
    watch, it had to rank among his top 10 most uncomfortable moments since
    the Hanoi Hilton.

    In the bigger picture of McCain’s campaign for
    the White House, what Gramm and Fiorina said matters last week less
    than who they are and what they’ve done in their respective careers.

    My way or the HP way
    was the first woman chief executive officer of a Dow Jones Industrial
    Average firm when she took the reins at HP in 1999. Aside from the
    first layoffs in company history, Fiorina used dubious arguments and
    trashed Hewlett-Packard’s founding families and its “HP way” culture to
    engineer a dubious merger with Compaq.

    The move, announced in
    2002, was designed to make HP the world’s largest manufacturer of
    personal computers. The company that invented Silicon Valley after
    Stanford University graduates David Hewlett and Bill Packard built a
    precision audio oscillator in a Palo Alto, California, garage (now a
    state historic monument), would stake its future on the low-margin
    business of grinding out a commodity product. HP shares fell 18% on the
    day the merger was announced.

    The Compaq merger decision came
    after HP had failed to partner with a business consulting firm and move
    the company more heavily into that space. IBM, which sold its PC
    division to China’s Lenovo, has just done that with great success. In
    2002, HP was the dominant player in computer printers, and, opposing
    the merger, board member and founder’s son Walter Hewlett urged focus
    on that very profitable segment. But Fiorina was following the Vietnam
    War strategy of destroying the village in order to save it. She wanted
    HP to unmistakably bear her stamp, one way or another. On this matter,
    and all others, those disagreed with her, well, they were simply wrong.

    got her merger but the results were predictably disappointing. In 2005,
    Fiorina got the ax, with a US$21 million severance package. Since she’s
    left, HP has also prospered. It has firmly taken the top spot in PC
    market share and acquired EDS, a leading computer services provider.
    The stock price, which rose 7% on the day Fiorina was fired, has more
    than doubled. In an unintentionally comic turn, Fiorina said in an
    interview last week, “My choices and my leadership had been completely
    validated by what happened from the moment I left. And by the way, the
    best legacy of a leader is what happens after they go. That’s how you
    know the kind of foundation they put in place.”

    Selective legacy
    Fiorina is taking credit for the progress HP made thanks to her firing.
    However, she’s not taking credit for what happened after she left
    Lucent, the telecom equipment maker spun off from AT&T, where she
    ran global sales. A darling of Wall Street in the late 1990s, the
    company imploded amid irregularities in sales reporting and accounting
    during her watch. (Nice hire, HP.) Lucent shares lost more than 99% of
    their value, the company sold off various pieces, and finally, in 2006,
    sold itself to Alcatel.

    Fiorina’s autobiography, Tough Choices,
    recounts an episode where she stuffed socks into her crotch and
    declared, “Our balls are as big as anyone’s in this room.” That would
    explain what can be charitably characterized her conveniently selective
    memory in misrepresenting McCain’s position on insurance payments for
    birth control.

    While Fiorina wants to bring her brand of
    corporate megalomania to the political arena – in addition to
    speculation she could be McCain’s vice presidential choice, Fiorina is
    considered a potential candidate to succeed Arnold Schwarzenegger as
    California’s governor – Phil Gramm has gone the other route, bringing
    his extraordinary political ego to the corporate sector as a vice
    chairman of Swiss banking giant UBS. But Gramm realized early on that
    there was no need to have a corporate job to be on corporate payroll.

    railing against government involvement in the economy, Gramm’s entire
    career has about been making his involvement in government personally
    profitable. His “mental recession” remarks fit a long-running pattern:
    Gramm and his wife, Wendy Lee Gramm, embody Washington insiders
    brazenly feathering their own nests and letting the public eat cake.

    gutting the rules that kept banking, securities and insurance separate
    as a senator, Gramm took more than US$1 million in contributions from
    the financial industry. Eliminating restrictions on financial services
    companies has enabled them to become behemoths. It’s also ensured that
    a problem in banking or insurance or mortgages isn’t a sectoral problem
    but a threat to the entire US economic system.

    Senator from Enron
    was also known as the senator from Enron, but he didn’t do that job
    alone. Wendy Gramm headed the Commodity Futures Trading Commission,
    where she approved many of the controversial strategies that Enron
    employed to make its name synonymous with corporate malfeasance. Her
    government work done, she went directly from her commission chair to a
    seat on the board at Enron. Phil Gramm then picked up the torch,
    co-sponsoring the Commodity Future Modernization Act that gave Enron
    even more scope for the fraudulent behavior that brought it down,
    costing shareholders billions while executives escaped the carnage.The
    Gramms, each with a doctorate in economics, kept their Enron money.
    From 1999, Wendy Gramm refused to accept Enron stock as payment for her
    work as a director. With an audacious lie that would make Josef Stalin
    blush, she declared that holding Enron stock created a conflict of
    interest for her as a director, so she cashed in her stock and took all
    further payments in cash. Corporate directors, by law, have a fiduciary
    duty to act in the best interest of shareholders. Any economist not
    named Gramm will tell you the best way to ensure they do that duty is
    to give directors the same financial interest as shareholders, ie that
    directors should be shareholders, preferably substantial ones.Gramm’s
    statement was complete and utter nonsense, the equivalent of declaring
    only foreigners should vote since residents’ choices would be impacted
    by having to live with the outcome. If Gramm actually believes her
    conflict of interest argument, then she can’t believe in democracy or
    representative government. But what matters is that she avoided getting
    stuck with worthless Enron shares when the crash came. Her rake as an
    Enron director reportedly totaled $2 million.The Enron episode reveals
    much about Wendy Gramm’s character. As a government official and in her
    current position as a chairman of Regulatory Studies at George Mason
    University’s Mercatus Center (to which Enron was a donor), Gramm
    champions the rough justice of markets to determine winners and losers.
    But as a director at Enron, she found a way to insulate herself from
    not just the market, but from the consequences of her own inadequate
    oversight as a member of Enron’s audit committee.To investors she was
    duty-bound to protect, Wendy Gramm still preaches that Enron’s demise
    was a triumph of market freedom (so quit whining).Phil Gramm is just as
    hypocritical but perhaps even less competent. His job at UBS entails
    lobbying Washington and providing the bank with perspective on US
    regulations and markets. You’d think the former chairman of the Senate
    Banking Committee would have foreseen the subprime mortgage debacle and
    steered UBS clear of it. Instead, UBS has been hit with losses
    estimated as high as $45 billion, and its shares have lost 70% of their
    value. Ask your bosses and shareholders whether it’s all in their
    heads, Phil.In Phil Gramm and Carly Fiorina, John McCain has a pair of
    economic experts who last week showed they can’t talk the talk and over
    their careers have demonstrated they can’t walk the walk. Yet McCain
    hasn’t cut either of them loose. With so many experts out there, McCain
    needs to explain to voters why he chooses to listen to what Gramm and
    Fiorina have to say.