The Five Dumbest Things on Wall Street This Week

1. If You Could See It Through My Eisner

CEOs say the darnedest things. Especially if they're Disney ( DIS) CEO Michael Eisner.

Eisner, you may recall, spent a great deal of his time earlier this year telling investors that (a) everything was OK at Disney; (b) the company and its management were on the right track; (c) there was no need to shake up management or corporate governance at Disney; and (d) everything was OK at Disney.

That's what was happening, at least until March 3. It was on that day, you may recall, when 43% of shareholders withheld their votes for Eisner's re-election as chairman of Disney's board.

Only after that vote did Disney do what a lot of vocal shareholders apparently wanted the company to do: eject Eisner from his chairmanship. As announced in a press release issued on the night of the acrimonious shareholder meeting, Eisner was succeeded as chairman by lead independent director George Mitchell, who was so beloved by shareholders that only 24% withheld their votes for him.

So what did Eisner have to say last week about the late-night decision, a few hours after the negative shareholder vote, that relieved him of the chairmanship?

"I didn't come to this arrangement kicking and screaming," Eisner said in a Q&A session arranged by Credit Suisse First Boston. "I was happy for this arrangement, particularly with George."

Not kicking and screaming? Hah! How are we supposed to characterize Eisner's -- and Disney's -- tooth-and-nail defense of the status quo in the months leading up to the shareholder meeting? A passion for change?

Perhaps Eisner would have us believe that he really wanted to lose his chairmanship -- that it was someone else who forced him to stay.

That's the party line, at least, according to a roundtable held by proxy solicitation firm Glass Lewis a week before the shareholder vote. During that session, Mitchell was asked why Disney, which retained corporate governance expert Ira Millstein in 2002, didn't take to heart Millstein's fervent belief that companies should separate the chairman and CEO posts.

Millstein, says Mitchell, "advised the board that we not at this time divide the positions. He took the view that where you have an existing chairman and CEO that the appropriate time to make a change was when a transition occurs, which would be, of course ... when the current contract of the CEO expires, assuming we want a change then."

Ah. Just like Eisner, Disney's board wasn't dragged kicking and screaming into its March 3 decision. Those folks wanted to split the posts all along. It was that mean old Ira Millstein who held them back.

Barrett's Boondoggle
Pick a price, any price, for options

2. There's No Accounting For Some Folks

We thought we came up with sufficient reasons last week to make fun of Intel ( INTC) CEO Craig Barrett.

We missed one reason.

As you may recall, last week Barrett wrote a ludicrous opinion piece in which he marshaled the lamest arguments possible against expensing stock options on a company's financial statements.

We took issue with part of Barrett's argument, but we should have paid more attention to part of his lead-off statement: "Unfortunately, no one has ever figured out a model that can value options with any degree of accuracy."

That caught the attention of reader Craig Dudko of New York:

"If we take as truth the argument that options are too hard to value, doesn't that mean that anyone granting options has been a bit irresponsible with shareholders' money?" writes Dudko.

"It's almost like going to a foreign country and not bothering to look up the exchange rate before leaving," continues Dudko. "If we can't value the options (as opponents claim), how do we know the CEO's work was worth options on 100,000 shares any more than, without the exchange rate, we can know whether a cup of coffee is worth 200 yen?"

Stumped us there. We asked Intel -- which does footnote option costs in its SEC filings -- for a response. This is what a spokesman emailed back:

"Perhaps the simplest answer to your reader's response is that wedon't know whether the options granted to any employee, including the CEO, will be worth more or less than the so-called strike price when granted. In some cases, it might ultimately be worth nothing. But if the companyperforms, it may be worth more. In other words, in order for an employeeto benefit, the stock price must appreciate. And when it does, all stockholders benefit, not just the employee."

If you think that's a persuasive response, we suspect you hold a lot of in-the-money Intel options.

3. Dozen Off at the Tyco Trial

Dennis Kozlowski appears to have a unique talent for getting other people to waste their money. But maybe not as much money as some folks think.

We're referring, of course, to estimates of how much money we, the people, spent on the six-month mistrial of the former Tyco ( TYC) CEO and his co-defendant, former Chief Financial Officer Mark Swartz.

Word on the Street, lightly sourced, is that the six-month legal excursion to nowhere cost us taxpayers $12 million. In the words of USA Today, for example, prosecutorial excess led to a "mind-numbing, six-month marathon that gobbled more than $12 million in state funds."

Wow. On top of the $600 million that Kozlowski and Swartz are accused of looting from Tyco -- including everything from a $15,000 dog umbrella stand to a $2 million birthday party and to $37 million in forgiven loans -- what further sign do you need that Kozlowski represents a walking, talking sinkhole in the American economy?

Except we don't buy it. That $12 million number, specifically.

Reason No. 1: It smells suspiciously like something that reporters have copied from other reporters. In late March, we note, The New York Times reported, "The trial has been estimated to cost the parties more than $12 million." Reuters quoted a defense attorney's estimate that the trial cost taxpayers $5 million to $6 million. It seems plausible to us that somebody came up with a $12 million estimate for the total cost of the trial -- combining prosecution, the obviously deeper-pocketed defense, and maybe even the judge and courtroom staff -- then some sloppy copyist attributed the full $12 million to taxpayers. A spokeswoman for the Manhattan district attorney's office, which tried the case, said the office never estimates the cost of trying cases.

Reason No. 2: Our own back-of-the envelope calculation. We start out with the fact that each day in court, the prosecution showed up with four or five lawyers -- public servants whose pay runs somewhere between $50,000 and $100,000 per year.

Picking the salary midpoint of $75,000 to come up with a (probably generous) salary per lawyer, we add 36% more to cover the cost of job benefits (using a number we pulled from a federal government report comparing public and private benefit scales). Dividing total compensation by our estimate of workdays in a year, we end up with cost per prosecutor per day of $431.25.

Now, how many days did they work? The case took up four days a week, give or take, over 27 weeks: a 108-day trial, let's say. Of course, they had to prep for the trial, too: We'll assume they spent two months, or 40 workdays, bringing us to 148 days of work.

So, we take five lawyers times 148 days times $431.25 per day, and what do we end up with? A total of $319,125 -- only about 1/37th of that $12 million figure.

Is there something we're missing here? Of course. We missed support staff. Photocopying. Expert witness costs, maybe.

We're also missing the costs of the judge, the court reporter, and some portion of the cost of the security guards at the courthouse. So, let's double that five-lawyer cost. Triple it. We're still at a fraction of the $12 million figure.

Say what you will about Dennis Kozlowski, but we don't think he's a $12 million man.

My Life as a Tyco Juror
Find me in the bargain bin

4. Throwing the Book at the Jurors

At the risk of sounding like Dennis Kozlowski's public relations representative, we were shocked to read in The New York Times that two of the jurors in the Tyco case were preparing to write books based upon their experience participating in the trial.

Shock One: Why did they think anyone would buy such a book? Don't they understand that once they've been interviewed on the courthouse steps and on "Good Morning America," their 30 minutes of fame is officially up? Just give us the sound bite, please, and go back to where you came from.

Shock Two: You know, if we were on trial for fraud and conspiracy, we would rather not be judged by someone who is fantasizing about parlaying our fate into a book deal. We all know a guilty verdict against a corporate titan is a lot more fun to read about than a not-guilty. One can't help but thinking that under such circumstances, it would be a challenge to be an impartial juror.

Get it straight, folks: The only people who are supposed to make money writing about trials are reporters like us. In New York, we already have a Son of Sam law saying that criminals can't benefit monetarily from their crimes. Before it's too late, we better get another law for the Juror of the Son of Sam.

Daylight 'Saving' One's ... Time
What time's the market close?

5. Theodore of New York

And we better do it in time for the trial of Theodore Sihpol, the former Banc of America broker accused of fraudulently enabling his client Canary Capital Partners to illegally late-trade mutual funds.

In an indictment unsealed this week, prosecutors include transcripts of various tape-recorded phone calls between Sihpol and unnamed Canary personnel.

While the transcript snippets don't prove any guilt on Sihpol's part, of course, they sure persuade us that Sihpol will have an uphill battle convincing people that everything he did with Canary was on the up-and-up.

We cite this fun transcript fragment from the indictment:

    Sihpol: "Ah, one thing, if it ever comes up, between you and I, you need to know -- I'm sure you know the right answer, but it came up today in conversation. You guys make all the investment decisions before 4 o'clock, correct?"

    Canary: "Absolutely"

    Sihpol: "OK, good. That's all I need to know."

Sounds to us like a new variation on "Don't ask, don't tell" policies: "I'll ask, and I'll tell you what I want to hear."

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