Bear Stearns, Viacom and ghosts of the past…

Viacom (VIA), something a frequent flyer here on footnoted, has cordially invited shareholders to its annual meeting on March 16 in New York. We can’t help but notice that the date is also the third anniversary of the date that Bear Stearns & Co., tottering on the precipice, agreed to be acquired by JPMorgan Chase (JPM).

This coincidence came to our attention after a reader pointed out a connection between the companies: Frederic V. Salerno, a former Verizon executive who sits on Viacom’s board and also sat on Bear’s board for more than a decade, even chairing its corporate governance and nominating committee. In fiscal 2006, the last year for which figures were filed with the SEC, Salerno received a little north of $200,000 for the gig — not the most we’ve seen directors earn, but a decent chunk of change for a part-time job.

As a board member at Bear, it was Salerno’s job, in part, to help oversee the risks the company took, and also the pay it gave to top executives, and the chief executive in particular. Clearly, on the risk front, something went wrong at Bear. And a line in last month’s report from the Financial Crisis Inquiry Commission suggests things worked a little differently on the pay front than might otherwise be expected.

Here’s the quote from p. 285 of the FCIC report:

“Cayne told the FCIC he set his own compensation and the compensation for all five members of the Executive Committee. According to Cayne, no one, including the board, questioned his decisions.”

Cayne, of course, is Jimmy Cayne, the chairman and CEO of Bear Stearns until January 2008, shortly before the company’s collapse into the arms of JPMorgan Chase. The commission notes that he collected $93.6 million in pay from 2004 to 2007, with executive comp at the company “based largely on the return on equity in a given year” rather than longer-term measures. So is his claim mere braggadocio from a once imperial CEO? Or is it a fair depiction of how Bear’s board operated?

Salerno isn’t the only member of Bear’s board who still helps oversee another big public company. Vincent Tese, who sat on Bear’s compensation, governance and finance committees and chaired its audit committee, sits on the board of Cablevision (CVC), a company we’ve footnoted several times as well. Its board meeting is likely coming up in early April.

In looking for the Cayne comment, we also ran across the following sentences from the same page of the commission’s report — lines that have a certain resonance today, given the bickering going on inside the Beltway over the budgets for the SEC and Commodity Futures Trading Commission:

“From 2000 through 2008, the top five executives at Bear Stearns took home over $326.5 million in cash and over $1.1 billion from stock sales, for more than a total of $1.4 billion. This exceeded the annual budget for the SEC.”

When five executives at one firm, in less than a decade, pull down more than the SEC spends in a year, it certainly puts the funding debate in perspective.


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