Micron ... Steve Appleton ... and the $700B Bailout

Let's start this blog with a 'what if.'  Let's say you own a large company worth billions and you hire someone to run it.  He seems like a nice, knowledgeable guy, but things start going very wrong.  Before you know it, your company is losing $4 million every day!  What's worse, the company has admitted to criminal price fixing under your guy's watch, leaving you on the hook for millions in legal fees and potentially hundreds of millions of dollars in settlements.  How long do you let him keep his job?  Months?  Years?  Until he bankrupts you and your company?

While you are pondering that, let's look at how local politicians are using Micron's current financial woes that have led to thousands more layoffs to justify their votes on the $700B bailout bill (I'm sorry ... financial rescue plan ... my bad).

Sen. Larry Craig, who voted for the bailout ... errr ... rescue bill sent this statement.  "It is obvious today with the Micron announcement that Idaho producers who sell in world markets are not immune.  These were the kinds of concerns I looked at over two weeks ago when I decided it was time for Congress to act, hopefully to forestall a credit meltdown."  Rep. Bill Sali, who voted against it, said this.  "Clearly the Micron job losses and today’s continued global stock selloff are evidence that the $700 billion bailout passed by Congress is not the right medicine to solve our economic problems."

Two Republican politicians making connections.  Two exactly opposite views.  So what is the connection between Micron's money-losing ways at the $700 billion 'whatever you want to call it' bill?  There isn't one.  My point is that both Craig and Sali are ignoring an important connection that does tie Micron to our current economic crisis.  America has a 'corporation crisis.'

This was clear during the AIG hearings that Rep. Bill Sali skipped out on.  Congressional investigators revealed that not only had AIG execs arranged for a $440,000 retreat the week after the government bailed the company out ... they also reported that a high ranking exec within AIG they allege caused a majority of the losses was given a big 'golden parachute' when he was fired, then was retained on a consulting contract for $1 million a month!  The CEO reportedly even publicly and illegally lied about AIG's financial health.  Talk about CEO incompetence!  So where was the Board of Directors, the people who are supposed to represent AIG shareholders (who ended up losing most everything)?  What in the world was the Board of Directors doing during this entire mess?  The answer ... nothing! ... betraying the very stockholders whose investments in AIG they were supposed to be defending.

American corporations are in so much trouble today because we have created a system whereby many CEO's are held accountable to no one.  Boards of Directors at several U.S. companies have become rubber stamps for Chief Executive Officers no matter how incompetent they may be.

Micron is a clear example of this.  Despite how dismal CEO Steve Appleton's performance has been or how close to bankruptcy he takes Micron, his millions in compensation remains secure.  In fact, the one board member who dared to say that perhaps Appleton should be removed for his poor performance was forced to step down.  The message?  Lose billions of dollars running Micron Technology = keep your job.  Question the wisdom of keeping CEO losing billions of dollars running Micron Technology = lose your job.  The message could not be any clearer.

The system worked better back in the days when large investors in corporations routinely sat on their boards.  J.R. Simplot was on Micron's board when he had a large stake in the company.  It was his way of defending and growing all the money he had put into it.

That's a rarity nowadays.  The proliferation for 401K's and large pension funds that invest in public companies leaves few large individual stakeholders.  What's worse, these funds are heavily diversified.  They typically don't invest large percentages of their money in one company, giving them less of a say in their performance.  If a CEO does poorly, these funds simply move their money somewhere else, but the CEO often gets to stay.  In this vacuum, the CEO can even get a big say in who sits on the Board of Directors, in essense picking his own bosses.  What a sweet deal!

If the American economy is to thrive in the cutthroat international business world, we need a system that rewards smart people who are held accoutable running our companies, not dumb, greedy ones who are not held accountable running them into the ground.

Should Appleton have been held accountable for his poor performance and fired a long time ago?  Of course!  But in Micron's case, I get the feeling he'll be there to the bitter end.  I'm hoping there isn't a 'bitter end,' but the way Micron has performed under Appleton's leadership to date, it is probably prudent that we fear the worst.

Comments

[The Boise Picayune]

You provide some astute and troubling observations.

[BigTony]

The price fixing scheme is just the tip of the iceberg for Micron. The entire memory industry has been colluding and stealing from the public for the last fifteen years. The two years of price fixing the DOJ gave Micron amnesty for are an indirect result of their theft of IP from Rambus. The BOD cannot fire Appleton because he knows where all the skeletons are buried. The BOD were fully aware of the price fixing scheme and IP theft and are just as guilty as Appleton. It's really not a question of accountability to the shareholders. Your premise makes the assumption that the BOD has the interest of the shareholders or the company as a priority. This is a false argument. The boards actions (non action) only make sense when examined as selfish individuals milking the system.

[Rammax]

Amen, brother.

Regards MU, don't neglect the amnesty and guilty plea for international price-fixing. Stephen was absolutely at the center of that. Quite a guy ... quite a company.
R

[J. Prufrock]

It is well known that Steve Appleton has a personal grudge against Rambus and has stated that he will never pay them a penny for their patents. The courts are very soon to prove the lie to that statement. Not only has he conspired with other Memory Manufacturers to steal valuable Intellectual Property from Rambus for almost ten years, he has also spearheaded a FTC vendetta against Rambus.
Micron stands to lose billions in an antitrust case scheduled to begin in March of 09. The company will probably not even survived another trial scheduled earlier in 09 calling them to task for infringement of numerous patents in a DDR case in California. Is there no one in Idaho with the power to bring this CEO to his senses? It is sad indeed that he will walk a way from the ruins with millions of dollars inspite of the horrendous job he has done.

jmos

J

[Penny Stocks]

Nice blog.Keep it up good work.

[Penny Stocks]

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