Revolt in the Boardroom | Alan Murray | Talks at Google

Okay.

Welcome to another edition of Authors at Google. My name is Tyler Peterson. I'm a business analyst here, and we're happy to welcome Alan Murray. Alan began his career in journalism in June of 1977 with the Chattanooga Times in Tennessee. He joined the Congressional Quarterly in 1980 and. Excuse me. And in 1983, he went to the Wall Street Journal. In 2002, he joined CNBC, where he was bureau chief and hosted the program Capital Report. In 2005, Alan came back to the Wall Street Journal, and now he writes twice weekly columns on business, the economy, and public policy. We have his new book, Revolt in the Boardroom, The New Rules of Power in Corporate America. Here he examines how CEOs, once the rock stars of the 1990s, are now being put under the microscope by board members, shareholders, the government, and even employees. So join me in welcoming Alan Murray.

Thank you. Thanks, Tyler. And thanks to all of you for taking some time out to listen to me. One of the great things about being a journalist is you get to go all sorts of places you probably really don't belong and talk to all kinds of people you probably really shouldn't be talking to and see all sorts of things that you have no business seeing. It's a great way to spend a career. It's not the most lucrative career. It's a troubled industry right now, but it is a lot of fun. And I've had a lot of fun being a journalist over the last 30 years. I spent most of my career in Washington, as Tyler was saying. I became the Washington bureau chief for the Wall street journal in 1993 and stayed there until the beginning of 2002. So it's pretty much concurrent with the Clinton administration. Everyone has their favorite Bill Clinton story, but I'll tell you mine. It happened in 1997 after he had just gotten reelected. And I was trying very hard to get an interview with the President. And the White House kept putting me off and putting me off. And finally I said it was June. I'd been trying for six months, and finally I said, forget it. I'm going on vacation. And I took my wife and our two kids, and we went to the mountains in Virginia and decided we'd take some golf lessons. And the kids were in a day camp down there. And we'd been there for about 24 hours when I got a call from the White House. And they said, hey, you know that interview you've been wanting for six months? Well, you can have it tomorrow. But they said, you got to show up right at 11 o', clock, because the President has a very tight schedule. You have to be here at 11 o' clock, because at 12 o' clock he has his. Never miss it, lunch with the vice president after Al Gore. And then at 1:00, he's meeting with the head of state. And it will start sharply at one. So I was about four hours from Washington. I got in the car the next morning, I drove back to Washington, showed up at the White House with a couple of other reporters from the Journal. 11 o', clock, no President Clinton. 11 15, no President Clinton. 11 30, no President Clinton. 12 o', clock, no President Clinton. Finally, at 12 15, he comes wandering in. We go into the Oval Office. We sit down and had about 30 minutes for the interview. Was probably the only. It was probably the least interesting interview I ever had with Bill Clinton. He had just gotten reelected, didn't seem to have very clear idea of what he was going to do. Didn't have a lot to say. Now, anyway, it's 12:45, the interview is over. We're walking out the door. And as we're walking out the door, he grabs me by the arm and says, say, I hear you and your wife are taking up golf. And I said, well, yeah. He said, well, come back in here. So he takes me back into the Oval Office, and remember, now we're 45 into his never miss it lunch with the Vice President. He takes me back into the Oval Office. He walks into this little room which we subsequently came to call the Monica Room, but at that time nobody had heard of Monica. And he comes out with two golf clubs. And he hands me a golf club and he goes, let me see your grip. And so I put my, you know, hands on the golf club. He goes, let me see your swing. And I swear. And he starts telling me to loosen up my grip. And he says, what you really need to do is play with somebody who's a lot better than you are. Like I play with Greg Norman all the time. I said, well, you know, that's really not going to work for me. And he keeps, you know. So we're about now 10 minutes into this golf lesson. So now it's five of one and the. And it's just him and me in the Oval Office with these golf clubs. And the door bursts open and in walks the vice President with a look on his face like he's going to kill somebody. And there were only two of us in the room, and I was pretty sure he wasn't going to kill the President. And without missing a Beat. Bill Clinton says, oh, hey, Alan, here and his wife are taking up golf. I'm just giving him a few pointers and turns back to me and proceeds with the golf lesson. So Al Gore steams out of the room. The golf lesson goes on for another five minutes. At one o', clock, I walk out of the Oval Office and the President goes off to have his meeting with the head of state. And I sort of. It helped my golf game a lot. I never did a lot with that story until three years later when I was at the Democratic convention and Bill Clinton was giving his speech saying what a great nominee he thought Al Gore would be. And during the speech he said, you know, Al Gore was a wonderful vice president. He said, every week I had lunch with the vice President and I never, ever missed that lunch. Anyway, I. In 2002, I left the Wall Street Journal and joined CNBC to run their Washington bureau and also to do a nightly television show for them called Capitol Report. This is the way cable television works. This is in the pre YouTube days, but it's not unlike YouTube. They gave me no training. They didn't tell me how to do it. They just said, we're going to give you a show. Threw me on, threw me in front of the set, and we were off. It was a bizarre little studio on Capitol Hill that was used by Chris Matthews to do his show. Alan Keys had a show at that time. He was there. Pat Buchanan had a show. In fact, one of my favorite daily scenes was to watch. We had a wonderful flamboyantly gay makeup artist who would put the makeup on Pat Buchanan every day before he would go on the air to denounce what homosexual culture was doing to America. But lots of weird moments like that. The first week after I'd been doing this show for four days, five days, my head is spinning. It was a language I never heard of. I really didn't know what I was doing. And I come walking out of the studio and standing in the hallway are Chris Matthews and Alan Keys talking to each other. Which, if you think about it is. You know, it's like, who's listening in this conversation? I mean, it's a kind of a. So I tried to walk past them quietly, and Chris stopped the conversation. He said, alan, it's your first week. Tell me how it's going. And I said, I gotta tell you, my head is spinning. I've never done anything like this. I don't know when you guys have time to think. And without missing a beat, Chris Matthews says, oh, you don't think that's over. You just talk now. Just get on the air and talk. So I spent three years on the air talking. The show was cancelled after the election in 2004. Paul Steiger, the managing editor of the Wall Street Journal, asked me to come back to the Journal, to come to New York. And this gets to the point of my conversation here, to start a new column that he wanted to call Simply Business. Now, there were a couple of odd things about this to me. I mean, the first is, this is the Wall Street Journal. I mean, it's a little presumptuous to have one column that, you know, what's the rest of the paper about? But I said, that's all right. I can deal with that. The other thing that was a little odd was I had spent my entire career in Washington, and while I had always written about the intersection between politics and business, this would be something entirely new for me. And I said, well, do you have particular topics in mind? He said, no, I just want you to write about business. It can be global. I want you to sort of take the view that people sitting in the executive office have to take, looking at how industries, not a single industry, but how industries interact, how they interact with the economy, interact with politics, and make it very newsy. And I said, sounds like fun. I'll give it a try. But I then spent the next two months sort of thinking, you know, I'm not quite sure. This is a little too free form for me. What is this column called? Business? What do I do with it? I didn't come up with a lot of column ideas right off the bat because I did want it to be on top of the news. And so I wanted to wait and see what the news was. We had agreed it would start the first week in February, and I had made plans to go to the Davos conference, the big gabfest in Switzerland, every year, the week beforehand. And I thought, well, there'll be some interesting people there. Surely I can find something. And one week before the column was set to start, I get up one morning and pick up the Wall Street Journal. And there is the front page story about the disagreements between Carly Fiorina and her board of directors. Now, I'd been a careful reader of the Wall Street Journal all my life, and I had never read a story like that before. There had been disagreements between boards of directors and CEOs that you would read about in the paper, but usually not until after the CEO had been fired. You never read about them real time. And the most Extraordinary thing about the story to me was that it said in the fifth paragraph, Carly Fiorina was leaving the next day to go to the Davos conference. I thought, what is this woman doing if she's having these kinds of problems with her board, going to the Davos conference? Nevertheless, it gave me a purpose. I went and spent my time chasing after her. And despite her best efforts to stay away from me, I finally did catch up with her. And I said, you know, what about this story in the Wall Street Journal? She said, you can't believe everything you read. And so I said, okay, tell me in your own words, how would you describe your relations with your board of directors? And she gets this icy look in her eye, and she says, excellent. That was 12 days before she was fired. 12 days before she was fired. And I believe on that day, she really didn't believe that she was about to be fired. I mean, think about the world that Carly Fiorina trained in, the world that she grew up in as a businessperson. It was at&t CEOs in that world had almost absolute power in their own domains. It was kind of the last great hierarchy to fall at the end of the 20th century. If you were the CEO of a Fortune 50 or a Fortune 100 company, there weren't many people who felt in a position to second guess you. Yeah, you had a board of directors, but the board of directors tended to be people who you'd put on the board and who were there mostly kind of to scratch your back so you could scratch theirs. If there was a big problem, the board would get involved, but they didn't spend a lot of time. They didn't have a lot of information. They generally didn't get involved. In the 70s and the 80s, firing a CEO was virtually unheard of. In the 90s, you started to see a few cases, General Motors, American Express, but it was still pretty infrequent. CEOs had extraordinary unilateral authority over the companies they ran. And in some ways, with Carly Fiorina, that was reinforced by the fact that she was one of the first women to make it to this position. And she thought. I think she thought, well, now I'm where the boys have been. I had to be able to. I had to be treated the same way they would be treated. And sure, I'm going to meet with my board of directors and I'm going to talk with my board of directors, but they're not going to tell me what to do at the end of the day. But what she Missed, of course, was that the world was changing and changing very dramatically and changing very rapidly. In the weeks leading up to those events in December, the board of Hewlett Packard had a series of telephone conferences, which she didn't attend, she didn't know anything about. In the old days, that sort of thing was unheard of. Ira Milstein, who's a lawyer in New York, told me about how when he was doing some work for the General Motors board, one day he invited one of the board members to breakfast, just the two of them, and was spotted at the Palace Hotel having breakfast with this director and the CEO at the time, I think it was Roger Smith, stormed up to his office that afternoon and said, how dare you have breakfast with one of my board members? I mean, the view in that day was that the way the CEO kept his or her power was to control the flow of information to the board of directors. And nobody else was supposed to get in the middle of that information flow. But In December of 2004, the directors of Hewlett Packard had a series of phone calls that Carly Fiorina wasn't invited to, didn't know anything about, and she was. And it was in those meetings that their dissatisfaction with her began to take hold. And then. And you all probably know some of this story then, but it's all laid out in revolt in the boardroom. Three of them were deputized to go meet with her the second week of January. They went in, sat down, talked with her, said, we think you have this company organized all wrong. You have this matrix management structure where it's very hard to figure out who controls what. People have multiple reporting responsibilities. The lines of reporting aren't very clear. We think it's a big problem. And she sort of was taken aback and said, well, wait a minute. I'm the CEO, you're not. You hire me to run the company. I get to determine the management structure and who runs things, not you. Finally recognizing that there was something serious going on here, she agreed to tear up her agenda for the board meeting the following week and address the issues that the board wanted addressed. And they did that, and they had a good conversation. But at the end of the day, she still wasn't willing to adopt their suggestions. And it was after that board meeting that the story was leaked to the Wall Street Journal by one of the board members. It was the leak itself that ultimately caused the thing to fall apart. Carly Fiorina called the board back for a telephone message, for a telephone conference and said to them, look, you've violated my confidence. Somebody has gone out and talked to the press and so the deal is off. We're not going to have these kinds of conversations anymore. And the board said, wait a minute, the leak was a bad thing. Somebody did violate your confidence, but you can't tell us that the deal is off. We're the board of directors. We have a responsibility to the shareholders to oversee what's going on in this company. You have to deal with us. And her view was, nope, sorry, you know, can't be trusted, deal is off. Another important thing happened, and I want to. In this story, there are two things to highlight. One is the fact that they had those conference calls without the CEO present. Executive session. One of the big changes that between 2001 and 2005 that became commonplace, whereas before 2001 it seldom happened. Executive sessions changed the dynamics. It was hard for me to grasp how important this one was because I thought if you put a room full of kind of type A powerful personalities together that they would say what they thought. But the truth is the social dynamics in a meeting where the CEO is sitting there are similar to the social dynamics that all of you have experienced. People just hold back. They're kind of more reserved about saying what they think. So that was a big change. The other big change is that In January of 2005, the directors of Enron and WorldCom were made to pay judgments out of their own pockets for the wrongdoing at those two companies. Prior to that, directors had generally been covered by insurance. So if there was a suit against them, the insurers paid out, not the directors. But the Court said in January 2005, no, no, that's not good enough. We want you to pay millions of dollars out of your own pocket for wrongdoing that was done by those companies. Now, if you don't think that was not a big wake up call for directors at public companies, let me tell you, it was a, it was a huge change. Which is why very shortly after Carly Fiorina was fired, you have what happened at Boeing. Harry Stonecipher. They loved the guy. He was, he had come back in to rescue the company from scandals. They just had to fire a CEO because of Washington scandals. Harry Stonecipher. Excuse me, Was this gruff, plain spoken, we're going to fix the problem. We're going to put ethics above everything else kind of CEO. They were having a board meeting in February of 2005. The compensation committee met. Everybody on the compensation committee said, harry's doing a great job. Let's give him A big bonus. They voted him a bonus. The head of the compensation committee gets in the elevator with Lou Platt, who was then the chairman of the board of Boeing, right after the meeting, and says, boy, everybody thinks Harry's doing a great job. We just voted him a big bonus. And Lou Platt says, well, wait, wait, wait until dinner, because you're going to get a shock. Then he said at dinner, I've got to reveal to the board this message I've got from someone saying that Harry Stonecipher is having an affair with one of his top reports and that they've been carrying it on in email messages that were extraordinarily explicit. And someone had sent a bunch of these email messages to the chairman of the board. Now, first of all, how many of you think this is the first time that a CEO had an affair with one of his top. His or her top executives? Nobody, right? I mean, we don't know how common it is, but we know it's happened. But it is the first time a CEO got fired for having an affair with a. With a top executive. And it was another interesting sign of how dramatically this corporate culture was changing. They had a meeting that night. He read some of the emails to the board. The board was very upset. A couple days later, they called in a woman named Bonnie Sudik, who was the ethics officer who Harry Stonecipher had put in charge of ethics to clean up ethics at Boeing. They called her in. One of the board members said to her, look, you're the person charged with enforcing ethics at Boeing. Do you think you can do your job effectively if it's perceived by people at this company that the CEO is above the rules? And Bonnie Sudik, who was very close to Harry Stonecipher, started shaking and her eyes started tearing up. And finally she said, no, I can't. And shortly after that, they voted to fire Harry Stonecipher. Now, fast forward just a few days, just a couple of weeks. And Hank Greenberg, who was the chairman of AIG and who, more than anyone that I'm familiar with in modern times, deserves the title Imperial CEO. I mean, this is a guy who built AIG from a little Asian insurance company into the largest insurance company in the world. He ruled it with absolute authority. He conducted himself like a head of state, met with heads of state. I went to visit him in his office in Lower Manhattan. It was kind of like going to the State Department. He had this waiting room with all these Chinese antiques in it that reminded me of the diplomatic reception rooms of the State Department. You would be ushered into an audience with him. He would be served tea by his butler. If you were a favored guest, you might be served tea too. But if not, you just watch him drink his tea. The guy was not thought of as somebody who broke the rules. He was thought of as somebody who made the rules. In the final rounds of the world of the. What's the word for it? The trade negotiations with China, not most favored nation, but what normalizing trading relations with China, Hank Greenberg actually personally negotiated the final language that made the agreement possible. He was on very close terms with the top people in the US Government, the top people in the Chinese government. He was accustomed to getting his way. And all of a sudden on the scene had appeared this New York State Attorney General, Elliot Spitzer, who was going after him and going after his family. And Hank Greenberg didn't like it and he was fighting back. And at some point in February, the directors of aig, aware of all these things I've already been talking about, aware of the lawsuits that were requiring directors to pay liability out of their own pockets following the new rules that require them to spend more time discussing issues themselves without the CEO present, the directors who had to a person been hand picked by Hank Greenberg, began to think, you know, we're on the verge of trouble here and maybe we better do something. There was a meeting in early February, a 10 hour meeting on a Sunday in early February, which Greenberg didn't attend, but found out about and called in frequently from his boat in Florida. And as he called in, he realized that the, that the situation was slipping away from him. By the end of the 10 hours, the board had decided the only way we can keep this company going is to Hank to ask Hank Greenberg to step down. Greenberg was shocked, couldn't. In his mind, he couldn't imagine AIG existing without him heading it. Certainly couldn't imagine that this board of directors that he had handpicked would kick him out. So those three stories, very different stories, very different circumstances, but they all happened within a period of five weeks at the beginning of 2000. Those were also among the first columns that I wrote, having started this business column. And it became pretty clear to me that I had inadvertently stepped into the middle of a sea change in the way corporations are run in this country and the way power is exercised in corporations. And that played out over the course of two years. I mean, you know, I could spend the next 15 minutes listing the CEOs who were fired over the course of 2005, 2006, but you know who they are, Bob Nardelli at Home Depot, Purcell at Morgan Stanley. Go to the pharmaceutical industry. You can hardly think of a CEO who wasn't fired in those two year periods. Ray Gilmartin at Merck, Hank McKinnell at Pfizer, Peter Dolan at Bristol Myers Squibb. An epidemic of boards of directors rising up and kicking out the CEO, something that had never been seen before. And this was not just directors suddenly waking up from their slumber and saying, let's exercise our authority. It's directors responding to a whole host of pressures that had been unleashed forcing them to do this. Some of it was regulators, some of it was the legal environment, the Sarbanes Oxley law that had been passed in 2002. Some of it was people like Elliot Spitzer and Elliot Spitzer wannabes at states all over in states all over the country. Some of it was pension funds and other shareholder groups that were flexing their muscles, groups like CalPERS. It was companies that were advising the pension funds like iss. The rise of hedge funds, hedge funds moving in, forcing out CEOs and companies that weren't performing well, the rise of private equity. And so in this very short period of time, you really saw a complete upheaval in the way public companies were run, where CEOs were greatly diminished in terms of their unilateral power, where a whole host of outsiders felt greatly empowered and felt that they could have a much bigger say in how corporations were run. And a kind of a chaotic interlude where people realized that the model of the public corporation that had been in some ways one of the great successes of the 20th century, certainly the source of much of the job creation and the wealth creation in the 20th century, had broken down and a new model was somehow emerging from the chaos. That's what I try and address in this book, Revolt in the Boardroom. I both tell the story of how it happened, but also try and begin to take a look at what it means. If the old model of the corporation has broken down, is there a new model that's growing up and what does that new model look like? And is it a good thing or a bad thing? And I think it's probably too early to provide a definitive answer to that question. There are certainly some good things about it Companies, big public companies today are much more transparent than they were. They're much more interested in not just pleasing the shareholders, but in addressing a broader set of constituencies. Social responsibility, which has been kind of a buzzword in Europe for a long time, has become important to companies, increasingly important to Companies in this country as well. Because of this series of changes, shareholders have more real power in the company and more oversight, which in some ways is clearly a good thing. But at the same time, it's not hard to find critics who say, yeah, but wait a minute, what you've done is create compliance boards, companies that are way too concerned about risk avoidance and not nearly as focused on taking the kinds of risks they have to take in order to survive, thrive, grow, do what they're supposed to do as public companies. You have boards of directors on which many people with money will no longer serve. Why should I serve on a board of directors if there's a possibility that some ambitious Attorney general who wants to be governor is going to try and reach in my pocket and take out millions of dollars for something that I basically have no control over? That's done by the chief financial officer of the company. Boards that spend so much time on complying with Sarbanes Oxley law that maybe they don't spend enough time focusing on the strategy of the company and what lies ahead. So I think we're in this period of uncertainty and period of dramatic change and trying to figure out where it's going and where it will lead. And the implications for all of us are huge. Again, look at how much of the wealth that was created in this country in the 20th century was done by public corporations. If you damage that model, you could have long term consequences, particularly when you're competing in a world where you have Chinese companies, for instance, that don't pay nearly that kind of attention to governance and the kinds of things that are impinging on public companies today. And of course, you look at the rise of private equity in some ways, some people argue that that's a sign of the demise of the public corporation, that more and more you have the top executives and you have money rushing to these private equity firms in order to escape the pressures that are making public companies harder to run. Now, you know, people always want, want a simple answer. They want to know, well, which is it? You know, is this, is this the end of the public company and does it spell doom for the American economy? Or is this a flowering of democracy in corporate America that was a long time coming and needed to happen? I don't think there is a simple answer. But I did at the end of this process, after I had written the book for an article that ran on the front page of the Journal the day the book was released. Go back to the three companies that I profiled in the opening of this book. Hewlett Packard, AIG and Boeing to see, to talk to the CEOs there and to see what had really happened. And what you do find is they are very, very different than their predecessors. They are much more transparent. They realize that they have much less unilateral power and authority. Jim McNerney, the CEO of Boeing, said to me at one point, you know, I'm at the end of the day when it comes to important decisions. I'm just one of 11 people talking about his 10 board members. I can assure you Jack Welch would never have said that. Sandy Weil would never have said that. It's a very different attitude for CEOs. All three of them talked about their social responsibilities, something that was not common for CEOs to talk about just five years ago. And the interesting thing is, for the moment, all three of them are doing pretty well. Boeing and Boeing and HP in particular have had huge returns to their shareholders since the revolution. AIG still bouncing along. But the company hasn't been hurt too much by what it's been through and seems to be. The underlying business still seems to be growing. And so I guess I came to the conclusion that's only three data points. But I came to the conclusion after that that you could be somewhat hopeful about where this is all leading, that we may be seeing the emergence of a different kind of corporation, of a more democratic corporation, of a more transparent corporation, but a corporation that can still provide value to shareholders and that can grow over time. So that's the thesis of revolt in the boardroom. I hope you won't think, having listened to me say it, that you shouldn't read the book. It's still worth reading. I've tried to make it an easy and a fun read. I hope you'll pick it up and take a look at it. But what I'd really like to do for the next 30 minutes is answer your questions either about the book or frankly, anything else you want to talk about. The fun for me of coming here is to have a conversation. I have plenty of time in my normal life to hear myself talk. So let me open it up and talk about whatever you folks want to talk about. Yes, sir.

So what about companies where the. The board is in the CEO's back pocket? What can shareholders do at that point?

Well, first of all, I think there are fewer and fewer companies where the board is in the CEO, its back pocket. One of the things that's happened, one of the reforms that's happened over the course of the last five years, not so much because of Sarbanes Oxley, more because of listing requirements on the stock exchanges or just because attention to best practices is that directors are increasingly being picked by the independent directors of the board themselves and not by the CEO. Usually they'll talk to the CEO and make sure they're not picking somebody who the CEO can't stand to be with. But the boards have become more self perpetuating and we are on the verge of yet another change that I think could have even greater implications, and that is the poss. The sec under some court pressure is studying rules that would make it easier for shareholders to actually propose names for directors jobs. You know, in theory, shareholders get to vote on directors. In fact, they're sham elections because there's no opposition. Except in cases where a wealthy hedge fund, you know, a Carl Icahn comes in as willing to put up the money to run a whole separate proxy battle, which is very expensive and very difficult because he can't get access to the company's own proxy ballot. Well, what these, what, what the SEC is looking at is opening up access to the proxy ballot so large shareholders could say, hey, we don't like this director and we have another director we'd like to propose. Put him on your ballot and let's let the shareholders vote. There's some limits to that. You know, you have to control a certain number of shares before you can propose directors. But if that happens, that will be a huge change because then it will become very clear to the directors who they're responsible to. And it's not the CEO, it's the shareholders. So we're moving in that direction. We could be on the verge of another big move in that direction that will change further, change the dynamic on boards of directors. Would you care to comment on the effect on corporate governance of share classes that have extraordinary voting power? Both your company and ours have that structure. That's an unfair question. Yeah, the argument that the courts make. So I, you know, this was obviously a big issue for us when Rupert Murdoch came in and said, I want to buy the Wall Street Journal and you have this family that controls a minority of the shares but a majority of the votes, which in a world where you're trying to make sense, where you're trying to create something that looks like shareholder democracy, that seems blatantly unfair. On the other hand, what the courts have always said was, well, yeah, it is blatantly unfair, but you knew it when you bought the stock. So we're not going to let you bring court action against this company because if you didn't like it, if you thought it was blatantly unfair, you shouldn't have bought the stock in the first place. That said, in our case, it certainly looks today like it's not going to matter. Rupert Murdoch is going to get his company. And my guess is those two classes share arrangements will, over time, disappear.

I had a question about those first three companies that you started with and then you went back to. Did you ever ask any questions about the employee, at the employee level in those organizations, how they felt about these changes? Yeah, I did with the changes. Can you comment on that a little bit?

Yeah, I can comment on it a little bit. This is on YouTube, right? So, you know, this will, this will mean I'll get, once again, have to deal with complaints from Carly Fiorina and Hank Greenberg. Carly Fiorina was not popular at hp, and I don't know if that's fair or unfair, but she just graded a lot of people the wrong way. I talked to a lot of employees and there was a sense there was. She was just not. She wasn't a hit. On the other hand, what's been interesting about the resurgence of HP since she left is it's all been done on the strategy that she put in place. And in fact, having watched that battle to get the compact merger approved, it's hard to imagine that a guy like Mark Herd could have pulled it off. I mean, it took somebody who had an extraordinary public presence and marketing skills to go up against Walter Hewlett and make that thing happen. In some ways, Hewlett Packard seems to, even though it's been incredibly chaotic and we haven't even talked about the leak investigation and the whole Patty Dunn story which followed. But in some ways, Hewlett Packard, the company, seems to have played this just right. They had kind of the visionary public figure who could sell a difficult merger agreement that in the end has proven to be very good for the company. And then when the time came, they said, okay, you're gone. Let's bring in somebody who can actually make this company work. Nuts and bolts, you know, head down executor. Let's figure out how to, to make the thing run. And so I feel like they, they, for very different reasons, kind of got it just right. Aig, it's a little more complicated. People at AIG tended to love Hank Greenberg. I mean, they felt particularly the high, higher executives who had been with him for a long time. He had made them rich. I mean, he really had built this company from nothing. And So I think while they understood his shortcomings that ultimately led to his demise, a lot of them felt real regret that he had to leave and still feel sort of tugged both ways on that one. Harry Stonecipher, much the same. He was very popular with his employees as well as with his board. They all liked him a lot. But I think everyone understood that in an environment where ethics had suddenly become the key issue for the company, how could you just overlook this and let him stay? So I don't know if that answers your question, but.

I've been following all the stories about the Wall Street Journal being sold, and it seems like a lot of it's been centering around more like journalistic independence, editorial independence, more so than the price, which is pretty amazing, right? And so I'm curious, you know, for someone who actually worked there was on the ground, how much influence do people outside of the actual reporters have on the writing of the stories in terms of what stories you choose, how you portray the stories, et cetera? I mean, did the Bancrofts ever weigh in? Did the editors weigh in? Like, how does that work?

No, and that's why it's. That's why the independence issue is such an emotional one. We live in sort of an ideal situation as journalists. I've. From my entire career at the Wall Street Journal, I've frequently been in situations where, because I covered economics when I first started and then, and then I was responsible for our political coverage, I was frequently in situations where we were writing things that they weren't editorials, they weren't opinion pieces, but nevertheless, they appeared to tug in a different direction from our own editorial page. When I started at the Wall Street Journal, supply side economics was the rage, and there was a lot of hard analysis which I wrote about. You know, this may not quite work the way that some of the supply siders are claiming it will work. Meanwhile, the editorial page was the number one proselytizer for supply side economics. And I never had to worry about the fact that on a certain given day, something I wrote might look like it was going in the opposite direction from what the editorial page wrote. There's absolute independence between the two parts of the paper. No one ever called me and said, you know what? You're not toeing the line here. Never. Which is pretty unusual. In fact, while other papers may claim to have that kind of a separation, I don't know of any paper in the world, frankly, that has that separation the way the Wall Street Journal does. Similarly, the separation between the business side and the editorial Side never had never been told to tone down a story, veer off a story, because some, because it interferes with some advertisers interest. In fact, I can't remember which story it was. But we made a big change last year by starting to sell ads on the front page. And one of the first companies to purchase those ads was Hewlett Packard. And the first day the ad ran, there was a particularly tough Hewlett Packard story running on the front page. Never heard a word about it. That, by the way, is a little more common in journalism. For instance, you know, I shouldn't speak for the New York Times. I'm not convinced the New York Times has quite as firm a separation between the editorial page and the news page as we have. But I am sure they have the same separation between the business side and the news side that we have. So those things are very important to us as journalists. There's very little in Rupert Murdoch's history to suggest that he values those quite the same way that we value those. Those. Did I say that diplomatically? You know, on the other hand, this is, Dow Jones is a company that frankly has been, all evidence is it's been poorly run for the last 25 years. The stock price hasn't gone anywhere for 25 years. The, for the last five years, the company's entire earnings have been paid out to shareholders in dividends. And this is a period, in a period of remarkable change in the industry where if there's ever a time you should be investing heavily in your business, it's now when the whole business model is under challenge and we've got to figure out how to get to the other side of this technological change and still be viable. So having somebody come in who loves newspapers, I think everybody would agree Rupert Murdoch loves newspapers and who has the resources to really try and get you over that valley to the other side of this technological change is pretty exciting. So it's, you know, it's, it depends on who you talk to in the paper. You'll, you'll hear both things. But I think it's, it's something that you have to look at both sides.

Of question on the role the board should be playing in controlling CEOs pay. And if you look at examples like Dick Carrasso, Bob Nardali, it looks like everybody else is trying to all help all the other CEOs you know, get. Yeah, they benchmark one another and you.

Know, and everybody else, it's a horrible.

System, you know, gets increased pay.

Look, as you go on, it's a horrible system. And one of the odd things about this period of. Of what I call revolutionary change is that the CEO pay piece of it actually got worse. And here's why. These boards of directors wake up and say, oh, my God, we've got a problem on our hands. We've got to get rid of the CEO. They get rid of the CEO, and then they say, well, now what do we do? In many cases, they hadn't paid enough attention to succession. They didn't have a natural successor in line, so they had to go outside and search for somebody. And to bring them in, they had to pay them a whole bunch of money. And so during this period where everything else is changing, pay is going up even more rapidly than it was before. There's a great story in the book about Jack Welch at GE who had this bake off between three of his. Three of his lieutenants. Bob Nardelli, Jim McNerney, who we've already talked about, and Jeff Immelt for the top job. And six months before he made his decision, he went to the board of directors and got his board to give all three of them a huge batch of stock options. And, you know, the board's saying, well, wait a minute, this is a lot of money we're giving out. And Walt said, don't worry about it. He said, because at the end of the day, you're only going to have to make good on one of these packages, and the other two are just going to take this package and use it as a negotiating lever to get more money from somebody else. And that's exactly what happened. Bob Nardelli made $200 million, not for anything he did at Home depot. He made $200 million because that's what it took to buy off the stock option package that Jack Welch had given him at General Electric. They guaranteed that to him in his contract before he even started the job. Jim McNerney, not quite as good, but similar, went to 3M and got a great package because that's what it took to supposedly pull him away from General Electric. So both of the losers in the great General Electric bake off ended up making more money than the guy who won. And so that's an example of how this period of reform and tumult in corporations and corporate governance actually jacked up CEO pay even more. I think that's changing now. And in fact, GE provides the example. The fact that David Calhoun, if you think of GE as the ultimate CEO training school, okay, the next generation after Jeff M. Elton, Bob Nardelli and Jim McNerney. The, the star of the next generation was David Calhoun. He could have been considered for any number of big public company CEO jobs. He made it clear to the marketplace, I'm told, that it was going to cost over $100 million to get him to move. And by the time he was in the marketplace, which is more like 2005, 2006, public companies weren't willing to pay that. And so in the end, he went into the private equity world. Much smaller company, Nielsen, probably a tenth of the size of the businesses he ran at General Electric. But the private equity guys were willing to give guarantee, not guarantee him. This is the key difference. They were willing to give him a package that promised him his hundred million if he delivered. That's the key difference. Nardelli got his 200 million without delivering. Calhoun will only get his if he delivers. So I do think it's, it's changing. And that gets to my final point, which is there is a market. The market is screwed up in some ways that you suggested. You know, when, when CEOs say, well, you have to pay me $50 million because all my colleagues make $50 million, there's something wrong with that logic, particularly when the escalator only moves up, it never moves down. On the other hand, if David Calhoun can make $100 million in the private equity world, then there may be some market reality to that figure. I think what public company CEOs are recognizing, though, is that there are other things that have to be considered. You know, what is the public price you pay for those huge paydays? Does it hurt the company? What is the price you pay within the company in terms of, you know, employee morale for taking such huge paydays. And so I think you're seeing us go back into what we had maybe 30 years ago, a period of real self restraint where CEOs accept something less than their market value for the privilege of running a big public company. Oh, I spent too much time on your last question. Let me give somebody else a chance. Do you think the increased shareholder power recently leads to more short termism and more kind of concentration on the quarterly figures than in the good old days when you could ignore the shareholders and kind of go for your long term vision? Well, that's an interesting question. Certainly you'll hear a lot of complaints from CEOs about the pressure they get from hedge funds. You know, you look at a company like Motorola, for instance, Motorola's cruising along, doing pretty well with the Razer phone, making good earnings and then all of a sudden, the Razer phone falls off a cliff, they have a horrendous quarter, and Carl Icahn is breathing down their neck. And so Ed Zander is saying, whoa, you know, you got to give me some time. You're forcing me to deliver quarter by quarter results. And I need to take a long term out outlook. My problem with that is clearly that's true. And clearly one of the things driving some companies into private equity is that they have to make transformations that may take a year or two years. And it's very hard to do that with the impatience of the market on your back. But as the Motorola case suggests, long term outlet, long term outlook is the refuge of failing CEOs. You know, if you don't do good this quarter, what are you going to say? You're going to say, well, you know, you got to look in the long term. And so it's difficult to balance those two things. The hedge fund guys, on the one hand, are forcing companies to perform. Yes, they are forcing them to perform in the short term, but they are forcing them to perform. One last thing I'd say about that is there's nothing new about the complaint from CEOs that the markets forced them to pay too much attention to the short term. I remember this bizarre meeting in Washington in 1980. I don't know, 1985. How many of you remember the name Paul Tsongas? Okay, so he was a senator who decided he was going to run for president. And he called up the Washington bureau one day and he said, you guys, I need to meet with you. I have something that's really revolutionary that's going to power my campaign, and I want you guys to be the first to know about it. And I'm going to come to the Washington bureau of the Wall Street Journal and I'm going to tell you first, and you can write the story and you'll have the exclusive. And this is the thing that's going to make me the next President of the United States. So we said, yeah, sure, come on in. So he comes in, we go in the room, we sit down, and he said, here's what I'm going to do. He said, I'm going to eliminate quarterly financial reporting. We're only going to report semiannually. You know, that was it. Revolutionary change. The world will be completely different because companies won't report their earnings on a quarterly basis. They'll report them semiannual. Needless to say, Paul Tsongas did not become president. And that idea never Took off partly because if you believe information is a good thing, the direction we ought to be moving in is not towards less reporting, but towards more reporting, maybe real time reporting. So I've gotten far away from your question. But you're happy. Good. He's happy.

So speaking of reporting, public companies are subject to a lot of regulations and reporting of a lot of details that private companies are not. I see a few companies in the last few years have went private for competitive reasons. And I was curious what your opinion was about that, about that strategy.

For competitive reasons. You mean to keep information about the company from getting into the, into the public domain?

Actually, I think it's probably. They probably do it for financial reasons.

They don't want to pay to do a Sarbanes Oxley audit or. Yeah, there's no question that's been one of the things driving companies to go private to get out of the kind of the spotlight that public companies are in. The interesting thing is, if you look at what's happened in the political world in the last six months, that may be starting to change. I think Steve Schwarzman, maybe if he doesn't regret the fact that he had that big birthday party with Rod Stewart, he should, because it's, it's put a huge spotlight on private equity. You've got Andy Stern, who runs the biggest, the fastest growing union in the country, focusing on private equity, trying to get them to. On private equity, trying to get them to abide by some of the same reporting requirements that public companies have to abide by, and also just making them feel some of the heat that public companies are abiding by. So I think, I think private equity has reached the point where increasingly they're not getting much benefit, much privacy benefit from being private. The spotlight is now on them and you'll see that continue, particularly if the Democrats keep control of Congress and possibly get control of the White House.

Hi. I wanted to ask you a little bit about the Journal itself. Recently, you guys. Well, I mean, not recently, but you added a Saturday edition and then cut back on some of your international coverage and stuff. Anyways, how has the changes gone and what do you, what do you think of the Journal now?

Well, I think the Journal is a great newspaper. What do you think of Google, The Saturday, the purpose of the Saturday edition? We'd been through this kind of strange, you know, the Journal's advertising money comes from financial advertisements, tech advertisements, some classified advertisements. But we had never gotten much of the consumer advertising that a lot of local papers get. And we went through this Period. A couple years ago, where it was consumer advertising was the only. Was where all the juice was in newspaper advertising. And so the Saturday Journal was an attempt to try and get a piece of that, to have. Have something that's more appealing to consumer advertisers. And it succeeded at that. It did bring in a lot new consumer advertising. So in that sense, I think it served its strategic purpose. I like the coverage as well. I mean, I love reading pursuits. I love having a journal to read on the weekend. I think it's got a lot of interesting stuff in it and all the feedback we've gotten from readers has been very positive. So in general, I think Saturday was a good thing. Cutting back on international coverage. The international additions. I don't think we have cut back on international coverage. We still have as many reporters out there covering the world as we did before. The international additions have been a struggle. You know, they haven't made much money and it's been hard to keep them going. One of the things that I find interesting and encouraging about the Murdoch bid is he says he wants to make the Wall Street Journal a global franchise and he'll invest in them to make them a success. I think that's great news. I hope he does, because I'd love to see the Wall Street Journal be a true global newspaper. And I think it should be a true global newspaper.

Google's received some sort of criticism from analysts who have complained about its lack of guidance that it provides to investors and analysts. And Google tends to do things in its own way. Yeah, in a very unorthodox fashion. And I don't know if you've covered Google, but I'm curious about your perspective on that and those sorts of complaints.

Well, look, there's no question, there's no question that the markets in recent years have gotten too far focused on quarterly earnings. And as a result, companies got too focused on quarterly earnings. And clearly in the late 1900s and early 2000s, companies were doing all sorts of stupid things in order to make their earnings report match expectations. But to go back to a point I made a minute ago, as a journalist and as a believer in democracy, you know, writ large, I think more information is a good thing. And I would think if any company would buy onto that notion, it should be Google. So saying, you know, we're not going to talk about what we think our earnings are going to be strikes me as a little odd. In a world where transparency is important and information is important, you may not like what the analysts are doing with that information. You may not like what the markets are doing with that information, but saying you don't think they should have that information doesn't seem to me to be, on the face of it, the right position. That's it. Okay. Thank you. It's been great fun, enjoyed it.