Thursday, May 11, 2006

Bored of Directors?


Back in junior high school, when it didn’t take much for a classmate to seem funnier than Leno, Letterman and Dave Chappelle combined, I recall seeing the phrase “Bored of Education” written in big block letters on some wiseguy’s notebook and thinking, while not laugh-out-loud funny, it was amusing and vaguely anarchic.

For some reason that silly play on words came to mind when I saw the headline of the press release issued by Overstock.com two nights ago, in which that company’s Chairman of the Board declared himself seemingly delighted to see his company get a government subpoena.

That subpoena requested, among other things, “all documents relating to the Company’s accounting policies, targets, projections, estimates, recent restatement, new technology systems and their implementation, and communications with and regarding analysts,” according to the last paragraph of the press release.

Readers might not have gotten that far down, however, given the preamble in the body of the release from the Chairman of the company’s Board, Patrick Byrne, which I am not making up:

Overstock.com Chairman and CEO Patrick Byrne said, "I may be the first CEO in history to celebrate receiving an SEC subpoena. Some of the requests suggest the whispering of the blackguards, but I remain unconcerned about their hokum….

Not only that, but the headline on that press release read: “Overstock.com Celebrates Receipt of SEC Subpoena.”

Which is why I wondered whether it is Overstock’s Board of Directors—for whom, presumably, the Board’s Chairman speaks—that is delighted with the government subpoena, and “celebrates” its receipt.

Or whether they’re just plain Bored of Directors and don’t pay any attention to what the Chairman of their Board is writing in his press releases.

Merriam-Webster’s Dictionary of Law defines “Board of Directors” as:

A group of individuals elected by the shareholders of a corporation to manage the corporation's business and appoint its officers

I always believed being a Director was serious business, although there was a time during the lax old days of the dot-com bubble and the telecom frenzy when boards approved mergers, option packages, and off-balance sheet deals with abandon. Those days are over, and being a director nowadays is usually considered a non-trivial position of responsibility.

So who exactly constitutes the Board of Overstock.com?

Just looking at my Bloomberg, I see that—aside from the Chairman who “celebrated” the SEC subpoena, the Chairman/Celebrant’s father, and the Chairman/Celebrant’s self-described “best buddy”—the members of the Board of Directors of Overstock.com include some familiar and non-lightweight figures:

Ray Groves is a former Marsh Mac CEO and a good guy, according to a friend who knows him.

John Fisher is a sober, highly regarded Wall Street guy, according to a friend who knows him.

Gordon Macklin is a former H&Q Co-CEO who also sits on the Chairman’s father’s company’s board.

Allison Abraham worked at a dot-com during the Bubble Years.


After considering the long string of proclamations from their Chairman, from his “Sith Lord” speech to his 'Celebration' press release, I wonder: could it be that, like my old high school classmate, these good board members are all simply “bored” of directors?



Jeff Matthews
I Am Not Making This Up


© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

4 comments:

dkman said...

Board or "bored" aside, it is refreshing to see the SEC finally focusing its attention where it should have been in the first place: inside the company that has been destroying shareholder value (most likely through sheer incompetence) since November of 2004 when the stock peaked at about $70.

An Investor said...

I'm just amazed that it took the SEC this long (then again, maybe I shouldn't be).

settlements said...

I think you folks have it partially wrong.

In an SEC investigation, the people being served a subpoena are not always the ones under investigation. Just askk those Journalists. Clearly, if you read the scope of this subpoena they are focusing in two areas.

1. Somebody put a bug up the SEC's butt and got the SEC to conduct that "accounting investigation". Overstock did announce awhile back that they were going back to restate but their numbers are going up not down.

2. The attention on shorting, Gradient, paper certs, proxy fails, delivery delays, etc... is looking for the evidence Overstock uncovered in their investigations.

amoore said...

He's not the first CEO to welcome subpoenas. When Warren Buffett was CEO of Solomon Brothers, he told the congressional committee doing the investigation that they had powers that the internal investigators at Solomon did not have, such as the power to immunize witnesses and issue subpoenas. He then went on to say that he welcomed the use of those powers.

Hmm. I just drew a comparison between Patrick Byrne and Warren Buffett. The world is truly a weird place.