Friday, November 24, 2006


You know how dogs love rolling around in something smelly? I felt that way recently while reveling in the preposterousness of an employment contract between The Greenbrier Companies (GBX), which makes railroad cars, and its President/CEO William Furman. As I noted a couple of weeks ago, Furman's contract allows him to be canned without severance only if he’s convicted of a serious crime - and then only if the crime happens to interfere with his job performance.

In fairness to Furman, his contractual chutzpah no doubt derives from his superstar status. The company reported record profits for last year and analysts expect more happy news for 2007. In fact, Furman has been running Greenbrier since 1994 and my favorite magazine, Progressive Railroading, credits him with transforming the former "small rail-car leasing company" into a large and profitable operation.

So what's wrong with a successful CEO negotiating himself a one-sided contract? I can just hear those esteemed professors of "law and economics" (known here as the Wannabeconomists) ridiculing my concerns. If you understood the first thing about the beauty and majesty of economics, Miss Stupid, they’d say, you’d understand that Furman’s employment agreement has come into being through a kind of economic immaculate conception. The guy's performance gave him the bargaining power to insist on this contract. The contract's terms are disclosed to the market. The market is free, free, free, free, free. It's all good. Yes, Milton Friedman’s in heaven, all’s right with the world.

I’d love to join your cult, boys, but I can’t shake the feeling that Furman is getting away with something. Just because a CEO is such a matinee idol that he can persuade board members to OK an employment contract nonsensically slanted in his favor doesn’t mean he ought to do that. Such behavior falls short of the good faith and loyalty Furman owes to the company and its shareholders. He may not be violating any duties in a legal sense, since American corporate law gives managers an embarrassing amount of leeway, but what about ethics?

I’ll leave those questions to the experts, whoever they are. But us regular folks can at least agree Furman’s behavior is selfish and piggy.

Look at it this way. If that guy who plays Jack on Lost were a CEO at some firm, he could totally put me on the comp committee, hand me a pen, and have his way with me at contract negotiation time. “Anything to ‘attract and retain’ you, Jack,” I’d purr. We’d both walk out of the boardroom happy. But that wouldn’t make it a healthy relationship.

(Thanks for not mentioning that this is the second time I’ve concocted an excuse to post Jack’s photo.)