A Goldmine for the Chairman, A Shaft for Investors
The corporate system is one that should work very well. Shareholders provide capital and elect a Board of Directors to represent their interests. The Board hires management to run the company, but the Board is the final authority. This system of checks and balances should mean that the company is run in a way that maximizes the benefits for the shareholders.
This corruption of the corporate model was on display recently as Dish Network moved to acquire a company called LightSquared, and as a result the Chairman of Dish Network would make several hundred million dollars.
A Dish Network Corp. director who resigned in recent weeks did so amid a disagreement over the company's handling of a bid for a telecommunications firm that could deliver hundreds of millions of dollars of personal profits to Dish Chairman Charlie Ergen, people involved in the situation said.
The director, Gary Howard, was on a special board committee formed to vet the LightSquared Inc. deal because of a potential conflict of interest on Mr. Ergen's part, the people said. Mr. Ergen in the past year or so bought LightSquared debt at discounts and would personally profit in a Dish purchase of LightSquared, according to court documents and people familiar with the trades.
And what about the other directors. Oh, there is this.
In the case of Dish, insiders carry particular clout: Mr. Ergen is Dish's largest shareholder. He and five of the board's eight directors are either current or former executives of the company. A seventh director is Mr. Ergen's wife, Cantey Ergen. The eighth, who was on the special committee, is Stephen Goodbarn, the people said. Mr. Goodbarn, who joined the board in 2002, is CEO of a software company he co-founded, Secure64 Software Corp.
But not to worry shareholders, nothing in this deal or anything else prevents you from signing up for the Dish Network at full price. Just because you are shareholders doesn’t mean the company will charge you extra for services, although they certainly would like to.