The Apologist’s Fund: a 9/11 Options Grantee Investment

One of the tools available to investors when determining where to put their money is the ability to evaluate corporate management.

For this purpose, a Crisis can be a wonderfully telling thing. Under pressure, without all the slick IR and PR folks around, people’s behavior can be quite revealing. Their true colors come out in these situations in moments of wonderful clarity. There are rarely better occasions to watch how corporate management behaves than in an actual crisis

We had that critical moment of national crisis — during 9/11 when the US was under attack. It was rather revealing to see how a small subset of CEOs and CFOs, and their do nothing, overpaid, lapdog Boards of Directors behaved.  Did they demonstrate a strong respect for their shareholders? Were their thoughts of God and Country? Were they men and women of courage and character?

Unfortunately, the answer for this group of 511 executives at 186 companies was a resounding no. In a moment of terror, their initial unguarded instinct was to make a money grab for cheap — and may I add, dilutive — options. They were not only not patriots, but they were not shareholder friendly either.

As an investor, perhaps you do not care that they failed to step up as Patriots; That is your right. That they were not great Americans, willing to put their own dollars to work in the market, to reassure nervous shareholders and the country in the great tradition of JP Morgan (and others) may not matter much to you.

But as shareholders, you ignore this revealing behavior at your own peril. I am someone whose job often entails making judgment calls about people — in particular, analysts, fund managers and corporate executives. I will admit something to you — I am too trusting and naive. Someone looks me in the eye, and with a golden and practiced tongue, lies their asses off to me — I tend to believe them. That’s why I almost never meet corporate management. I learn nothing useful, and often come away with bad information and a misleading spin. That’s why my preference has been for quantitative data and technical analysis (amongst other tools). I choose not to rely on what people say, but rather what they do. And that’s revealed in both the numbers and their behavior.

And, oh, what they did: The apologists for this group can try to spin it however they like — but the executive behavior speaks quite loudly. There was a golden opportunity to step up and this group of CEOs whiffed.  What they revealed through their behavior is that they are not worthy of my investing dollars. Until these Boards are sacked, and these CEOs/CFOs replaced, they won’t get dime one from me, or my fund, or my managed accounts.

However, there seems to be a small group of apologists — primarily Law Professors, but others included — who don’t see anything particularly wrong with what happened. Disagreeing with my ire over the 9/11 option grantees are several deservedly well-respected people: Professor Bainbridge, Larry Ribstein, Eddy Elfenbein.

That is their option. However, I say its no longer time for talk, its time for action:  I will not invest in these companies — lets not call it a boycott, but rather, an investment choice —  because I believe that the judgement, ethics and respect for shareholders is extremely important. I want corporate management that creates and not destroys shareholder value. 

As someone who gets "marked-to-market" everyday, my raison d’etre is performance. So I elect not to put money with people who I do not believe will respect my dollars, nor give me a lot of confidence in their ability to make me money.

But for others — the apologists for this contemptible behavior — I hereby propose that you should invest.

Let’s assemble the 9/11 Options Grantee fund (that’s a catchier title than the "Apologist Fund").  Then, I propose that  Bainbridge and Ribstein and Elfenbein put their actual money at risk with this collection of fine, fine human beings and outstanding corporate executives.

I say less talk, and more actual money at risk.

Its time for the chattering class to step up and prove they have the right stuff. Few things focus the mind like hard earned cash at actual risk. Under those circumstances, will the apologisms somehow become less glib than the what we have seen so far? (That’s my suspicion).


Gentlemen: Are you willing to put your monies where your opinions are (Hey, I do everyday)?

Or, is all this just so much empty theoretical chatter?   

What say ye?


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What's been said:

Discussions found on the web:
  1. DBLWYO commented on Jul 18

    Here, here. Would that more institutional investors would step up to their fiduciary obligations to inspect management performance and act accordingly. How much of the last ten years of unsinn might have been avoided ? Or at least mitigated ?

  2. Rich DeSio commented on Jul 18

    I share your outrage at the shameful, unethical conduct of these CEOs and their governing boards. Barry, don’t ever change – it is why small investors like myself follow your commentary and work.

  3. Uncle Bob commented on Jul 18

    Hurrah for your side! From Boards to Congress, we seem to have an “oversight of convienence.” At least a few are standing for ethical and moral behavior without the force of law to goad them.

  4. eb commented on Jul 18

    hoorah! well said. where is the press to keep pressing this issue. must be done. CEO compensation in general is ridiculous and a crime against what our country stands for, just completely grotesque and selfish in a way that must be stopped since obviously such greedy individuals — at times of crisis no less — are willing to reap whatever they can at others’ expense. something must be done, and this is a good rough draft for a manifesto.

  5. Craig commented on Jul 18

    Oh Barry, A perfect fast ball right over the plate!

    As from my earlier post, these jerks need to be listed, their companies and boards listed, and their stocks sold.

    Investors, speak loudly, VOTE with your dollars.
    Don’t wait for the ballots to be mailed.
    Vote to change boards to investor interested activists.
    Vote with retirement fund managers that represent your interests.

    They only know and hear one thing.

    Senseless greed. I say we show them the door.

    Not another penny.

  6. 23 commented on Jul 18

    In agreement 100%.

    If anything, these companies should have taken advantage of depressed share prices to buyback shares, creating value for shareholders. Instead, they dilute at a time of crisis. Obscene.

  7. Craig commented on Jul 18

    BTW, one of the big SELL rules is very simple: Dilutive issues BELOW current market value is management telling you they don’t give a crap about shareholders.

    It doesn’t matter if it’s an issue to other shareholders for sale or if issued to some greedy asshole, the result is the same. YOU get screwed.


  8. BettinaZ commented on Jul 18

    Barry, is it possible to post a list of these greedy bastards, or is it so long that your website would blow up?

  9. MikeF commented on Jul 18

    Well said and worthy of the support of all serious investors. Yet, ironically, there is a page 1 article in the Money & Investing section of this morning’s WSJ in which certain analysts are touting this controversy as a buying opportunity for UnitedHealth Group. Curiously, the focus is on CEO William McGuire and absolutely no mention is made of the 96,000 options granted to Divisional CEO R. Channing Wheeler on 9/21/01 which was cited in Saturday’s WSJ article. Go figure.

  10. Barry Ritholtz commented on Jul 18

    I asked if the WSJ was going to run the full list, and they replied they needed to reach each and every company to get a response (fairness requires companies at least be given the opportunity to comment). Quite frankly, that probably isn’t worth it them to make the calls.

    Give credit where it’s due — both the backdating option scandal and the 9/11 option issue were uncovered by the investigative journalism of the WSJ.

    I wonder how individuals could track this — it should be listed in every companies disclosures, and any buy or sell is in 144 filings . . .

  11. Mike M commented on Jul 18

    Right on Barry. There is a complete lack of service to and respect for the owners of the companies. Only at the end of this long protracted bear market will we see the return of manager’s who give two shits about the shareholder. (And large mutual fund companies should be utterly ashamed of themselves, as well.)

  12. commented on Jul 18

    9/11 Options Debate Heats Up

    The debate about 9/11 options grants just got more interesting. Over at the Big Picture, Barry Ritholtz lays down a challenge. He wants Professor Bainbridge, Larry Ribstein and Eddy Elfenbein—who have defended the grants—to put their money where the mo…

  13. Alaskan Pete commented on Jul 18

    Keep pounding on these jokers Barry.

    Let me add another clown to the list…no not a CEO, but an equally repugnant little shitstain: Brit Hume of Fox “News”.

    When London’s subway was bombed, what was Brit’s first thought? No, not empathy for the people. Not sadness nor fear. No, not concern for colleagues, friends, or relatives in London. His thought…. To make some quick cash. To wit:

    “The other thing is, of course, people have — you know, the market was down. It was down yesterday, and you know, you may have had some bargain-hunting going on. I mean, my first thought when I heard — just on a personal basis, when I heard there had been this attack and I saw the futures this morning, which were really in the tank, I thought, Hmmm, time to buy. ”

    Thanks, Brit. You sack-o-shit. And no apologists, please. If you believe for a second the motive was “to help prop up the market for the sake of the people”, you don’t have good reading comprehension.

  14. AllanB commented on Jul 18

    I can see the Home Depot HQ from my office window here in Vinings (Atlanta) and feel shame for a hometown company included in the list produced by the WSJ. Not to mention the incredible arrogance displayed by the Board of Directors by not showing up at the last shareholders meeting. Lowe’s will get my money, stock and retail.

  15. jkw commented on Jul 18

    What about indices? Are you not going to buy SPY or QQQQ? I assume they must have at least some companies that were involved. I think index investing is a major cause of non-oversight. I doubt there is any broad, balanced index that I could buy that would not include companies that either granted post-9/11 options or backdated options. When I buy an index etf, I don’t expect to have any say in what the component companies are doing. I generally don’t even know what most of the components of the index beyond the top 10-20 are.

    What we need is for someone to start making indices that consider corporate actions. There are a few socially-responsible indices that look at environmental and labor issues, but I don’t think there are any that exclude companies for bad CEO behavior. Someone should construct an index using similar methodology to the major ones, but excluding companies that demonstrate a lack of ethics in CEO compensation. It should be possible to backtest the performance and compare it to the major indices. It would be interesting to see how it does. Is there a significant difference between the performance of the companies that issued dilutive 9/11 options and the companies that didn’t? I don’t have easy access to the market data and tools that would be required to calculate that, but you probably do.

  16. L. Bumiller commented on Jul 18

    Where’s the complete list of all 511 executives and the 186 companies?

  17. RP commented on Jul 18

    I haven’t read the WSJ article and don’t know that much about how options work, so bear with me…but how long does it take for a company to arrange to give out options to execs? Is it complicated? I assume there are regulatory procedures that must be followed. How long does that take? How long after 9/11 were the options issued?

  18. drey commented on Jul 18

    JKW –

    Agree strongly with your observation on the need for etf’s or index/sector funds that do some sort of screening for socially responsible, investor friendly companies – this would allow those of us who give a shit (and there are many) to vote with our feet so to speak.

    Personally I’d like to see an energy sector etf that doesn’t heavily weight Exxon-Mobil because they are bad actors who will never again see a dime of my money. Is anyone aware of such an animal?

  19. Wade commented on Jul 18

    Amen Brother…somewhere there must be some service that sheds light on ALL of the option grants that are made out there, regardless of what kind of political/economic environment we are in. If these guys feel justified in the massive grants they layer on themselves, there should be no reason not to post this info on some clearing house.

  20. The Big Picture commented on Jul 18

    1929 Crash and Bankers

    An anonymous emailer asks: You’re pretty harsh on these execs, What should they have done? Fair enough question. When in doubt, I like to look to the past to find analogous situations. One can let history be your guide. Here’s how in past crisises, cer…

  21. Alaskan Pete commented on Jul 18

    Drey, most of the energy ETFs have XOM as a heavy weighting for obvious reasons. But, there are some that are less heavily weighted than others. For example: IGE is about equally weighted among majors…i.e. about 7% in XOM, 7% CVX, 7% BP etc, whereas XLE is 15% in XOM, 10% in CVX, etc.

    You could look at some of the OSX (services) type etfs. Powershares has a O&G svcs specific (PXJ). PXJ has no XOM or other majors, it’s strictly services…offhand I think BJS is the largest holding, but it’s pretty equal weight from about 5% at the max to around 2% and holds a large number of companies, basically what you would expect…Halliburton, Baker-Hughes, Diamond offshore, transocean, etc.

    You can go to this link at MSN:

    Punch in the ETF symbol and view the top holdings of the ETF. The msn version is much more complete than the Yahoo finance versions which often don’t have any info on the holdings.

  22. Gary commented on Jul 18

    You are right! Too many of these ‘insiders’ are using public corporations to feather their own nests ‘at the expense of shareholders’ and the public investors.
    This is NOT a level playing field. Even when they’re getting caught many just get a slap on the wrist or at worst disgorging of some of the loot.

    Who will end up being the fall guy/girl?
    The HR manager for not following the rules?
    The insider will probably claim they didn’t know this was happening or they were informed that this is Standard Operating Procedure. They should have to disgorge ALL GAINS, but this won’t happen. Meanwhile many of these corporations will restate earnings and hurt current shareholders and the stock price.

    By the way, what happened to all of that money taken by the illegal ‘after hours’ trading? Those companies were fined and walked away without accepting nor denying responsibility. New York State (Spitzer) keeps the fines. Such a deal!

  23. Ideoblog commented on Jul 18

    The 9/11 option grantee fund

    In response to my post about the 9/11 options, Update: Big Picture says I elect not to put money with people who I do not believe will respect my dollars, nor give me a lot of confidence in their ability

  24. Ideoblog commented on Jul 18

    The 9/11 option grantee fund

    In response to my post about the 9/11 options, Big Picture says I elect not to put money with people who I do not believe will respect my dollars, nor give me a lot of confidence in their ability to

  25. John commented on Jul 18

    I’m very disappointed. When I read the headline I thought someone was starting a fund into which these execs could be pressured into placing these tainted gains, with the proceeds going to benefit the children of the heros now battling cancer they surely contracted at ground zero while others were busy scamming the system.

  26. Dogstar commented on Jul 18

    Hey Barry, if you don’t know who they are, how can you not buy their stocks?

  27. JL commented on Jul 18

    Barry, I think that you’re absolutely correct in pursuing this matter. What’s upsetting to me about Home Depot personally is that Blank and Marcus two of the original founders do so much for Atlanta and the community at large but in very different ways and Nardelli can ruin that image in a few years. My husband works at that corporate location that AllanB can see and yesterday received a reminder to vote and become active with a list of MY ISSUES. On the list was an item to block legislation improving port security; and that was not my issue at all. I think Vote orange is how they phrased it.

  28. drey commented on Jul 18

    thanks for the info, Pete. I’ll check it out.

  29. commented on Jul 18

    Technical Analysis: The Big Picture

    The blogger at Big Picture has been ragging on Larry Ribstein and I over our view that the so-called 9/11 options aren’t exactly a scandal. He’s challenged us to put our money where our mouths are. Larry’s done a fine

  30. RP commented on Jul 18

    (Two RPs now, eh? Suppose I’ll have to find a new descriptor)

    Barry – you are a drop in the bucket, although an
    admirable drop.

    401(k) mutual fund money is the ocean,
    and the 401(k) servicing companies get
    to make the votes without consulting their
    captive 401(k) participants. Nothing is going
    to change, because there is NO way to
    exert pressure…by design.

  31. Ideoblog commented on Jul 19

    The 9/11 option grantee fund

    In response to my post about the 9/11 options, Big Picture says I elect not to put money with people who I do not believe will respect my dollars, nor give me a lot of confidence in their ability to

  32. Fernando Margueirat commented on Jul 21


    This is your best post I’ve read so far. And you have a lot of good ones. But it would be great to find out the other side of the coin. The CEOs of company’s that step up in crisis time and defend shareholder’s money (I guess they might be a few). And as someone suggested, create a fund or ETF that follow the companies of these CEOs.


    BR Fernando — there was a service a few years ago that tracked insider buying relative to performance, but I do not recall its name.

    It was like an insider’s version of “Starmine”

    Anyone recall the name of this service?

  33. justin lent commented on Aug 4

    Hi BARRY,
    Thought you’d enjoy this. Yesterday I responded to Bainbridge’s personal response to my own previous post on his TA bashing blog article.

    My response that I posted 24 hours ago has since been DELETED eventhough it wasn’t harsh at all, and in fact said I even respected him for his opinion but thought he should reassess the validity of the analytics behind the passive investing statistics.

    I copied below what I posted on his blog yesterday, which was there for about 12 hours, before it suddenly “DISAPPEARED”…

    Thought you’d get a kick out of it–who know’s, maybe he visited my options trading blog that is based mostly on TA and thought I was attempting some voodoo mind trick on him… Having learned myself so much from the many “lawyers who turned traders/investors” (like yourself) at, I thought most lawyers (even Bainbridge!) would have the basic logic skills to realize that the stock market isn’t as random as most think and passive investing is better than active (The passive investing schtick always sounds like more of a cop out to me–usually by people who claim the market is “rigged” or who lost much of their life savings in the Tech Crash because of poor broker advice).

    Here’s my post that was deleted from Bainbridge’s Blog… (One of these days I’d love to see a tag team investing debate of Ritholz/Cramer vs. Bainbridge/Ribstein someday!–Maybe CNBC can arrange it!)

    I respect your response. It’s obviously based upon how you’ve chosen to analyze the data that you’ve been presented.

    From your experience as an attorney, I’m sure you’d agree that regardless of how pristine the form of an item of evidence is presented, that different people will no doubt involuntarily (or even voluntarily, under duress, or because of groupthink) see it differently from each another. Over your years of practicing law, you’ve even probably witnessed many times lawyers who choose to spin into their favor how they feel the jury should view the evidence presented in the courtroom.

    Personally, I feel papers that reference the ineffectiveness of active portfolio management are written by similar folks who have choosen to spin the statistics towards proving their own hypothesis that passive investing is best (or at least no better than active investing). When running statisical measures of any process, stock market or whatever else, the rigorousness of the analytical process that follows the gathering of the statistics is always more important than the numbers themselves. Having an opinion on whether active vs. passive investing is better, is no different than having an opinion on whether the Atkins diet is better than the South Beach diet—you’ll have your proponents on both sides, and each side will have statistics that support their side. No harm, no foul in this, and at the very least it likely provides a greater informational base from which everyone can learn a little more than they previously knew before beginnnig the debate about “Who’s right”.

    I guess I’ll just have to agree to disagree with you and leave it at that. If the dynamics of investing were as cut and dry as Newtonian physics, and predicting that a stock would fall 100% of the time because of a theory with the predictive power as pure as is predicting that this pencil in my hand will fall to the ground by virtue of gravitational theory if I drop the pencil, then I guess the stock market wouldn’t be quite as fun and intriguing as it is–both to invest in, and to debate.

    Best of Luck to you in your own investing, Professor.

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