Public disgust with executive enrichment is humbling

ADD Deutsche Bank boss Josef Ackermann to the lineup of Ken Lay, Bernie Ebbers, Conrad Black, Martha Stewart and other business stars suspected of looting public shareholders.

Ackermann's criminal trial opens today in Dusseldorf, Germany, and he is suffering Martha-style press treatment as well as the potent attentions of prosecutors.


The chief executive of Germany's biggest bank (and the ultimate chief of Deutsche's Baltimore operations) has been summoned from his Frankfurt headquarters to a little courthouse in a provincial town and a trial that could put him in prison for a decade.

How the mighty are humbled.


And why not? After all, Ackermann stands plausibly accused of ... of approving millions in executive pay! Of negotiating a deal with a top boss! Of doing what U.S. corporate directors do routinely!

Off with his head!

A decade ago, compensation expert Graef Crystal started saying that executive pay had reached "Marie Antoinette" levels, that it threatened to do for corporate managers what Versailles and the salt tax did for Louis XVI and his queen.

Nobody set up guillotines in Wall Street, but CEO pay has continued to swell. The Ackermann case and others like it -- in which compensation deals that are legal on their face are speciously challenged in court -- mark a new level of public disgust over executive emoluments.

Ackermann did not cook the books. He did not dump stock based on inside information. He did not pillage a company with business side deals. He doesn't even make that much money himself. (Yearly pay, about $4.5 million.)

His alleged crime: Granting $56 million to several executives at Mannesmann, a German telephone company on whose board he sat, after Mannesmann accepted a takeover bid from the British Vodafone PLC. Several other Mannesmann directors are being prosecuted for the same deal.

Former Mannesmann CEO Klaus Esser made out best in the $56 million handout, taking home $15 million.

This kind of golden parachute is absolutely routine in the United States, but apparently it bothered some Germans. A Stuttgart law firm filed a criminal complaint against Ackermann and the other Mannesmann directors, and the case has gone much further than anybody thought it would.


The legal theory behind the prosecution is that, by granting $56 million to the departing bosses, Ackermann and the other Mannesmann directors committed a breach of faith against the Mannesmann shareholders.

Never mind that the directors legally represented the shareholders, that they were charged with setting Esser's pay and that Esser had just enriched the shareholders by forcing Vodafone to boost its bid by almost 30 percent. Ackermann and his peers are in the criminal dock. Apparently prosecutors have no problem with German corporate law -- unless it produces a result they don't like.

There are similar cases in the United States.

A couple of weeks ago The New York Times reported that the New York Stock Exchange has urged state and federal regulators to pursue legal action against Richard A. Grasso, its former chairman.

Grasso was only recently a hero for reopening the exchange after the terrorist attacks. He has apparently broken no law -- except the unwritten one against making too much money. He resigned late last year after it was revealed he earned more than $150 million.

In Maryland, the revelation of a potential golden-parachute package of up to $119.7 million for executives of CareFirst BlueCross BlueShield not only killed a buyout deal that would have benefited the state but also triggered a broad federal investigation.


Again, the letter of the law was apparently observed, but the outrage perpetrated under protection of the law prompted prosecutors to dive in anyway.

This should worry the public. Prosecutorial overreaching in response to legalized executive looting is a sign that something is wrong. Maybe the law is wrong -- and executive pay should be explicitly capped.

And it should worry executives. At first, Ackermann's fans said he wouldn't be prosecuted for the Mannesmann deal. Then they said it wouldn't go to trial. Now they say the charges will be settled before a verdict. Convicting Ackermann would patently flout the law, they say.

We'll see. The beheadings of Louis XVI and Marie Antoinette were not legal acts, either. But that was small consolation to them.