How the Movie Mom Might Expose "Enron II"

Nell Minow leads a double life. Half her time is spent as The Movie Mom, a no-nonsense critic, columnist and radio personality (Movie Mom on Britney's Spears's Crossroads: "The good news is, Britney's a better actress than Mariah Carey. The bad news is, it's not a very good movie.").

The other half of the time, Minow edits The Corporate Library, an online research center specializing in corporate governance. It may sound like it's a world away from Movie Mom, but Minow says that the two are surprisingly similar. Michelle Chihara spoke with her recently about the Corporate Library's role in exposing potential misconduct at Global Crossing, a communications giant now facing bankruptcy, worthless stock and the possibility of total liquidation.

Michelle Chihara: You were one of the first people to draw attention to Global Crossing. Is its financial predicament on the same scale as Enron?

Nell Minow: It's too soon to tell. They're alike in some ways, but different in others. Enron's kickoff was the company's acknowledgement of omissions and obfuscations in accounting. That's when we began knowing that there was something crooked at the center. With Global Crossing it's not yet clear if it's failure or fraud.

With Enron, there was some understanding of its original business model, which was producing income. At Global Crossing, investors invested on expectations of future profits. It was more of a speculative investment.

Chihara: Recent revelations, which involve a complex side deal that Global Crossing made with its current potential buyers, make Global Crossing's mess look even more suspicious.

Minow: There's a pattern of insider coziness that's very troubling.

Chihara: How many Global Crossings and Enrons are out there?

Minow: I don't think there are a lot, but I do think there will be more. A company called AES Corporation [which is now selling off millions of dollars worth of assets in an effort to pay down its debt] could be a very troubling story. It could be another Enron, or it could be being unfairly battered because of concerns that it might be another Enron.

Chihara: What does "more" mean?

Minow: It means that the markets as a whole are going to take quite a battering for a while. Over the next 6 months every company is going to have to answer the same question, in one way or another, from shareholders: Why should we believe in your numbers?

Now, most companies will come out all right. They'll be able to say, here are some new numbers we hadn't shown you last time, or we've amended our numbers according to the following rules. Most companies will come out all right.

Chihara: You flagged a corporate executive contract at Global Crossing that promised the CEO everything from the make and model of his BMW to first class tickets to fly his mother back and forth across the country, among other lavish perks. Many people assume that this kind of excess is par for the course at big corporations.

Minow: First of all, that's not the case. But let me put it this way -- that contract was the only thing I flagged at Global Crossing. I decided to do a report on CEO employment contracts, to draw attention to my new Web site. Those contracts are theoretically public, but in reality they're very hard to find. I decided to publish them all in one place.

I got to Global Crossing, and it was so obvious, it was such an abberation. In terms of the total pay package, it was not that shocking. It was in the way the pay package was spelled out; even in the wacky world of CEO pay, it was genuinely shocking.

It wasn't because of flying mom out to visit first class, it wasn't that the make and model of the BMW was spelled out. That's unusual and appalling in its own way, but I understand that those things involve a trivial amount of money. It was the $10 million signing bonus and 2 million shares in options sold at $10 below market value. When a CEO asks for that, that's when you look for the eject button under your desk that opens a trap door under his chair. Because in effect, he's saying, "I don't think stock is going to up under my watch, and when it does go down, I'm not going to pay as much as everyone else."