One on One with Carl Icahn, Chairman, Icahn Enterprises
Friday, March 21, 2008
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SUSIE GHARIB: Perhaps more than anyone else, the person associated with leading proxy fights these days is Carl Icahn. He calls himself a shareholder activist. He uses funds from his firm, Icahn Associates, to buy stock in a company that he considers undervalued and pressures management to take measures he thinks are necessary to turn it around. If they don't, Icahn often tries to get his own directors elected to the company's board.
I sat down recently with Carl Icahn and began by asking him how he rates his chances of success in proxy fights over the next couple of months, now that hedge funds and mutual funds are joining with him.
CARL ICAHN, CHAIRMAN, ICAHN ENTERPRISES: We think they're pretty good. It depends on the proxy fight of course. We're going to be in two of them that we see coming up: Motorola and Biogen.
GHARIB: So you think you're going to be pretty successful?
ICAHN: We hope so. But again, the best way to win the war is not to fight it and if we can make certain - if the companies will do certain things, then we might not have to do the fight.
GHARIB: You have said that corporate democracy is almost non-existent, because the boards of American companies are allowed to quote rule arbitrarily. If the system is rigged against shareholder activists like you, why do you even bother with proxy fights?
ICAHN: The reason I bother with it, if you're willing to put up a lot of time, a lot of effort and a lot of capital, you can win proxy fights. And you can make inroads. But the system is completely inept. There really is very little corporate democracy. I think economic historians will look back at this period -- provided we don't blow ourselves up or whatever -- and look back and marvel at why the shareholders, who do have the votes, haven't done more about this. And I want to say there are many good CEOs and many good boards. But for the most part in this country, the CEO isn't the fellow that should be running the company.
GHARIB: Why do you think boards have approved CEO salaries and bonuses that many people consider are way out of line?
ICAHN: Because the boards are all buddies with the CEO. You can't nominate your own board unless you do what I do and have a very expensive proxy fight. It's ludicrous. And it's very difficult to go and say, well, we're going to pay you less. What a board should be doing is exactly that and unfortunately the boards don't make most of these guys accountable until it's too late -- like at Enron or finally at WorldCom they made them accountable, but that was way to late.
GHARIB: You noted recently that you've increased shareholder value in public companies by more than $55 billion over the last few years by prodding CEOs and boards. So what does this tell investors about the level of -- the job that American managers are doing?
ICAHN: That's a perfect example of what I'm talking about, Susan. They're not doing a good job and it's a very sad commentary for our economy. That's why I'm so interested in it because I feel strongly about this. I mean I make a lot of money doing this and I'm almost talking against my own job because what we should do is change the rules. And you don't want big government. But government actually in these states protect these guys and what you want to do is make these guys accountable. I can go into any company, almost any company and I'm not a manager and I say this at the risk of being immodest, and I can knock 30 percent off costs because there's so much waste and the CEO is out there playing golf. And I used to say the only time you get him off the golf course is when I file a 13-D.
GHARIB: Let me ask you something else. You mentioned that you've targeted Motorola and that you're going to have a proxy fight. What do you hope to accomplish there?
ICAHN: What I want to accomplish and I really think I'm making inroads in this and I think hopefully we're on the same wavelength here. They should take the hand-held business and spin it off to the shareholders and make it a separate business where you can get a top management team in there - a management team that understands it, a management team that will know what to do. And that company is an extremely valuable company. I mean the hand-held business, they put -- even last year I think they put in two and a half billion just in research. They put billions and billions and billions over the years into it. This is a really top company. It's very hard to enter into the hand-held business, many barriers of entrance. But the business is falling on the vine and evaporating, because this board has failed to act up to now.
GHARIB: Mr. Icahn, don't take this the wrong way, but some critics call you an unlikely Robin Hood, that it's not so much that you're a shareholder activist, but that you're somebody looking to make a quick buck and that some of the fixes that you put into these companies may be good for the short run, but they're not always in the best long-term interests of a company. What do you say to that?
ICAHN: Well, there's two questions. One, I'm not telling you I'm a Robin Hood. I do it because I'm a fiduciary for my fund, a hedge fund. I'm a fiduciary, really to the people who invest with me and I'm one of my own investors, so I'm a fiduciary to myself, OK? I'm not here to tell you that I'm Robin Hood or doing it for anybody else. But it does work out inordinately well for shareholders. They did make $55 billion in the last year, if they were just invested in the companies we went into.
GHARIB: But the long-term.
ICAHN: OK, let's talk about that. Every company that I've gotten into -- every one -- without exception, we've put millions, if not hundreds of millions of dollars into these companies. We're not against investing, so that's nonsense to say that we're just looking for short-term fixes. We're looking to save costs and stop the waste. I just got into Imclone six to eight months ago. We've saved hundreds of millions in costs, but we're spending a lot more on clinical testing and research. So we're not against it. We're just against waste. So that's a completely -- that criticism in my mind absolutely makes no sense.
GHARIB: Mr. Icahn, thank you very much for your time. ICAHN: A pleasure being here.
GHARIB: We contacted Motorola about Icahn's charges about actions by the company's board, but Motorola declined to comment.
