The secret of CEO success.
There are few CEOs like Howard Hill. In the short space of five years, he has guided ConArts Technologies from its scrappy beginnings as just another Internet company through the heady days of its huge initial success to its spectacular current position as one of our largest and most influential bankruptcies. Through it all, Hill saw his own fortune grow to more than $12 billion last spring when he dumped his stock just before the collapse.
How does such an experience make a man feel? To find out, I attempted to interview Hill at his 160-acre Aspen getaway, where he was recovering from scruple-bypass surgery. Unfortunately, I was not permitted access-his security guards apparently mistook me for a disgruntled stockholder. So instead I traveled back in time and interviewed him in early 2001 (there are some advantages to writing only about fictitious subjects).
Lincoln Spector: ConArts Technologies is now one of the most successful companies in the world, yet no one is exactly sure what it does. Could you…
Howard Hill: So how much ConArts stock do you own?
LS: Um, I don’t own any of your stock.
HH: Well, we have to fix that. It’s higher than it’s ever been before, so now’s the time to buy.
LS: Actually, I can’t own stock in your company while writing this article. That would be a conflict of journalistic ethics.
HH: Journalistic what?
LS: Never mind. ConArts Technologies is now one of the most successful companies in the world, yet no one is exactly sure what it does. Could you explain the company’s business?
HH: Sure. We’re an Internet company. We sell the rights to transport data over wire owned by other companies, who also pay us to lease their wire.
LS: Why would they pay you for this?
HH: Because we’re cutting-edge. We’re the new paradigm. We’re the road warriors of the information highway.
LS: OK, but why don’t your customers simply buy from your suppliers? What does ConArts offer that no one else has?
HH: Why don’t you ask some of our customers? I’ll put you in touch as soon as we acquire some. And we will. Why? Because our stock is going through the roof! Everyone wants to own it-even our employees, who are happy to work for very low wages as long as they get our incredible stock bonuses.
LS: Weren’t some of your employees complaining about the fact that all of their compensation is tied to your stock?
HH: A few malcontents did complain. But the last round of layoffs silenced them.
LS: Let’s talk about that. Late last year, while ConArts was one of the most profitable and fastest-growing companies in the history of the planet, you inexplicably laid off three-quarters of your workforce. Why?
HH: Let me make one thing clear: We at ConArts do not like outemploying our family. But the workforce reconstruction was absolutely necessary if we were to remain competitive in the all-important area of CEO compensation. And remember, the few unfortunates who we had to let go over a bubbling cauldron were comforted by our extremely generous stock options. Some of them own millions in ConArts stock.
LS: So they can simply sell their stock and live happily ever after?
HH: Well, not yet. Outfoxed employees are not allowed to sell their stocks until August 2002, by which time they will be worth even more. [Editor’s note: In August 2002, ConArts stock was valued primarily for insulation and submarine ballast.]
LS: As CEO, do your stock bonuses carry the same limitation?
HH: Funny you asked. I just got another bonus this morning and I’d like to get rid of it. It’s very profitable, you know.
LS: Let’s talk about that profitability. Your business model involves selling something you don’t have, and you’ve admitted that you’ve yet to acquire a customer. Yet last year you reported profits of 600 percent. How did you manage that?
HH: Hard work, diligence, and a good relationship with my independent auditor, Corleone Accounting. They really do wonders. For instance, you would guess that leased data lines are ConArts’ single highest expense. And yet, thanks to Corleone, those expenses simply don’t show up on the books. Now, that’s the secret to good stocks!
LS: I can’t get over the feeling that there’s a scam here, somewhere. Important expenses aren’t on the books, your stock prices are soaring despite business practices that can’t possibly be profitable, you’re shoving stocks down employees’ throats, and yet you’re selling your own stocks as fast as you get them. What does the federal government say?
HH: They say that business is self-regulating, that there are no problems with the economy that lower corporate taxes wouldn’t cure, and that they need campaign contributions.
LS: What do you see as the future for ConArts?
HH: We expect to buy out Enron, WorldCom, General Electric and AOL Time Warner as soon as our stock reaches $330 a share. That should be in, oh, October of 2002.