Train Wreck

This might have been more timely a week or two ago, but there's always Boss's Day (October 16th in case you were wondering) and the inevitable birthday. Regardless of the occasion, giving and receiving gifts are typically joyous experiences for both parties.

But when it comes to an employee giving his or her boss a gift, well, let's just say there might be a whole lot more going on there than meets the eye.

Your boss will likely think you're sucking up; dysfunctional executives love that sort of thing. But in fact, you're sending a message. And whether it's out in the open or subtly or even not-so-subtly hidden is entirely up to you. In any case, here are some novel suggestions for the nutcase boss on your gift list.

Blood pressure monitor

(Credit: A&D Medical)

Blood pressure monitor. Ostensibly because you care about him or her, giving this to your Type A boss is really about your own health. Maybe when his blood pressure hits 160/100 he'll stop ranting and raving at you and go out and take a walk or something.

Controlling People by Patricia Evans

(Credit: Steve Tobak)

Book on controlling people. Bosses are always trying to get employees to read books and take classes to improve their skills. Why not the other way around? It's a great way to send a not-so-subtle message about what you think of their behavior. This is one of my favorites.

Market analysis tool

(Credit: Steve Tobak)

High-tech market analysis tool. Decision-making for dysfunctional executives is often more about their emotional state or superstition than anything resembling logic or deductive reasoning. Who knows, buying and selling stocks at random might actually be an improvement.

Armida Poizin Wine

(Credit: Steve Tobak)

Poizin "the wine to die for". What better way to reduce the stress of acting out and throwing tantrums like a spoiled child all day long than a glass or two of vino. Not only is this very good wine, but like the book, your boss may even get the hint.

Danbury Greatest Boss Clock

(Credit: Steve Tobak)

"Greatest boss" clock. Sadly, dysfunctional bosses are often in denial about their behavior. Most believe they have to be tough for their employee's own good. More than likely your boss will think you mean it, but you and your coworkers will know the truth.

Favorite Pet Picture Frame

(Credit: Casey Tobak)

Favorite pet picture frame. Dysfunctional executives don't relate well to people, which explains why they act like self-important jerks much of the time. But they love their pets, which they often elevate to iconic status. Otherwise your boss can use it for the person she loves most - herself.

Now you know the real reason why it's better to give than to receive ... at least until you become a boss and start getting strange gifts with double meanings.

Did you know that the president has a Corporate Fraud Task Force? That's right, he does. It's led by the deputy attorney general, whoever that is.

Anyway, this task force has apparently been very busy. Over a five-year period since its inception, the task force claims 1,236 corporate fraud convictions, including 214 CEOs and presidents, 53 CFOs, 23 corporate counsels, and 129 vice presidents.

That's a lot of fraud. Who knew there were so many dysfunctional executives in this great nation? The dark side of greed and capitalism must be pretty attractive, huh?

I also wonder what these executives' boards of directors were doing while all this fraud was going on? Aren't they supposed to be looking out for shareholders? Isn't that what corporate governance is all about?

Anyway, members of the task force have successfully brought a laundry list of fraud and other charges against executives of Adelphia, Cendant, Comverse, Computer Associates, Dynegy, Enron, Enterasys, Homestore, Imclone, Impath, Monster, Network Associates, Prudential Securities, Qwest, Refco, and WorldCom.

The Justice Department has also recovered $1 billion in ill-gotten gains and distributed the funds to victims of corporate fraud. Want to know how much money shareholders actually lost in all those fraud cases? Me too, but I'm confident the number has two or three more zeros than what was recovered.

According to a Department of Justice fact sheet, President Bush created the task force in July of 2002 "to restore public and investor confidence in America's corporations following a wave of major corporate scandals." Did it work? Has your confidence in America's corporations been restored? Not mine.

You know what I think? I think it's great that the government is cracking down on white-collar crime. Sure, it's sad that so many officers of public companies have such flexible views on ethics and morality. But you know, if that's the way it's got to be, then I say lock 'em up...without the severance package.

While that might be rewarding, I have to admit it doesn't help investors. If, like me, your confidence in America's corporations has not been restored, there's only one thing you can do about it. Don't let your investment and retirement strategy depend on a branch of the government to cover your butt.

The only way to truly mitigate the potential risk of corporate fraud is to diversify your portfolio, plain and simple. If you don't, you're asking for trouble. I hate to say this, but with these kinds of fraud conviction stats, anyone with 5 percent or 10 percent of their assets in one company's stock really doesn't deserve to keep it.

Just when you think you've seen it all and covered this stuff to death, another (alleged) greedy sociopath comes along with even more creative ways of defrauding investors.

David Brooks, former CEO of body-armor manufacturer DHB Industries, has been indicted by the feds on a laundry list of charges that include conspiracy, securities fraud, insider trading, tax evasion, and obstruction of justice.

The company's former COO, Sandra Hatfield, and CFO, Dawn Schlegel, were also indicted on similar charges.

Brooks and his cronies allegedly (it's always allegedly) used false accounting entries to inflate profit margins, filed misleading SEC reports, pumped up the company's stock ten-fold, and cashed out to the tune of $200 million.

The scandal also includes millions in unreported bonus payments and Brooks' use of company funds for all the usual personal excesses: luxury cars, vacations, jewelry, lavish parties, and to fund other family-owned businesses. But there are excesses I've never seen before: cosmetic surgery and the purchase of an armored vehicle for the family's use.

I've got to ask, what exactly does a family need an armored vehicle for? ... Read the full post at CNET's CES 2010 blog

This blog's supposed to be about corporate dysfunctionality, but somehow we've gotten sidetracked. We've never really looked at the big picture. The big picture is this: a reasonably significant percentage of executives and their boards are dysfunctional.

What do I mean by that? I mean they shouldn't be doing some of the things they're doing, and those things can get them in big trouble with a variety of law enforcement agencies. Why do they do it? Who knows.

As for you good folks--investors and employees--well, I don't want to be an alarmist, but if you knew what really goes on out there, the countless ways you can get screwed, well, let's just say you'd need a good dose of Ambien to get any sleep.

The good news is you can protect yourself; we'll get to that in a minute.

Until then, here are the most common ways that dysfunctional executives and directors can mess up. I've included a few well-known examples, but the scary part is that, for every big-name scandal, hundreds fly under the radar screen.

The seven deadly sins of corporate dysfunctionality

Creative accounting
Most of the biggest scandals of our time have included some form of creative accounting: shell companies, offshore accounts, creative expensing, or just your run of the mill accounting fraud. That's what did in Enron, WorldCom, Adelphia and a host of others.

Conflicts of interest
One of the biggest scams in history was the conflict of interest between investment banks and their research analysts leading up to the dot.com bust. The top ten investment banks coughed up $1.4 billion to get the SEC, the N.Y. attorney general and a host of others off their back. A few analysts were banned, but amazingly, nobody went to jail.

Insider trading
If you really think this is just the domain of Martha Stewart and ImClone ex-CEO Sam Waksal, then I've got some nice used cars from New Orleans to sell you. I'd be willing to bet that at least half the executives who say they've never traded on inside information would be lying. The other half have so much money they don't need to.

Dysfunctional families
I don't care if it's IBM in the old days, Motorola all too recently, Adelphia, Wang Laboratories, or Atmel. If you're considering a company with any family relations on the executive management team or the board, forget it. And if a family actually controls the stock's voting rights, as was the case with Adelphia, soon enough you'll read about it in the newspaper.

Rubber-stamping boards
Behind every dysfunctional executive and company is a board that fits nicely into the CEO's back pocket and rubber-stamps everything put in front of them. Tyco was a great example, but there are probably hundreds, if not thousands of boards that are blindly loyal to their company's CEO.

Generic SEC filings
10Ks have to be the biggest waste of paper since An Inconvenient Truth was published. The risk factors are generic and watered down while the business sections do more to hide than highlight competitive challenges. The lawyers and Sarbanes-Oxley consultants are in charge. That's really scary.

Ludicrous compensation
How many CEOs and other officers have been sacked as a result of stock option backdating scandals? Must be 30 or more in the technology space alone. Besides the sometimes ludicrous equity and monetary compensation, CEOs can sometimes make even more money by quitting or getting fired. Sure, some deserve their pay, but many don't, and there's everything in between.

Well, that's the seven, and I'm not even talking about the rare psychopath that can take down an entire sector. Take Bernie Ebbers of WorldCom. How smart do you have to be to ask a simple question: in what universe does it make sense for a guy who was a motel owner, a milkman, and a gym teacher to somehow be competent at running one of the world's largest telecom companies? Just thinking about it makes me feel delusional.

With all these ways to get hosed, what's an investor to do? Simple, diversify. If you have more than five or ten percent of your net worth in any one stock, you're asking for trouble. As for employees, you need to manage your own career. Don't expect anybody or any company to do it for you. Trust and protect yourself and you'll do fine.

The only person you can be sure isn't dysfunctional is yourself. If you're not sure if you're dysfunctional, take this quiz and find out.

When I was a little kid I was scared of all kinds of things: my dad, the neighborhood bully, yellowjackets, monsters under the bed, ghosts in the closet, you name it. Now I'm a grown-up and I'm not scared of anything...except my wife.

But it wasn't that long ago that someone scared me even more than my wife did. My boss. Actually, I had a string of scary bosses. Managers definitely have a way of being intimidating, and there's a very good reason for that. It's because they can.

Bosses can bully you, scream at you, threaten you, and even terrorize you. Most importantly, they can fire you or even worse--make your life so miserable you wish they'd fire you. In fact, at-will employment gives bosses the power to do almost anything they want, as long as it's legal.

What can you do about it? Well, you can do anything you want; it's a free country. You can quit, yell at your wife, kick the dog, punch a hole in your kitchen wall, or become a monk and submit to a vow of poverty. But all that's likely to get you is divorced, bitten, a broken hand, and a shaved head. ... Read the full post at CNET's CES 2010 blog

Does your boss act out and throw tantrums like a spoiled child?
Does your company ship most of its product the last 24 hours of the quarter?
Are you afraid to bring up certain hot-button issues in meetings for fear of being humiliated?
Do you spend more time covering your ass than you do sitting on it?
Is your company in a perpetual state of limbo because nobody can make a decision?
Does your company's mission statement change weekly?

These are all signs of a dysfunctional workplace. But don't fret; you're not alone. In fact, an entire lexicon has grown up around dysfunctional corporate behavior. See if you can recognize some of the issues that drive you and your co-workers nuts in these definitions:

Analysis paralysis. Chronic debating that obstructs the decision making process. Often a systemic problem within a company and a symptom of dysfunctional leadership, processes, and pretty much everything else. Also see disruptive management style.

Breathing your own fumes. When executives actually start to believe and make decisions based on the spin-doctored bulls--t they consistently spew out to the media, analysts, investors, customers and employees.

Blowing smoke up someone's ass. Feeding an insincere compliment or bulls--t to someone who should know better but hasn't been around long enough to develop a healthy, cynical filter against that sort of thing. Not to be confused with having your head stuck up someone's ass. ... Read the full post at CNET's CES 2010 blog

What do Bernie Ebbers, Walter Forbes, Martin Grass, Dennis Kozlowski, Sanjay Kumar, Ken Lay, Joe Nacchio, John Rigas, Jeff Skilling, and Sam Waksal all have in common?

They were all CEOs of prominent public companies, convicted of big-time corporate fraud and sentenced to lengthy prison terms. They were all also fabulously wealthy (we're talking hundreds of millions of dollars and up) when they committed their crimes.

Who among us hasn't asked themselves, what would I do with $100 million? You get all kinds of whimsical answers to that question, but one thing you never hear is, "I'm going to risk the money, my family's well-being, and my freedom to be a high-powered CEO and defraud thousands of shareholders."

That's because nobody thinks that way and these ten CEOs were no exception. Nevertheless, they risked their careers, families, reputation, wealth, power, everything. And for what? What motivates rich, high-powered CEOs to unnecessarily risk it all against all logic and ethical principals?

Maybe it isn't even about motivation. Perhaps there's something deeper going on here, something in their circuitry that's hard-wired for exceptional success followed by devastating disaster. Or is it just probability? Maybe x% of highly successful, super-wealthy CEOs of prominent public companies will turn out to be dysfunctional crooks. ... Read the full post at CNET's CES 2010 blog