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OCTOBER 18, 2004
Edited by Ira Sager Talk Show "I'll bet both [Bush and Kerry] were wishing they could reach as many people on a daily basis as I do." --Oprah Winfrey, dismissing a possible future in politics, in New York's Daily News AFTERLIVES There's Life After Schwab Three months after being ousted from Charles Schwab (SCH ), David Pottruck is teaching B-school and getting into the private equity business. The former Schwab CEO has formed The Pottruck Group to invest his own money, BusinessWeek has learned. So far, the "group" is just Pottruck and an assistant -- sharing an office in San Francisco with private equity firm Francisco Partners. Pottruck says he's eyeing several fields, including companies that provide outsourcing services, pay-for-performance advertising that's popular on the Net, and health care for baby boomers. Together with co-investors, he plans to take majority stakes in established companies or spin-offs from public companies. No investments have been made, though Pottruck is evaluating companies. "Maybe in the process of looking at companies, I could find one where I could actually end up as the CEO," he says. On Oct. 12, Pottruck will start teaching a five-week course for senior managers at the Wharton School. An alum, Pottruck joined as a senior fellow in the management department before the fall semester began. His course will be "The Role of the CEO," covering "lessons learned." The 56-year-old Pottruck is upbeat about his 20 years at Schwab, although his final 14 months were tough -- especially working in the shadow of the founder and chairman, Chuck Schwab. "I never considered Chuck Schwab and myself to be equal," he says. Even after Schwab handed off the CEO job in May, 2003, there was always a lingering possibility that he might want it back. Schwab took the post after Pottruck left. Pottruck accepts the blame for Schwab's poor performance on his watch. He concedes that opportunities were missed, including the boom in mortgage refinancing, 401(k) plans, and bank consolidation. But he does expect to return to the executive suite at some point, although no offers have come in yet. Luckily for him, second acts in business are not uncommon. Chuck Schwab was once a failed mutual-fund manager. By Justin Hibbard   DISNEY SLUGFESTS The Ovitz Affair: Directors Beware The hottest story line at Walt Disney (DIS ) is nearly 10 years old and plays out in a Delaware court on Oct. 18. That's when Disney board members go on trial, in a shareholder lawsuit, for allegedly failing to oversee properly CEO Michael Eisner's 1995 hiring of talent agent Michael Ovitz as president. At issue: Will board members have to repay the estimated $140 million Ovitz got when he was forced out after just 15 months? The case -- a "derivative lawsuit," in which damages would be paid to the company, not the shareholders -- is already a soap opera, with tales of backbiting by anti-Ovitz Disneyites and of Ovitz' wild spending. In allowing it to proceed, Judge William Chandler noted that board minutes show little time was spent approving Ovitz' contract and no questions were asked. Chandler questioned whether directors could "be held personally liable to the corporation for a knowing or intentional lack of due care." If found to have acted in "bad faith," directors could be forced to pay damages unless their insurance specifically covers it, says Charles Elson, a University of Delaware professor. Disney wouldn't discuss directors' insurance, and directors' lawyers declined comment. By Ronald Grover STOCK ANSWERS An Index For Board Watchers Researchers have long tried to assess the impact of good governance on stock returns. On Nov. 1, proxy adviser Glass Lewis will introduce a stock index that links the two. Based on research from Harvard Law School professor Lucian Bebchuk, the Shareholder Rights Index reweights the Standard & Poor's 500-stock index, giving more heft to companies with less-entrenched boards. Bebchuk's innovation is to home in on six provisions that hurt shareholder value. Black marks are given to companies with: staggered boards, which protect against proxy fights; limits to amend by-laws; supermajority requirements for mergers; limits to amend the company charter; poison pills; and golden parachutes. The lower the occurrence of any of these, the more weight a company receives in the index. Southern Co., First Data, and CVS, for instance, have a much larger position in the Shareholder Rights Index than they do in the S&P 500, according to Greg Taxin, CEO of Glass Lewis. Taxin has confidence in Bebchuk's research, which has shown that the absence of those six "bad guys," as Bebchuk says, correlates with increased shareholder value. From 1990 to 2003, Bebchuk says, an investor holding stocks with none of the six bad indicators, while shorting stocks with five or six of them, got an annual 7% premium on his returns. Bebchuk cautions that past results don't always reflect future returns. But he thinks the research may be a guidepost to make institutional investors more effective watchdogs. "It's a better identification of what provisions institutions should target, other than going after provisions that are innocuous," Bebchuk says. And for companies, it's a measure of how to do good, and do well. By Brian Hindo INN BUSINESS Farewell Hotel It hosted six Academy Awards. Its Cocoanut Grove nightclub helped launch singers like Bing Crosby. Nixon wrote his "Checkers" speech by the pool. And in 1968, Robert F. Kennedy was shot in its pantry. Los Angeles' Ambassador Hotel may soon face its own demise. On Oct. 12, a school board, which owns the long-shuttered hotel, will vote on a proposal to tear it down for an elementary school. A facade like the original would be built, but critics want the hotel intact. School officials say that would add $100 million to a $318 million project. But it would be a good history lesson. By Christopher Palmeri FACE TIME Lawrence Auriana: Fighting The Mob Label -- Again  The evil great whites in the animated movie Shark Tale have Italian names and the voices of actors known for mobster roles, including Robert De Niro (The Godfather II) and Michael Imperioli (The Sopranos). That has Lawrence Auriana mad enough to bite off someone's leg. "It's a horrendous exhibition of negative stereotypes," says Auriana, co-manager of the $6.5 billion Federated Kaufmann Fund (KAUAX
) and president of the Columbus Citizens Foundation, an Italian-American heritage group.Auriana sent a letter to Steven Spielberg, a founder of the film's producer, Dream-Works SKG, asking that Italian names, mannerisms, and speech be removed -- to no avail. So at the New York premiere on Sept. 27, attendees faced a phalanx of leafleteers -- also to no avail. Shark Tale took in $49.1 million at the box office over the weekend. Two years ago, Auriana did get a court to block actors from The Sopranos from joining his group's Columbus Day Parade. By Lauren Young MAD AVE Will Your Kids' Favorite DVD Be An Ad? (Extended) Think there's too much product placement in TV and movies, especially aimed at kids? Well, this fall, brand names won't just be sprinkled into show -- they'll be the show. More toymakers are going Hollywood with their own direct-to-video animated full-length feature films. Mattel's (MAT ) Barbie is the queen of the genre, having turned out three films in as many years, each grossing about $35 million, plus more than $200 million in sales of related items for each film. But Barbie isn't the only toy that's ready for a closeup. Hasbro 's (HAS ) G.I. Joe, LEGO's Bionicle, American Greetings' (AM ) Care Bears, and Hit Entertainment's Bob the Builder will all have feature films out this fall. Toymakers see feature films as the next step from TV and short-story video -- and critical to establishing fresh stories and characters on which to base new toys. Besides, as a media buy, it's hard to beat your own feature film for kids. Children, especially preschoolers, watch their favorite DVDs more than 100 times. Talk about media saturation. For an extended version of this story, see BW Online, 10/06/04, "Turning Old Toys into New Stars " By David Kiley CAR TALK On Track To Grab More Truck Buyers Toyota Motor (TM ) has a novel way to reach truck buyers scattered throughout the country: moving billboards. The company struck a deal with Amtrak to paint the lead car of cross-country trains with an ad for its Tundra Double Cab. The one-month campaign, which kicks off on Nov. 1, covers trains on two popular routes: the Silver Service, from New York to Florida, and the Texas Eagle, from Chicago to Los Angeles. It's part of Toyota's drive to boost its share of the booming U.S. truck market. The company won't say how much it's spending, but Amtrak says it charges about $10,000 a month per train, not including the paint job. By Chester Dawson 
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