Cramer: Check your tactics at the door, Dan Loeb
Where do we draw the line between feeling bad for a CEO and knowing that they are paid well for what they do?
Is it ever right to wish that maybe their critics had a bit more tact and treated them with more respect?
That is what was going through Jim Cramer's mind when he saw the peace treaty announced between Dow Chemical's Andrew Liveris and Dan Loeb of Third Point on Friday.
Third Point reportedly owns 2 percent of Dow's shares and struck a treaty with Dow that allowed Third Point to appoint two men as directors on Dow's board. Third Point selected Steve Miller, the chairman of AIG, and Ray Milchovich, former CEO of Foster Wheeler and now lead director at Nucor.
To boot, the agreement gives these two directors stock appreciation rights from Loeb's hedge fund, even as Dow Chemical's stock goes higher.
"A controversial pay package to say the least, given that these directors are supposed to be working for all the shareholders, not just one of them," Cramer noted.
The "Mad Money" host described the way that these directors got on board as ugly, demeaning, and downright vicious. It turned his stomach just thinking about it.
Loeb released a three-minute video with a stentorian announcer talking about bad decisions and broken promises that the company has made.
"Loeb's video was vicious, to say the least, and I say that as someone who regularly berates underperforming CEOs on the 'Mad Money' wall of shame," Cramer added.
As a background on Dow, after stumbling for a bit following the great recession it has turned itself around to be one of the best performers in the chemical group in the past three years. The stock is up up 19 percent in 2014. Liveris worked tirelessly to increase both the dividend and a buyback for shareholders.
None of that mattered.
"CEO's who work hard to create value and are doing so, deserve better than to be smeared with hit job videos so that some hedge fund can get a slightly better negotiating position."
It seems wrong to Cramer, and frankly he expects better from grownups. Let alone grown-up money managers.
The truth behind it is that while Liveris has made mistakes in the past, Cramer thinks that he has now delivered a ton of value. Some may argue that it is only because Loeb put him in the hot seat. However at the end of the day, it was Liveris who created the value, not Loeb.
And Cramer gets it. He was once a hedge fund manager, solely focused on making money. If the company didn't do what he wanted, he would sell the stock. But activist funds are different because they are so big, they can put pressure on CEOs. Cramer just wishes they would put pressure on the bad CEOs, not the good ones.
Some may even argue that these CEOs make so much money that they can take care of themselves. And maybe they are right.
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"I still think that the kind of smear campaign that Dan Loeb waged against Andrew Liveris is wrong. I want embarrassment where embarrassment is due," Cramer said.
Cramer warns money managers to check the attitude at the door. CEOs deserve more than getting snowed by a video smear job. Let's keep a little tact and class in this business—or at least preserve what little is left.
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