You Look Maaarvelous… But your future may not


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Expert Perspective by Grahall’s OmniMedia Editorial Board

expert perspective telescopeWe read with raised eyebrows the September 24, 2009 article in the Wall Street Journal titled “Marvel CEO Got Options Ahead of Deal” where authors Ethan Smith and Joann S. Lublin state that “Marvel Entertainment Inc. Chief Executive Isaac ‘Ike’ Perlmutter was granted in excess of 1 million stock options in the weeks after an  employee of Marvel commenced discussions with Walt Disney Co. that ultimately led to the consummation of a merger agreement, according to a filing Disney submitted to the Securities and Exchange Commission.” 

What in the world was Marvel’s Board thinking?  Have they been reading the popular press?  Don’t they know that actions like this will attract “lightning rod like” criticism, even outside the banking business? 

Ultimately, this situation may hinge on whether the Board actually knew that discussions were “opened” with Disney. It isn’t unusual for the Board to be presented with a “package” for consideration after an initial contact regarding a merger has been made, though the Board will often be aware that such a contact has occurred.  However, shouldn’t this Board – or any Board – assure itself prior to making any significant equity grant that it may do so without violating any fiduciary duty or not run afoul of the securities laws?  Shouldn’t its governance process regarding equity awards require an affirmative obligation to assure itself that any awards can be made without any negative legal or perceptual consequence to the Company?

Regardless of whether Marvel’s Board knew of the negotiations, or whether it was acting in ignorance, we are equally dismayed and concerned about equity award practices at Marvel.  How could a “subordinate” (this not too low level “subordinate,” according to Smith and Lublin, being David Maisel, the Chairman of Marvel’s film Division) essentially open up merger discussions with Disney and NOT at least advise the CEO? 

Is this a corporate faux pas or something more serious? As with so many things, timing is everything. The WSJ article continues “Whether the two option grants to Mr. Perlmutter violated securities law would partly depend on whether any Marvel board members were aware of the Maisel-Iger meeting, according to a New York securities lawyer.
‘If the board didn’t know, they didn’t do anything wrong,’ the securities lawyer said. But if board members were aware of a possible business combination, the lawyer continued, ‘that certainly is a securities law violation.’”

The economic crisis of 2008 and 2009 has certainly ripped a hole in the pocket of many high level executives.  Underwater stock options, shares valued substantially lower than a year ago, and 401(k) and other investment portfolios with their values halved have created their share of downsizing by high level executives.   Add to this today’s unfavorable focus on executive pay and perks, and an executive might find him- or herself in a yellow cab or on a commercial flight.   Grahall would not be surprised to see some companies tempted to “slip in” a mega stock option grant or two to help executives recover from the losses of the past year.   This is a temptation that should appropriately be resisted.

Maybe this situation is an accidental outcome for Mr. Perlmutter. Let’s just hope that Marvel’s Board, Perlmutter and  Maisel find themselves holding the “Three Blind Mice” award for 2009 rather than facing charges of securities law violations.

Contact Grahall’s OmniMedia Editorial Board at

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