Corporate America is dominated by chief executives who could use a good kick in the rear, according to legendary raider Carl Icahn, who spoke at Bear Stearns' annual credit conference in New York last week. Icahn, who likened CEOs to college fraternity presidents who are likable but toe the line and avoid making fundamental changes, encouraged conference attendees to put the pressure on underperforming CEOs. Icahn said he is surprised there have not been more scandals like those of Enron and Tyco and noted that corporate governance reforms have stalled. It is up to investors to turn into corporate activists to enact change, he said, even going so far as to imply that it is their moral duty to do so for the good of the U.S. economy. "Some of you should become corporate activists," he quipped to the crowd of fixed-income investors, bankers and researchers.
Icahn, who claimed to have made $1 billion from the split-up of R.J. Reynolds and Nabisco, also spoke on the state of the U.S. economy. He said the housing market is in the midst of an unsustainable bubble and, referring to the corporate bond market, said, "The refinancings of today will be the bankruptcies of tomorrow."
The corporate raider shared anecdotes from some of his takeover battles and discussed some of the below-the-belt threats he encountered during his initiatives. He added that companies have a hometown advantage in dealing with local bankruptcy judges, because they perceive corporate raiders as out-of-town attackers. Icahn ended his roughly 40-minute set by repeating an oft-told lesson he said he has learned from the world of corporate finance: "If you want a friend, get a dog."