The Dilemma of Harold Hughes - Empiricum Op-Ed

Perception is the outward manifestation of one's reputation. The perception can be adorned, managed and controlled to enhance and maintain that reputation.

At the Annual Shareholders Meeting of Rambus Inc. a couple of weeks ago, the company Chief Executive Officer, Harold Hughes, responded to a well-intended question from a shareholder about the excessive and recurrent option grants and questionably timely exercise or selling thereof. Hughes' responses to the question were widely perceived as arrogant, irresponsible and reckless. On the basis of those responses, Hughes is now perceived and reputed as such and, coupled with his failure to apologize to-date, as a hardliner and, by his own admission, "combative in nature."

Yesterday, the Enron verdict was handed down finding Kenneth Lay and Jeffery Skilling guilty on numerous counts. The crux of the Enron fraud and conspiracy case is that management was telling their employees to "buy more" Enron stocks while they themselves were planning to keep "selling more...and more... and more." This brings to mind what Hughes told a shareholder at the annual meeting "to sell if you don't like what you see and buy coke."

That quoted statement now puts Hughes in a big dilemma.

There is a report that shows that there has been "0" stock purchases as compared to "35" sales by Rambus Insiders for the last 6 months. RMBS: Insider Transactions for RAMBUS INC - Yahoo! Finance.

That's where Hughes' dilemma lies. At the same shareholders meeting, Hughes was also quoted as saying that he does not know how to manage the company without the option grants. If that is the case, how can he effectively manage the company now? If he and the Board of Directors embark into a new round of option grants now that the stock price was visited by a barber, what could be the perception that such action could create? Is it also a coincidence that there has been no independent stock purchases by the insiders since the annual meeting? If Hughes and his fellow insiders are conscious and aware of this predicament, and avoid making their purchases or option grants as a result of the bad perception of management in the aftermath of the annual meeting, how can the stock price go up?

Whether Hughes will apologize or not at the "analysts' meeting," that dilemma continues. Let's hope that the members of the Board of Directors are all smart enough to realize this predicament.