What's in a word

Alot more than you think. The Financial Times today has highlighted the example of both Chuck Prince former CEO of Citigroup and Stan O'Neal, former CEO of Merrill Lynch both departed over the past week due to the sub-prime crisis and the impact this has had on their respective banks in terms of write-downs. They have both "retired" rather than "resigned". Take a look at the official announcement of Chuck Prince's departure on the
web site press centre I saw it a few days ago and did not pick up on significance of use of language.

Silly. As John Gapper of the FT points out today, there is a great deal of significance in the word. According to the article and because they retired not resigned, they will walk away with significant amounts in unvested shares i.e ones which he has not bought even at a low price but has been able to leave on the shelf until required. In the case of Chuck Prince this means a further $40million. So now we can see the reason for the delay in Chuck Prince's announcement. The lawyers were hard at work agreeing a statement and there was a great deal of signficance in the words. Good lesson - always remember to deconstruct the official statement, the use of words is invariably very important.

Gapper nicely brings into the piece the element of moral hazard about the deal. He says this is an example of moral hazard, encouraging potentially reckless behaviour. Brings us back to Northern Rock and Governor of the Bank of England. Do you remember that moral hazard was the very real concern he had when considering whether to support the bank or let it fail as he indicated when appearing before the House of Commons Parliamentary Finance and Treasury committee. Interesting how certain phrases which we may or may not have heard of or used before, suddenly become common currency for a while.