SBJ/June 9 - 15, 2003/This Weeks Issue

Top exec has no equity in CART, fueling questions and rumors

Tucked away in financially sputtering Championship Auto Racing Team's annual proxy is a striking disclosure: Chief executive Chris Pook owns no company stock.

Since he became CEO on Dec. 18, 2001, the company's share price has fallen 81 percent. Taken in that light, staying away from the stock is not a bad decision. But investors like to see the interests of management aligned with their own, which usually means CEOs and their underlings own company shares.

"What is his stake in making things work?" asked Dennis McAlpine, a research analyst who follows auto racing companies. "It is not a good sign."

Indeed. Few public companies of any kind have CEO's who are not equity holders, said Cheryl Gustitus, vice president with Institutional Shareholder Services, an investors rights group, in an e-mail. "Typically, it is more beneficial for shareholders when executives — certainly the CEO — have a personal stake in the company's performance."

Pook has undertaken an aggressive and cash-guzzling strategy to turn around CART by getting the open-wheel sanctioning body into the race event promotion business.

Top CART shareholders
No. of shares
Gerald Forsythe
Fidelity Management
Jon Vannini
Fuller & Thaler Asset Management
Source: CART proxy

That risky maneuver has yet to bear fruit, and it led to 2002 losses of $14.5 million, compared with a 2001 shortfall of only $950,000. Meanwhile, the company's cash and short-term investments, a measure of its financial liquidity, skidded 39 percent to $71 million in the first 15 months of Pook's tenure.

Company spokesman Adam Saal wouldn't comment on the shareless Pook.

Questioned 13 months ago about the same issue, Pook replied, "Right now, they are getting 18 hours a day out of me. I think that is a pretty good interest in the company."

There could be another, more recent reason why Pook still does not own any shares. When a material event is looming, company insiders are precluded under federal securities law from buying or selling shares. Rumors have swirled around CART that insiders will take the company private. If true, that would certainly constitute an event that would restrain Pook from buying shares.

Even so, it's doubtful that would cover his entire 17½-month reign.

Last year, Pook was given 250,000 options to buy shares at a price of $4.50. The stock today is at $3, making the options worthless. He received compensation totaling $564,000.

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