"It sounds corny, but it bothers me about the country. The country did a lot for me," Carl Icahn says. "I had nothing, I grew up in Queens, I was able to go to a good college, I made all this money. And I feel sad because you do have a great country, it's just sad that the system is dysfunctional."

One problem is lack of accountability: "You had very few real, functioning boards to control what went on on Wall Street," he says. The CEO "puts friends on the board, his cronies, and in the end those guys aren't going to throw him out. These CEOs, with many exceptions, are very mediocre guys."

Ismael Roldan

When Wall Street crashed, he adds, the guys that drove the companies off the cliff made off with huge severance packages. "It's worse than what Marie Antoinette got guillotined for! They just walked off with hundreds of millions, leaving shareholders and employees stranded. And where's the outrage?"

Mr. Icahn recently launched United Shareholders of America, a campaign to change laws to make companies, and CEOs, more accountable. New laws, he says, will make CEOs realize "that if they're going to mess up and they're playing golf all day, some shareholders will be able to call a meeting to say no more poison pills, no more staggered boards, we want you to get out of here."

Why does he care so much about this? "Because I really think current boards and managements are killing the country," he says. "I'll tell you why, 'cause I've lived it. I'm on a lot of boards, I see how ineffectual they are."

There are, of course, exceptions. But Mr. Icahn says some boards are so bad that it's (almost) funny. There's no need to watch Saturday Night Live anymore, he says, "I just sit at a board meeting."

So there you have it: a billionaire investor, ranked No. 20 earlier this year on the Forbes list of the richest Americans, keeping an eye on Wall Street's fat cats. Some will question his motives. Mr. Icahn is famous for acquiring positions in underperforming companies and then agitating for change. Empowering shareholders to get rid of bad management may be a worthy cause. But wouldn't it also make his job a lot easier?

"It actually doesn't help me to increase shareholders' rights," he argues. "It might hurt my business, but it's something that should be done." Changing the rules, he explains, could just bring on more proxy fights. Now, "I'm one of the few guys that will launch a proxy fight. If you got more shareholders rights a lot of others would do it . . . I'm one of the few guys that can go and do it and stand up to these guys. It may take me a year or two but I can do something."

Mr. Icahn, 72, grew up middle class in Far Rockaway, Queens. (In New York, "anywhere you bought real estate, let's say in the '50s, you would have made money -- except where I grew up.") He graduated from Princeton, dropped out of medical school, joined the army, and then began his career on Wall Street in 1961. Since then, he has taken significant or controlling positions in RJR Nabisco, TWA, Texaco, Phillips Petroleum, Western Union, Viacom and Time Warner, to name just a few. He says that he's unusual in this business in that "I made all this money and kept it."

This summer, he worked with Microsoft to purchase Yahoo's "search," but settled for a place on the board. "I thought they would do a deal with Microsoft. Obviously, I think Yahoo made a mistake by not doing so. I talked to [Microsoft CEO] Steve Ballmer quite a bit, and we had a pretty damn good deal to sell search," he says. "I thought I could be an activist in it, but it was very difficult. But these things take time." Mr. Icahn says he can't comment too much about the issue, but he still thinks that Yahoo "should do a deal with Microsoft."

Mr. Icahn describes himself as "sort of an obsessive, workaholic kind of guy," and nailing down an appointment with him wasn't easy. When we finally sit down for a long talk at his midtown Manhattan office, it is dark outside. His office resembles a luxurious study and is quite cozy -- even with the cannon-shaped lamp and battle-themed artwork in the hallway. "The real good one is a Meissonier of Napoleon ['The Battle of Friedland']," he says.

His image has changed since the 1980s hostile-takeover era, when a TWA president called him "one of the greediest men on earth." The language used to describe Mr. Icahn is much kinder these days: A "corporate raider" has evolved into a "shareholder activist."

"I never changed," Mr. Icahn says. "A rose is still a rose, I guess." But he admits, "Yeah, I'm perceived better than I was . . . I don't think it's a word that matters, but a raider was a misnomer anyway . . . a raider is perceived as somebody who goes and takes something. You raid a village, you take all the stuff out. Every company I've ever gone into I've put a lot of money in. I've owned companies for the last 20, 30 years."

Mr. Icahn has been singing a similar tune for a long time, but now his message will likely resonate. He says of his United Shareholders of America: "We get a lot of people now joining because they understand one thing: how screwed they got." (People sign up for free on his blog, Icahnreport.com.)

He says poor accountability at the top helped fuel the subprime crisis. Some "Wall Street firms went out and securitized mortgages -- that was how it all started. And you kept securitizing and securitizing to where it made no sense . . . Wall Street never should have underwrote [mortgage-backed securities] to the point that they did, because it was taking undue risk. So if you had a decent board, that board should have stopped the CEO from doing it, or got rid of the CEO or at least checked, and said: Why are we taking all this risk?"

Too much money has been put at risk by institutions that can't afford it, he says. "Endowment funds and pension funds have put too much money into private equity and hedge funds, but some of this money has not even been marked down yet. You have a debt market that is in a depression. If this continues, it will be very difficult for private equity to pay debt by recapitalizing if they need to."

How has this market affected his own hedge fund? "I've been bearish for a long time. But we do have a hedge fund and we've lost money, no question. But we didn't really leverage. You know, we have a lot of cash around . . . you didn't have to be real smart to look at the bubble that was going on for the last five years and say, how long can this last? I mean any smart guy said it wasn't going to last, it was just a question of when to get off the merry-go-round."

So where does the oft-cited "greed and corruption on Wall Street" fit in? "People are out to make money, that's what they do! That's what the driving force of the capitalistic system is." He adds that many states are somewhat to blame for the current crisis. "Look at the laws in most states that protect dysfunctional boards and managements by permitting staggered boards, poison pills, unfair elections, etc."

Mr. Icahn argues that America's ideals of democracy and accountability do not extend to corporations. He asks, what if "you want to go against the incumbent senator, you have to put up your money, but that senator could take it from the Treasury? You'd put the senator in jail! But that's what you do in corporate America."

So basically, it's easier to elect the leader of the Free World than to change the management of a company? "Much easier!" he exclaims. "Hey, you just did it. It's much easier, 'cause you have fair rules."

As for Barack Obama, he should not "let the world think, the country think, that he's coming after corporations with overregulation," Mr. Icahn says. "I'm not against taxing rich individuals but I'm against taxing corporations. Once you start hitting corporations, they will stop hiring and investing. Corporations are the lifeblood of a capitalistic system." He says the bailout was necessary, but it should have been tougher on CEO pay and accountability.

Mr. Icahn claims he's never seen a downturn like this. "You've never had the banks frozen up. You never, that I can remember, saw it where you had this kind of a depression in the debt markets, where you're crowding out any ability for corporations to raise new debt."

There may be more pain to come. "I think New York real estate is going to get really badly hit. It's badly hit already but I think people are in denial," Mr. Icahn says. The city may also have far fewer investment bankers. He says that for the past 10 to 15 years investment bankers made fortunes by borrowing, and that leverage isn't coming back for a long time. "You've had a sea change in investment banking. You certainly can still make some money, but it's not going to be money based on this tremendous leverage. So therefore, you don't need all these people to invest that money, because you're not going to have the money to invest."

The average investor today, Mr. Icahn says, should be very careful. "Right now there's great opportunity in the debt markets, but you have to know what you're doing."

The problems Mr. Icahn describes could take a long time to fix. In the meantime, he'll be out there demanding accountability. "I can go in and save 30% in almost any company because there is so much waste and mismanagement," he says. "I'm not even a manager, and I don't claim to be. But I can put the right guy in, I don't micromanage him, and if he ain't doing the job he knows I can throw him out. And very rarely do I have to throw him out. Because even some of these CEOS that are doing a terrible job and playing golf all day . . . if they knew they could be accountable they could probably do a much better job."

So ideally, would corporate America get to a point where it doesn't need a Carl Icahn anymore? "You still need people to do it, what I do," he says. "Somebody's still going to have to go and raise hell a little bit."



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