A Mark-To-Market Joke

The plant manager had presented some good news to the CEO this morning. Shareholders had been complaining about the performance of the stock, and the top boss needed something to mollify them. Hence, he was glad to let in the plant manager, normally someone who thought ill of his new regime of transparency, into the corner office on the 14th floor.

The news turned out to be good indeed. "Sir, I've managed to get a firm valuation on the plant." Then, he supplied the figure, which (the CEO was careful to check in his full and detailed list of accounts) was more than twice the value that the firm was obliged to keep on its books.

"Good!" the CEO replied, a little surprised. He saying so got his guard up, though. Transparency obligations being what they were, you couldn't be too careful these days.

"This valuation...is it a fair one?"

"Oh yeah," his plant manager okayed, "It's about as fair as you can get under current watch-dog standards. I checked around; it's a mark-to-market dealie."

Uh-oh. Now, the CEO's guard was really up. "You said 'mark to market'. I have to tell you that this is a delicate area, so the paperwork on it had better be as solid as can be."

"I know. The paperwork's so solid, you could bring it to court and count on it."

"To court?" Hopefulness is hard to conceal even by a CEO. "Is it that solid?"

"Yep, it certainly is. Any court action that's enforceable will have to use the figure I quoted to you as the basis for its action."

The guy was evidently telling the truth. When this honesty sunk in, the CEO looked as beatific as a typical CEO can be. "That's just wonderful!" There wouldn't be any shareholder querulousness with the marking up at all. Not to mention more serious measures being taken by the feds.

"Yep, and even better for it, the shareholders assented to the figure. They'll not only not cause trouble, they'll back it up all the way."

The look on his division manager's face popped the too good to be true warning flag in the top boss' mind. He looked at his subordinate very carefully.

"Are you completely sure about that? There's no way that this adjustment can wind up in...court, is there?"

Now his plant manager was looking even more wry. "Not unless we fail to follow through on the terms."

Terms? What was this referring to, a fairness opinion? Why wasn't I consulted about this?

"Is there some sort of ambiguity here that you haven't told me about?"

"No, none whatsoever, boss o'mine. The valuation results from a contract that a representative of the executive committee on the board signed, and the audit committe okayed with a 'yippee.' The board sold the plant right out from over us."