My Very Own Taj Mahal

There's a glistening place called Shalimar, nestled in the foothills of a small city in California called Palo Alto. At first glance, this Silicon Valley town is rather unassuming if not somewhat sleepy, and not quite the place where one would expect to find a name evocative of the palace and gardens built by the Mughal emperor Shah Jahan in Lahore of modern day Pakistan. The original Shalimar was built in 1641 had three terraces and was laid out in the form of an oblong parallelogram, and surrounded by a high brick wall famous for its intricate fretwork. In 1981, Shalimar Gardens was deemed to be such a jewel that it was included as a UNESCO World Heritage Site. We were as perplexed as you must be by now to discover the meaning of what looked to be a mini (but only slightly) and rather exquisite Middle Eastern palace, perhaps an oasis of sorts, preceded by a glittering garden replete with its own reflecting pool, not unlike that of its original namesake, that was decidedly not in Pakistan. To further the confusion, there were in the gardens a number of palm trees that most certainly did not choose on their own to be raised among the scrub brush and bushy trees of the lower Santa Cruz Mountains. “Was this all but a desert mirage?” we wondered

Short of ringing the doorbell unannounced (not that we were by any means capable of hopping what was most surely a well-armed fence), we did everything to determine who lived there and what they did. While we never did get a detailed answer from anyone, although the consensus among the passersby and the townspeople was essentially, “well, you're in the prized fiefdom of Silicon Valley, it must be the home of some CEO.”

According to a recent study, there is a pronounced link between the size of CEO homes and stock performance. The logic may seem a bit rough, but the numbers pan out: “CEOs willing to spend outrageous money on housing aren't concerned about their job security or a watchdog board of directors, meaning they may not be working as hard as shareholders would like.” (MSN Money, 4/11/2007). In fact it would seem that the acquirement of a palatial mansion by a CEO fairly well predicts the demise of their stocks.

That's according to a recent research project completed by finance professors David Yermack of New York University and Crocker Liu of Arizona State University, who recently examined the link between the size of CEO homes and stock performance. It does have a certain logic, come to think of it. Who really needs to sacrifice themselves to some widget in demand (these days some pricey bit of software or a public networking site) when they already own an 11,000 square foot mansion and surely will never spend all the bucks they already have unless they decide to develop real estate on the moon?

After all, who is really to blame? The stock market is rather like Russian Roulette anyway, and if individual investors fail to do their research and invest in companies they believe are managing their money well, well, that's kind of like the owner of an SUV blaming the company that built their vehicle for only giving 12 miles to the gallon and contributing to global warming. People need to do their research!! The CEO is a research genius when it comes to the dough........

So now that we've justified CEO slick spending, let's see what kind of homes they come up with. This is more fun than looking at the final tab of a ritzy celebrity vacation:

The year is 2000, and then-CEO of Power-One Steven Goldman, a maker of power-conversion devices for telecom equipment related to the internet, bought himself a home for 3.3 million dollars. Lest you protest that this is not spectacular, the 1.2 acres on which the home was situated were valued at an additional 3.2 million dollars. The home only has six bedrooms and seven baths, modest structure that it is. The year Mr. Goldman purchased his house, stocks were valued at $86 a share. By year's end, they had fallen to $39.31. For a final, shocking statistic, by September of the following year, stocks were worth a paltry $5.50. But the story has a happy ending: The price of the home has almost certainly increased!