This has been quite the week for CEO mistakes. First was all the hubbub about Scott Thompson, CEO of Yahoo, inflating his resume to include a computer science degree he did not actually receive. According to Mr. Thompson someone at a recruiting firm added that degree claim in 2005, he didn't know it and he's never read his bio since. A simple oversight, if you can believe he hasn't once read his bio in 7 years, and he didn't think it was ever important to correct someone who introduced him or mentioned it. OOPS – the easy answer for someone making several million dollars per year, and trying to guide a very troubled company from the brink of failure. Hopefully he is more persistent about checking company facts.
But luckily for him, his errors were trumped on Thursday when Jamie Dimon, CEO of J.P.MorganChase notified the world that the bank's hedging operation messed up and lost $2B!! OOPS! According to Mr. Dimon this is really no big deal. Which reminded me of the apocryphal Senator Everett Dirksen statement "a billion here, a billion there and pretty soon it all adds up to real money!"
Interesting "little" mistake from a guy who paid himself some $50M a few years ago, and benefitted greatly from the government TARP program. He said this would be "fodder for pundits," as if we all should simply overlook losing $2B? He also said this was "unfortunate timing." As if there's a good time to lose $2B?
But neither of these problems will likely result in the CEOs losing their jobs. As obviously damaging as both mistakes are, which would naturally have caused us mere employees to instantly lose our jobs – and potentially be prosecuted – CEOs are a rare breed who are allowed wide lattitude in their behavior. These are "one off" events that gain a lot of attention, but the media will have forgotten within a few days, and everyone else within a few months.
By comparison, there are at least 5 CEOs that make these 2 mistakes appear pretty small. For these 5, frequently honored for their position, control of resources and personal wealth, they are doing horrific damage to their companies, hurting investors, employees, suppliers and the communities that rely on their organizations. They should have been fired long before this week.
#5 – John Chambers, Cisco Systems. Mr. Chambers is the longest serving CEO on this list, having led Cisco since 1995 and championed much of its rapid growth as corporations around the world began installing networks. Cisco's stock reached $70/share in 2001. But since then a combination of recessions that cut corporate IT budgets and a market shift to cloud computing has left Cisco scrambling for a strategy, and growth.
Mr. Chambers appears to have been great at operating Cisco as long as he was in a growth market. But since customers turned to cloud computing and greater use of mobile telephony networks Cisco has been unable to innovate, launch and grow new markets for cloud storage, services or applications. Mr. Chambers has reorganized the company 3 times – but it has been much like rearranging the deck chairs on the Titanic. Lots of confusion, but no improvement in results.
Between 2001 and 2007 the stock lost half its value, falling to $35. Continuing its slide, since 2007 the stock has halved again, now trading around $17. And there is no sign of new life for Cisco – as each earnings call reinforces a company lacking a strategy in a shifting market. If ever there was a need for replacing a stayed-in-the-job too long CEO it would be Cisco.
#4 – Jeffrey Immelt, General Electric (GE). GE has only had 9 CEOs in its 100+ year life. But this last one has been a doozy. After more than a decade of rapid growth in revenue, profits and valuation under the disruptive "neutron" Jack Welch, GE stock reached $60 in 2000. Which turns out to have been the peak, as GE's value has gone nowhere but down since Mr. Immelt took the top job.
GE was once known for entering and changing markets, unafraid to disrupt how the market performed with innovation in products, supply chain and operations. There was no market too distant, or too locked-in for GE to not find a way to change to its advantage – and profit. But what was the last market we saw GE develop? What has Mr. Immelt, in his decade at the top of GE, done to keep GE as one of the world's most innovative, high growth companies? He has steered the ship away from trouble, but it's only gone in circles as it's used up fuel.
From that high in 2001, GE fell to a low of $8 in 2009 as the financial crisis revealed that under Mr. Immelt GE had largely transitioned from a manufacturing and products company into a financial house. He had taken what was then the easy road to managing money, rather than managing a products and services company. Saved from bankruptcy by a lucrative Berkshire Hathaway, GE lived on. But it's stock is still only $19, down 2/3 from when Mr. Immelt took the CEO position.
"Stewardship" is insufficient leadership in 2012. Today markets shift rapidly, incur intensive global competition and require constant innovation. Mr. Immelt has no vision to propel GE's growth, and should have been gone by 2010, rather than allowed to muddle along with middling performance.
#3 – Mike Duke, WalMart. Mr. Duke has been CEO since 2009, but prior to that he was head of WalMart International. We now know Mr. Duke's business unit saw no problems with bribing foreign officials to grow its business. Just on the basis of knowing about illegal activity, not doing anything about it (and probably condoning and recommending more,) and then trying to change U.S. law to diminish the legal repurcussions, Mr. Duke should have long ago been fired.
It's clear that internally the company and its Board new Mr. Duke was willing to do anything to try and grow WalMart, even if unethical and potentially illegal. Recollections of Enron's Jeff Skilling, Worldcom's Bernie Ebbers and Hollinger's Conrdad Black should be in our heads. How far do we allow leaders to go before holding them accountable?
But worse, not even bribes will save WalMart as Mr. Duke follows a worn-out strategy unfit for competition in 2012. The entire retail market is shifting, with much lower cost on-line companies offering more selection at lower prices. And increasingly these companies are pioneering new technologies to accelerate on-line shopping with easy to use mobile devices, and new apps that make shopping, paying and tracking deliveries easier all the time. But WalMart has largely eschewed the on-line world as its CEO has doggedly sticks with WalMart doing more of the same. That pursuit has limited WalMart's growth, and margins, while the company files further behind competitively.
Unfortunately, WalMart peaked at about $70 in 2000, and has been flat ever since. Investors have gained nothing from this strategy, while employees often work for wages that leave them on the poverty line and without benefits. Scandals across all management layers are embarrassing. Communities find Walmart a mixed bag, initially lowering prices on some goods, but inevitably gutting the local retailers and leaving the community with no local market suppliers. WalMart needs an entirely new strategy to remain viable – and that will not come from Mr. Duke. He should have been gone long before the recent scandal, and surely now.
#2 Edward Lampert, Sears Holdings. OK, Mr. Lampert is the Chairman and not the CEO – but there is no doubt who calls the shots at Sears. And as Mr. Lampert has called the shots, nobody has gained.
Once the most critical force in retailing, since Mr. Lampert took over Sears has become wholly irrelevant. Hoping that Mr. Lampert could make hay out of the vast real estate holdings, and once glorious brands Craftsman, Kenmore and Diehard to turn around the struggling giant, the stock initially took off rising from $30 in 2004 to $170 in 2007 as Jim Cramer of "Mad Money" fame flogged the stock over and over on his rant-a-thon show. But when it was clear results were constantly worsening, as revenues and same-store-sales kept declining, the stock fell out of bed dropping into the $30s in 2009 and again in 2012.
Hope springs eternal in the micro-managing Mr. Lampert. Everyone knows of his personal fortune (#367 on Forbes list of billionaires.) But Mr. Lampert has destroyed Sears. The company may already be so far gone as to be unsavable. The stock price is based upon speculation of asset sales. Mr. Lampert had no idea, from the beginning, how to create value from Sears and he surely should have been gone many months ago as the hyped expectations demonstrably never happened.
#1 – Steve Ballmer, Microsoft. Without a doubt, Mr. Ballmer is the worst CEO of a large publicly traded American company. Not only has he singlehandedly steered Microsoft out of some of the fastest growing and most lucrative tech markets (mobile music, handsets and tablets) but in the process he has sacrificed the growth and profits of not only his company but "ecosystem" companies such as Dell, Hewlett Packard and even Nokia. The reach of his bad leadership has extended far beyond Microsoft when it comes to destroying shareholder value – and jobs.
Microsoft peaked at $60/share in 2000, just as Mr. Ballmer took the reigns. By 2002 it had fallen into the $20s, and has only rarely made it back to its current low $30s value. And no wonder, since execution of new rollouts were constantly delayed, and ended up with products so lacking in any enhanced value that they left customers scrambling to find ways to avoid upgrades. By Mr. Ballmer's own admission Vista had over 200 man-years too much cost, and its launch still, years late, has users avoiding upgrades. Microsoft 7 and Office 2012 did nothing to excite tech users, in corporations or at home, as Apple took the leadership position in personal technology.
So today Microsoft, after dumping Zune, dumping its tablet, dumping Windows CE and other mobile products, is still the same company Mr. Ballmer took control over a decade ago. Microsoft is PC company, nothing more, as demand for PCs shifts to mobile. Years late to market, he has bet the company on Windows 8 – as well as the future of Dell, HP, Nokia and others. An insane bet for any CEO – and one that would have been avoided entirely had the Microsoft Board replaced Mr. Ballmer years ago with a CEO that understands the fast pace of technology shifts and would have kept Microsoft current with market trends.
Although he's #19 on Forbes list of billionaires, Mr. Ballmer should not be allowed to take such incredible risks with investor money and employee jobs. Best he be retired to enjoy his fortune rather than deprive investors and employees of building theirs.
There were a lot of notable CEO changes already in 2012. Research in Motion, Best Buy and American Airlines are just three examples. But the 5 CEOs in this column are well on the way to leading their companies into the kind of problems those 3 have already discovered. Hopefully the Boards will start to pay closer attention, and take action before things worsen.