This post contains a gallery of ten cosmically dumb moves that famous CEOs have made over the years. I'm open for suggestions about who else should be on the list, but I think I've got a pretty solid collection. So if you really want to know how dumb a CEO can be...
Al Dunlap became famous for turning around Scott Paper and Crown Zellerbach by firing thousands of employees at once and closing plants and factories. When he took over as chairman and CEO of Sunbeam in 1996, similar methods resulted in record earnings the following year.
However, while plenty of CEOs have a reputation for being tough, if you're going to spend your entire career screwing over your underlings, you'd better not leave a bunch of rotting skeletons in the closet. And you'd be especially well advised not to brag, as Dunlap did, about how you've treated everyone like crap.
When Dunlap was accused of channel stuffing and a variety of other sharp practices, his underlings and erstwhile colleagues, far from watching his back, had their knifes sharpened to stab away. As a result, "Chainsaw Al" has become a watchword for bad management and has since been banned from ever serving as an officer of a public company.
It's one thing to throw a good corporate bash, but it's quite another to throw a re-enactment of the movie Caligula. Especially if people are starting to question whether you're being compensated unfairly.
Tyco CEO Dennis Kozlowski's $2 million Roman-themed birthday party for his silicon-enhanced wife included a birthday cake with exploding breasts and an ice sculpture of Michelangelo's David with a penis streamed Russian Stolichnaya vodka into crystal glasses.
While such decadence was no doubt quite the hoot, it provided a vivid image for jurors asked to make a judgment on his receipt of $81 million in purportedly unauthorized bonuses, the purchase of art for $15 million and the payment by TYCO of a $20 million investment banking fee to a former pal.
Even though some legal scholars believe that Kozlowski broke no laws, he was condemned to serve from eight years and four months to twenty-five years in prison for his role in the scandal. All things considered, he's probably lucky he didn't get thrown to the lions.
Imagine that you're working with the world's greatest engineer, scientist and inventor, and he's just given you an invention that will quite literally change the world. What's your best move? For George Westinghouse, it was to tell the guy to take a flying whatever at a rolling donut.
Nikola Tesla's patents and theoretical work form the basis of all modern alternating current (AC) electric power systems. He also contributed to the establishment of robotics, remote control, radar, and computer science, ballistics, nuclear physics, hydraulics and theoretical physics.
Westinghouse's original agreement with Tesla paid the inventor royalties for his groundbreaking electrical work. However, when bankers complained that the payments were reducing profitability, Westinghouse pressured Tesla to accept a lump sum instead. As a result, rather than continuing to be a source of innovation for Westinghouse, Tesla struck off on his own.
Ratner was the ex-CEO of Ratners Group, a low-end but very successful UK jewelry group with 2500 shops. In a 'private' speech in 1991 to 5000 members of the UK Institute of Directors , which of course became public the next day, he said - as a way of adding some jokes to the speech:
"We do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for 4.95. People say, 'How can you sell this for such a low price?', I say, 'because it's total crap'.The share price went from 4.20 to 0.07, wiping off about 500 million pounds. The business never recovered. Some joke, eh?
Thanks to PBDP Consulting for this one!
A while back, I sat next to John Sculley at a dinner hosted by my old friend Jonathan Seybold. Sculley seemed like a nice enough guy, but there's no question that getting rid of Steve Jobs after taking over as CEO was one of the true jackass moves of the business world.
In a way, I get it. Jobs isn't the kind of guy who's going to play second fiddle to a professional manager. But one of the challenges of that kind "I'll take over the day-to-day stuff while the founder gets all creative" management position is dealing with the constant meddling.
No matter how annoying it gets, when you're working with an icon, you don't give the icon the boot. And you certainly don't pretend (as Sculley did when he made himself Apple CTO) that you've got the creative chops to fill in his shoes. Sad to say, when you're working with a genius like Jobs, you can't afford to get uppity. Sculley never figured that out.
Let's face it: when everybody's life savings are going down the toilet, you don't want to become famous for spending $35,000 for your own personal crapper.
Merrill Lynch CEO John Thain got a $15 million signing bonus, between $50 to $120 million a year, and even then felt obligated to spend corporate money to renovate his office suite to the tune of $131,000 for area rugs, a $68,000 antique credenza, guest chairs costing $87,000, a $1,400 wastebasket. Next to that, $35,000 for a "commode" seems like chickenfeed.
However, this is the kind of corporate perk that tells the world that the top managers in this company think they excrete diamonds. It's symbolic, in the most ribald manner possible, of the culture of insane excess which characterizes the banking industry. As a result, John Thain's good name will be forever associated with... you fill in the blank.
Ken Lay, of course, was the primary target of the widely reported corruption scandal that led to the downfall of Enron Corporation.
As CEO and chairman of Enron, he was one of America's highest-paid CEOs, earning a $42.4 million compensation package in 1999. Even so, when confronted with the double-dealing and fancy accounting that had characterized his company, he pleaded at one point that all of it had happened without his knowledge.
That, of course, seemed just a bit unrealistic, considering that Lay dumped large amounts of his Enron stock while simultaneously encouraging employees to buy more stock, telling them the company would rebound.
Under founder Ken Olsen, Digital Equipment Corporation popularized the minicomputer as a viable alternative to mainframe computing. However, when the minicomputer market stalled and PC sales started growing like gangbusters, his belief that PCs were a dumb idea permeated the entire company.
Rather than launching a viable PC business, DEC expanded into mainframes in a clear attempt to imitate IBM. What was worse, Olsen created an entire corporate culture that seemed unaware that PCs were real computers and represented a threat to the minicomputer market.
By the time Olsen left and DEC started building PCs, it was far too late to make an impact on an already-mature market. DEC revenues, still based largely on minicomputers, declined, layoffs gutted the company of talent, and it eventually got bought by Compaq, where the remains of the company quickly became the proverbial albatross around Compaq's neck.
One of the most shocking scenes in the TV series The Sopranos is when the protagonist, the crime don Tony Soprano tries to smother his mother in a hospital. There are few things that make people more uncomfortable than the combination of organized crime and taking care of old people, which is Soprano's and Scrushy's transgressions remain so memorable.
HealthSouth was the largest company in the U.S. providing comprehensive rehabilitative services (i.e taking care of old people). However, it reached that pinnacle of success by billing for services it never provided, delivering poor care, treating patients without a formal plan of care, and using unlicensed therapists.
Even though he managed to escape conviction by claiming to be a devout Christian, Scrushy was eventually convicted of bribery, conspiracy, and mail fraud. Unlike Tony Soprano, though, we know how Scrushy's story ends. In 2007, he was sentenced to six years and ten months in a federal prison and in 2009 was ordered to pay $2.87 billion in damages.
Edison may have been a genius when it came to his inventions, but he often bumbled when it came to business. Most his stupid decision came when he insisted that the products that he invented were superior to competitive products that were, quite frankly, a generation ahead.
Two examples come to mind. First, Edison kept promoting direct current (DC) over alternating current (AC), claiming that AC created a danger of electrocution when, in fact, DC was far, far more dangerous. Second, Edison kept promoting his wax cylinder technology for audio recording long after it was clear that flat disks were much more convenient.
None of this detracts from Edison's brilliance as an inventor, but his inability to see beyond his own inventions are a warning to any engineering-type CEO who feels too much ownership of his own ideas.
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