Movers and stinkers from the world of businessLast week we profiled our choices for the top ten chief executives in the technology business so it’s only fair that this week we give you a selection of the worst.
For every great chief executive who inspires staff and makes farsighted business decisions there’s usually two or three absolute stinkers who make life miserable for employees and shareholders alike.
In many ways this was a tougher list to write. There were a lot of names to choose from to be sure, but what distinguishes a bad chief executive from a truly bad one. Below you’ll read about bosses riddled with ineptitude, destroying a company’s esprit de cours or just being so pig-headed that they refuse to accept reality.
The end result is the longest and most detailed top 10 list we’ve ever written. There was something about the topic that really inspired us both to let it all out. When you’ve sat though as many insanely optimistic PowerPoint demonstrations, interviewed management who lie through their teeth or just had to listen to overenthusiastic pitches as we have then an article like this comes as something of a relief.
As ever, we’ve also added a couple of honourable mentions at the end, at least one of which may surprise you. Feel free to add your own choices in the comments section below.
10. Vladimir Tsastsin - Est.Domains
Shaun Nichols: It's not that Tsastsin did a bad job running his company, he did after all turn it into a rather successful registrar, albeit a notoriously shady one. The problem was that he also pretty much destroyed the company singlehandedly when he was convicted on several counts of fraud and money laundering.
Though Tsastsin says he no longer holds the top position at the company and that he is appealing the conviction, ICANN decided that the case was serious enough to warrant pulling Est.Domains accreditation, effectively killing the company.
Iain Thomson: Shaun was very brave in nominating Tsastsin and I applaud him for it, considering the low cost of mafia hitmen. I would like to point out to them that this was his decision and I think Tsastsin is a lovely man who is kind to puppies.
But seriously, for ICANN to have actually stirred itself into action and acted then Est must have been doing something really bad. ICANN usually shows all the drive and purpose of a week old beached whale and that it took action at all shows Tsastsin deserves to make the list.
But there's a serious point to this. Spam and malware don't just appear from the blue, they need people to facilitate them. As we've seen with McColo and Intercage these companies make life hell for the rest of us and anything that can be done to make life difficult for them should be done.
9. Patricia Dunn - HP
Shaun Nichols: Technically, Dunn shouldn't be on this list. She was, after all, on the board of directors and chairman at HP. However, Dunn's ability to totally screw up the company she helped direct was just as destructive as any chief executive, so we'll cheat a bit and add her to this list.
Dunn, of course, was the person who masterminded HP's 2006 investigation over the source of boardroom leaks. Dubbed "Kona 2," the investigation was successful and rooting out the director responsible for the leaks (George Keyworth) but the methods used caused problems for the company far, far worse than any leaked story.
Investigators used a variety of less-than-legal methods to obtain the information. Most notably, the investigators obtained phone records for both reporters and board members by way of "pretexting," or calling carriers and lying about their identities. Spyware-laced emails were also sent, and Dunn was even said to be mulling over the placement of spies in newsrooms.
The results were, of course, disastrous for both HP as a company and all those involved in the case. The company faced a public-relations nightmare and Dunn found herself among five people who were charged with conspiracy and fraud.
Iain Thomson: The irony is that were it not for honourable nature of one HP director this story would never have got out.
Tom Perkins resigned from the board when the tactics were announced and eventually leaked the story after it became clear that HP was not going to reveal the reason for his departure to the SEC. Even when it all came out it was Dunn continued to cling to power until a sustained campaign by Perkins did her in.
In her defense it is entirely possible that she had no idea illegal measures were being used to get the information she wanted. But the fact that she was prepared to launch the investigation at all shows serious deficiencies of character. To sit in board meetings with people she was spying on and look them in the eye takes some chutzpah.
But to compound the error all she had to do was ask who the informant was. When she exposed Keyworth he said as much himself but it doesn’t seem to have occurred to her to do so. All in all a sad end to her career.
8. Terry Semel - Yahoo
Shaun Nichols: While Jerry Yang takes the blame for the recent spectacular collapse of Yahoo, Semel definitely gets an assist. Once the big bully on the block (albeit one hit heavily by the dot-com bust), Semel's reign saw Yahoo waste away from a can't-miss internet titan to an aging firm with little focus and an eroding revenue base.
When Semel left, the company found itself mired with a pack of unprofitable ventures one vice president described as "peanut butter spread thinly on a slice of bread" and far behind rival Google, who Semel once reportedly balked at a chance to acquire. Semel was also linked to failed acquisition attempts for Facebook and YouTube.
The departure of Semel almost certainly caused some optimism amongst Yahoo employees, many of whom had to think "well, the next can't possibly do any worse." As we will see later in the list, however, those thoughts were proven very, very wrong.
Iain Thomson: Semel was a curse on Yahoo, but also a very expensive one. When you look at how much money he took from the company in salary and bonuses and compare it to the results he achieved the dichotomy becomes clear.
Under his reign Yahoo went from being one of the biggest name in the internet industry to being an also ran being fought over by bigger, better companies. The company had no focus, no drive and no new ideas.
But what I really dislike about the man is that he approved the handing over of his customer’s details to the Chinese authorities, leading to long jail sentences for people who’s only ‘crime’ was free speech, a right built into the Chinese constitution even if ignored. A dd in the harm it did Yahoo's reputation and you've got a massive mistake.
At first Yahoo denied the move, and Semel later said that he felt bad about the decision. I’m sure that’s a lot of comfort to the poor souls currently labouring in a Chinese prison camp.
7. Henry T. Nicholas III - Broadcom
Iain Thomson: OK, I’ve got to be a bit careful on this one as Nicholas is still only under indictment but here’s why I think he should be on the list.
Nicholas co-founded Broadcom, which manufactures circuitry for broadband equipment. In fact, you may well have some of their parts in your systems yourselves. It’s a largely successful company, although it’s one of many to have violated the GPL license, but under Nicholas’ reign has become known for, shall we say, irregularities.
This much is a matter of record. He left the firm in 2003 but in July 2006 the company announced that it was having to subtract $750 million from its earnings, and doubled that figure a few months later. But 2007 the figure had risen to $2.24bn from its financial results from 1998 to 2003 and the authorities decided to take a look.
The allegations that have since emerged have been so extreme that it threatens the image of IT as boring. Nicholas is alleged to have drugged business executives, hired prostitutes and maintained an extensive drug warehouse. One allegation recounts how he and other executives smoked so much marijuana on a plane ride that the pilot had to don an oxygen mask. Builders at his home are suing him for non-payment for their job of building an underground ‘sex cave’ at his home, replete with secret chambers and a huge bar.
What makes these claims odd is that Nicholas was seen as rather straight-laced by many. He liked staff in suits and ties and was a strong campaigner for criminal justice to toughen up and support victims as well. If they are true, it may be a classic case of denial, like those of Senator Larry Craig and church leader Ted Haggard.
In April of this year he checked himself into the Betty Ford clinic for rehab and is currently awaiting trial on felony drug, conspiracy, and securities fraud charges.
Shaun Nichols: The environment in many technology companies is often likened to that of dorm halls at Stanford or MIT. Broadcom was a bit more like a USC frat house.
Hotboxing entire jets and building underground sex-caves is the stuff of legend… if you're a heavy metal band. For a business executive, it's just a shameful and depressing episode of excess and mismanagement.
On the other hand I'm sure that to many of the young men who worked for Broadcom didn't mind that much; drugs and prostitutes beat the heck out of a wine country gift basket or being named employee of the month as an incentives package.
On another note, how often is it that you can say cooking the books to the tune of $2bn wasn't even the worst thing you did as chief executive?
6: John Scully - Apple
Iain Thomson: When Steve Jobs convinced Scully to head up Apple, with the famous quote “Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?” it looked like a great fit.
Scully had been the youngest ever president of PepsiCo (albeit while married to the chairman’s daughter) and was a genius at marketing and organization. But he quickly showed that he didn’t get the tech industry.
At first all looked good. He introduced much needed stock control and purchasing reform, adding millions to the balance sheet. Then he committed the ultimate sacrilege, he kicked Jobs out of his own company.
After taking away the existing leader he then didn’t keep control of the company. Under his leadership Apple grew initially and had a chance to dominate the PC industry. Instead it dissolved into petty power play by managers, who wasted millions on personal projects and reorganizations that left staff confused and demoralized.
He also kept the price of Apple hardware high, at a time when PC prices were falling. This was what relegated Apple to an also-ran in terms of market share. Who would buy a $10,000 Mac IIfx when you could buy a PC for half as much? PC prices continued to drop, while Apple’s stayed constant or rose.
Other errors included jacking up the price of Apple’s hardware and kept it there, licensed parts of the Apple GUI to Microsoft, which proved very expensive in court, disastrously span off the software division and was involved with the Power PC debacle. Overall, his ten year tenure can be seen as Apple’s darkest hour.
Shaun Nichols: Scully showed an early example of how the technology world differs from other business models.
Pepsi and Coke have had the same products competing for decades. The most threatening advance either company can make is a new can design or marketing campaign, with New Coke being the exception that proves the rule.
In the tech world, however, innovation trumps all. A snazzy marketing campaign or a new product name means nothing if the hardware behind it doesn't offer something new or exciting.
Scully never really caught on to the Apple ethos that new products should either be mind-blowing or they shouldn't be made at all. There's a story that shortly after returning to Apple, Jobs called in the engineers and placed before them a table of the products which had been in development under the old regime.
"What do all these products have in common," Jobs was said to have asked. When no-one was able to answer him he told them.
"They are all worthless."
Merciless as it may have been, the story illustrates a key difference between Apple under Jobs and Apple under Scully.
5. Darl McBride - SCO
Iain Thomson: Bill Gates must have loved Darl McBride. After years of being the most hated man in the industry McBride came along in 2002 and took his crown in a heartbeat.
McBride took less than a year to doom the company, by launching a legal attack on IBM claiming that SCO’s UNIX source code had been used in Linux and as such SCO wanted paying $1bn. This was widely interpreted by the open source community as an attempt by SCO to take control of Linux, something SCO reinforced in May by sending out letters to companies pointing out the dangers if they tried using Linux.
SCO then started suing other big names while McBride touted himself through the media putting his case that SCO was the wronged party, while all the time refusing to say explicitly what code had been misappropriated. He also started upping the damages requested from IBM, first to $3bn and then to $5bn.
As far so good it must have seemed. SCOs share price was on the up and, speaking to journalists who interviewed him, McBride seemed cocky and sure of himself. He was offering licenses to use Linux, which were largely ignored by everyone else. But he had not thought through the situation or else he wouldn’t have been so cocksure.
Legend has it that in a special sealed basement cell at IBM’s headquarters its team of lawyers lurk. Strange moans emanate from its dark depths and the legal eagles sit in semi-darkness discussing arcane points of law while sharpening their teeth on the bones of past victims. After SCO filed suit, IBM unleashed the hounds.
IBM countersued, quickly followed by Red Hat and then Novell, which pointed out that it owned the rights to UNIX. SCO asked for more time and a date for the trial was moved to 2004. SCO kept shifting its position, first claiming hundreds of lines of stolen code, then millions and even going as far as to suggest that the GPL violated the US Constitution.
Meanwhile IBM’s lawyers were killing his case in death by a thousand cuts. IBM basically challenged SCO to put up or shut up on evidence of stolen code and although SCO tried to delay IBM had the case dismissed. Novell meanwhile won its case that it owned the rights to UNIX and not SCO.
There are still legal cases pending but as of today SCO has filed for Chapter 11 bankruptcy protection and it has been delisted from NASDAQ. It has been reported that McBride sometimes carries a gun, has protection at public events and that the latest rescue package insists he is removed from the company. I pity the next company he heads up.
Shaun Nichols: McBride has no shortage of chutzpah, I'll grant him that much. Taking on IBM's legal team for the rights to Linux is a bit like trying to storm Fort Knox with two trained monkeys and a slingshot.
The SCO case did accomplish one good thing, however. It united once disparate groups of Linux advocates in a common cause, and watching the company slowly get the life choked out of it in the courts was poetic justice in the eyes of many.
A pack of Big Blue's lawyers and a crowd of several million fanatical Linux advocates makes for a very powerful collection of enemies. It's no wonder that McBride has become a bit paranoid.
4. Julie Wainwright - Pets.com
Shaun Nichols: Pets.com was only one of many businesses that fell apart when the bubble burst and the site does get unfairly scapegoated at times. That doesn't mean, however, that Julie Wainwright doesn't deserve a bad rap and a place high on this list for the epic failure that she oversaw.
Pets.com has become an icon for the dotcom bubble and subsequent collapse. The company's meteoric rise, huge marketing hype, and subsequent collapse became the sort of thing business professors write textbooks about.
But what really guilds Wainwright's place in Silicon Valley's hall of shame was not the business itself, but the mascot. The company used a sock-puppet dog that became the mascot for the cotcom burst, (and the first indication that Michael Ian Black was a very annoying human being.)
How bad was it? In an editorial for her new women's health site, SmartNow.com, Wainwright admitted the following:
"I had people laugh in my face when I introduced myself for years after the company closed. It happened as recently as a year ago. A couple of people asked me what it felt like to be one of the best-known failures in the U.S. Most just walked away from me."
Iain Thomson: It’s very easy to mock dotcom failures (and a surprising amount of fun) but what stands out here is management, or rather bad management.
Pets.com made the classic mistake of overinvesting before it actually had the customers to pay the bills. There was a real ‘if we build it they will come’ mentality, but the fact remained that customers didn’t.
When it became apparent that the company was in real difficulties she refused to sell it as a going concern and even had the gall to pay herself nearly $500,000 to wind the company up. Frankly, I’m not surprised she finds herself unpopular at parties.
3: Steve Case - AOL
Iain Thomson: Steve Case makes it onto the list for one of the biggest mergers of all time, AOL and Time Warner.
Case was the whizz kid who made America Online (later rebranded AOL) into one of the biggest internet operators out there. He hit the market at just the right time and became one of the top internet companies in town, with over 30 million subscribers. His strategy was simple – make it easy to get online with AOL software and make the software itself pervasive.
For a time in the 1990s you couldn’t buy a technology magazine or get your post in the morning without finding an AOL CD ROM. There must be billions of the things sitting in landfill sites around the world and in the future archaeologists may be left wondering if some strange cult took hold of the planet, which in a way it had.
At the peak of its success Case made an astonishing decision, he was going to merge with Time Warner, one of the Blue Chips of entertainment. It was described as the first big "clicks and mortar" companies, a synergy of traditional and new media. The word synergy should have been a warning.
It was a disaster from start to finish. Time Warner executives were barely consulted and those who were pointed out that it was a stupid idea. The two companies had little in common and even less to offer each other. AOL’s valuation was mostly down to market misunderstanding and Time Warner had very little to gain from the merger.
The one person who did do well out of the merger was Steve Case. He got very rich indeed off the back of it, and got chairmanship of the new company to boot. Meanwhile the internet bubble imploded, AOL’s membership began to slide and has never risen since and Time Warner executives were left wondering how they’d been hornswoggled to quite such a degree.
Shaun Nichols: The tech industry views the old business world as lethargic and out of touch. The brick-and-mortar business world views the tech market as fickle, short-sighted, and highly volatile. The AOL-Time Warner deal proved that both sides were right.
In hindsight, the merger was a terrible fit. AOL would have been better off finding a partner with a larger telecom portfolio that would allow the company to jump quickly into broadband, while Time Warner could have saved itself a lot of time and money by acquiring a smaller, cheaper content provider to serve as its web portal.
While hindsight it 20/20, a good chief executive would have understood that AOL had to do more to prepare for the transition to broadband. Case either didn't see this or he did and decided to dump his outfit on to Time Warner before anyone realized that bad dial-up service and junk-mailed CDs weren't going to be the future of the internet.
2. Carly Fiorina - HP
Iain Thomson: When Carly Fiorina first joined HP in 1999 as chief executive it looked like a good fit. She’d done great things at AT&T and the industry needed more women in top positions.
The next year I was at an HP conference and heard her speak for the first time, and came away even more impressed. Fiorina’s keynote got the hairs up on the back of your neck and the HPers in the audience were clearly enthused.
But as time when on the cracks started to show. The HP culture was always very egalitarian and that changed rapidly. Mass layoffs were announced at a time when we began to hear tales of lavish corporate jets and personal grooming assistants and engineers were rumbling that they were being pushed out of decision making. And then came Compaq.
The Compaq merger was disastrous for the HP Way and signaled the final death rattle of what had been one of the best work cultures in Silicon Valley. The HP family trust fought it all the way, with allegations of dirty tricks< flying, but lost their case.
It also wasn’t exactly a stellar success, with sales not great, a mass exodus of talent (mainly from the Compaq teams) and a stuttering share price. To compensate HP became one of the worst offenders at gouging consumers for print toner, making it more expensive to purchase than cocaine.
Finally the board had had enough. The value of the company had halved, staff were demoralized and sales were still not up to scratch. Fiorina refused to resign so they gave her the boot, with a suitably huge payout. It was a sad end to what had been a stellar career.
Shaun Nichols: The $25bn price paid for Compaq was amongst the highest ever, and while it did give HP instant credibility in the enterprise server and workstation markets, it also worsened the already-problematic morale levels and, as Iain noted, signalled the end of the culture which had traditionally defined HP.
It should also be noted that Fiorina is largely credited with the creation of a very dysfunctional boardroom. The same board whose persistent infighting and leaks to the press would set the stage for the infamous 2006 pretexting scandal.
1. Jerry Yang - Yahoo
Shaun Nichols: Few people have managed to screw up a company so spectacularly and so quickly as Yang has managed with Yahoo in the last year.
The co-founder returned to his old company in 2007 to fix the mess left by Terry Semel. While rough, the situation seemed fixable to many, and the comeback successes of Steve Jobs and Michael Dell had many feeling optimistic about Yang's return.
That optimism turned out to be very, very misplaced. Instead of helping the company regain its focus and get back in touch with what made Yahoo successful, Yang's strong attachment to Yahoo dealt a crushing blow to the company.
As early as 2007, Microsoft had actively pursued an acquisition of Yahoo and its search advertising business. In 2008, those efforts went public, and things got very messy. Microsoft chief Steve Ballmer made it known that his company was willing to put up tens of billions of dollars for Yahoo, at one point as much as $40 per share.
Fueled by a loyalty to the company he founded and a disdain for Microsoft and its corporate culture, Yang lead a group of Yahoo die-hards on the board into a wholesale rejection of Microsoft's efforts to acquire the company. The board was convinced that it could bring Yahoo's value far beyond what Microsoft proposed through its own growth and partnerships with Google.
The board was very, very wrong. Yang's rebuilding efforts were slammed by the recent economic downturn and then dealt a fatal blow by Google's decision to kill off the proposed deal due to regulatory concerns.
Earlier this week, Yang formally resigned, and Steve Ballmer all but laughed in Yahoo's face, declaring any possibility of a deal long since dead. Yahoo's share price currently sits at around $9.
It's understandable that a founder would feel a fierce loyalty to the company and would therefore be averse to an acquisition, but when the company goes public and people start putting their retirement accounts into its stock, what's best for the company's legacy has to take a back seat to what's best for the people invested in it.
Because of the Yahoo board's inability to grasp that concept, many people have lost a lot of money, and the company is now on the verge of one of the most spectacular collapses in history.
Iain Thomson: When we sat down to formulate this list we both looked at each other and said “Well Yang’s on there at least.”
On one level Yang had damaged goods to start with. Semel had left the company in a terrible mess and even the best boss would have had a tough job turning things around.
That Yang didn’t isn’t too bad – that he made it worse earns him the number one spot.
I sometimes wonder if Yang lies in bed at night looking at the ceiling and silently mouthing the words “$40 a share” before sobbing gently into his pillow. Self belief that you can take your company to untold heights is one thing, self delusion however is something else entirely.
Google were probably seriously concerned that Yang would do a deal with Microsoft, which is presumably why they agreed to do a deal. They could have saved themselves a lot of time and money if they had just made a better read of Yang’s stubborn nature.
Shaun raises probably the best point, and it was an argument that clinched Yang’s prime spot for me. The duty of a chief executive is to make the best decisions for his staff and investors. Yang has done nothing to support either group.
Honourable Mention: Steve Ballmer - Microsoft
Shaun Nichols: Someone has to take the blame for Microsoft's recent gaffes, so why not start at the top? Under Ballmer's watch in recent years, the company's image has gone from that of a dangerous, calculating superpower to that of a bumbling giant.
While the XBox has thrived and Office remains a cash cow, Microsoft hasn't had a lot of big wins in recent years. Internet Explorer is still losing ground to Firefox and Safari, the Zune is all but dead, the company's new online services outfit is playing catch-up to competitors and Windows Vista has become the company's most embarrassing product failure since Bob.
Iain Thomson: Ballmer has been groomed for the leadership role for years, as Bill Gates has shown more foresight than Steve Jobs in recognizing that the head man has to go sometime.
Ballmer isn’t higher on the list because he hasn’t been chief executive long enough to justify it but the signs aren’t good. If even half the stories that come out of Microsoft are true he’s a bit of a bully not above using non-violent physical intimidation to get his way.
Ballmer is a powerful character, a forceful speaker but seems to display a distinct failing to accept reality. Even though Vista is about as popular as a rattlesnake in a lucky dip Ballmer insists that it will all come out right in the wash. Although it’s early days I’d be worried if I was a Microsoft employee.
Honourable mention: Craig Barrett
Iain Thomson: What’s this I hear you say, Barrett! Didn’t he manage Intel through troubled waters and help make it the powerhouse it is today?
Barrett was very good for Intel in a number of way but he gets a mention in my book down to one decision, which if had been followed through without resolution, could have seriously damaged the company. The decision? Itanium.
Itanium was very much Craig’s baby we were told at Intel Developer Forums. He thought is was a great idea and did much to support it. Why that is will remain a mystery, as it was patently clear to a lot of people that the Itanium was being massively oversold.
Companies don’t mind upgrading their systems because they know it makes them more efficient. But Itanium was built to only run 64 bit software, which, while the logical successor to 32 bit code, wasn’t available in massive quantities. Meanwhile AMD was building its own chip capable of running both types of software and it was clear the market agreed.
Intel gave away free systems to developers in an effort to stimulate the code production for Itanium but sales remained poor and all of a sudden AMD was the hot processor manufacturer on the planet. It wasn’t until Intel’s own 32/64 bit chip came out that Intel got back on track.
Shaun Nichols: In the same way that Steve Ballmer gets saddled with the Zune and Vista fiascos, Barrett has to take the blame for Itanium. While it was an ambitious project, Itanium was a terrible business decision.
You have to believe that at some point in the process, someone advised Barrett that not supporting 32-bit code would severely limit the market for the chip.
Fortunately for Intel, the Core2 architecture was able to save the day. AMD's inability to get a quad-core chip to the market for roughly six months after Intel definitely didn't hurt matters much either.
There's also the lingering antitrust battle with AMD which threatens to further tarnish Barrett's legacy.