It's the new era of accountability: Most of the nation's worst-performing bosses have been shown the door. But what about the guys who just won't go? Meet the Teflon CEOs. Poor results, declining stock prices, and strategic blunders just seem to slide right off them.
The I-I's Don't Have It
Although large institutional investors such as mutual funds, banks, and pension funds hold the biggest blocks of almost every one of America's public companies, the chances of their leading a public revolt against a bad CEO are mighty slim. Nor, despite conventional wisdom, is the tide turning. In a recent survey, just over half (55%) of big U.S. investors said they exert any influence over the management of the companies whose stock they hold. And that's actually down from 2000, when the number was 68%. The periodic exceptions are CalPERS, the California public pension system that names a watch list of troubled companies each year, and TIAA-CREF, which tries to push for change by meeting privately with CEOs and boards.
So why is it that the shareholders with real clout are nowhere to be found when it's time for the CEO to be sent to the showers? Biggs says TIAA-CREF is studying why large investment firms don't devote more resources to the issue. "We've always contended that you should go talk to [companies], and if you don't get satisfaction, go public," he says. Teslik has a disturbing explanation. "They're conflicted. They'd all like to manage the pension fund of Motorola," she says. Probably the most straightforward reason is that institutional investors are compensated for delivering good returns to their clients -- and that means they would rather spend their time finding a stock with real upside possibility than trying to change a company that has already hit the skids.
For now, one thing is clear: For every high-profile corporate execution we read about in the papers, there's another chief executive who has managed to buy one more shot at pulling his company back from the cliff he nearly drove over. They are there because of institutional indifference, political wiles, conflicted boards, or because the fear of the unknown trumps the mediocrity of the current situation. Certainly, these chief executives were happy to take the credit for the good times when the economy floated their boats. Maybe now they should shoulder some of the blame.
Sidebar: CEOs Who Won't Let Go
It's been a rough five years for these guys' shareholders. A look at the record.
Walt Disney
CEO: Michael Eisner
Tenure: 19 years
Total shareholder return*: -41.0%
Peer return*: -37.9%
S&P 500 Index return: -7.8%
Total Pay**: $706.1 million
Other lowlights
Has made improvements to board once dubbed America's worst, but still gets an F from watchdog group The Corporate Library. Embroiled in a bitter fight with a company that owns some of the merchandising rights to Winnie the Pooh and in tough negotiations to re-up the partnership with Pixar: Trouble in either situation could cost the company hundreds of millions of dollars. Recent improvements and a string of hit movies mean some see a turnaround. Are they right?
Motorola
CEO: Christopher Galvin
Tenure: 6 years
Total shareholder return*: -41.6%
Peer return*: -34.1%
S&P 500 Index return: -7.8%
Total Pay**: $28.1 million
Other lowlights
Third generation of family-run company has hit a brick wall. Ongoing turnaround effort has been a disaster. A $5 billion bet on Iridium ended with losses of $2.6 billion. Stuck in some commodity markets in which prices continue to decline. Pressure to sell off semiconductor business continues. New phone models have been slow to market, plagued by delays, and face a brutal competitive environment.
Compuware
CEO: Peter Karmanos Jr.
Tenure: 16 years
Total shareholder return*: -77.6%
Peer return*: -28.3%
S&P 500 Index return: -7.8%
Total Pay**: $97.4 million
Other lowlights
Revenue has steadily declined for the past three years. Most recent earnings miss blamed by Karmanos on poor execution. Involved in costly lawsuit alleging that IBM has stolen its intellectual property. Move to develop services hasn't paid off, nor has the restructuring of the sales force. Compuware pays a company owned by Karmanos's brother over $625,000 for printing services and another company owned by Karmanos more than $1 million for access to sporting events.
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Recent Comments | 5 Total
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