CEO Gaffe of the Week: Carnival
Last month, I introduced a new weekly series, "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the Worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
This week I want to highlight Micky Arison, CEO of Carnival (NYS: CCL) .
The dunce cap
This was a nomination that rightly should have come a few weeks ago, but there are sometimes just too many gaffes to fit into this series.
First off, I want to extend my sympathies to those affected by the tragic accident of the Carnival-owned Costa Concordia off the coast of Italy. While it may not seem like it at the moment, cruise ships actually have a 33% lower fatality rate per passenger than flying. While it's impossible to say this will never happen again, history has shown that cruise ships are one of the safest modes of travel.
What is inexcusable is the way Micky Arison and Carnival's legal team handled themselves immediately following the accident. As noted by The Wall Street Journal, it took Carnival CEO Micky Arison more than a week to show up at the crash site to survey the damage.
The company jammed its foot further into its mouth when it essentially offered peanut shells to those who survived the accident. Costa Concordia pledged 30% off passengers' next cruise while Carnival made an offer of $14,600 for losses and mental anguish for the 4,200 Costa Concordia passengers. Now, keep in mind that this ship is expected to lower earnings by $85 million to $95 million in 2012, and all the company is willing to muster is about $61 million in total payouts. Between the PR fallout from Arison's lack of visibility and Carnival's lack of sympathy to passengers' anguish, I highly doubt Carnival will be getting off that cheaply.
To the corner, Mr. Arison...
But wait -- there's more!
This week, just six weeks after Costa Concordia ran aground off Italy's western shore, a fire erupted in the generator room of the Costa Allegra. Adrift at sea and without power, passengers waited in main concourses for tugboats to arrive and tow the lifeless ship to land. Where was Micky Arison when this crisis occurred? The answer: tweeting about the Miami Heat organization that he owns. In fact, the only response I can find from Mr. Arison regarding the Costa Allegra is a tweet from about six hours ago detailing the compensation passengers will soon receive. Not even six weeks later, Arison seems to have forgotten what put him in the doghouse in the first place with Concordia.
I think the real hot-button issue here is the rapidly rising passenger-to-crew-member ratio, which currently stands at three-to-one, up from two-to-one in just the past few decades. Cruise ship employees work 12 to 14 hours a day, seven days a week, for months at a time without a break. Mr. Arison's attempts to reform safety procedures are absolutely meaningless if the company (and sector, for that matter) doesn't do something to counteract the rise in fatigued employees working on its ships.
The PR fallout from this incident is going to carry with Carnival for quite some time. Royal Caribbean (NYS: RCL) noted that bookings were down year-over-year but were beginning to improve. Likewise, not even Mickey Mouse has been able to cheer Disney (NYS: DIS) passengers into booking cruises, although its CEO, Bob Iger, noted that his cruises are about 75% booked for the year.
What it came down to for Carnival was having a visible and obviously sympathetic CEO. I'm not going to say Mr. Arison failed, but let's just say he definitely didn't succeed.
Do you have a CEO you'd like to nominate for this dubious weekly gaffe honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.
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At the time this article was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Motley Fool newsletter services have recommended buying shares of Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.
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