9 CEOs Who Need to Be Fired
It's the middle of the year, and by now, most large public companies have reported financial results for the second quarter of 2011. Some of the figures have been terrible -- in many cases worse than expected. In the case of a few large companies, the horror of this year is an extension of several years of declines. The CEOs at many of these most troubled companies have been in place for a long time and investors have to question how they keep their jobs. Eventually, performance has to count, even in sectors in which the overall environment is poor.
Last year, 24/7 Wall St. also put together a list of CEOs Who Need To Retire. One has left -- the head of BP (BP). Some have barely hung on, like the chief executives of Goldman Sachs (GS) and Toyota (TM). In some cases, like Wal-Mart (WMT), the jury is still out.
24/7 picked the CEOs who need to retire based on three categories. The first is financial performance as reported in quarterly earnings. The second is stock price, including year-to-date, one year, three years, and five years returns. The last is innovation. Some companies have become trapped in old business models, or stuck with old products that lost their appeal long ago. And let's face it: a CEO who cannot lead his or her company to the next level is an impediment to the company's overall progress.
1. Talbots (TLB)
> CEO: Trudy F. Sullivan
> Date joined: August 2007
> One year price change: $10.92-$3.64
> Industry: apparel stores
The retail environment has been tough over the course of the recession, but some companies have underperformed the sector by wide margins. Talbots is at the top of this list. CEO Trudy F. Sullivan took over the company on August 6, 2007. She had a retail background, having worked at Liz Claiborne (LIZ) and J. Crew. The fortunes of Talbots have disintegrated from about the time she joined the group. The company's share price was around $25 then. It now trades at $3.75 and is only up recently because private equity company Sycamore Partners took at 9.9% stake in the retailer. Talbot's fiscal 2007 sales were $2.231 billion. The company made $32 million that year, and then posted a loss for each of the next three years. In the most recent fiscal year, Talbots had revenue of $1.21 billion and net income of $11 million.
2. Research In Motion (RIMM)
> CEO: Jim Balsillie and Mike Lazaridis
> Date joined: 1992
> One year price change: $53.39-$24.15
> Industry: wireless devices
Research In Motion is probably on nearly everybody's list of companies in need of a new CEO. Jim Balsillie has been co-CEO since 1992; Mike Lazaridis shares the top job with him. RIM has received as much press coverage as nearly any major consumer electronics company over the last year. It has hemorrhaged market share, which has been gained by Apple (AAPL) and a number of companies that produce smartphones based on the Google (GOOG) Android mobile operating system. Market research shows that RIM is the no. 3 or no. 4 smartphone company in both the U.S. and abroad, and that its piece of those markets has continued to fall quickly. RIM has revised its growth forecasts lower several times. Its new PlayBook tablet PC did poorly when it was introduced. The company continues to throw products into the market, most recently seven new smartphone models. RIM's shares have dropped nearly 70% in the last two years and 55% year-to-date.
3. Eastman Kodak (EK)
> CEO: Antonio M. Pérez
> Date joined: June 2005
> One year price change: $4.02-$2.26
> Industry: photographic equipment and supplies
Eastman Kodak has been without a strategic direction for a decade. Antonio M. Pérez has been CEO since June 1, 2005. Kodak's shares are off nearly 90% in the last five years, and 44% in the last year alone. Revenue in 2006 was $13.27 billion. The company had a net loss that year of $346 million. Kodak has lost money every year since, and revenue fell to $7.19 billion in 2010. Perez has made three moves recently, and none has been successful. He put the company into the ink-jet printer market, which is extremely competitive. He has not been able to effectively diversify away from the company's dying film and camera business. Also, he has bet Kodak's fortune on a series of lawsuits based on its patents. Apple and RIM are in the intellectual property cross-hairs now, but preliminary rulings on the actions are not encouraging for Kodak, which may be why the shares have plunged to $2.25.
4. Bank of America (BAC)
> CEO: Brian Moynihan
> Date joined: January 2010
> One year price change: $14.19-$9.71
> Industry: banking
Bank of America is the most troubled of this country's troubled big banks, which also include Citigroup (C) and Wells Fargo (WFC). Brian T. Moynihan was made president and chief executive officer on January 1, 2010. His job was to turn around a bank battered by the credit crisis and the management of long-time CEO Ken Lewis. The government, which was involved in restructuring the big banks in which it has invested, probably had a hand in Moynihan's appointment. It was a mistake. Bank of America's stock is down well over 30% in the last two years and significantly lags those of peers Citigroup, Wells Fargo, and JP Morgan (JPM). The financial firm has recently been embroiled in foreclosure settlements for improper activity in mortgage management. Its overall losses in its mortgage business are staggering. Its charge card business has done poorly. Critics also say Bank of America has done a poor job of integrating Merrill Lynch. As Morningstar recently said of the CEO, "While we were initially willing to give Moynihan the benefit of the doubt, we now believe he has a problem of overpromising and underdelivering."
5. Sprint Nextel (S)
> CEO: Daniel Hesse
> Date joined: December 2007
> One year price change: $4.54-$4.00
> Industry: wireless communications
For years, Sprint Nextel has been the poor step child of the wireless service provider business, an industry dominated by AT&T (T) and Verizon (VZ). That situation is about to get worse as AT&T takes over T-Mobile. On December 17, 2007, Daniel Hesse became CEO of Sprint. Shares have declined just over 80% since then. To compare, AT&T's shares have been close to flat. The stock price move is similarly awful for the last year. Sprint's stock dropped 17% recently after it released dismal quarterly numbers, posting a loss of $847 million. It also lost 100,000 wireless subscribers during the same period, and it lost $760 million in the same quarter a year ago. Hesse's biggest problem is that he has shown no bold imagination to solve the company's woes. Sprint still does not sell the Apple iPhone. The company would have been at least as good a merger candidate for T-Mobile as AT&T, and the deal would have faced less regulatory trouble. Hesse, in essence, has done nothing to improve Sprint's position.
6. Cisco (CSCO)
> CEO: John Chambers
> Date joined: January 1995
> One year price change: $23.82-$15.46
> Industry: computer networking
Cisco was once the darling of Silicon Valley, and CEO John Chambers was the dean of big tech chief executives. Cisco's core router business was at the heart of the growth of broadband infrastructure. The company could hardly have been better positioned for the revolution in wireless and ultra-high speed connections. But Chambers got greedy and decided he could diversify into what he believed were related businesses, even if those businesses sold home Wifi network devices and inexpensive video conferencing technology. Cisco went from a big ticket, high market sector into the highly competitive world of cheap consumer electronics. Chambers is one of the longest serving CEOs of any large American company, having been in his jobs since 1995. After years of improvement, Cisco's net income and growth have started to fall apart, and many on Wall St. want the company broken into pieces. Shares are down over 30% in the last year and 22% year-to-date.
7. Boeing (BA)
> CEO: W. James McNerney Jr.
> Date joined: June 2005
> One year price change: $69.54-$67.70
> Industry: aerospace and defense
Boeing has built a reputation on the late delivery of its most important products. Its flagship 787 Dreamliner has begun commercial distribution three years late. The delay cost billions of dollars in revenue, some of which the company will realize in the future ... maybe. Boeing has also consistently lost key clients to rival Airbus. Its most recent catastrophic loss was a large portion of the American Airlines business. CEO W. James McNerney, Jr. has been able to hold onto his job since June 1, 2005, which was about the time the early work on the Dreamliner began. Boeing shares have underperformed the S&P 500 over both the last five years and one year periods.
8. Best Buy (BBY)
> CEO: Brian Dunn
> Date joined: June 2009
> One year price change: $34.90-$26.89
> Industry: electronics stores
Best Buy was the dominant consumer electronics retailer for five years. Revenue rose from $39.53 billion in fiscal 2007 to $50.27 billion last year. Unfortunately, net income has dropped from $1.37 billion to $1.27 billion over that same time. The market has not liked that margin compression. Best Buy shares are down 40% in the last five years and 22% year-to-date. Richard M. Schulze, the founder, might as well be the CEO. He ran the company from 1966 until 2006. He still has an iron grip on it. Brian J. Dunn was named chief executive in 2009, after 26 years with Best Buy. He was a poor choice. Best Buy has been hammered online by Amazon.com (AMZN) and other internet retailers. Dunn allowed Best Buy to go down the direction of Borders and Blockbuster: lots of big stores, not enough web traffic.
9. The McClatchy Company (MNI)
> CEO: Gary B. Pruitt
> Date joined: May 1996
> One year price change: $3.48-$2.10
> Industry: publishing
McClatchy is one of the largest newspaper chains in the U.S. Perhaps the best market perspective on the company can be gained by comparing its share price to those of peers The New York Times Company (NYT), Gannett (GCI), and The Washington Post (WPO). McClatchy has underperformed the others over the last five years, one year, and year-to-date periods. Gary B. Pruitt has been chief executive officer since 1996. He's made two mistakes, each of which could eventually be fatal to the company. First, his strategy to buy newspaper chains has contributed to McClatchy's $1.7 billion in long-term debt. The company's interest expense has averaged over $150 million each of the last three years. These payments have been made as revenue dropped from $1.90 billion, to $1.47 billion, to $1.38 billion last year. In the second quarter of this year, revenue dropped to $303 million from $336 million in the same period a year ago. McClatchy lost $2 million compared to a profit of $2.2 million last year. Pruitt's second mistake -- perhaps the more damning -- is that, unlike the management at the Post, Times, and Gannett, he has not created a substantial Internet presence.
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