The Worst CEOs In American History

The age of the American CEO did not begin until the end of the 19th century. Prior to that time, all the largest businesses in America were run by owners and families acting as proprietors. The best examples of these were in four industries: steel, finance, oil, and railroads.

Although the firms often had general managers, most historians believe that the period in which the CEO dominated large corporations did not begin until Alfred Sloan took the helm of GM in the mid-1930s.

The 24/7 list is based on a review of the Fortune 500 companies back to 1955. In order to perform further analysis, we also consulted the histories of US corporations dating back to the 1880s.

Those selected for the list fall into one of two simple categories – those who ruined the companies completely while they served as sitting CEOs and those who did severe damage from which their firms could never possibly recover. Some will make the argument that many of these CEOs should be excluded because their companies failed as a result of fraud committed by the CEOs. In each of these cases, however, the chief executives ruined the company. It does not change this fact if this occurred because of avarice or mismanagement.

Readers may argue that there are other CEOs who should have been on this list.  However, each of the CEOs on this list ran their companies when they were at or near their peak performance.   Many companies on this list like Pan Am and Eastman Kodak, dominated their industries. That makes these failures all the more colossal and, almost certainly, avoidable.

1.   Jonathan Schwartz. By the time Sun Microsystems was bought by Oracle for $7.4 billion, Jonathan Schwartz, the hip, blogging, ponytail wearing CEO, had ruined the firm’s prospects so badly that acquisition was its only option.

In the early 1980s, the company was founded by a small group of engineers and its CEO, Scott McNealy.  During his tenure, Sun Microsystems grew to become one of four dominant players in the server and processor space, which also included Oracle, HP and IBM. Prior to Schwartz’s appointment by McNealy, Sun was a largely profitable and competitive company.

Schwartz’s promotion to CEO in April 2006 was followed by a long series of losses. Despite its strong position, Sun started to fall apart as it lost market share in its main server business to HP and IBM.  The company’s shares fell from almost $27 to under $4 from late in 2007 to late 2008; Sun also later fired nearly 6,000 people, or about 18% of its employees.

In 2008, in an attempt to diversify, Sun bought MySQL AB, the company offering the popular open source database. The acquisition did not work.  As Sun’s share of the server market continued to fall, Schwartz tried to improve market adoption of its Java software, which never brought in much revenue.  Despite some success, the problem was that Java is free and Sun never came up with a realistic model to monetize it.

Sun could have become one of the largest enterprise technology companies in the world. Schwartz blew that chance. Larry Ellison did not.

2.   Ken Lay. Enron grew out of Northern Natural Gas Company and Internorth, both essentially natural gas companies.  Enron reached $101 billion in sales in 2000 despite this humble origin, through a series of acquisitions and expansions into new businesses. Ken Lay became CEO in 1986 and presided over most of the company’s growth which was largely fueled by diversification into energy generation, gas distribution businesses and water based utilities. Lay was so successful at marketing the firm to Wall St. and to the press that it was Fortune’s “America’s Most Innovative Company” for six years in a row, from 1996 to 2001.

It became clear in 2001 that Enron was hiding portions of its liabilities off of its balance sheets. Most of its assets and earnings were doctored. By the end of the year, Enron filed for bankruptcy. An investigation of the scandal found that Lay had an active hand in inflating the company’s financial health. In 2006, Lay was found guilty of securities fraud and other charges. He died July 5, 2006, shortly before his sentencing.

3.   Chuck Conway. Chuck Conway was the head of Kmart when it declared bankruptcy.  He was charged with accounting fraud that improved the company’s balance sheet.

Founded in 1899, Kmart, formerly known as S. S. Kresge Co., was one of the preeminent retailers in the US for decades.  By the 1970s, Kmart was the Walmart of its era and controlled a large portion of the “big box” retailer business in the US, Canada, and Australia. At its peak, it had over 1,000 stores.  In the 1980s, despite its slowing growth, the company began to invest in separate business lines, which included Waldenbooks, the Sports Authority, and Office Max.

By 2000, following a string of unsuccessful business decisions, Conway was brought in to turnaround Kmart.   When he joined the company in 2000, it was still a formidable force in the US retail space, despite its lackluster performance over the prior 15 years.  As part of his inaugural address, he said his primary goal was to improve the company’s supply chain and bolster its brand so that the firm could better compete with Walmart, a company that was founded over 60 years after Kmart. He did not carry out any of his goals.

At the time of Kmart’s bankruptcy in 2002, he was charged with defrauding stockholders by covering up details of the firm’s faltering financial position. He was also accused of spending the company’s money on airplanes and houses.

4.   George Shaheen. Shaheen joined Webvan in September 1999 after being the head of Andersen Consulting, later renamed Accenture.

The company, one of the largest start-ups during the Dot-com Bubble, was set up to take grocery orders over the Internet and deliver the orders within 30 minutes. Webvan planned to have operations in 26 cities.  It never got beyond 10, and most of these remained on the West Coast. The company spent $1.5 billion over a year and a half period, beginning in 2000. At one point, Webvan had 4,500 employees and owned a string of warehouses. When it declared Chapter 11 in 2001, it fired 2,000 people.

Webvan doubled down on its strategy to operate an online grocery business by buying HomeGrocer in June 2000. It was an error that increased Webvan’s cash burn rate. The logistics needed to execute its business model were a nightmare. Shaheen failed to understand that all retailers operate on tiny margins and Webvan had no leverage with customers to improve that. Perhaps, worst of all, he authorized issuance of an IPO that raised $375 million – almost none of it was recovered.

Shaheen holds a special place among bad CEOs. He fancied himself as one of the greatest business consultants in the world when he ran Andersen.  Yet, it seems he did nothing to effectively review Webvan’s business model. It appears that he made no attempt to work with his board of directors or management to alter the company’s operations.

5.   Tommy Sopwith. Tommy Sopwith, the founder of The Sopwith Aviation Company, began the storied airplane business in 1912. Contracted by the British government during the First World War, the company built 16,000 aircraft and employed 5,000 people.  It was one of the largest aircraft manufactures of the first two decades of the 20th century.

Sopwith was slow to realize that most airplane manufacturers would need to convert their products to appeal to the commercial market and failed to adjust to the civilian world in time. Sopwith tried to sell slightly modified models of its military planes, but was unsuccessful. Although the company bought ABC Motors Limited, a motorcycle and engine manufacturer, in 1919, it was too late to diversify this business. Sopwith closed the following year.

Sopwith’s problems were compounded by charges that the company made exorbitant earnings on its wartime enterprises, and were eventually punished by punitive anti-profiteering taxes.

6.   John Sculley. John Sculley is on the list for one reason. He fired Steve Jobs from Apple. Similar to the Google board’s decision to hire Eric Schmidt to run the company with its precocious founders, Sculley was hired to be Apple’s CEO in 1983.  Because of his significant business experience and marketing acumen, which included the top job at PepsiCo and introduction of the Pepsi Challenge, the board hoped Sculley would bring a proven management style to Apple.  It also hoped that he would bring a mature business approach to a company that was growing quickly but was run by inexperienced executives, which included its co-founder Steve Jobs.

In 1985, he convinced the board to strip his rival, Jobs, of all managerial responsibility, effectively canning one of the greatest product designers and marketers of all time.

Sculley believed in expensive marketing campaigns. Unfortunately, his marketing heft did not compensate for his insufficient product management skill. At the end of the day, he lacked sufficient technical background to be a product manager for Apple.  During his tenure, he invested heavily in a number of failed ventures, including Apple’s Newton, an early PDA-like device, cameras and CD Players.  And in 1993, Sculley’s lack of knowledge regarding the technical details of the products built by Apple and its competitors cost him his job.

Apple bought the computer company that Jobs had created, NeXT, in 1997, and Jobs became Apple’s CEO that same year.  Like Sculley, the rest is history.

7.   Thomas Edison. In 1887, Thomas Edison, the greatest inventor in US history, formed the Edison Phonograph Company – founded to profit from the phonograph technology he created.

Edison himself ran the company through most of the years it operated. Sound was recorded on wax cylinders. Recognizing the commercial appeal of the device, Edison increased adoption of his products by acquiring and offering more entertainment recordings for his machine. However, because the cylinders were difficult to mass produce, sales were limited.

In response to this design flaw, competitors, notably Columbia, designed and sold lighter discs, now called records.  Its superior design allowed for faster production than the wax cylinders.

In 1916, Edison expanded into dictation, a more profitable business. But by that time, Edison had made a fatal decision that would lead to the firm’s eventual failure: he allowed competitors to dominate the business of selling the discs. Around that time, a group of popular artists under the Victor brand did all of their recordings on discs and Edison lost the market for recorded audio that he had created.

Although Edison hedged his bet in 1913 by creating his own disc division, he continued to aggressively market the wax cylinder product, believing it would be the eventual winner in the format wars. He was wrong and The Edison Company, as it had been renamed, shut down in 1929.

8.   Bernard Ebbers. Under Bernard Ebbers’ stewardship, Worldcom became the second largest long distance company in the US, after it bought MCI in 1997 in a transaction valued at $37 billion.

Bernard Ebbers had been CEO of Worldcom’s predecessor firms starting in 1985. Over 15 years, he built the company through a series of acquisitions, culminating with the MCI deal.

In 1999, Ebbers tried to buy Sprint.  Had the merger been completed, the $129 billion deal would have made Worldcom the largest telecom company, placing it ahead of AT&T.  However, the deal was plagued by objections from regulators and eventually fell through.

During the merger, Ebbers began to prop up the Worldcom results with the help of senior financial executives at the company. The tech and telecom downturn of 2001 began to undermine Worldcom’s earnings and over the next two years, the efforts to manipulate the company’s financial results became more aggressive.

On top of this, Ebbers needed to sell large portions of his own Worldcom stock, to support his lavish lifestyle. The Worldcom board, fearing Ebbers’ sales would destroy the firm’s share price, made him a series of loans.

In 2002, internal auditors discovered that Ebbers’ efforts were the cause of a $3.8 billion financial fraud. That same year, Worldcom filed for Chapter 11.

In 2005, Ebbers was convicted of fraud, conspiracy and filing false documents. He was sentenced to 25 years in prison.

9.   Angelo Mozilo. Mozilo co-founded Countrywide Credit Industries in 1969 as a mortgage lender.

By the mid-1990s, Countrywide had created a system to lay off risk by reselling bundled loans into the secondary market as mortgage-backed securities. Countrywide also expanded its services so that it could make loans, service them via collections, and handle closings with real estate appraisal services. About half of Countrywide’s loans did not conform to the criteria necessary for them to be sold to Fannie Mae and Freddie Mac. This increased its need to sell securitized loans to institutions.

By the mid-2000s, Countrywide’s core lending business had grown so much that it was estimated to have issued over 15% of all home loans in the US. When housing prices began to falter, the mortgage-derivatives market that CountryWide had helped to create began to collapse. These derivatives had been a major source of revenue for CountryWide and in August 2007 it was near financial collapse. The federal government provided capital to CountryWide but the sums could not salvage it as an independent business.

In July 2008, Bank of America closed a transaction to buy the failed mortgage lender. Subsequent to the events, it was disclosed that Mozilo had sold shares in the company that gave him a profit of nearly $300 million between 2005 and 2007. Shareholder class action suits claim that Mozilo was aware of the company’s problems during much of this period. The company was also sued in several states for misleading customers about the terms of the mortgage agreements, particularly the effects of adjustable rate mortgages on monthly payments. Countrywide was accused of originating loans with little or no due diligence on those receiving the loans. Those loans were then packaged and sold by CountryWide in the secondary market. Friends of Angelo, stock holders were not.

10.   John Rigas. Adelphia Communications, once one of the largest cable companies in the US, filed for bankruptcy in 2002. John Rigas, its founder, is now in prison.

Rigas founded the company in 1952 and built Adelphia into the fifth largest cable TV enterprise in the nation. By the late 1990s, Adelphia had almost 5 million subscribers to its cable TV service and a rapidly expanding high-speed Internet business. It had cable systems in over 30 states.

In 2002, the company filed for bankruptcy, in part because Rigas had siphoned off money to fund other companies owned by his family. He was eventually charged with stealing nearly $100 million. After its bankruptcy most of the Adelphia assets were eventually purchased by Time Warner Cable.

11.   Juergen Schrempp. Schrempp was the architect of the 1998 merger of Daimler and Chrysler, which he called a merger of equals. In fact, Schrempp took control of the combined company almost immediately even though he had a co-CEO, Bob Eaton, for part of his tenure.

Schrempp sold the “merger” to shareholders by saying that Chrysler would reap huge savings by using parts and technology from Daimler, which was highly regarded for its engineering prowess. After the merger, however, Chrysler executives resisted the plan, and Schrempp did not push the matter as hard as he claimed he would. Schrempp also failed to accomplish another key point of the merger’s benefits that he touted: Chrysler’s sales foot print in the US would help Mercedes sell more cars in the US and Mercedes presence in Europe would help Chrysler.

Schrempp ignored the management of Chrysler in the US and its marketing and manufacturing operations began to fall apart only a year after the marriage. Within a year of the deal closing, the new company lost more than 50% of its market cap. Shareholder Kirk Kerkorian sued the company for $9 billion, charging the Germans with fraud for failing to do what they claimed they would do with Chrysler.

Schrempp was pushed out by his board in 2005. Cerberus Capital Management, a private equity firm, bought Chrysler from Daimler for $7.4 billion in 2007.

12.  Kay R. Whitmore. Eastman Kodak was founded in 1880 and for much of the 20th Century was the gold standard of the film and camera industries. By 1963, the company was No. 44 on the Fortune 500 with sales of over $1 billion, putting it ahead of industrial giants Alcoa and Dow Chemical. The company thrived for the next decade as its share price rose from $12 to $65.

The company continued to dominate the consumer and enterprise photo world until 1984, when Fuji began selling film similar to Kodak’s for 20% less than Kodak’s price. Kay R. Whitmore, the company’s CEO from 1990 to 1993, assumed that its brand would win out over price, and continued to charge premium rates for its film. He was wrong.

Even though Kodak scientists invented the first digital camera and first mega-pixel camera, Kodak failed to commit the company entirely to the digital world.  Kodak assumed that its high-profit film business would continue to dominate the market.

Kodak tried to bridge the period between the decline of film and digital products with instant cameras, launched in 1987.  This helped the company remain profitable in the film business for another 15 years. Whitmore, it could be argued, had a window from the early 1990s until later in the decade to use the company’s brand and R&D prowess to retain the firm’s lead in the imaging business.

Kodak failed to adapt to the new reality, or rather it adapted in a half-hearted way. In the 1990s, it came out with Photo CD, a quasi-digital quasi-analog bridge product with some impressive technology. The company was in the business of selling digital cameras. With each passing year, the core audience for Kodak’s film, film paper, and the cameras that use them disappeared.

13.   William Seawell. Pan Am was the US flagship carrier overseas from the beginning of the Great Depression until the early 1970s. From early on in its history, it flew to Europe, Asia, and Latin America. The firm pioneered the use of clipper aircraft and was an early adopter of commercial jets and jumbo jets, which helped insure the success of the United States aerospace industry.

Most of the company’s growth came during the leadership of Juan Trippe, still considered by many to be the greatest airline CEO in history. Trippe not only expanded the company. He built, by many measures, the most experienced and professional flight crews and ground crews in the industry. Pan Am also built the predecessor of the modern airline reservation system in a partnership with IBM.

William Seawell was the CEO of Pan Am in 1980 when the company bought National Airlines in a bidding war against Frank Lorenzo, a corporate raider. Seawell believed that Pan Am needed a large domestic airline to feed its international routes. But the price for National was $400 million. And that added to the debt the company had already taken on to buy its fleet of Boeing 747s, which it had purchased to increase the capacity of its international fleet. Pan Am tried to salvage its balance sheet by selling the Pan Am building in New York. In September 1981 Seawell was replaced by C. Edward Acker who came too late to save the airline. After struggling with its debt, the company declared bankruptcy less than a decade later.

14. Raymond W. McDaniel, Jr. Moody’s CEO, Raymond W. McDaniel Jr., has been the head of the company since 2005. Since that time, Moody’s, which was founded in 1900, has gone from being one of the two most respected credit rating  agencies in the world, along with S&P, to being the target of public criticism and law suits by Connecticut State and investigations by Congress of its role in the credit crisis.

The Washington Post recently wrote of the investigations “A probe of the credit-rating industry by the Senate Permanent Subcommittee on Investigations found that firms used outdated models, were influenced by their clients and waited too long to downgrade investments as the collapse in the housing market intensified in the year before the financial crisis.”

More recently The Financial Crisis Inquiry Commission issued a subpoena to Moody’s complaining that the credit rating agency had not complied with its request for documents and e-mails to aid in its investigation. Most recently California subpoenaed Moody’s Investors Service Inc., asking for documents in the state’s investigation of the company’s evaluations of asset-backed securities. There is almost no case to be made that the trouble for Moody’s will not get worse and that its reputation has been effectively ruined. Over the last five years, the DJIA is up slightly and Moody’s is off by over 40%.

During McDaniel’s watch, Moody’s century-long sterling reputation for integrity vanished.  It is almost certain that the value of its brand can never be regained.

15. Eckard Pfeiffer. Eckard Pfeiffer ruined Compaq, one of the original PC companies, and for years one of the most successful.Compaq was started in 1982 with a $3,000 investment from its three founders. That same year, the company released the first commercially available portable computer, the father of the laptop. In 1984, the company released its first desktop, arguably making it the PC company with the broadest product line of any in the world. In 1989, Compaq moved into the low-end server market and pushed IBM and Packard Bell out.By the late 1990s Compaq would have been better off focusing on the PC and server markets. Unfortunately, Eckard Pfeiffer, the company’s CEO from 1991 to 1998, had plans to greatly expand the company’s businesses and sales. In 1997, he bought Tandem, a manufacturer of high-end servers. He then purchased DEC, the leading mid-frame computer company, in 1998. In both Tandem and DEC, Pfeiffer strayed from Compaq’s core business, buying high-end brands that were not only expensive but were in the process of becoming obsolete.  Notably, Pfeiffer was unaware of the value of one of DEC’s assets, Altavista, the original search engine and the predecessor to Google and Yahoo!

As Pfeiffer took that company up-market, competitors like Dell and Gateway stole most of the lower end of the market—the area Compaq had once dominated. After seven years as CEO, Pfieffer was sacked by his board of directors. It was too late for the company to recover critical market share in the fastest growing parts of the PC market. Compaq was sold to HP in 2002.

Douglas A. McIntyre

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