Special Report

Eight Companies Ruined by Their Founders

Dell logo
Source: courtesy of Dell
For every Sergey Brin, there is a Michael Dell. While the Google co-founder and CEO has made his company one of the most valuable in the world with its shares reaching an all-time high, Dell has laid waste to his company.

Dell and financial supporters offered to buy the company for $13.65 a share, 40% lower than what it was when Dell retook the CEO job in early 2007. Investors who bought shares a year ago have taken a haircut of more than 20%. Dell is not alone in his failure. He belongs to a group of founders of large public companies that showed great promise for a time, and then were wrecked by poor decisions, serious legal problems, and lack of innovation.

Click here to see the eight ruined companies 

Perhaps the greatest hallmark of founders who ruin their companies is that they — at least appear to — look out mostly for number one rather than the interests of the company and its shareholders. This is reflected largely in their generally excessive compensation. By contrast, it is worth remembering that Steve Jobs of Apple, earned only $1 in salary and bonus in 2010.

Aubrey McClendon, who was recently ousted as CEO of Chesapeake Energy, made over $100 million in 2008, and remarkably large sums in the years since then. Some of his other actions, such as allegedly borrowing against assets that he co-owned with Chesapeake, raised concerns of conflict of interest. Martha Stewart recently received a new contract from her company, Martha Stewart Living Omnimedia, which has lost money four years in a row. Under the arrangement, she will continue as founder and chief creative officer at the firm until 2017.

That is in addition to the more than $20 million she made over the three years that ended in 2011.

Dov Charney, who drove the company he founded, American Apparel, to the brink of bankruptcy in 2011, made $11.6 million that year. Michael Dell, who in 2010 settled SEC charges that he helped misrepresent Dell’s financials, made more than $21 million during the company’s last three combined fiscal years.

A more complex measurement of these founders’ performance is their lack of vision to transform their companies as the markets in which they operate change. None have shown the foresight Brin did when he moved Google beyond search and into mobile operating systems. And his company is also the dominant force in online video.

Michael Dell did not drive any comparable revolution at Dell. The company never stepped aggressively into the new age of personal computing — tablets and smartphones. The same holds true for Mike Lazaridis, the co-founder of BlackBerry, which did not transform its market share in the corporate smartphone industry into a lead in the consumer sector. Richard M. Schulze, who was the founder, largest shareholder, and de facto head of Best Buy oversaw a period in which the retailer failed to move into e-commerce quickly. In the meantime, Amazon has nearly bulldozed Best Buy under.

Finally, the most maddening, and often damaging, problem with these founders is that they cannot be pushed out. Martha Stewart owns the controlling interest in her company. Andrew Mason and two other shareholders control Groupon. Schulze and Dell own commanding portions of the shares in the companies they founded.

24/7 Wall St. reviewed large, U.S., publicly traded companies that have been irrevocably damaged by their founders or co-founders. We included in our analysis a review of company financials, as well as share price change over time. To reflect the amount of control these individuals have, we reviewed company documents filed with the U.S. Securities and Exchange Commission to identify voting share of the founders. If the voting share could not be determined, the total share ownership of the founder was used instead. In the case of Dell, Michael Dell’s voting share reflects his ownership before the completion of the pending move to go private.

These Are the Eight Companies Ruined by Their Founders:

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