Train Wreck

In baseball, you get three strikes and you're out. As for technology CEOs, that depends. It depends on the magnitude and visibility of their screw-ups, the aggressiveness of the board, all kinds of things.

Sometimes it just takes one event, if it's big and hairy enough. On the other hand, I've seen CEOs swing and miss dozens of times for years on end, and they're still in the game.

Let's take a look at five recent examples of CEOs getting canned and see what we come up with:

Patricia Russo of Alcatel Lucent. It came as no surprise when Alcatel Lucent announced on July 29 that CEO Russo would step down. She had a decent run at the helm of Lucent, but the 2006 merger with Alcatel has been a disaster for both companies. This is a great example of one huge, high-visibility strike doing a CEO in. Incidentally, Chairman Serge Tchuruk is out, as well. ... Read more

The concept of corporate governance implies consistent and effective laws, methods, and metrics for governing our nation's public companies. The sad fact is that there is no such thing. It's a myth. Here's why:

People talk about the fiduciary responsibility of boards of directors. What that means, in plain speak, is that boards are supposed to:

1) Hire and fire the CEO and appoint other corporate officers
2) Compensate the CEO and other corporate officers
3) Oversee corporate strategy
4) Represent shareholders in the transparent and effective governance of the company

As an ex-officer of several public companies and as a consultant, I've been involved with lots of boards, executive staffs, investment banks, VCs, corporate attorneys, and the like. At least in my experience, boards don't operate the way they're supposed to.

Let's take the last point first. Shareholders are offered a slate of directors and a handful of issues to rubberstamp. That means they have two choices: accept or reject.

Now, let me ask you this. If your spouse or doctor says, "Here's my recommendation, take it or leave it," what do you do? That's right, you take it. Is it the best thing for you? Who the heck knows? You had a gun to your head so you nodded up and down. ... Read more

(Credit: Artwork by Arthur Rackham 1909, executive's heads courtesy of their respective companies, collage by Tobak)

Every kid knows the fairy tale of Hansel and Gretel, but I bet you've never heard the story of Jerry and Sue, right? Well, read on.

Not so long ago, in merry old Silicon Valley, lived a family named Yahoo. When hard times and famine hit, the father - an old advertising executive named Bostock - led two of his children - Jerry and Sue - into the forest.

Why did Bostock do that to his kids? Some say he did it so he'd have fewer mouths to feed, but nobody knows his motives for sure.

Lost in the forest, Jerry and Sue finally came upon a huge house made of gingerbread. The house was called Microsoft, and inside lived a witch named Ballmer. Some say the witch was evil, but he was more likely just desperate to reinvigorate his ancient, slumbering home with some youth. ... Read more

Corporate fraud didn't start with Enron, Tyco, and WorldCom and it didn't end with them, either. Fraud is rampant in the technology industry. What most employees, investors, and consumers don't realize is how much it costs them.

Excuse me for stating the obvious, but you'd be surprised how many people think there's some magic pile of dough somewhere that pays for companies to comply with investigations, contest charges, and remedy issues. In fact, the costs are born primarily by the corporation. That means it comes right out of shareholders' and employees' pockets. Consumers also pay, albeit indirectly.

And yes, we're talking about costs that materially impact earnings, balance sheets, and cash flow. We're talking about internal and outside lawyers, accountants, consultants, crisis PR, D&O (directors and officers) insurance, Sarbanes-Oxley compliance, exit packages, and even recruiting costs to replace executives.

Of course, the biggest cost is in terms of loss of market capitalization. ... Read more

If you've ever been involved in any sort of home construction, you know it always takes longer than the contractors say it will. For the past 10 weeks, the Tobaks have been doing a swimming pool project. So far, so good.

Last night, as the Bay Area cooled down from a three-day heat wave, my wife said, "It would sure be nice to get water in the pool in the next two weeks."

"What do you mean?" I exclaimed, "You know the pool company is scheduled to come out tomorrow and fill it up on Tuesday. Two weeks? We'll be swimming in two days!"

"Uh huh," she said.

The next morning, my wife pulled the pillow off my snoring head and announced, "We have no water."

I replied with a blank, bleary-eyed stare.

"The pool guys are all here and we have no water."

"Okay," I replied, "I'm getting up."

Apparently, a stuck check valve in our irrigation system had been dumping precious water faster than our well pump could pump it. Our holding tanks were dry.

No water meant the pool guys couldn't do their thing. An hour later, the whole gang packed up and left.

When you live in a rural mountainous area, this sort of thing happens from time to time. That means every few years.

So I'm sitting here trying to figure out how my wife knew something was going to happen. She couldn't possibly have known. Wait, I know. She sabotaged the irrigation system just to appear prescient. Nah, that's just crazy.

When I asked her about it, she said she'd just had a feeling.

That got me thinking: Is there such a thing as intuition? And if so, what is it and how does it matter to you and me? ... Read more

In case you've been in a sensory deprivation tank for the past few days and missed the news, Henry T. Nicholas III, founder and former chief executive officer of chipmaker Broadcom, was indicted on securities fraud, conspiracy, and federal narcotics charges on Thursday.

Henry T. Nicholas III

One of the indictments was related to options backdating, the cause of a $2.2 billion charge Broadcom took last year. But it was the sex and drug-related indictment that captured the media's attention.

If you read the indictment (PDF), you'll understand why one report said, "You can't make this kind of stuff up," .

Rarely does a billionaire and technology industry legend self-destruct in such dramatic and flamboyant style. But there's more to this human tragedy than meets the eye, and it almost surely extends beyond Nicholas. ... Read more

A long time ago - I think it was 1995 - I was seated at a long dinner table in a rather nice home in Santa Fe, New Mexico. Around the table were all the officers and directors of Cyrix - the microprocessor company that was later acquired by National Semiconductor.

One of our directors was Jack Kemp, quarterback and politician extraordinaire. Jack, who can really work a room, eventually turned the conversation to politics. The question put to the table was whom did we like in the upcoming Republican primaries and why.

I instantly panicked. I didn't even know who the candidates were. I wasn't a Democrat; I just didn't care much about politics. Back then, my opinion of political candidates was based solely on the effect they would have on my taxes.

Thankfully, the inquisition went the long way around the table. By the time it got to me, I was able to fudge a pretty good answer.

I'm more politically astute these days - which isn't saying much - but I'm still not sure if it matters to the technology industry who wins the upcoming presidential election.

(Credit: Greg Sandoval/Declan McCullagh/News.com)

A March phone survey of 600 technology employees had Obama and McCain tied.

I also checked out the CNET Technology Voters' Guide, which had Barack Obama's and John McCain's answers to a questionnaire. There was some good content regarding specific issues there, but it wasn't what I wanted to know.

All I care about is our nation's ability to compete in an increasingly global world economy. To be more specific, these are the top three technology-related political issues I'm interested in:

1. Protecting the intellectual property rights of U.S. companies overseas;
2. Helping to improve the competitiveness of U.S. companies overseas; and
3. Helping to prepare our children for an increasingly competitive and global marketplace.

Sure, there are other issues, but I think they pale in comparison to these three.

So I ask you - the ever-knowledgeable and opinionated CNET reader - which candidate will be better for our nation's global competitiveness? Or, if you think there are bigger issues, please enlighten us.

Note: the first part of this post is based on a story originally published here.

(Credit: Steve Tobak)

Here's the first installment of Train Wreck's first recurring post: Dysfunctional Executive Watch. It'll show up whenever there's enough material. Enjoy the lunacy, and let us know if you've got something to report.

You've got fraud
On Monday, the Securities and Exchange Commission filed civil charges against eight former executives of AOL Time Warner for fraudulently inflating online advertising revenue by more than $1 billion. Four of the executives agreed to pay millions in fines and return ill-gotten gains. Charges against the other four, including former CFO John Michael Kelly, are still pending.

The company had previously agreed to fork over $500 million to settle civil and criminal charges brought by the SEC and the Justice Department. ... Read more

Maybe I'm missing something, but I don't believe I've ever seen a negotiation handled, with all due respect, as dysfunctionally and amateurishly as the way Yahoo has handled its negotiation with Microsoft.

Saturday's shenanigans seemed more like a reality television show than two industry giants sitting down to negotiate a deal.

Steve Ballmer

(Credit: Microsoft)

Unfortunately, negotiating with Microsoft is not a job for amateurs. There was a time when the two companies were more-or-less evenly positioned in this dual, but that time has come and gone. The weekend's activities have left Microsoft holding all the cards. ... Read more