Updated August 21, 2008 at 11:02 AM PST with comments from Glassdoor's CEO.
Glassdoor.com uses an online questionnaire so employees can rate their companies and CEOs. I took the questionnaire. It's all the usual stuff, like what do you think of the leadership abilities and competence of senior management, would you recommend your company as a place to work, that sort of thing.
I thought it would be interesting to track the stock performance of the
public companies with CEOs that had the highest approval ratings versus those with the lowest approval ratings.
Guess what I found?
Over the past five years, shares of all the companies whose CEOs had the highest approval ratings were in the black, while shares of all the companies whose CEOs had the lowest approval ratings were either in the red or flat. We're talking 8 of 8 in the black, 8 of 8 in the red or flat.
What does that tell you?
First, that we live in America, the great land of greed and capitalism. If you're stock is in the money, the CEO's a god. If your options are under water, he's a dog. And don't flame me, it's what employees had to say, not me. But for what it's worth, I don't think that's a bad thing. ... Read more
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
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
Fear is a human emotion. It's part of our survival mechanism--the adrenaline fight or flight response. In ancient times when a caveman felt fear, he ran and hid or readied himself for battle. Those who paid attention to their fear survived; those who didn't, well, let's just say their descendants probably aren't around to read this.
Having courage does not mean ignoring fear. It means facing fear head-on and doing the right thing anyway. At least that's my definition. If you fail to face fear and act appropriately you're not necessarily a coward, but you're not the best you can be either.
The most successful people on the planet are the ones who face the cold, hard truth of reality and act accordingly. They don't surround themselves with "yes men" and they don't view the world through rose-colored glasses. ... Read more
Technology companies run into trouble from time to time. Today it's Yahoo, Dell , and Motorola. Tomorrow it could be Google, Cisco Systems, or Apple.
Lest we forget, it wasn't that long ago that Apple flat-lined for an entire decade before ousting Gil Amelio in favor of ex-chief Steve Jobs. Jobs restructured the company by first cutting Newton and other unprofitable products, then introducing exciting new core products like iMac, and finally branching out into consumer devices like iPod and iPhone.
But that's nothing new. It happens to most companies, sooner or later. ... Read more
My in-laws were in town this past weekend, escaping the Wisconsin snowstorms for a few sunny days in Silicon Valley. Hanging out with them was a welcome break from all the usual nonsense we call day-to-day life.
It got me thinking about how infrequently we take a step back from our gadget-filled, workaholic lives to gain some perspective. How often do you ask yourself if you like what you're doing, if you're on the right track, or if you should be doing anything differently?
The same goes for companies. After all, companies are made up of people. Executives and directors are people. How often do they step back and assess the company's technology, products and services, and strategy with respect to the competition? ... Read more
Note: I wrote this on Thursday before Microsoft's latest bid for Yahoo; it's a follow-up to a post I wrote six months ago. I have two comments on Microsoft's offer: 1) It's aggressive and it's a sweetheart deal for Yahoo's shareholders; I think Yahoo's board will accept it; and 2) nevertheless, the issues I present are the same; it just becomes Microsoft's problem.
It's been seven months or so since Yahoo chief and co-founder Jerry Yang replaced Terry Semel at the helm of the ailing internet giant. At the time, I pondered the obvious question: Can Yang fix Yahoo?
For the record, I thought the board acted rashly in appointing Yang--a relatively inexperienced executive--to perform what would clearly be a challenging turnaround. I didn't think he had the experience to pull it off.
At the time, I thought that Yang--a visionary--wasn't what Yahoo needed. I thought Yahoo's problem was largely failed execution and missed opportunities in search advertising that allowed Google to leapfrog its more mature rival.
At this point, I'm even more convinced that Yang was the wrong choice. But I think the problem is bigger than missed opportunity and failed execution. The company does indeed need a new vision. And it needs a CEO who's capable of articulating and selling that vision down through the ranks and ensuring everybody's goals are aligned.
That's a tall order, but it can be done. Lou Gerstner did it at IBM, and that was no walk in the park. But Jerry Yang is no Lou Gerstner. ... Read more
I don't know how many times I've read a post or an article by some small-minded, self-important journalist advising a public company's board of directors on how to "fix" the company. The most common advice is "sell the company," "fire the CEO," or better still, "fire all the executives."
Even if a company is screwing up, how is a journalist--whose entire management experience consists of looking at his watch to be sure he files a story by 3 p.m.--qualified to dole out management advice? Is mastery of a keyboard sufficient experience to know how to run a company?
... Read moreDid you know that the president has a Corporate Fraud Task Force? That's right, he does. It's led by the deputy attorney general, whoever that is.
Anyway, this task force has apparently been very busy. Over a five-year period since its inception, the task force claims 1,236 corporate fraud convictions, including 214 CEOs and presidents, 53 CFOs, 23 corporate counsels, and 129 vice presidents.
That's a lot of fraud. Who knew there were so many dysfunctional executives in this great nation? The dark side of greed and capitalism must be pretty attractive, huh?
I also wonder what these executives' boards of directors were doing while all this fraud was going on? Aren't they supposed to be looking out for shareholders? Isn't that what corporate governance is all about?
Anyway, members of the task force have successfully brought a laundry list of fraud and other charges against executives of Adelphia, Cendant, Comverse, Computer Associates, Dynegy, Enron, Enterasys, Homestore, Imclone, Impath, Monster, Network Associates, Prudential Securities, Qwest, Refco, and WorldCom.
The Justice Department has also recovered $1 billion in ill-gotten gains and distributed the funds to victims of corporate fraud. Want to know how much money shareholders actually lost in all those fraud cases? Me too, but I'm confident the number has two or three more zeros than what was recovered.
According to a Department of Justice fact sheet, President Bush created the task force in July of 2002 "to restore public and investor confidence in America's corporations following a wave of major corporate scandals." Did it work? Has your confidence in America's corporations been restored? Not mine.
You know what I think? I think it's great that the government is cracking down on white-collar crime. Sure, it's sad that so many officers of public companies have such flexible views on ethics and morality. But you know, if that's the way it's got to be, then I say lock 'em up...without the severance package.
While that might be rewarding, I have to admit it doesn't help investors. If, like me, your confidence in America's corporations has not been restored, there's only one thing you can do about it. Don't let your investment and retirement strategy depend on a branch of the government to cover your butt.
The only way to truly mitigate the potential risk of corporate fraud is to diversify your portfolio, plain and simple. If you don't, you're asking for trouble. I hate to say this, but with these kinds of fraud conviction stats, anyone with 5 percent or 10 percent of their assets in one company's stock really doesn't deserve to keep it.
