In the late 1990s, investors deified corporate chief executives. In the first few years of the 2000s, CEOs were vilified. And now they seem largely ignored, seldom appearing in the financial media unless they're in handcuffs. They are the forgotten souls of Wall Street's remodeled machine.

But that doesn't mean that the overpaid and underachieving heads of many public companies aren't just as lame as ever. It simply means that we've become complacent about the hardships they cause shareholders when they pursue bad strategies, bad communications, bad hiring, bad products and bad marketing -- and then blame their problems on the weather, world politics or traders.

Who are the worst chief executives out there at the moment? You could probably name the CEO of every company you've lost money on. But a handful should be at the top of every capitalist cynic's list.

David Dorman

Let's start with David W. Dorman of AT&T ( T). This one is almost too pathetic to make fun of. True, he inherited a junkyard dog of a company from predecessor C. Michael Armstrong, but he hasn't done anything to improve Ma Bell in the past two years. With such an immensely renowned brand name and a legendary research-and-development team, you would think that Dorman could make his company synonymous with the global growth of networking as a way of life.

Yet he appears to be pushing the company ever deeper into the background, outsourcing its wireless business in an expensive deal with Sprint, losing the price wars on bundling home wire line and broadband services to the more aggressive Baby Bells and the formerly bankrupt MCI, making its long-distance plans more ridiculously complex than ever, experimenting with a high-quality-but-high-cost enterprise strategy, pursuing Internet-based telephony too slowly and timidly -- and now, through no fault of its own, losing its local phone service connection in the recent court battle over FCC unbundling rules.

Since Dorman, who was once a Bell-system wunderkind, has taken the reins, the value of AT&T shares has sunk about 60%. Before he took over, the stock had fallen about 60% in value in the previous three years. The stock's 5.8% dividend is a nice start on a return, but Dorman needs to find a way to grow the business -- not just cut expenses -- to keep capital losses from making the yield immaterial. Revenue has been down every year since 2000, and earnings-growth trends are negative.

Carly Fiorina

It's fashionable these days to suggest that Hewlett-Packard ( HPQ) CEO Carly Fiorina is a genius for improving results slightly in the past couple of quarters, but let's be frank: She's not. Not even close. Under her direction, a company that was once a paradigm of Silicon Valley entrepreneurship has simply failed to make any progress at enhancing shareholder value. It is now trading about where it did in 1995.

Fiorina's reign at H-P -- combined with that of the CEO just before her -- makes a great case study of exactly what not to do. They transformed a company that was fantastic at doing one thing (printers) into a company that is increasingly marginalized at that one thing and truly lousy at everything else. The stubborn, ill-conceived purchase of fading, unprofitable computer giant Compaq, has utterly failed to deliver on its promise of making shareholders richer with a soup-to-nuts strategy. The printer business still brings in the majority of the entire entity's earnings.

And yet because Fiorina decided to pick a fight with Dell ( DELL) in the PC business, Dell has turned the tables and made a strategic decision to return the favor. Dell has steadily released a very nice suite of new low-cost devices made by a variety of partners. Making matters worse, it has slashed prices on ink -- the most profitable part of the printer trade.

"If Hewlett is not profitable in personal computers, and it's not profitable in mainframe computers, and it's not profitable in services, and their printer business is being hollowed out by Dell, then what's left?" asks Bret Rekas, a hedge fund manager in Minneapolis. "I'll answer that: nothing."

Here's a stat for you: In 1995, Hewlett-Packard posted $38 billion in sales and earned $2.5 billon. In 2003, it posted $73 billion in sales and earned the same $2.5 billion. That's not progress. That's running harder to stay in the same place.

Larry Ellison

No major technology company's chief executive has put his shareholders through more pain than Larry Ellison at Oracle ( ORCL) in the past four years. Oracle shares are down 72% from the March 2000 high, about twice as much as hardware peer Dell and about half again as much as Microsoft ( MSFT). And while most of Ellison's peers have found a way to make shares grow in the past 12 months, Oracle remains in a rut, down 11% since June 2003.

A large part of Oracle's problem is that the company did so well, for so long, at getting its databases into Fortune 500 companies that there is little room for major business growth. With so few major installations left in the world, it will be difficult for Oracle to grow much faster than the global economy.

Ellison's personality is another major part of the problem. His combative approach to business with partners and competitors alike has turned off investors. His quixotic attempt to do a hostile takeover of PeopleSoft ( PSFT) has justified their distrust of his instincts.

Mark Anderson, a longtime technology industry observer and hedge fund manager, complains that Ellison "is so predatory -- it's as though he cannot control himself." Anderson says that Ellison would grow shareholder value more appropriately if he were more creative than rapacious. Anderson believes the PeopleSoft deal is a bid to "buy seats" for Oracle database software by purchasing and shutting down a competitor. It will probably fail, and it has been a costly distraction in the meantime.

Ellison would do much better by his shareholders, Anderson says, if he would drive an initiative to build communications more effectively into the world of database applications. The chief executive, who is a terrific competitive sailor and pilot, understood the power of the Internet early and rode the online boom brilliantly in the late 1990s. But since then, he has failed to grasp a foothold for his company in a broader communications play that will carry it into the next decade.

With that failure, he has doomed his company to single-digit revenue growth and a stagnant stock price. After all, database software is a business that will never go away and gets deeply embedded in clients' way of doing business. Once you have customers, "you pretty much need to shoot both their dogs before they'll leave you," is Anderson's colorful phrase.

But Wall Street demands more than stability. With moderating sales, Ellison has to do more than try to ham-handedly smother the competition and cut costs -- especially with a premium multiple of six times sales and 24 times next year's estimated earnings.

Assorted Others

Some utilities deserve special mention for incredibly poor strategic decision-making in their executive suites. Among the worst are AES ( AES), Calpine ( CPN) and Teco Energy ( TE).

Portfolio manager John LaForge, of FA Asset Management, told me that two chief executives he would put in the penalty box are Carol A. Ammon of Endo Pharmaceuticals ( ENDP) and Austin Shanfelter of MasTec ( MTZ). Ammon deserves opprobrium, he said, because she made a series of poor decisions in dealing with the Food and Drug Administration on her company's generic alternative to the addictive painkiller OxyContin. "She pandered to the FDA and let it push her around on doing extra trials when she should have held her ground," he said. Her calls cost the company valuable time to market, allowing archrival Teva Pharmaceutical ( TEVA) to outmaneuver and beat them.

LaForge nominates MasTec's Shanfelter for the stonewalling his company did in not releasing its 10-K annual report to the Securities and Exchange Commission last year and all this spring. MasTec's communication has been "horrific," he said. Company officials told investors repeatedly that they would file their report within two weeks and then neither filed nor advised investors that the reports were further delayed.


Would you like to nominate a chief executive as the worst of the 2000s so far? Email me at and put the word "CEO" in the subject line. I'll comment on the best suggestions in my next letters column.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider MasTec to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
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A clarification was made to this story after it was published. Please see Corrections and Clarifications.

At the time of publication, Markman was long Microsoft and Dell.

Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at

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