Readers Rage at the Worst CEOs: Their Bosses

Investor resentment toward crooked companies that cheated them in the bubble-and-bust years was soothed somewhat last year by solid gains in the market. It was a year of truce between public companies and their stakeholders, strangely backdropped by overseas fury.

But this year of stunted growth seems to have reignited the smoldering anger of both investors and employees. In response to my request for nominations for the worst U.S. chief executives last week, I received nearly 1,000 emails -- many seething with resentment and disappointment about the shabby ways many top executives lead their firms, treat workers, handle shareholders and compensate themselves like a royalty class with little regard to business performance.

The responses yielded stories not merely of earnings numbers missed or shares in decline, but of promises broken, retirement accounts raided, health benefits slashed, opportunities missed and futures clouded. By the hundreds, the letters hammered home the fact that so many corporate stakeholders are not just owners of a slip of paper that can be traded for another, but employees holding the bulk of their retirement savings in their employers' stock. And many more are simply expecting to work for their employer with dignity until they retire.

The Ugly Side of Capitalism

To be sure, some are merely commonplace sour-grapes attacks on tough bosses, but many more were heart-rending. They paint a picture of an ugly side of capitalism, American style; of greed and incompetence on a grand scale; and of blatant self-interest at the public trough.

The greatest number of letters came from angry employees or investors in the 16 companies listed in the chart below and the bankrupt United, Mirant and Touch America Holdings.

The Good and the Bad
Which will perform better?
Company 5-Year High 5-Year Low June 14 Price YTD % Change
Bad CEOs (Past or Present)
Boeing (BA:NYSE) $69.06 $25.06 $48.87 17.82%
NiSource (NI:NYSE) 32.55 12.75 20.48 -5.7
Xcel Energy (XEL:NYSE) 31.85 5.12 16.61 -1.4
Disney (DIS:NYSE) 43.88 13.48 24.69 6.0
General Motors (GM:NYSE) 94.62 29.75 47.45 -10.0
Ford Motor (F:NYSE) 38.79 6.57 15.25 -2.6
Bristol-Myers Squibb (BMY:NYSE) 79.25 19.49 25.79 -9.6
Hewlett-Packard (HPQ:NYSE) 77.75 10.75 21.45 -5.3
Safeway (SWY:NYSE) 62.69 16.20 23.69 6.3
AMR (AMR:NYSE) 67.43 1.25 11.81 -9.0
Delta Air Lines (DAL:NYSE) 72.00 4.50 5.97 -50.8
Interland (INLD:Nasdaq) 206.88 2.55 3.44 -47.8
DuPont (DD:NYSE) 77.81 32.64 43.40 -4.6
Electronic Data Systems (EDS:NYSE) 76.69 10.09 17.54 -27.6
SBC Communications (SBS:NYSE) 59.94 18.85 24.60 -4.8
Qwest Communications (Q:NYSE) 65.06 1.07 3.57 -15.3
Good CEOs
Whole Foods Market (WFMI:Nasdaq) 87.09 14.13 86.31 28.1
Wrigley (WWY:NYSE) 64.00 29.94 63.26 13.5
Starbucks (SBUX:Nasdaq) 43.33 9.94 41.79 28.6
Expeditors International (EXPD:Nasdaq) 47.68 10.16 45.98 23.8
Source: MSN Money

From a contrarian standpoint, one must wonder if these companies' failures are so well-known that they are fully discounted in their stock prices. Yet it seems unlikely, as the concerns raised are so deep and visceral. Perhaps the best way to tell is to set up a one-year competition between 15 of the solvent companies above and four prominent companies that I believe have strong, respectful, value-enhancing chief executives: Expeditors International ( EXPD), Starbucks ( SBUX), Whole Foods Market ( WFMI) and Wrigley ( WWY). If the stocks with allegedly abusive CEOs win, then we'll just acknowledge that Wall Street is a cruel, hard place.

Fetch the Tar and Feathers

Most letters centered on CEO overspending, either on ill-conceived business ventures or on themselves. Dozens nominated former American Airlines chief Don Carty, who after resigning in disgrace two years ago has recently resurfaced as a potential leader of Hawaiian Airlines, the operating unit of Hawaiian Holdings ( HA).

Said Doug Walsh: "He spent money like he had a printing press and mortgaged the future of AMR ( AMR). He bought arena signage in Miami and Dallas for hundreds of millions of dollars, built terminals and spent loads of money while the low-cost guys just moved into the buildings he vacated. ... Then he tried to load his pockets in the middle of the night while the employees took pay cuts. Shame on such executives who inherit vibrant healthy companies and drive them to bankruptcy. Tar and feathers are way too good for their ilk."

Many telecom execs came in for a special level of anger, but the most frequently cited were Joe Nacchio at Qwest Communications ( Q) and Ed Whitacre at SBC Communications ( SBC). T. Oltmans of Denver said the botched merger of US West and Qwest, which was then run by Nacchio,

ruined tens of thousands of people's careers, lives, families and retirements in 14 states. ... We all understand the dot-com bubble, but what Joe Nacchio did to the company and stock price under his direction (down 95%) is amazing. I know several people that this has affected. ... Nacchio was rewarded for his performance with a $150 million parting gift. Evidently, this business practice is legal. ... What the FCC and SEC allowed is truly an American story that should never happen again.

Wrote C. Burroughs about Whitacre of SBC, the giant Baby Bell: "He appears to be so blinded by his own greed, he cannot see what can make a company great." Burroughs, like many SBC managers who wrote in, complained that they were asked to train and fill in for union employees during a recent strike, but not compensated for the extra work -- and ended up taking pay cuts and health insurance cuts that were worse than what the union workers received. Meanwhile, workers complained that Whitacre and his management crew voted themselves bigger pay packages.

Auto Industry Abuses

Many readers nominated the former chief of Ford ( F). Wrote M. Kelly:

The worst CEO is Jac Nasser, hands down. He decimated employee morale by taking the worst of Jack Welch and misapplying it. He alienated employees, then shareholders and finally, the Ford dealers. The Ford family had no recourse but to remove him. He's financially secure, yet Ford Motor Co. will struggle for years from his "innovative and creative" ideas. End of story.

The head man at General Motors ( GM) came in for equal abuse. Wrote reader D. Elliot:

CEO compensation is the single most important factor in competitiveness of U.S. corporations. It destroys the worker morale as average employees are told their pay, their health care and their pension are too expensive for the company to deal with; yet the executive compensation continues to skyrocket. Last week, G. Richard Wagoner, the CEO at General Motors, complained that "Soaring health care costs are crippling the competitiveness of U.S. companies." ... Meanwhile, he received a 2003 compensation package valued at $12.8 million.

Mickey's boss was another frequent target. Wrote M. Burns:

How can you list really bad CEOs and leave out Michael Eisner of Disney ( DIS)? There are so many reasons, but here's one: He's put Mickey, Donald and Goofy on the ash heap of history. There was a time when every kid in America knew Mickey Mouse. Now Mike doesn't even feature him on the Disney Channel, let alone push him to the general public. Decades of product marketing are being flushed down the old toilet and good luck ever getting that "magic" back.

Fire Sales and Decimation

J. Martin nominated Lewis B. Campbell, CEO of defense conglomerate Textron ( TXT), as "certainly the worst" in America. "During his stewardship, Textron has consistently lost sales volume, decreased shareholder value and damaged the reputations of Cessna, Bell Helicopter and EZGo, all former market leaders," Martin wrote. "He has voided all meaningful research and development, nearly lost all government contracts, sold profitable businesses at fire-sale prices and behaved as if his job description was to decimate Textron rather than build it."

It's interesting to note that only one financial institution increased its ownership of Textron significantly in the past year, and it was the one that held on to Enron to the last: Alliance Capital.

The outpouring of distress over incompetence and avarice could stretch on for pages. I'll post a hundred or two on a page at my personal Web site. Next week, I'll look into the culpability of corporate boards and how the new federal rules under the Sarbanes-Oxley Act may act to restrain the worst abuses.

At the time of publication, Markman was long Starbucks, Expeditors International and Whole Foods Market.

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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