5. Lockheed Goes Loony Poor, poor Christopher Kubasik. Lockheed Martin's ( LMT) next CEO just couldn't keep his weapon of self-destruction in his pants. Last Friday, the defense contractor ousted Kubasik, the company's president who was scheduled to take the top job from the retiring Robert Stevens in January, over an improper relationship with an employee. Lockheed said an ethics investigation confirmed that the married executive had a close personal relationship with a subordinate, violating the company's code of ethics and business conduct. "I regret that my conduct in this matter did not meet the standards to which I have always held myself," said Kubasik in a statement. Well, clearly that wasn't the case, because if Kubasik held himself, and not his underling, then he would still have his job right now. That said, Kubasik's womanizing did have one positive outcome in that it opened the door for another woman to break through the executive glass ceiling. The company said Marillyn Hewson, a 29-year Lockheed veteran, will take Kubasik's spot in the corner office just in time to navigate the so-called fiscal cliff. Since 82% of Lockheed's sales last year came from the U.S. government, any fiscal cliff-related defense spending cutbacks will surely hit Lockheed where it hurts. And speaking of getting hit where it hurts, what we want to know is why Kubasik didn't heed the warnings of other CEOs recently booted for improperly mingling with the help. It's not like the dismissals of Brian Dunn from Best Buy ( BBY) or Mark Hurd from Hewlett-Packard ( HPQ) were kept confidential or anything. These were well-reported terminations and should have been warning shots for any CEO engaged in such fireable offenses, not just ones with firsthand access to F-16 Falcons. Who knows, maybe the resignation of CIA Director David Petraeus will finally teach these overly randy CEOs a lesson about the dangers of simultaneously holding a mistress and a powerful office. If America's top mole can't keep a secret under wraps, then these morons should simply give up trying.
4. Penney's Apoplexy Congratulations JC Penney ( JCP) CEO Ron Johnson. You win. We here at the Five Dumbest Lab tried as best as we could to keep up with your maniacal pricing maneuvers and ever-shifting sales strategies, but you simply proved too much for us to handle. Like your stock, which sank to 52-week low of $17 this week, we bow down to you. So what finally made us submit? Why throw in the towel now after weathering all these weeks and months of Ron's recklessness? Believe it or not, it wasn't the humbled retailer's rotten third-quarter earnings report last Friday. The Plano, Texas-based company said it lost 56 cents per share, or $123 million, in the quarter, compared with a loss of $143 million, or 67 cents per share last year. Revenue dropped 27% year-over-year to $2.93 billion. Wall Street was looking for a loss of 15 cents a share on revenue of $3.27 billion. Yes, it was an absolutely ugly report, yet that wasn't the straw which broke our back. Nor for that matter was it the downgrades that arrived fast and furiously on Monday. Credit Suisse analyst Michael Exstein, for example, questioned Penney's long-term viability, writing: "JCP must find a way to significantly slow the sales decline within the next six months, and if it doesn't, management's attempt to 'bet the company' could become more problematic." Standard & Poor's, for its part, chopped the company's credit rating to B- from B+, saying: "The downgrade reflects recent performance that has remained poor and our view that it will continue to be weak over the next 12 months." Nope, that wasn't it either. We're used to Penney's getting downgraded by now; although the existential aspect certainly did raise our eyebrows considering the iconic nature of the 110-year old company. No, what really made us give up the ghost was Ron "No More Sales" Johnson's announcement Monday that JC Penney will host "its only sale of the year" on Black Friday. "All day long, customers will find some of our lowest prices ever and the chance to win amazing gifts, including once in a lifetime trips to great American destinations," said Johnson. "It's our way of kicking off the holiday season and saying, 'Merry Christmas, America!'" Lowest prices ever? Only sale of the year? Are you out of your mind Ron? What about the coupons you gave out last month? What about the "Month-Long Values"? What about the "12 promotional events each year"? What about the "Everyday" low prices? What about the "Best Price Fridays"? What about the end of "retail gimmicks"? What about the free haircuts? Aaaahhh!!! Enough Ron! Just stop it. We can't take it anymore. You promised us a "fair and square" pricing strategy and a break from all those ridiculous retail tricks of the past. Sadly, you broke our brains and a once-proud retail chain instead.
3. Microsoft's Sinofsky Situation Here's one out of Redmond, Washington that's got us a bit bewildered. Steven Sinofsky, the head of Microsoft's ( MSFT) Windows unit, exited the technology giant Tuesday barely two weeks after the launch of its flagship Windows 8 product. The move was completely unforeseen and neither Microsoft nor Sinofsky, a 23-year veteran of the company, offered an explanation for the split other than to say the parting was "mutual." Okay. Maybe it's not as big a deal as Steve Jobs or Bill Gates leaving the building, but it sure is unsettling. Don't you think? Seriously, if a well-known restaurant's longstanding chef serves you its signature dish and then scurries off the premises without warning, would you dig in immediately or wait to find out if something's wrong in the kitchen? Maybe that analogy is a bit of a stretch. We'll try again. Say Apple's ( AAPL) star product designer Jonathan Ive unexpectedly pops off a fortnight after the release of the newest iPhone, would you buy the smartphone on the spot or wait to see why the Brit bolted? Alright, that comparison sucks too, yet hopefully you get our point. No matter how much Microsoft CEO Steve Ballmer -- and apparently a lot of other folks at the company as well -- hated Sinofsky, we don't understand why they would not keep him around for the entire roll-out of Mister Softee's tent-pole product. So what if he's a control freak who can't play well with the kids over in the Xbox division? They should have found a way to keep him around, locking him in a closet if necessary, lest they face a mob of consumers intent on sniffing around for metaphorical cracks beneath Windows surface. Or even worse, literal cracks in the Surface, Microsoft's brand new tablet, which Sinofsky helped develop to confront Apple's wildly popular iPad. Ballmer informed employees about Sinofsky's departure in a memo on Monday simply saying that "Steven Sinofsky has decided to leave the company." Ballmer told the media later on that it was "imperative that we continue to drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings". Alright big guy, we get it. Let's call a Sinofsky a Sinofsky. You didn't think the guy was a team player and from all indications you wanted this thorn out of your side a long time ago. But with Microsoft's stock back below $30 and the window on Windows 8 closing fast, it seems fairly clear you should have put your ego aside and taken one for the team. You put up with Sinofsky's snootiness for over two decades, so what's the harm in letting him stick around a few more months when your biggest product is on the line?
2. Abercrombie's Asinine CEO Sorry, Michael Jeffries. Just because Abercrombie & Fitch ( ANF) announced a Street-beating and short-skewering quarterly earnings report doesn't mean you are piloting the sexy teen retailer with aplomb. Your private jet proclivities still have us convinced that the company's long-suffering shareholders would be better off if you flew off into the sunset. First, the good news. Abercrombie shares popped 30% Wednesday after the company said it earned $71.5 million in the third quarter, or 87 cents a share, compared with $50.9 million, or 57 cents, last year. Wall Street's analyst community proved to be way off on their Abercrombie estimates, penning in 59 cents on average. Sales rose 9% to $1.17 billion, led by a 37% rise in international markets. Next, the not-so-good news. While the Q3 results and full-year guidance were admittedly impressive, the surge in the stock had a whole lot more to do with the scrambling of short sellers, a group who at last check held more than 15% of the company's shares in their accounts, than Abercrombie's performance. The company's same-store sales fell 3% in the third quarter, and while that's an improvement over its 10% drop in the second quarter, it's still not particularly heartening for investors seeking a retail name to try on. Abercrombie's stock certainly has not been fashionable for a long time. It's down almost 30% in the past year even after Wednesday's run-up, while shares of competitors like The Gap ( GPS), American Eagle ( AEO), Urban Outfitters ( URBN) and Buckle ( BKE) have risen 68%, 44%, 35% and 10% respectively. Not that Abercrombie's 14% decline in 2011 kept Jeffries from collecting a league-leading $48 million in total pay of course. Macy's ( M) CEO Terry Lundrgen, by comparison, pocketed $17.6 million over the same period for guiding a company almost 5 times Abercrombie's size, and his stock went up 28.5% to boot. But that's old news. Here's the really disturbing new news. A judge this Tuesday ordered Jeffries to grant a second deposition in an age-discrimination lawsuit brought by a former corporate jet pilot in April 2010, according to Bloomberg. Instead of sitting in his corner office in New Albany Ohio, Jeffries will be forced to sit through seven hours of questioning in Philadelphia over the next two weeks as a result of what U.S. District Judge Paul Diamond called Abercrombie's "disturbingly belated production of highly damaging evidence." Jeffries was originally deposed two years ago as part of the lawsuit, which was filed in federal court in Philly by corporate jet pilot Michael Stephen Bustin, who is now 55 and claims he was canned illegally and replaced by a younger man. The suit revealed Jeffries's wacky specifications for the airplane's flight attendants, from the way they address him to the kind of cologne they spritz on. For example, Jeffries's detailed flight instructions command male staffers to wear Abercrombie polo shirts, flip-flops, a "spritz" of the firm's cologne, sunglasses and boxers. And, according to Bloomberg, when Jeffries or his boyfriend Matthew Smith make a request, the reply must be "No problem" as opposed to "Just a minute" or "Sure." He even has rules for displaying the toilet paper! What a load of crap. His company is in a veritable free-fall and this joker is making sure that the washcloths are "tri-folded." Unfortunately, Jeffries most recent contract reportedly nets him an obscene payout of more than $100 million if he loses his job due to a change in ownership. That makes it difficult for shareholders to boot him before his contract ends in late February 2014. But if they could find a way to jettison the jet-crazy Jeffries before then, we would certainly be on board. Heck, we would even wear flip-flops and fold the washcloths if it would help the cause.
1. Papa John's Poppycock Mama Mia! This Papa John's ( PZZA) text message lawsuit is a textbook case in stupidity. Shares of the pizza purveyor got flattened this week, falling as much as 4%, over a class-action lawsuit that could potentially cost the company more than $250 million. The lawsuit, certified last Friday in a U.S. District Court in Seattle, claims Papa John's violated state and federal law by hiring a marketing company called OnTime4U to send unsolicited pizza deals to unsuspecting people's cell phones. For its part, Papa John's cut its ties to OnTime4U back in April 2010 when it was first sued over the tasteless texts, telling franchise managers that the practice "is most likely illegal" under the Telephone Consumer Protection Act of 1991. Caroline Oyler, Papa John's head of legal affairs, dismissed the suit, maintaining that the texts were sent "by third-party vendors and a small number of franchisees." Oy Vey Oyler, we could not agree more. Let's be honest, these whiners were receiving unwanted texts, not being waterboarded. No way is that relatively minor annoyance worth damages of $250 million, or nearly a quarter of the market cap of Papa John's. The lawsuit contends that more than half a million such texts were beamed to Papa John's customers with some folks complaining that they received the messages multiple times a day and some in the middle of the night. The attorney representing the class is pushing for the plaintiffs to pocket $500 or more in damages for each text message. Oh for the love of tort reform! Somebody send that guy a text telling him that silly cases like this are gumming up our court system and diverting American businesses from getting the economy going again. We would do it ourselves, but we don't want to get sued. -- Written by Gregg Greenberg in New York.