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The 5 worst CEO flameouts (you might not have heard of)

Mr. Burns suddenly doesn't look so bad.

History is lousy with miserable CEOs. Whether it was Ken Lay’s house-of-cards tenure at Enron or John Rigas buying his own private golf course on the backs of his employees, it’s not too difficult to find examples of greed-soaked executives who fell from grace and, in many cases, fell directly into jail.

We’re not interested in the big stories or the recent ones here. Rather, we’re interested in a few of the less well-known examples, tried-and-true tales that remind us that the more things change, the more money-grubbing ghouls stay the same.

Albert J. Dunlap

Albert Dunlap had nicknames that would be more appropriate for a mid-90’s Van Damme vehicle than a corporate boardroom. Known alternately as “The Shredder” and “Chainsaw Al,” he was euphemistically described as a “turnaround specialist” during his years as a CEO, which is a polite way of saying “this dude fires a lot of people.”

For a while, things were good in the career of Al Dunlap. He turned Scott Paper and Crown Zellerbach into profitable companies by ruining thousands of lives, selling off the corporate scraps, and making millions for himself in the process.

In other words, he’s the sort of soulless yutz that Gordon Gecko would write mash notes to.

Eventually, Dunlap found his way to Sunbeam-Oster, a company that sold mixers, barbecues, and waffle irons and started doing Al Dunlap-y things. He announced plans to lay off half of Sunbeam’s 12,000 employees, with cuts ranging from the management team to clerical and factory workers, and in his first seven months at the helm, Sunbeam’s stock rose 284 percent. To most people, it seemed like typical Chainsaw Al.

But to other people, namely industry insiders, the turnaround was a little too good to be true. For example, it seemed odd that barbecues were selling so well in the winter, when most Americans are splurging on firewood, not charcoal. Auditors and the SEC started digging and found a whole host of shady sales and financial practices that proved Sunbeam’s massive turnaround was actually just a series of cynical accounting sleights-of-hand. Dunlap was fired, sued, and sued some more. Old success stories were debunked. Sunbeam went bankrupt. And Al Dunlap never worked as a CEO again.

An important postscript: It’s not that Al Dunlap doesn’t want to be a CEO. Rather, it’s that because he’s legally forbidden from serving as an officer or director for any public companies. It’s one thing to be bad at your job. It’s a whole other to be so mercilessly awful that you’re never allowed to do it again.

John Sculley

steve_jobs

Cool apple, bro. You’re fired.

It’s not fair to put John Sculley on a list of the worst CEOs of all time. He retains a certain cachet as a brilliant marketing mind, notably for his time at Pepsi. He was instrumental in spearheading the “Pepsi Challenge,” a gimmick where Pepsi and Coke were pit against each other in a blind taste test and Pepsi was declared the better tasting sugar water. This eventually led to Coke remaking their flagship beverage as New Coke, a cola that tasted like brown water with pennies floating in it.

But this isn’t a list about the worst CEOs of all time. It’s about CEO flameouts and terrible decision making. And there are few worse decisions in the history of tech than telling Steve Jobs to take a hike.

These were very different men. Sculley was a master marketer and classical businessman. Everything was about streamlining and selling and profit margins. Jobs, of course, was more concerned with innovation and elegance. They were both excellent at what they did and butted heads frequently. Jobs tried to oust Sculley, who found out about the plans and in turn convinced the board at Apple to kick Jobs to the curb. Sculley was successful for a time, until he championed the PowerPC and the Newton, which both lost Apple a good deal of money. He was then replaced.

Like any CEO, Sculley had his successes and his failures. But forcing out one of tech’s most innovative—and yes, erratic and downright belligerent—figures is a pretty glaring mark on the resume of a leader.

Bernie Ebbers

The only thing Americans love more than a rags to riches story is a riches to rags story. That’s not to say we’re hateful misanthropes. But when someone who has it all cheats the system, there’s a certain glee we take in seeing them pay up.

Bernie Ebbers, for his part, starred in both a rags to riches and riches to rags story. He was one of five children. He worked as a milkman. He invested in a company called LDDS, which stood for Long Distance Discount Services, which was a kind of conglomerate of small, independent telecommunications firms. LDDS eventually changed its name to WorldCom, which then bought MCI, which made Ebbers into a minor corporate celebrity. WorldCom was growing into a behemoth, a sort of new age Ma Bell sitting at the forefront of networking and communications.

But like Al Dunlap, there had been some chicanery. Dunlap resigned early in 2002 and, a few months later, Worldcom admitted they’d messed up their accounting a little. Just a little though. What’s $11 billion between friends?

Congress started an investigation into these massive financial booboos and subpeonaed Ebbers. He began his testimony by saying “I do not believe I have anything to hide, I believe that no one will conclude that I engaged in any criminal or fraudulent conduct,” then pled the fifth for the entire proceedings. He eventually claimed in court that the accounting department and CFO were to blame for WorldCom’s “fuzzy” math, but since his fortune was in WorldCom stock and he tended to keep a pretty firm handle on the company in general, the jury didn’t believe him. He was found guilty of securities fraud, conspiracy, and a whole host of nasty fiduciary felonies. He’s currently in jail and can’t legally be released before 2028.

Dennis Kozlowski

The most productive place to have your next shareholders meeting

The most productive place to have your next shareholders meeting

Speaking of jailed CEOs, there’s Dennis Kozlowski. While most shamed executives fall from grace in the way that Ebbers and Dunlap did—namely, by fudging earnings to make their corporate stewardship seem laudable—Kozlowski just went on ahead and pretended his company was his own personal piggy bank.

Actually, piggy bank doesn’t really describe the extent of graft that went down during Kozlowski’s tenure at Tyco. He and his accounting team decided he deserved an $81 million dollar bonus and Kozlowski also lifted nearly $15 million to buy art, presumably because the original $81 million he took wouldn’t cover the Renoit he had his eye on.

For his part, Kozlowski still maintains his innocence. “I was a guy sitting in a courtroom making $100 million a year,” he said. “And I think a juror sitting there just would have to say, ‘All that money? He must have done something wrong.’ I think it’s as simple as that.”

That said, if you’re going to assert your innocence of financial misappropriation, it’s probably not a good idea to throw your wife a $2 million birthday bash and have the company pay for half. People tend to balk at a “shareholder meeting” on an Italian island with a vodka-micturating ice sculpture of Michaelangelo’s David.

James McDermott Jr.

James McDermott’s mistakes weren’t as massive or shady as the other men on this list. He didn’t force out a visionary or hide losses with elaborately shady accounting chicanery. His misdeeds didn’t cost thousands their jobs or serve to enrich him to levels that even Scrooge McDuck would find moderately distasteful.

Rather, James McDermott was a philanderer. And he told secrets in the bedroom that should’ve stayed in the boardroom.

As the CEO of KBW, a fancypants Wall Street investment bank, McDermott was privy to some sensitive corporate information. And since insider trading is a no-no, it’s generally a good idea to keep that information to oneself, or at least avoid telling it to your mistress, who might be an adult film star, and who might be passing that information off to other investment types.

In the end, he served 5 months in prison and paid fines that amounted to less than one tenth of one percent of his annual salary.

Oh. And just in case you wanted to feel sorry for the guy, while he was busy blabbing corporate secrets in bed, he was also looting his family’s trust fund during the affair. That’s most of the deadly sins, all wrapped up in one shiny, depressing little bow.


If you run a company and aren’t the sort who’s planning on large scale embezzlement or international graft, check out our Small Business Center or our Business Compliance Center for information on how to keep your growing company on the right side of the law.

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