Don't Get "Vicked"

Heading into the 2003 NFL season, the Atlanta Falcons had it all. Young quarterback Michael Vick had electrified a stagnant squad with his ability to weave magic in the open field. Coaches recognized the strengths of their gifted signal caller and built a team around him. Between sure-handed running back Warrick Dunn to the latest acquisition -- deep-threat receiver Peerless Price -- the offense was built to spread the field and give Vick room to perform his gridiron feats of fancy.

Two weeks ago, in a meaningless preseason game, Vick suffered a fractured fibula. Sure, he'll be back eventually, but how will the Falcons manage without him over the first few weeks of the regular season? His replacement, Doug Johnson, is an entirely different type of quarterback. That wouldn't be so significant if the team wasn't custom-tailored for a spunky southpaw with an intact fibula.

Corporate America, take notes
This is about more than football. A company can be too dependent on its huddle master to carry the team. What happens when its play caller -- the one who strategizes and isn't afraid to audible at the line -- has to leave the game?

Sure, torn ACLs and groin pulls aren't common boardroom injuries, but death, displacement and retirement are. As investors, how confident are you that the stocks you own belong to companies with capable leadership warming the bench?

It's a problem with companies of all sizes. When Coca-Cola's (NYSE: KO  ) Roberto Goizueta passed away in 1997 the company missed his global marketing skills. His emphasis on return on investment produced a better-than-7,000% total return to Coke shareholders during his amazing 16-year tenure. Coke's fizz has gone flat since he's been gone. The shares have shed 25% of their value in his absence.

In short, you don't want to get Vick-timized. You don't want to get Vicked off.

General Electric's (NYSE: GE  ) Jack Welch went to great lengths in grooming his replacement and made an announcement months in advance. Given GE's executive pedigree, with folks running the show at places like Home Depot (NYSE: HD  ) and Intuit (Nasdaq: INTU  ) , you'd think the transition couldn't fail. So how has Jeffrey Immelt fit into the Doug Johnson jersey? Not too well. GE's stock has been halved over the past three years. Apparently, you can spell succession without success.

It's a long season
Sure, it can be argued that Coke and GE were trading at lofty multiples under their former rulers, and that the fundamentals at both companies haven't deteriorated as badly as their market caps. But isn't that the point? Some CEOs command a market premium while others don't.

So beware if your portfolio is filled with companies that are run by superb hat-stacking executives, but with little backup. And if you're drawn to a company by its fiery helmsman, just make sure that the charisma is contagious.

Tech companies are ripe with ego-stroked executives. Can you picture Oracle (Nasdaq: ORCL  ) without Larry Ellison? How about a Steve Jobs-less Apple (Nasdaq: AAPL  ) ? Would Sun Microsystems (Nasdaq: SUNW  ) still shine without Scott McNealy? I'm not suggesting that these companies are hollow on the inside. It's great to have a confident leader, but, just for Plan B's sake, it pays to pull back megalomania's curtain every once in awhile and see what lies beneath.

And I'm not saying you need fret over the passing of company founders. Harley-Davidson's (NYSE: HDI  ) success over the past 100 years has obviously outlived William Harley and Arthur Davidson. Goizueta and Welch weren't even born when their companies were founded.

It's just important to consider that the same micromanaging CEOs who are receiving high marks for their hands-on approaches are often domesticating companies that won't be able to fully function in the wild without them. As cocky as some of these chieftains might appear, that is hardly the kind of legacy they wish to leave behind.

Go for a business that any idiot can run
Peter Lynch said that, adding, "because sooner or later, an idiot probably is going to run it." But that's the rub in the Lynch mob mentality. There is no business that any idiot can run. Something as simple as selling Coke's high-margin syrup water or McDonald's (NYSE: MCD  ) burger grub just isn't the kind of venture that can blossom on autopilot.

So do yourself a favor and go for a business run by a genius, with another genius carrying the clipboard. In Berkshire Hathaway (NYSE: BRK.A  ) speak, that means that you should be grateful if behind every Warren Buffett, there's a Charlie Munger.

And don't be afraid to step up at a company's annual shareholder meeting and ask about its succession plan. Companies like Disney (NYSE: DIS  ) with prolific CEOs that dodge these questions should be taken to task. A leader who is so bloated with self-importance that the very notion of tapping an heir falls into the unmentionables drawer is like a wrapper that stops at the first ingredient.

What's the harm in naming names? It would cause dissent? Already, Disney should be installing FastPass stations at the exits the way executives have been bolting over the past few years.

As we celebrate the Fool's 10th anniversary I have to admit that I'm glad to be riding the coattails of two brothers -- not just one. Living under the flashy, yet solitary, Vick-like CEOs may be exciting for the spectator but it's risky from the inside. CEOs aren't tour guides. They should be empowering educators, instilling a corporate culture with lifelines longer than their own. That's where the meat behind the broken bones comes in.

Rick Aristotle Munarriz takes his football seriously. He's been a Miami Dolphins season ticket holder since 1987 and he lives out his fantasy-football obsession on his Fanway.com site. Rick's other stock holdings can be viewed online, as can the Fool's disclosure policy.


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