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The Worst CEOs of 2011: Part 1

This has not exactly been a great year to be a CEO. In a normal year, there might be a handful of companies whose CEOs stand out like sore thumbs as potential "worst" candidates. This year, it was like trying to sort through eggs in a hen farm. This list could just as easily have been a few dozen CEOs long, thanks in part to a slew of Chinese fraud scandals, Congressional malfeasance, and what I would term a collective series of poor decisions by a number of CEOs.

What I've done is put together a two-part series that's whittled the veritable forest of worst CEO candidates down to 10. In my opinion, these CEOs, through a combination of poor decision-making and a lack of decision-making, are responsible for crushing shareholder equity and potentially crippling the long-term viability of their respective companies. Today, we'll count down from No. 10 to No. 6:

10. Tim Armstrong, AOL (NYSE: AOL  )
The answer is yes -- AOL does still exist, barely. Long removed from the dial-up days of the late 1990s and its botched merger with Time Warner, AOL still hasn't found its niche and seems destined to slowly bleed market share to its peers.

Even worse, CEO Tim Armstrong seems hell-bent on running his company's balance sheet like he's at a craps table in Las Vegas. Despite purchasing the Huffington Post for $315 million and TechCrunch for a reported $25 million, as well as spending $40 million a quarter on, AOL still faces the same challenges in driving traffic to its websites. Armstrong clearly understands that AOL isn't growing organically and that it'll need to buy growth, but those purchases so far just haven't delivered the goods.

Amplifying the woes at AOL has been its new reliance on ad revenue to drive results. In fact, ad revenue has been so strong that Armstrong recently announced that AOL is angling its business to be ad-driven rather than subscription-driven. Not to be a worrywart, but nearly every Internet company that based its business primarily on ad revenue went belly-up in the last decade. If Armstrong can't turn around AOL's ailing market share in the very near future, he could be looking for a new job. Call it a hunch, but I don't think AOL shareholders would be all that sad to see him go.

9. Stephen Elop, Nokia (NYSE: NOK  )
Mr. Elop deserves a special place on this list because his actions, or lack thereof, are the primary reason that Nokia, still the leading producer of cellphones, is losing market share to rivals Apple, Samsung, and HTC, faster than ever.

Nokia already found itself in a precarious position heading into 2011. Its Symbian operating system was untested, and its smartphones were unpopular next to the Apple iPhone and other better-selling devices. Making matters worse, in February Nokia decided to completely abandon its Symbian operating system in favor of Microsoft's (Nasdaq: MSFT  ) operating system. Great idea, right? Actually, not so great because it would end up taking most of a year to roll out the new platform. With Nokia way beyond fashionably late to the smartphone party, it appears that Mr. Elop's decision to change the company's direction so late in the game may have cost it any chance to compete against the likes of Apple or HTC.

Nokia now seems relegated to the lower-margin, lower-cost end of the cellphone market. While there is money to be made at this end of the market, it's no wonder that Nokia's gross margin has been on a steady downward slope and its market share is dwindling. Don't be surprised if shareholders show up with pitchforks in hand at the doorstep of Nokia's headquarters if things don't drastically improve over the next six months.

8. Trudy Sullivan, Talbots (NYSE: TLB  )
Don't let yesterday's buyout offer from private equity firm Sycamore Partners fool you: Talbots has been on an accelerated downward path since Trudy Sullivan took the helm in mid-2007. The company did state on Monday that, after four-plus years of driving Talbots into the ground, Sullivan was planning to retire. But that won't save her from being my eighth worst CEO of 2011.

Talbots has struggled to keep pace with changing consumer trends since the economy peaked in 2007. For a while, I would easily have given the company a free pass, because its competitors also struggled with excess inventory and the unwillingness of their customer base to spend on themselves. The time for excuses, however, has come and gone. Since 2007 Talbots has attempted with regularity to introduce new styles and reduce inventory only to consistently miss its own expectations. You don't see Chico's or ANN dipping into their bag of excuses every quarter.

The creme de la creme, however, comes from Trudy Sullivan's pay. As Fool Alyce Lomax has alluded to on many occasions, Sullivan was taking home exorbitant paychecks loaded with stock-based compensation even as her company's stock sank. Despite years of losses, Sullivan took home nearly $6 million in compensation last year, double the total she took home in 2009. Did I mention that Sullivan will also be receiving a $5 million severance package laced with another two years of equity incentive vesting? Oh, those poor shareholders...

7. Antonio Perez, Eastman Kodak (NYSE: EK  )
If you're into buying a company where the CEO's strategic direction involves crossing your fingers and praying the courts find in your favor, then perhaps Antonio Perez is the CEO for you. As for the rest of us who consider ourselves to be rational investors, Antonio Perez represents a stubborn figurehead greatly responsible for the demise of a once-great company, Eastman Kodak.

Since Perez took the helm in May 2005, Kodak's stock has plummeted by a saddening 96%. Perez has been uninspiring in his never-ending turnaround story (which evidently is taking the long route) and has instead turned to suing every tech company that may have infringed on its patent rights over the years, including Apple and Research In Motion, in order to stay afloat. Of particular worry to shareholders has been Kodak's reliance on its revolving credit line to finance its day-to-day operations of late -- a worry that has raised bankruptcy fears despite management's insistence to the contrary.

Unfortunately for shareholders, the figures don't lie. Kodak has been profitable on an annual basis only once since Perez took over, while revenue has been cut nearly in half. In fact, free cash flow fell from a $776 million inflow in 2005 to an outflow of $903 million over the past 12 months. Being stubborn has rarely proved a valuable CEO trait, and as I see it, Mr. Perez is exemplifying this with flying colors. Shareholders may want to take their jabs at Kodak while they still have the chance, because I don't anticipate the company surviving much longer.

6. Dan Hesse, Sprint Nextel (NYSE: S  )
Although Dan Hesse hasn't done quite the job on Sprint that Antonio Perez did on Kodak, he still deserves a mention for the more-than-80% stock decline shareholders have suffered under his reign as CEO. As a distant No. 3 carrier behind AT&T and Verizon, Sprint has struggled under the weight of a large amount of debt and high churn rates for years. Ironically, though, that's not the biggest drag on Sprint's stock price.

No, the biggest drag on Sprint's stock has been the decision at the top to continue to support the three-headed debt monster Clearwire (Nasdaq: CLWR  ) . Like a child who just won't leave home for good, Clearwire continues to need cash infusions to stay afloat, and like a parent who doesn't learn from their mistakes, Sprint keeps obliging. With another deal announced last week totaling $1.6 billion to keep Clearwire afloat, Sprint's only adding to the huge amounts it has already spent on Clearwire's very unprofitable network.

Since Dan Hesse took the helm in 2007, Sprint not only hasn't turned an annual profit, but it's also stopped paying a dividend, seen gross margin drop from 57% to 45%, and watched its book value erode every year. In that same time period, Mr. Hesse took home $12.3 million in 2009 and $9.1 million in 2010 in executive compensation. If paying for performance was actually a law, I think Mr. Hesse would be receiving a bill on a yearly basis.

Stay tuned...
On Monday, I'll list the picks for the top five worst CEOs of 2011.

In the meantime, I invite you grab your copy of our latest free report, "The Motley Fool's Top Stock for 2012," in which our analysts have highlighted a company they feel very strongly about in the upcoming year. 

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He doesn't expect to make many friends with this two-part article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of, as well as creating bull call spread positions in, Microsoft and Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's always looking out for your best interests.

Read/Post Comments (28) | Recommend This Article (27)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 09, 2011, at 11:52 AM, tweenthelines wrote:

    Excellent! Why not look FIRST to see who's at the helm; QB in football, CEO in business. Moreover, CEO annual letter to shareholders. Isn't this what The Man (Buffett) does.

  • Report this Comment On December 09, 2011, at 11:59 AM, jerr1 wrote:

    7 billion year revenue is great for Kodak . Sure its needs to raise the revenue to keep in line with its obligation an post profit . Which they are doing soon to be announced with hiring of new legal representation . Im sure company representing kodak wont be representing them if it wasnt possible they have had alot sucess in resructuring companys . Between that an soon to be finalized patent dispute an release new products next 14 days should be very intresting. 94 cent a share is bargin concidering what upside next 14 days will be.

  • Report this Comment On December 09, 2011, at 12:01 PM, jerr1 wrote:

    update ek december 12 2011 stock rockets to 1.94

  • Report this Comment On December 09, 2011, at 12:13 PM, techy46 wrote:

    Stephen Elop, Nokia? You're crazy, he made a bold decision based on participating in building a 3rd mobile ecosystem for enterprise consumers and you're calling him a bad CEO. So you think he should've selected Android, an advertising and marketing virus from Google. Next you;re going to nominate Steve Ballmer because he's arrogantly lead Microsoft to the world's number one posistion in entersprise client and server software. Maybe you should nominate Steve Jobs for dumping all his Apple shares like a cry baby when he didn't get his way.

  • Report this Comment On December 09, 2011, at 12:22 PM, TMFUltraLong wrote:


    I'd love to see Kodak complete a turnaround and have its products fly off the shelves. Unfortunately, it's running out of cash and its products are so heavily commoditized that it just doesn't seem possible. It's patents are worth something, but as I've argued before, I think everyone is pretty content letting the company go belly-up and attempting to purchase those patents in bankruptcy court.

    Thanks for the comments.


  • Report this Comment On December 09, 2011, at 12:23 PM, TMFUltraLong wrote:


    Elop has been a perpetual flip-flopper in his tenure as CEO and he picked a pretty poor time to switch platforms. I'm not even saying that the switch to Microsoft's OS is going to be successful either, but I'm at least mildly hopeful they might stick with a game plan for longer than 12-18 months this time.

    Thanks for the comment.


  • Report this Comment On December 09, 2011, at 12:54 PM, constructive wrote:

    "Not to be a worry wart, but nearly every Internet company that based its business primarily on ad revenue went belly up in the last decade."

    The companies that relied on nonexistent revenue were obliterated, whether their fantasy business plans were ad-based or not. Obviously, the bubble popping didn't obliterate the companies that were actually booking significant ad-based revenue (for example Yahoo).

  • Report this Comment On December 09, 2011, at 1:18 PM, spokanimal wrote:

    Man, did you get it WRONG with Dan Hesse.

    While it's true that the Sprint CEO is one of the worst CEOs of 2011, his biggest gaffe was in NOT launching network vision last spring when Clearwire completed it's LTE evaluations and Ericsson ran Clearwire's version of TD-LTE on a live, swedish network at speeds in excess of 100 megabits. THAT is the performance that Clearwire's fat-pipe, TD-LTE will achieve for it's 135 million POPs once it's up and running... Hesse's error was in not funding Clearwire's LTE overlay last June... for a mere 1/15 of the eventual cost of his own "network vision" project.

    Clearwire's WiMax network has been mopping up the floor with Verizon since Verizon first launched LTE. In the 3rd quarter alone, Clearwire added over 1.9 million new subscribers vs Verizon's 1.2 million net-new on ALL platforms and it's been that way all year long.

    The key is Sprint/Clearwire's unlimited, un-throttled data plans which Dan Hesse scaled back on all devices except handsets last month... even though that aspect of Clearwire's service was what was driving both Clearwire's and Sprint's subscriber build...

    ... without clearwire's contribution, Sprint would have fared far worse in the net-new subscriber department... and now we have this Sean Williams guy getting THAT fact entirely wrong.


  • Report this Comment On December 09, 2011, at 3:27 PM, TMFRhino wrote:

    Can't wait for the RIMM double team in the next part of the series.

  • Report this Comment On December 09, 2011, at 3:51 PM, Jimdotcom wrote:

    Perez has had 6 years! The stock has gone from the 20s to under $1 today. What do you think he will do differently?

  • Report this Comment On December 09, 2011, at 5:18 PM, TechMeme wrote:

    The writer, Mr. Williams, is wrong about Tim Armstrong. Armstrong gets AOL, he gets advertising, he gets Local. He is the correct CEO for AOL and I seriously doubt there's a better person than Armstrong for the job.

    He is forthright, a good communicator, a strong leader, bold and he actually appears to care about his people and the communities in which AOL operates, which is more than can be said of some. He also doesn't sit around his office. He's engaged and he's out there working hard and leading from the front. Those are not qualities of someone deserving to be in the bottom 10 CEOs of 2011.

    Can you name any CEOs who were able to miraculously turn around a business and change its business model inside of two-to-three years? Some in your business think that magic wands exist. They don't, though there is still some fairy dust available for a few dotcoms. Some things take actual time and hard work and capital investment. I see that with AOL and while many may have bailed out of the stock already now might actually be a very good time to buy low.

    The culture and spirit at AOL has turned around since he took the helm. Certainly not every transition has been perfect. The layoffs at the time of the HuffPost acquisition were not pleasant, but they at least made some sense.

    Let's look at for a moment. Patch may not be profitable yet, but how long did Facebook and Twitter run on investment capital before they began making money? Patches are great places for local businesses, and as eyeballs increase they will be great places for national advertisers, consumer goods ads, big box stores and retail chains to connect with customers. Also have you noticed that politicians have started using Patch as a forum? Local and regional politics were very interesting and much more engaging on my local Patch this November. Watch for that trend to grow.

    Lastly, and perhaps best, it's nice to see a December when AOL is hiring rather than laying off people. So, while we wait to see if AOL indeed has a sustainable business model I think it should be clear enough that Armstrong is undeserving of the appellation Mr. Williams has attempted to cast upon him.

  • Report this Comment On December 09, 2011, at 8:15 PM, jerr1 wrote:

    Makes ya wonder why ceo of kodak remains ceo unless hes going down with ship. Stock is down 30 percent in friday an slipping . Surely does look like end is near for kodak stock will be 10 cents by christmas at this pace .

  • Report this Comment On December 09, 2011, at 9:08 PM, ajaykc wrote:

    @techy46 and TMFUltraLong,


    I would completely agree with you. Mr. Elop is quite a bold CEO and I am not sure how he would have done it differently. He took his time after being apointed in September, to understand Nokia as a company (its strengths and its weaknesses) and to come up with a clear decision without wasting a lot of time. He chose a path and went ahead and married microsoft rather than keep flirting/dating/sleeping with bunch of chicks around and getting STDs in the process. Whether this marriage was successful or complete failure, time will tell. I am sure Mr. Elop has hurt feelings of lots of Nokia/symbian fans around the world and given microsoft haters to rise and talk whatever.


    When did he flip-flop, I want to know? I think he promised that he will deliver a Nokia phone running on windows phone software by the end of this year and he has delivered. I don't see a flip flop in this, unless something I don't know about. He is not putting Nokia for sale and he has consistently denied all those rumors. He is still focused in markets where Nokia brand has been strong, e.g. Europe, Africa, Asia, South America etc.

    I can see his failure on one metric and that is stock price. He has not been able to convince market traders that his plan is working and whether it will work. Maybe Nokia fans are waiting for windows based phones and they didn't buy symbian based phones in last few quarters as they knew Nokia is focusing on windows and will have better product line in that segment.

    My last point, you shouldn't be too quick to pass the judgement and if you do then you may not have a chance to correct yourself if Nokia really turns around. Just have some patience.

  • Report this Comment On December 09, 2011, at 9:22 PM, ajaykc wrote:

    I am not sure why Goldman CEO has not made the list so far. Is he going to top the list? He lied to congressmen in 2010 and in 2011, he flip-flopped. I don't know how many cases have already been filed against him. He is shame on capitalism. Even if you look at the share price, he should make it to your list.

    HP's CEO was even worse. He really flip flopped. First said, spin-off PC business then changed his mind. Second, launched touchpad and within a month took it off the shelves. I think, he destroyed HP.

    How about AMR's CEO, he stepped out on the day company filed for bankruptcy? How easy? Took his retirement money and walked away over the dead shareholders. He should be criminalised...

    Can you forget Netflix, the darling of Wallstreet? You don't impose hiked fee on your customers to grow your company, you do that from your profits.

    How about Bank of America? A day ago Mr. CEO tells media that his company has all the capital it needs and next day sleeps with Mr. Buffet and promises to pay pays him 5-6% interest (I don't recall the real number) for years to come. If he didn't need money then why did he give him such a deal?

    It seems Cisco didn't make your list as the company seems to turn around and yes its not easy to turn a big ship.

  • Report this Comment On December 10, 2011, at 2:14 AM, TMFUltraLong wrote:


    Keep in mind this is only part 1 of 2.... numbers 5 through 1 will be out Monday.


  • Report this Comment On December 10, 2011, at 8:43 AM, dragonLZ wrote:

    I don't know enough about these CEOs and their companies to be able to agree or disagree, but I enjoyed reading this article. Brilliant.

  • Report this Comment On December 10, 2011, at 12:08 PM, TMFDarwood11 wrote:


    So this list is the "best of the worst." I can hardly wait to see who is selected for the "top 5 worst CEOs of 2011!"

    Drum roll, please!

    Nicely done.


  • Report this Comment On December 10, 2011, at 1:18 PM, Kloris wrote:

    John Corzine of MF Global. Hands down as far as I am concerned.

  • Report this Comment On December 10, 2011, at 3:03 PM, TheDumbMoney wrote:

    Top Five:

    5) Moynihan (BofA)

    4) Hastings (NFLX)

    3) Murdoch (Newscorp)

    2) The RIMM guys

    1) Jon Corzine (MFGlobal)

    Game, set, match.

  • Report this Comment On December 11, 2011, at 11:54 AM, jerr1 wrote:

    maybe ceo of kodak is intent letting kodak go belly up . Probley wont see any insider buying this time ,but kodak has giving its employees option to purshase company stock in 401 k program agun . Price is right at 89 cents employees would stand to make millions over nite an retire comfortably forever after

  • Report this Comment On December 11, 2011, at 12:04 PM, TheDumbMoney wrote:

    I think Kodak has been circling the toilet bowl for a decade. There has been no sudden decline or problem this year indicating a 2011 terrible CEO candidacy, in my view.

  • Report this Comment On December 11, 2011, at 12:09 PM, jerr1 wrote:

    Well for company who has openings for alot techicle jobs dont see kodak demise in near future . Ceo of kodak actually good ceo he on obama team creating jobs in usa . Im voting for obama 150 percent he got me good job

  • Report this Comment On December 11, 2011, at 9:58 PM, TheDumbMoney wrote:

    "Mr. Corzine compulsively traded for the firm on his BlackBerry during meetings."

    Aaaand the winner is....

  • Report this Comment On December 11, 2011, at 11:35 PM, TradeDragonfly wrote:

    Reed Hastings better be top 3.

  • Report this Comment On December 12, 2011, at 1:09 PM, LostInTx wrote:

    Great article. Would wager that a Austin based computer maker could be on this list as well...maybe next year.

  • Report this Comment On December 14, 2011, at 2:58 AM, Ironbob wrote:

    Perez is brain dead. I'm all for minority hiring but must a company keep a moron on the payroll forever????

  • Report this Comment On January 16, 2012, at 3:28 PM, walkerrowe wrote:

    Fool editors,

    You mentioned Dan Hesse and Kodak in the same sentence but did not mention that Dan Hesse once ran the film division of Kodak. Seems he ran it into the ground.

  • Report this Comment On March 23, 2012, at 8:31 PM, vivienneaa wrote:

    Kodak callous side is now out in the public domain and I wish all US braced employees the best of luck with there court action …. as here in the UK Kodak is cutting all UK employees redundancy payments to the minimum allowed by Law in preparation for closure of all UK manufacturing sites on the cheep In the next twelve months

    here in the UK …. this means all employees will lose 70% of there redundancy pay ...I am embraced to work for the company

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