CEO Gaffe of the Week: Research In Motion…Again

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This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week, I plan to highlight both the current CEO of Research In Motion (Nasdaq: RIMM  ) , Thorstein Heins, as well as former co-CEOs, Jim Balsillie and Mike Lazaridis.

The dunce cap
Yeah, it's this trio again -- Wall Street’s version of The Three Stooges.

Research In Motion’s gaffes probably deserve their own 10-part documentary on CNBC but, for the sake of time and RIM shareholders worldwide, I want to focus strictly on a filing with the Securities and Exchange Commission two weeks ago regarding severance pay for former co-CEOs Mike Lazaridis and Jim Balsillie.

If you recall, after failing to innovate its line of BlackBerry smartphones for the growing consumer market, and having its market share eaten alive by Apple’s (Nasdaq: AAPL  ) iPhone and Google’s (Nasdaq: GOOG  ) Android operating system, both former co-CEOs reduced their annual salary to just $1, presumably to save costs and reflect the poor performance of RIM’s stock.

Fast forward to the SEC filing two weeks ago and what do we find -- (quick, grab something to bite into, punch and/or mangle) -- a nearly $12 million severance package, which RIM referred to as a "transition package," consisting of roughly $4 million for Mike Lazaridis, and about $7.9 million for Jim Balsillie.

If I were a shareholder, I’d be downright ticked off, especially considering that the company recently announced that it would report an operating loss in its upcoming quarterly release. Also, what happened to the company’s tough money-saving decision making? It apparently didn’t last too long under Thorstein Heins’ reign.

To the corner you Stooges
But wait, there’s more!

One area in which  RIM doesn’t disappoint is annoying its shareholders. Not only did RIM greatly reward its former co-CEOs, but it released this "blurb" directly below the "transition agreement" in the SEC filing (page 43 for those interested):

Lazaridis and Balsillie revolutionized the worldwide wireless industry with the introduction of the BlackBerry and forever changed how the world communicates. Under their leadership, the Company successfully navigated many challenges and quickly scaled to become a global company and industry leader with sales in over 175 countries and more than 17,000 employees worldwide. Over the last decade, the Company experienced tremendous growth, with annual revenues increasing from $294 million to just under $20 billion.

I, however, feel that  they left some key parts out. Like how their lack of innovation is costing the company both consumer and enterprise market share, how its BlackBerry PlayBook flopped almost as badly as Hewlett-Packard’s (NYSE: HPQ  ) TouchPad when they went toe-to-toe with Apple’s iPad, how sales decreased 33% sequentially, and how the company reported a $518 million operational loss last night, and outlined a plan to lay off 5,000 workers. I’ve heard of paying CEOs for past performance, but we’re really stretching the limits of the rearview mirror with this statement.

The one and only saving grace for RIM may be its patent portfolio, but even that isn’t as cut-and-dried as you might expect. Most of RIM’s patents are shared with Apple or Microsoft (Nasdaq: MSFT  ) stemming from their consortium bid of $4.5 billion, when they collectively purchased Nortel’s patent portfolio in bankruptcy court. This makes a potential RIM buyout even trickier to navigate.

Sometimes you can’t win for trying, and RIM’s management certainly isn’t trying very hard.

Do you have a CEO who you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. 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, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On June 30, 2012, at 11:07 PM, jopow wrote:

    Well, calling RIM rotten at this point is a reasonable proposition. RIM is like a tomato that was sitting in the kitchen at room temperature and turned ugly green moldy very rapidly.

    Remember (I am sure you do) that Mike and Jim were told that BB 5 and 6 were bad OSs, which were clunky, slow, crashy, buggy, etc, etc. Even BB 7 has so many flaws in this regard, and I know directly on this because my wife has already had to return 3 BB torches for replacements because her unit crashed and would not work unless exchanged.

    Something is wrong with the RIM engineers, where they don't really know how to build a great OS. Why are these engineers taking 2 years to build BB 10??? What is up with that??

    Apple and Android engineers get things done fast.

    I really think that a large part of the RIM problem is incompetent engineers that just did not know how to build a competitive smartphone on a timely basis. After all, what about the engineering flop with the Playbook. Then, they took about a year for an update??? What is up with that?

    Now, even worse, Heins is now unable to tell the truth or give out reliable facts and estimates. I really doubt they can get BB 10 out by the end of March 2013. Bet on it coming out much later, or maybe not at all if they are out of business by then anyway.

    What a laughing stock the whole company has turned out to be now, and the laughs keep on getting bigger and louder almost every day.

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