CEO Gaffe of the Week: Carnival

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Last year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions 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 have no choice but to again select the CEO of Carnival (NYSE: CCL  ) , Micky Arison.

The dunce cap
I'm not quite certain how many more times I’m going to have to do this, but Carnival's CEO, Micky Arison, is, without question, leading the charge for worst CEO of the year in my book.

Carnival, the highly embattled cruise ship line, has a remarkable streak when it comes to mechanical problems with its ships. In January last year, the Costa Concordia crashed off the coast of Italy, tragically killing 32 people. Just weeks later, the Costa Allegra had a fire in its generator room that left the ship adrift at sea. The Allegra was later taken out of service and scrapped for parts.

Fast-forward to mid-February 2013, when passengers on the Carnival Triumph dealt with a fire in the engine room that left the ship adrift at sea near Mexico. With toilets overflowing and food scarce, it took five days for the boat to finally make it back to Alabama. On March 9 the Carnival Elation announced that it had a steering issue and was towed back into port by tugboat. On March 13, the Carnival Dream noted it was stuck in port at St. Maarten because of generator problems while passengers reported toilet and power issues. Finally, just a day later, the Carnival Legend reported that it was having sailing speed problems. 

Tallying this up, that's six mechanical problems for Carnival since January 2012 compared to zero for Disney (NYSE: DIS  ) , NCL (NASDAQ: NCLH  ) (owner of Norwegian Cruise Lines), and Royal Caribbean (NYSE: RCL  ) . In fact, what you might anticipate would be a negative for the cruise sector as a whole has actually turned into a positive, with passengers eager for a vacation simply choosing to avoid Carnival's fleet of disaster-prone ships in favor of the above three. Disney has benefited from advanced bookings which have shielded it from any negative sector headwinds. Royal Caribbean, which hits many of the same routes as Carnival, is bound to gain share from Carnival as it deals with this PR nightmare, as well as gain traction in emerging-market routes catering to China. Norwegian Cruise Lines followed this trend as well, tacking on $46.2 million in additional net income in 2012 compared to 2011 as its brand presence grew. 

To the corner, Mr. Arison
But wait -- there's more!

If it wasn't bad enough that Carnival has moved well beyond the "coincidence" stage of its mishaps, Micky Arison continues to act like a deer in the headlights when it comes to his handling of his company's miscues.

If you recall, one of my biggest gripes last year was Arison's weeklong wait before visiting the site of the Costa Concordia disaster. On top of distancing himself from the wreck, the compensation package offered by Carnival seemed a bit skimpy. A year later, you'd think that perhaps Arison would take a more hands-on approach to managing Carnival’s problem… well, guess again!

Outside of an appallingly small compensation package offered by Carnival in February for Triumph passengers, Arison might as well be a hide-and-seek champion, because not a soul can find this missing leader in times of crisis -- unless, of course, you look courtside during a Miami Heat home game, because Arison is owner of the team. In fact, if you check out Arison's Twitter feed, it's littered with posts about the Miami Heat and re-tweets people have sent Arison regarding their loyalty to Carnival. However, I can find just one post about Carnival's ship issues -- and the post itself may have you banging your head when all is said and done:

"Looks like a FUN evening on Carnival Dream" -- Micky Arison, March 14 

The end link there is to a "surprise" Jon Secada concert, but I can't help but point out how the post is in poor taste considering that March 14 is when the Dream was stuck in port because of a generator issue! It's almost as if the worse the PR gets, the more reclusive Arison becomes. He clearly cares more for his basketball hobby than his fiduciary responsibilities as CEO.

Do you have a CEO 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 see your suggestion in the spotlight.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (8) | Recommend This Article (14)

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 March 22, 2013, at 4:50 PM, DRovito wrote:

    Pretty vicious . . . the CEO isn't the one in charge of the operation. I'm sure there will be a new COO incoming any minute. Maybe Pat Riley? Seems like the author of the article got stuck in one too many FUN ships.

  • Report this Comment On March 22, 2013, at 5:07 PM, birder1500 wrote:

    In the railroad industry when I worked in it had a policy of "deferred maintenance" to soup up their earnings. It appears that perhaps that Carnival is following that policy to enhance their earnings. I guess it has not worked as was planned.

  • Report this Comment On March 22, 2013, at 5:09 PM, Invest58 wrote:

    I just looked at what the people on Triumph received for compensation and it looks like plenty to me. What would be considered not appalling to you?

  • Report this Comment On March 22, 2013, at 10:49 PM, KKoleto wrote:

    Reminds me of Tony Hayward from BP...

  • Report this Comment On March 23, 2013, at 12:35 AM, Mo1074 wrote:

    I guess it is easy to criticize, especially when you have no facts other than what the average joe has seen on CNN. I believe the facts were different, especially when all of us heard the passengers praising the crew. Where does the crew that were praised for being above and beyond in their level of service get their instructions and training and directives from?

    If the crew had performed the way they did, and where praised for it, then I believe management did the best they could have ever done with the controlled elements, machines break down for no apparent reason. I believe you drive a car like most of us, and no matter how much maintenance you do, sometimes the car breaks down.

    The fact that there was a fire in the engine room, and it was put out by the systems installed in the ship, then to me management saved the passengers and the ship.

    Safety is what matters in these situations and not a visit here or there.

  • Report this Comment On March 23, 2013, at 1:38 AM, sliderw wrote:

    I don't need to see the CEO visit the lesser incidents for show. But the frequency of incidents indicates a poorly run company, which is the CEO's responsibility.

    I think some wise investor said, when a CEO starts indulging in sports team ownership, get out of the stock.

  • Report this Comment On March 25, 2013, at 10:24 AM, CluckChicken wrote:

    @Mo1074 - The crew in many of these cases may have done an outstanding job after the incident the real question though is why is this happening so often for Carnival but none of the others? Yes sometimes things just break but after a while somebody should look into why things just seem to break more often at Carnival then anywhere else.

  • Report this Comment On March 25, 2013, at 10:41 AM, sltepper wrote:

    6 mechanical problems for carnival and none for the rest of the industry?

    1) Concordia was not a mechanical problem.

    2) Royal's Allure had a fire in the engine room last April.

    3) An NCL and RCCL ship crashed into each other last September.

    4) Nice throwing Disney into the mix without mentioning that Disney has a total of FOUR ships. Carnival has more than 100.

    5) This is not secret information. Try the Google, Sean.

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