If you work your way up to being the CEO of a high-profile company, you'll have many eyes upon you. It's a terrific opportunity to build a great reputation, and perhaps to enter the annals of history as a great influence.
Think, after all, of Henry Ford, and how he made great use of assembly lines and pay hikes. Or think of Katharine Graham, who maintained her integrity and earned much respect by publishing the Pentagon Papers and breaking the Watergate scandal.
Then there are the other kinds of CEOs, the ones who don't do as well. Here are the three worst CEOs of all time, according to three folks who follow many CEOs.
Dan Caplinger: With the benefit of hindsight, it's pretty easy to blame former Apple (NASDAQ:AAPL) CEO John Sculley for the near-death experience the company suffered in the 1980s and 1990s. Coming from PepsiCo, Sculley was brought on in 1983 to help act as a counterbalance to Apple co-founder Steve Jobs, with Sculley providing considerable experience in marketing, with campaigns such as the well-known Pepsi Challenge. Yet according to many, the relationship between Sculley and Jobs turned into a power struggle that culminated in Jobs' removal from his management duties at the Macintosh division.
It took the return of Steve Jobs in 1997 to help Apple start a recovery. Sculley now says that one of his biggest mistakes was not bringing Jobs back in the early 1990s, a decision that cost Apple several years of valuable time in which it fell behind some of its tech peers.
Moreover, Apple shareholders might well have had even stronger long-term performance were it not for Sculley's missteps during his decade-long tenure as the company's leader. By 1993, Apple was foundering, and many blamed Sculley's strategic decisions for the company's underperformance early in the tech boom. Sculley was ousted by Apple's board of directors that year, beginning a four-year period during which two more CEOs came and went.
Jason Hall: Kenneth Lay, the founder and CEO of Enron, gets my vote as the worst CEO in history, and I don't know that it's even a close call. At the company's height in 2000, Enron claimed more than $100 billion in annual revenue and had regularly been on lists of the "most admired" and "most innovative" companies.
It looks like most of the innovation was in illegal manipulation and shenanigans, seemingly led by Lay. In short, Lay oversaw a massive fraud, as management used shell companies to hide big losses and debt off the company's books.
Lay and his cohorts were so effective at their shell game that they even managed to rope Arthur Andersen -- at the time, one of the largest and most venerable accountancy firms in the U.S. -- into their dealings, a move that led to the closure of the firm after felony convictions of obstruction of justice. (Those were later overturned, but by then it was too late to save the company.) It gets worse.
Tens of thousands of Enron employees' pensions were essentially destroyed, with only $85 million of $2 billion (barely 4%) recovered in a lawsuit -- around $3,000 per employee. Shareholders made out better, but not much. A number of lawsuits did award shareholders about $11 billion in total, but the losses totaled over $70 billion at the final tally.
The outcome of the Enron scandal was the Sarbanes-Oxley Act. This law significantly increased the reporting standards for companies, the accountancy firms that audit them, and the management and boards that oversee them, with potential criminal consequences. Lay and his cohorts not only destroyed tens of billions in wealth, but two multibillion-dollar companies, and led to the most comprehensive tightening of reporting regulations for public companies in decades.
Lay's conviction on 10 charges was vacated upon his death from heart attack three months before he was to be sentenced. Skilling was convicted on 19 charges and remains in prison. He will be eligible for release in early 2019.
Selena Maranjian: When it comes to the worst CEOs of all time, I know it can be hard to choose, as there have been so many spectacular disappointments. One stand-out has remained in my mind over many years, though: Bob Nardelli, who once ran both Home Depot (NYSE:HD) and Chrysler (now Fiat Chrysler (NYSE:FCAU).
I remember being appalled, hearing about Home Depot's annual meeting in 2006, where no outside directors of the board were present (reportedly encouraged by CEO Nardelli to not bother attending), and where Nardelli took no questions from shareholders. That's appalling because shareholders are not mere enthusiasts in a company or interested reporters -- they're the co-owners of it.
What a contrast to the Berkshire Hathaway annual meeting, where CEO Warren Buffett and his partner Charlie Munger answer dozens of questions from shareholders, journalists, and analysts for more than five hours! Nardelli reportedly was only at the meeting for 30 minutes or less. That's sending a blatant message of disregard to shareholders.
At the meeting, many shareholders wanted to question Nardelli's pay package, which topped $120 million over five years. Consumer complaints had risen sharply during his tenure -- staffing cuts had hurt customer service -- while the stock dropped 8% over that period. Nardelli did eventually leave the company, in 2007, but with a severance package worth $210 million!
Nardelli quickly moved on to Chrysler, which was admittedly ailing. He cut costs and cut jobs, but the company filed for bankruptcy less than two years later.
We investors would do well to get familiar with the CEOs running our holdings, and to favor those who inspire confidence and trust.