The only thing more difficult than achieving success for startups is predicting who will be successful. So much of it comes from decisions people make, and that usually starts at the top with the CEO. Naturally, the traits that make for a good CEO at a startup are very different than what makes for a good CEO of a large corporation, be it publicly-traded or privately-held. But in either case, you have to ask: are high-profile CEOs effective?
Seven years ago, GE CEO Jack Welch resigned, and after what must have been the highest profile succession planning process, Jeffrey Immelt was handed the keys to the car - or, shall I say, plane.
Immelt was one of the three lieutenants who were in the public race, along with Jim McNerney and Robert Nardelli. In a very odd and somewhat shocking twist, Immelt was chosen to replace Welch and McNerney and Nardelli were let go.
The idea was: after the grueling race, McNerney and Nardelli would never recover and report properly to Immelt. Right or wrong, it was one more amazing page from Welch’s playbook, which has been replicated but not quite duplicated (or is it the other way around; you know what I mean).
In all fairness, Immelt took over on September 11 2001. That’s bad timing, to put it mildly. Exasperating matters was the fact that GE was a major jet engine provider and as such the 9/11 attacks affected GE more profoundly due to its exposure to the travel industry. However, like any self-respecting diversified entity, GE was also a supplier of military jet engines… something that - thanks to 9/11 - boomed in the 21st century. In that sense, net-net, you almost have to ask, should GE not have exceeded the market? It has not.
While GE has continued to do well, its stock has languished: the stock is down 25% since 2001, causing some to call for Immelt’s head. Immelt has also faced pressure from some to spin off NBC, which he merged with Vivendi’s Universal.
See our video profile on NBC Universal here, and our post on How Much is NBC Universal here.
This past month, CNBC host Maria Bartimoro sat down with Jim McNerney, who now runs Boeing. He had actually left from GE for 3M, but then was lured to Boeing (he had run GE’s jet engine business, if my memory serves me right). Here is an excerpt and intro to her interview:
Boeing (BA) Chairman and CEO Jim McNerney has taken his share of hits lately. The ambitious 787 Dreamliner is about 15 months behind schedule, and in late March, Boeing lost out on a multibillion-dollar contract to build a fleet of refueling tankers for the U.S. Air Force. That deal, which is being protested, went to Northrop Grumman (NOC) and partner EADS (EADS), the European consortium that builds the Airbus and is Boeing’s archrival.
Boeing’s stumbles have caught many by surprise, primarily because McNerney, a disciple of former GE CEO Jack Welch, is held in such high regard. After a stellar 19-year career at GE, McNerney became chairman and CEO of 3M, moving to Boeing as chairman and CEO in 2005. I talked with McNerney on May 22 in Chicago at a conference on competitiveness sponsored by the Commerce Dept.
The good news ends there, with McNerney’s past. Sure, Boeing could not have predicted the slowing economy and rising oil prices, but its failure to deliver the Dreamliner in time will serve as McNerney’s achilles heel, in the end.
What about Nardelli? Home Depot lured Bob Nardelli immediately. To put things mildly, that was an even bigger disaster.
The former GE lieutenant basically bombed the company after earning a payout of $210M to leave on top of $170M in salary since 2001. When he left, the story ran as follows:
Home Depot Inc. Chief Executive Officer Robert Nardelli, under fire from investors for earning $225 million while the company’s stock languished, resigned “by mutual agreement,” the world’s largest home-improvement retailer said.Nardelli, 58, will receive $210 million in severance payments, the company said.
Home Depot has lost market share to Lowe’s Cos. during Nardelli’s six-year tenure, its shares have declined 7.9 percent and the company is headed for its smallest annual gain in profit in at least nine years.
“Ultimately the board felt the negativity associated with Nardelli was an impediment to his and the company’s success,” said Daniel Popowics, an analyst with Fifth Third Asset Management.
Nardelli, who joined Home Depot from General Electric, became a lightning rod for critics of excessive executive pay. Nardelli was the only board member to appear at the company’s annual meeting last year, where the size of his pay package was questioned.
“I know he’s been under pressure and that there’ve been dissidents in there,” said Marvin Roffman, of Roffman Miller Associates in Philadelphia, which owns Home Depot shares among $410 million in assets. “There had to be some kind of problem with the board.”
Nardelli left Home Depot and now runs privately held Chrysler, whom private equity firm Cerberus bought off the hands of Daimler Chrysler, ending that disastrous merger. Chrysler is set to lose $1.6B. To his credit:
A source inside Cerberus says that Nardelli will receive only $1 a year in base salary. This person would not go into detail regarding the rest of Nardelli’s pay package, and would only add that Nardelli’s pay will be directly tied to the success of Chrysler’s turnaround…
With all due respect to Jeffrey Immelt, he has not fared better.
GE’s stock price in October 2001: $40. GE’s stock price in 2008: $30. For a company worth $300B, everything else is irrelevant, after all. But compared to Nardelli and McNerney, Immelt has been a smashing success, I presume.
This all begs the question: were these men’s track records their downfall? They all came into their new positions with what can only be described as extremely high expectations…
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WatchMojo NewsletterFake Steve Jobs was absolutely correct in saying that the “Facebook and Slide ecosystem” represented a ponzi scheme of sorts. No one in the Valley will say this, because they would run the risk of burning too many bridges… but the truth is that while Facebook has created an interesting business, it also lost a lot of value by opening up to developers and whoring their audience. I log in to Facebook less and less frequently, and I am probably not alone.
But the euphoria that fanboy developers had for Facebook’s platform helped lock MSFT’s interest to the tune of a $15B market cap, on paper… it was not a coincidence that no one other than Slide founder Max Levchin stood up at the F8 event and hailed Facebook’s platform as the platform to pick up the baton from MSFT’s Windows ecosystem. That kind of developer envy led to MSFT’s investment… which by of itself was smart (it c*ck-blocked Google from Facebook and ensured that no one but MSFT could ever buy Facebook if an exit was warranted).
But running with the ponzi scheme analogy: once Facebook locked in their $15B valuation, then it let follower Slide lock in its own crazy valuation: $500M pre-money for what is really nothing other than noise on an otherwise useful social network.
Alas… much the same way that one year into the journey Facebook is no closer to developing a business model, Slide now realizes that a Facebook-obsessed distribution strategy is folly… and a Facebook-centric monetization strategy is as realistic as an orgy starring Santa Claus and the Tooth Fairy.
Facebook can actually build a very valuable ad-supported business if it gets off their “we’re a technology company” mantra and accepts that it needs to act more like a media company. If it does not want to be a media business, which is fine, then stop it with the advertising business model mirage-chasing.
Facebook has a shot at making that $15B valuation into reality, Slide? Not sure… Today’s move at least makes me realize they realize that, too.
Mojo Supreme owns about 100 or so URL. HipMojo.com is one. Others include WatchMojo.com, ArcadeMojo.com, etc. We house everything under WatchMojo.com for simplicity but one day might hatch a number of verticals… as we did when we launched in 2006 before the unification.
Anyway, separately from the mojo names, I also own some like businessmyths.com or contextisking.com.
I got an offer to sell contextisking.com. I like it, I intended on writing a book with that name but then basically launched Mojo Supreme as a result of my findings / conclusions in the context is king mantra.
My question: should I sell contextisking?
My observation: imagine if M&A was more like buying and selling a URL.
I asked one of my informal de facto advisers if I should make a corporate development sale on price alone or also include the company’s new home, management of the buying party, and other intangibles such as this, along with what the sum of the parts can yield. The outcome of MSFT/Google competitions for acquisition targets hasn’t always been based on price alone… of course. But for most deals, it does boil down to price.
He laughed at me and called me an idealistic little you-know-what… arguing that price and price alone is all that matters… because once you sell you lose control and all is moot.
I am not saying I agree with him… but if I did… then I figure M&A would work better without the song and dance that comes with the process. Imagine an interested party submits a blind offer, you counter, etc., until you agree to a price. When it’s said and done, you realize who it is and what they intend to do with it.
Either way, you look like a freaking genius or a dumb bloke. Which, basically, is what happens with M&A now anyway.
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