Winners, Losers, And Why

Sunday, December 21, 2014
Since 2010, Sydney Finkelstein, a leading academic on corporate leadership and strategy who teaches management at Tuck School of Business at Dartmouth College, has researched and compiled a list of the five “worst” CEOs of the year. The list’s purpose is to show students how a CEO’s actions can sometimes lead to disastrous results for the company, and to study the mistakes in order not to repeat them.

Last year, to illustrate the flip side of the equation — how good moves by the CEO advance the company for the better — Finkelstein introduced his list of the five “best” CEOs of the year. In each case, Finkelstein and his researchers weigh a variety of quantitative and qualitative factors — from financial performance to market position to reputation — in formulating the lists. The process takes about four months and culls information from databases, corporate filings, media reports and informal conversations among colleagues, students and other experts.

Finkelstein acknowledges that any such list is subjective because different researchers could select a different set of factors, emphasis or focus in drawing up their list of candidates. However, there also is commonality, as some CEOs, such as John Martin of biotech company Gilead Sciences, appear on several other best CEOs lists.

“There are a lot of reasons why companies do well or not, ” Finkelstein said. “It’s not always the CEOs. It’s important to look for the factors that a CEO and his or her management team have discretion over.”

For example, results for oil companies are expected to compare unfavorably this year, but that is due to the falling price of oil, in part driven by falling demand, extraction from new fields and geopolitics over which CEOs have no control.

Here is Finkelstein’s list of the worst and best in the 2014 CEO class, along with his explanation about why those on the list were selected:

Worst Five Countdown

5. Dick Costolo of Twitter: With shares at Twitter dropping by 42 percent and monthly active users slowing, Twitter is not fulfilling its huge potential, growing more slowly and with more question marks under Costolo.

4. Eddie Lampert of Sears Holdings: This is the second consecutive year Sear’s Lampert has landed a spot as worst CEO. A failed strategy, arrogant leadership and rapidly dropping stock price, along with ongoing half-billion-dollar quarterly losses, continue to make the retailer one of the worst managed companies around.

3. Philip Clarke of Tesco (with honorable mention to his predecessor as CEO, Terry Leahy): A disastrous year for U.K.-based Tesco. Clarke was fired in July. Leahy gets the blame for Tesco’s poorly executed push to enter the U.S. with a network of “Fresh & Easy” markets, which cost the company $2.7 billion. But his successor, Clarke, took a full year to exit the hemorrhaging business.

2. Dov Charney of American Apparel: There were numerous reasons to award Charney the penultimate spot on the worst list, including several company scandals, alleged financial misconduct, numerous lawsuits filed against American Apparel, and the company’s stock price, which is down 80 percent in five years.

1. Ricardo Salgado of Banco Espirito Santo: The head of the Salgado family of Portugal controlled the second-biggest bank in the country, and brought it to bankruptcy. During the first half of 2014, BES lost $4.5 billion. It cost Portugal $6 billion to bail out the bank, which was engulfed in allegations of fraud and complicated by intertwining ownership stakes among family-controlled enterprises.

Best Five Countdown

5. Andrew Wilson of Electronic Arts: It was as recently as 2012 and 2013 that video game maker Electronic Arts was dubbed the “Worst Company in America” by Consumerist, the online news site of Consumer Reports. Wilson, a former Starbucks executive, successfully led a turnaround and important shift to online gaming. Today, EA’s stock price is up 96 percent, which Finkelstein calls “incredible.”

4. John Martin of Gilead Sciences: Marketing and pricing new pharmaceuticals is one of the most difficult challenges in business, but Martin’s deft strategy to allow a generic brand of costly Solvadi, designed to treat hepatitis C, to be sold in the developing world brings new hope to populations that would never be able to afford it at the same time that significant value was delivered to investors.

3. Jack Ma of Alibaba: After the largest IPO in history, which raised $25 billion, the China-based e-commerce giant that combines elements of eBay, Amazon and PayPal, succeeded in growing its stock price an additional 12 percent since its IPO. Ma is credited with growing Alibaba’s revenue nearly 54 percent to $2.74 billion in 2014 with mobile revenue growing by more than 1,000 percent.

2. Kevin Plank of Under Armour: Under Armour’s stock price rose 58 percent, after an incredible 80 percent gain last year. The sportswear design and apparel company has now had four straight quarters of more than 30 percent growth and 18 straight quarters of more 20 percent growth. “Nike,” said Finkelstein, “is on alert.”

1. Elon Musk of Tesla and SpaceX: “2014 was an impressive year for Elon Musk as he led two companies on big growth trajectories,” said Finkelstein. “In addition to Tesla’s stock price increasing 38 percent year to date after rising 344 percent in 2013, SpaceX made a number of successful trips to space and won important government contracts.”



John Lippman can be reached at 603-727-3219 or jlippman@vnews.com.




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