2011 had its fair share of CEOs whose missteps came at great cost to shareholders, employees and personal reputations. And then there are the executives who screwed up so badly and on such a scale that the fallout goes far beyond the realm of money.
In compiling his list of "Top CEO Mistakes for 2011," Tuck Professor Syd Finkelstein singled out Netflix's Reed Hastings, RIM's Mike Lazaridis and Jim Balsillie, and HP's Leo Apotheker, as detailed in part 1 of this interview.
Here, Finkelstein zeros in on the worst of the worst - a veritable Hall of Shame for 2011: News Corp.'s Rupert Murdoch, Johnson & Johnson's William Weldon and Penn State's Graham Spanier.
Testifying before British Parliament over the so-called Hacking Scandal, Murdoch "rotated between really tough old guy and then looking completely clued out," recalls Finkelstein, author of Why Smart Executives Fail. "He didn't look like the kind of person most people would want as the CEO of their [multi] billion-dollar company."
Murdoch is guilty of "managing by hubris," Finkelstein says, suggesting the media mogul believes he's above the law and supports employees who push the limits of socially acceptable (and legal) behavior.
The hacking scandal may have faded from the headlines in the U.S., but it's still very much top-of-mind in the U.K. and Finkelstein believes it's like to cross the pond again in 2012. "It's not going to go away, he says. "As soon as some hacking is found of someone in America who's a sympathetic person - and who's to say that didn't happen - that will just blow it all up."
Beyond the hacking issue, Murdoch runs News Corp. "the way people used to operate in medieval times," Finkelstein says, citing his ill-fated investments in The Wall Street Journal and MySpace, as well as the constant rotation of Murdoch children to see who will be the heir apparent to a media dynasty that's lost a lot of its luster.
The Tony Hayward of 2011
While Murdoch's literal and figurative trials and tribulations were front-page news in 2011, much less attention was paid to William Weldon's struggles at J&J.
But to Finkelstein, Weldon is "the Tony Hayward of 2011" for overseeing an organization that put profits above the public safety.
J&J was hit by a string of recalls in 2011 across multiple divisions and product lines, including, but not limited to:
- 43 million bottles of Rolaids, Tylenol, Benadryl, and Sinutab.
- 70,000 potentially cracked syringes preloaded with the antipsychotic drug Invega.
- 585,000 surgical sutures.
- 384,000 insulin-pump cartridges.
- 200,000 syringes preloaded with Eprex, an anemia drug
- 57,000 bottles of Topamax, used to treat epilepsy.
- Select hip implants and contact lenses.
"There is something wrong with blood-flow of the organization" when you have this many problems across such varied product lines, Finkelstein says. "[Weldon] got a lot of credit before and deserves a lot of responsibility now" for what's wrong with J&J.
Adding insult to potential consumer injury, J&J also announced this year it would remove potential cancer-causing agents from its iconic baby shampoo; but Finkelstein notes the company has, to date, only removed the chemical from products in Scandinavia and the U.K., but not in the U.S.
As bad as Murdoch and Weldon may have been - and they were really bad - Spanier is the worst of the worst among senior executives in 2011.
The former President of Penn State University stepped down in November, part of the fallout from the scandal surrounding Jerry Sandusky, a former assistant football coach who's been charged with 27 counts of child molestation, including rape, with 10 boys over a 15-year period.
Earlier this week, Sandusky entered a non-guilty plea and waived his right to a preliminary hearing, avoiding, for now, confrontation with his accusers.
Spanier has not been charged with any crimes but the grand jury report said Spanier testified that two administrators came to him in 2002 to report an incident involving Sandusky showering with a preteen boy.
"Spanier denied that it was reported to him as an incident that was sexual in nature," the report said, according to The NY Times.
"That is not a defensible position," Finkelstein says, noting Spanier had a history of "circling the wagons" and trying to squelch bad news at Penn State.
"It occurred when high-profile Penn State employees came under fire, when student actions threatened to embarrass the university, and when people sought to obtain information that almost any other public institution would be required to release," The NY Times reports.
Spanier and legendary head football coach Joe Paterno lost their jobs over the child molestation scandal; but what the Penn State community -- and certainly Sandusky's victims -- have lost can never be replaced.
"One of the lessons here: if there's some bad news, you can't cover it up. It's going to come out," Finkelstein says. "The unfortunate thing is this general attitude of knowing something's going wrong and not doing something about it, is very common. When it enters this kind of big scale at a great institution...it's a disaster."
- Rupert Murdoch
- Penn State