by Jonathan Berr | February 20, 2014 12:26 pm
It’s quiz time, readers. On average, whose career lasts longer: an NFL player or a Fortune 500 CEO?
Believe it or not, the average NFL career (if you make the opening day roster as a rookie) lasts almost seven years … exceeding the 4.6 years a corporate leader stays on his job. Both are well-compensated, and both certainly face large amounts of stress. Of course, when an NFL player stays too long on the job, he typically only hurts himself and might cost his team a few million dollars. When corporate CEOs don’t know when to quit, they can put billions of dollars in stock market wealth in jeopardy, along with countless jobs.
The following five CEOs are among those executives who should exit the C-suite (or should have the door shown to them by their boards of directors) because they’re already causing some serious damage, or because it won’t be long before they do.
As a note, JPMorgan (JPM) CEO Jamie Dimon, under whose tenure the bank has paid tens of billions in fines, isn’t on the list. Though Sen. Elizabeth Warren (D-Mass.) recently called for his ouster, Dimon, considered by many to be one the savviest operators on Wall Street, isn’t going anywhere baring some as-yet unknown scandal. Also missing are Best Buy (BBY) CEO Hubert Joly and his counterpart at JCPenney (JCP), Myron Ullman, who are on the hot seat but not truly endangered yet.
These CEOs are on truly thin ice for a variety of reasons, and it’s time for them to shape up or ship out. In no particular order…
Started as CEO: July 1, 2012
Total Return of MCD: +14%
Total Return of S&P 500: +34%
When Don Thompson took over the leadership of the world’s largest hamburger chain, he faced the unenviable task of following the popular and well-liked Jim Skinner. Things have gone wrong for MCD stock ever since then.
Under Thompson’s leadership, McDonald’s U.S. business has come screeching to a halt as rivals such as Wendy’s (WEN) and Burger King (BKW) gained market share. Indeed, many new menu offerings that McDonald’s has introduced under Thompson’s leadership, such as Mighty Wings, have flopped. McDonald’s menu is so bloated that service is suffering and franchisees, who have seen their fees skyrocket, are livid. U.S. same-store sales have plunged for the past three months, though the company’s overseas business is showing some signs of improvement.
McDonald’s has blamed everything from macroeconomic conditions to the weather to the man in the moon for its problems. But these excuses are starting to wear thin. Unless Thompson can show meaningful progress in improving its U.S. operations and put a jolt into an underperforming MCD stock, his tenure at McDonald’s will be over soon.
Started as CEO: Feb. 11, 2013
Total Return of RSH: -25%
Total Return of S&P 500: +21%
Shares of RadioShack (RSH) got a nice pop earlier this month after the electronics retailer earned kudos for its clever Super Bowl ad. Unfortunately, RSH stock came back to earth after Wall Street snapped out of its haze and remembered that RadioShack — as the commercial reminded us — hasn’t been relevant since the 1980s.
Magnacca, RadioShack’s fourth CEO in five years, is overhauling the chain’s merchandising and redesigning its stores. He has even opened a concept store in Manhattan’s Upper West Side. Still, little appears to be going right, and RSH is awash in red ink. Although RadioShack secured loans of $835 million ahead of the critical holiday season, the chain is burning through cash at a torrid pace. And reports say 500 stores are going to close within the next few months — potentially the beginning of the end for the beleaguered chain.
Even if Magnacca keeps his job, it’s unclear whether he will have much of a company left to manage.
Started as CEO: July 30, 2013
Total Return of WTW: -56%
Total Return of S&P 500: +8%
About the worst possible thing that can happen to any company is having to compete against a rival who provides the same or a similar service for free or at a low cost. Newspapers found themselves in that situation at the dawn of the Internet age, and now Weight Watchers (WTW) is in the same situation.
In Weight Watchers’ case, the company’s core meetings business is shriveling as dieters are increasingly using free apps or even paying for activity wearables from Nike (NKE), Under Armour (UA) and others to help them lose weight. Not to mention, the diet arena in general is a historically fickle one.
Under Chambers, Weight Watchers has tried to make its program simpler, but its Simple Start program — which it has been relentlessly hawking in commercials staring Jessica Simpson — has flopped. WTW also is trying to partner with corporate clients to get them to provide the Weight Watchers program as part of their healthcare initiatives. It’s unclear whether that businesses will grow fast enough to make up for the declines in its meetings business.
Regardless, investors are hungry as heck for better returns in WTW. A halving of one’s stock in half a year’s time doesn’t make for solid footing.
Started as CEO: Oct. 28, 2013
Total Return of MSO: +77%
Total Return of S&P 500: +4%
When Daniel Dienst was named to head Martha Stewart’s media company last year, it puzzled many people since his background was in the scrap metals industry and he didn’t have any experience in the media sector.
When asked about his lack of experience, Dienst replied that it was an asset, not a liability, adding, “I’m not burdened by history.”
But even if he had experience in the media and licensing worlds, there is little Dienst can do to right the fiscal ship at MSO besides fire employees … and he has done that already. New York-based MSO has only turned an annual profit once in the past decade, and MSO shares have shed nearly 90% since Stewart was released from the slammer after being convicted for lying about a stock sale. Meanwhile, the domestic diva has been awarded lavish compensation.
Although MSO shares have rebounded enormously against a barely-in-the-black market since Dienst’s hiring, keep in mind that this stock is fairly well shorted (6.9% of the float as of the end of January) and expectations are quite low.
Putting Dienst on the list is perhaps the easiest call, however, simply because Martha Stewart Omnimedia CEOs don’t last long. They have the trying task of working with the company’s namesake, and if Lisa Gersh, Susan Lyne and Wenda Harris Millard couldn’t do it, odds are Dienst won’t be able to, either.
Started as CEO: July 17, 2012
Total Return of YHOO: +142%
Total Return of S&P 500: +34%
Marissa Mayer certainly has brought excitement back to the pioneering Internet media company Yahoo (YHOO).
Unfortunately, revenues haven’t followed.
Growth in the company’s core display advertising business has stagnated despite Mayer’s acquisition spree, adding about 30 companies including the $1.1 billion whopper buyout of popular blogging site Tumblr. Henrique De Castro, who worked with Mayer at Google (GOOG), was supposed to be Yahoo’s liaison with Madison Avenue.
But De Castro was ousted by Mayer, who argued that he wasn’t a good “fit” … which makes his $40 million severance package especially galling to investors.
Mayer, who is taking on De Castro’s job herself, might be the luckiest CEO in corporate America. YHOO stock has soared over the past year as investors became more enthused over Mayer’s aggressive strategies.
However, it’s Yahoo’s holdings in Alibaba and Yahoo Japan that have really pushed the growth. And Alibaba’s growth is starting to slow, plus an IPO is likely on the horizon, which would result in Yahoo losing most of it’s holdings in the Chinese Internet giant.
So unless Mayer can show some tangible results for her initiatives in the core business, the “sugar high” propping YHOO stock could turn into a brutal crash that could take Mayer down with it.
As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities. Follow him on Twitter at @jdberr.
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