The usual place for a CEO who was fired for ethical reasons is in the Leadership Laggard section. We’ve made an exception this month to give a tip of our hat to the Board of Directors at Lending Club Corporation for the firing.
Renaud Laplanche, Lending Club’s founder, is now the former Chairman and CEO after an internal probe into loan sales that violated company business rules revealed Laplanche wasn’t exactly forthcoming about what he knew and when he knew it.
Turns out full disclosure isn’t one of Laplanche’s strong suits, since he also failed to disclose his personal interest in a fund that Lending Club was considering as an investment.
The board quickly showed Laplanche and three senior managers the door for the “unacceptable” behavior, disclosed the wrongdoing, and pledged to investors to strengthen internal controls.
Scott Sunburn, Lending Club’s president and acting CEO summed it up nicely, saying, “Our business depends on trust. The problems identified this quarter run counter to our values and will never be tolerated.”
Even though the bad loan sales represented a tiny fraction of the company’s transactions, by proving himself untrustworthy, Laplanche may have completely ruined a business model that relied on the trust and confidence of his customers.
Unfortunately for Lending Club, the board’s actions may not have been enough. Since the early May disclosure, the Securities and Exchange Commission and the Justice Department have launched their own investigations, and the lawyers jumped on a class action lawsuit like a duck on a June bug. Needless to say, their stock is in the toilet right now.
Lending Club’s board took the correct four steps required after a mistake: they acted quickly, they didn’t cover it up; they owned it; and, they took the necessary steps to make it right. For doing it right, we congratulate them and wish them well as this month’s Leadership Leader.
Leadership Milquetoast
Speaking of the right thing to do when you make a mistake, VA Secretary Robert McDonald joins us again this month — this time as our Leadership Milquetoast — with an all-to-familiar leadership tap dance that we call an “apology that’s not”.
McDonald had the opportunity to correct his gaff comparing waiting for treatment at VA facilities to waiting for a ride at Disneyland… and he blew it. In ‘falling short’ of apologizing, McDonald showed he’s still completely out of touch with those he’s charged to care for.
Instead, he said, “If I was misunderstood, if I said the wrong thing, I’m glad that I have the opportunity to correct it.” Who wrote that lame equivocation, Goofy or Dopey?
We didn’t misunderstand, and he did say the wrong thing. But given the opportunity to correct it, he cavalierly let it pass by.
My guess is that Secretary McDonald hasn’t had a long wait for treatment since he left active duty service in 1980. He certainly never waited in a VA facility (P&G always had good benefits), and I guaran-damn-tee you I never looked forward to what was in store for me after the soul-sucking hours I spent in a waiting room full of vets during every visit to the VA hospital after I left the military.
Not that I was shot in the ass with my experiences in the Disney parks when my kids were little either, but to compare the two is beyond imagination.
Come on, Bob! If you want us to believe that you’re solely focused on better care for veterans, here’s a simple equation: trust = integrity + competence + compassion. So far, your misstatement about your service in special forces, doling out over $140M in bonuses for crappy 2014 performance by VA executives, and making light of our fantasy vacations in VA waiting rooms aren’t giving us warm fuzzies.Your decades of military and corporate success don’t give you leave to rest on your laurels at the VA. We don’t need your kind of Milquetoast leadership in such an important post.
Leadership Laggard
Being fired sucks. Being fired by email… now that sucks so bad it might take anger management classes to get over.
What the hell was Matt Clark, co-founder and CEO of Amazing Academy LLC, thinking when he let Amazing.com notify 24 out of the 46 workers at the company via email that their jobs had been eliminated – effective immediately?
Who does that?
To add insult to injury, Clark was “out of the office” when the email went out, and “unavailable” for the next week, so he never had to see their faces again. Okay, maybe the layoffs were necessary (though keeping the staff chef is a stretch), but short of a singing telegram, I can’t think of a more calloused and unfeeling way to let people know.
On the upside, Clark has plenty of potential for leadership development… he’s obviously starting from scratch.
If we had an a-hole of the month award, we’d give it to you, Matt. Instead you’ll have to settle for being Triangle Performance’s Leadership Laggard of the Month.
International Paper (IP) CEO Mark Sutton is the real deal. A 30-year IP employee, he has managed to redirect this 117 year-old institution from simple paper (think office supplies) to packaging (think of all those Amazon boxes).
Through skillful and strategic divestitures and acquisitions, Sutton unloaded underperforming legacy operations (beverage packaging and wood products) while picking up those visionary directions (again with the Amazon boxes. Plus UPS, Fedex, et al) that are the forward-thinking antithesis of Intel, this month’s Laggard.
The paper business has a tough history. I’ve been in a few paper mills; it’s a real “heavy industry” environment, and well, the aromatic challenge is significant. They don’t smell like roses. It’s manufacturing at its core, and the people working there earn every dime.
Sutton’s approach to visionary success is different than most large-company manufacturing CEOs. He didn’t do it by focusing on bricks, mortar, and fast dollars; he took a simple, leadership centric approach.
“People think of us as a manufacturing company, but we’re really in the people business.”
Say what?! That’s crazy talk coming from a manufacturing boss, who went on to say “…the real differentiator for long-term value creation is people.” Not assets, not creative financing, not outsourcing jobs to China. People.
The success of IP is obvious and notable. The stock price has nearly doubled in four years, productivity is up 40+%, driving earnings up as well. This guy knows what he’s doing. It’s hard not to write a tome praising this guy—both his approach and results. I’ll end with a quote from him we would all do well to remember:
“You’re not a leader because you were named to a position or have a degree in your back pocket,” said Sutton. “You become a leader when the people who’re supposed to follow you decide you’re a leader.”
Mark Sutton is the real deal, and an exemplar. And he’s this month’s Leadership Leader.
Milquetoast
We left Volkswagen alone for six months to see if they’d learn any lessons from the emissions cheating scandal. No need to rehash ex-CEO Martin Winterkorn’s epic leadership failure, and we’re not surprised that he’s no longer on the Porche and Audi boards, since that’s what we suggested last October.
Now that VW has taken an $18+ billion provisional charge to cover the fallout, wiping out almost all of the shareholders’ dividends, someone doesn’t think the senior executives — including Winterkorn — deserve their business-as-usual bonuses for 2015 performance.
Normally, it’s the shareholders who rise up like the villagers in Young Frankenstein. Not this time.
Who then, labor? After all, most of VW’s half a million workers don’t get bonuses, and almost all will be affected by slumping sales. Nope.
It was VW CEO Mattias Mueller who actually suggested a reduction in executive bonuses to the board steering committee after the German state of Lower Saxony — a major shareholder — complained. Mueller was eventually able to twist the board’s arm to accept a 30% reduction in bonuses, but they didn’t like it.
How much are we talking about? Well, in 2014, the $61 million in executive bonuses accounted for more than 75% of the executives’ total compensation. Yep, $18 million in base salary plus $61 million in bonuses.
If I were the shareholders, I’d be pissed about their base salary, too. And I might storm the castle if any executive got a bonus while the emissions scandal was still unresolved.
So good on Mueller for bringing the proposal forward. Shame on both he and the board for feeling entitled to the fat share of the spoils. A lost opportunity to for a leadership team to take accountability and show they care about the serfs.
The only thing this executive board deserves to share is April’s Leadership Milquetoast award. Prosit!
Laggard
Bottom line up front: Intel is cutting 12,000 jobs because its leadership has no vision.
Okay, that’s not entirely fair; their vision is so short-sighted that the strategy that’s based on it is taking them down the tubes.
CEO Brian Krzanich, the “safe pick” to move from COO to CEO in 2013, announced the cuts last week as an effort to be more efficient and invest in areas like data centers, memory, and the internet of things.
Not to worry, says Stacy Smith, just named to move from CFO to de facto COO, “we’re in the midst of this transformation and we’re executing well through it.” Their new strategy will take them from being the “heart of the PC to the heart of the Cloud,” says Smith.
That’s some bold thinking, considering declining PC sales — at least the prediction of it — is so last decade.
Just like culture, the failure of a company to recognize and understand changes in the market and their external environment falls squarely at the leader’s feet. Intel’s conservative culture has made them slow to adapt to both, doing more of the same in a down market.
What’s the evidence? Just this past January, Krzanich (who, with Smith, have more than 60 years combined at Intel), declared 2016 to be a macroeconomic copy of 2015 and identified robotics, automation and integration as “next emerging trends.” He also predicted that industrial use of drones could really take off (pun intended).
Wow! Or as the English would say, “Brilliant!”
Having missed out on the smart phone and tablet markets, Intel’s leadership completely misjudged the speed people would abandon PCs and is late to need identifying development opportunities beyond the cloud like artificial intelligence and virtual reality.
It’s possible that the introduction of new blood in the form of a President for the Internet of Things could turn Intel from its seemingly dogmatic culture. After all, past performance doesn’t guarantee future returns.
And in the meantime, 12,000 Intel employees get an opportunity to find somewhere else to work.
Thanks, Mr Krzanich. Intel’s culture may have eaten its strategy for breakfast, but it can’t have been a very satisfying meal. For that you get to be April’s Leadership Laggard.
I don’t generally support pay reductions. They seldom have the desired effect. Having said that, and in contrast to others (mentioned below), Shell’s Ben van Buerden is the poster-child/rock star for CEO pay reductions, after he saw his total package drop nearly 10% amid our crazy oil pricing environment.
Contrast that with BP’s Bob Dudley, who recently received a 20% increase in his pay package, after smoothly revealing that 2015 was the worst financial year in the oil giant’s history. The worst. The Board’s compensation committee also said that executive directors received no increase in base salary in 2015 and that senior leadership would not see salary increases this year either.
How, exactly, does that conversation work? “I’ll take 20%, please. Let them eat cake.”?? I didn’t want to give Dudley any more airtime, or we could have made him this month’s Laggard.
Shell’s Board said: “Shell’s executive compensation reflects delivery of our strategy… there is a clear alignment between the company’s performance and our compensation policies.” I should say so. If van Buerden has to go back to the cost-cutting well with added layoffs and/or pay restrictions, at least he’s felt some of the pain, and has some degree of personal credibility.
Look, we can all argue for days about CEO compensation. Having the burden of thousands of families depending on your decision-making is certainly worthy of compensation. But optics matter as well. In these times for Oil & Gas, a CEO accepting/insisting on a pay reduction (or at least not a pay raise given only to you) is a solid standard to which others should aspire.Shell’s Ben van Buerden set that standard, we appreciate it, and he’s our Leadership Leader for March.
Leadership Milquetoast
Being a veteran doesn’t give me any special standing to be disgusted at the waste that brought down the CEO and COO of the Wounded Warrior Project. It’s a way too familiar story in the non-profit world, and we’ve all been warned to be careful who we give our money to.
I’m disappointed, of course, because that means millions of dollar (possibly tens of millions) were diverted from helping a cause near and dear to my heart. But I can’t say I’m surprised.
Oddly, what was least surprising to me was the milquetoast way WWP handled the firing of CEO Steve Nardizzi (who helped found WWP in 2003) and COO Al Giordano. Nardizzi has long been a vocal critic of the charity rating system, and even predicted this very reaction to alleged wrongdoing in his July 15, 2014 post about how charities “should lead the dialogue about charity ethics and effectiveness.”
(The fox guarding the henhouse? The first sentence presciently reads, “There’s no shortage of news coverage on the charitable sector when a charity … is suspected or proven to be fraudulent.”)
I watched with disappointment as WWP Chairman Anthony Odierno’s attempted to regain the nation’s trust on the morning news. He said that while the charity’s independent review may have uncovered some opportunities to strengthen some controls and policies, “a lot of the allegations were not accurate.”
Hardly a damning enough indictment to justify decapitating the senior leadership team. In fact, Odierno’s dead-pan assertion that the dismissals were for “certain judgment decisions that could have been made better” left my spin-detector buzzing.
CBS news claims to have spoken to over 100 current and former WWP employees who described lavish spending and a toxic culture. That’s enough smoke for me to reach for a fire extinguisher.
Leaders get just one opportunity to admit wrongdoing in their organization the right way. Acknowledge it, take responsibility for it, and apologize for it. Odierno missed his chance.So congratulations for another apology-that-isn’t, Mr Chairman. It didn’t win our trust back, but it did win you this month’s Leadership Milquetoast award.
Leadership Laggard
Full disclosure: someone from Zenefits keeps spamming me asking if I want their help running my business. Not likely.
What a month it’s been for Zenefits, the beleaguered San Francisco-based human resources software startup who’s CEO resigned last month over “compliance failures.” Parker Conrad stepped down amid “revelations” that some of the Zenefits salesforce was selling health insurance without required licenses, and David Sacks was promoted from COO to CEO and promised to fix their “inadequate” compliance processes and controls.
According to Sacks, the company grew so fast, it outgrew its culture and controls, which (I suppose) would have kept it from breaking so many laws. To un-grow, Zenefits gave out about 250 pink slips – almost all to the salesforce (whose boss left right after Conrad). Hopefully, they didn’t let anyone go who had a broker’s license… they didn’t have enough of those in the first place.
Oops, I forgot. Right before the layoffs, Sacks banned drinking at work. Talk about kicking employees while they’re down.
Culture’s a funny thing – sometimes literally. Last summer the company’s management felt its culture needed adjusting so it sent out a memo last summer that declared building stairwells were no longer to be used for smoking, drinking, eating, or sex.
So what’s the big deal? Sounds like a great place to work.
The problem is Sacks. Or more accurately, Sacks was already part of the problem, and now he’s CEO. What was the board thinking?
Are we to believe that the COO didn’t know that the salesforce was selling insurance without brokers’ licenses – that’s been public knowledge since at least November! Zenefits would certainly like their clients and investors to believe it, but I have a hard time with the idea of a CEO and VP of Sales creating a culture void of ethical behavior by themselves. What is this, Volkswagen?
Apparently, Sacks has disavowed any knowledge of wrongdoing and laid the blame for the culture at Conrad’s feet; that seems to be good enough for the board.
And it’s good enough for us… to make the Zenefits board – including Sacks – our Leadership Laggards for March. Congratulations, gentlemen.
Straying from organizational values is a slow fade.
Too often, senior leadership is so disassociated with how their people reflect corporate values outside of the organization, the brand is severely tarnished long before it’s noticed and damage control is initiated just after the nick of time.
It’s refreshing when a leader recognizes the culture is changing – or has changed – and jumps on an opportunity to address it and get the organization back on track.
Disclaimer: While Bill McRaven is a friend, we have exactly one Aggie and zero Longhorns in our firm.
What a breath of fresh air to have the University of Texas System Chancellor remind the System’s senior leaders that leading by example isn’t an option, and their example should be a good one.
In short, Chancellor McRaven (aka retired Admiral Bill McRaven who oversaw the bin Laden raid) wrote a letter to all UT System presidents and athletic directors reminding them that the US flag and national anthem still mean something and deserve respect. He adds that because young athletes learn so much of their behavior from adult athletes, UT athletes and staff would do well to demonstrate respect for the flag as a positive example for others.
So a man who understands service before self and the sacrifices made to keep this nation free asks, “… encourage your coaching staff and your players to stand up straight when the National Anthem is played; to face the flag and place their hand over their heart as a sign of respect to the nation.”Isn’t that what we all learned as kids?
Culture starts at the top, and the top of the UT System knows it. Well done, Bill. You’re this month’s Triangle Performance Leadership Leader.
Leadership Milquetoast
Xerox. A lifetime of “just after the nick of time.”
The company could have—should have—owned the whole damned computer industry. Bigger than Microsoft, bigger than Apple, bigger than IBM. It was theirs for the losing. And they just keep on losing it… their corporate tagline should be, “Xerox—just after the nick of time.”
Xerox built and programmed the first GUI (graphical user interface), before Apple, before Microsoft. Your mouse could point a cursor to information on a screen. It was connected to other computers via this thing they invented called Ethernet. In a nutshell, Xerox invented the PC. Way cool stuff.
Alas, the powers in Xerox believed it was a fad, and support for it would lessen support for their buggy whips paper copiers. Later, Xerox tried to get on board with their own line of PCs… just after the nick of time.
Xerox understood and engineered inkjet printers in the late 90’s. Delaying for further analysis and power struggles (after all, printers were not buggy whips copiers), they waited until HP’s inkjet division was larger than all of Xerox; then they launched an inkjet division… just after the nick of time.
IBM sold their PC business a decade ago; HP a few years ago. In the midst of this intense industry focusing, Xerox buys a service company to complement its buggy whips copiers, now surprisingly, must split it off… just after the nick of time.
If this company would ever get out of its own way, it could crush an industry. Unfortunately, it can’t, so won’t. Revenue in 2015 was almost 5% less than in 1999.Hate to lay all of this on Burns, but to modify the Polish idiom, “Your circus, your monkeys.” Our February Leader Milquetoast.
Leadership Laggard
It was all we could do to pass over Martin Shkreli, the much-reviled ex-CEO of Turing Pharmaceuticals, KaloBios Pharmaceuticals and Retrophin, as a Leadership Laggard since we started the newsletter segment last September. His buffoonery may have reached apogee with his latest stunt, amazingly not related to the three companies he’s nearly ruined.
He could have easily made it any month for his narcissistic profiteering on drugs at the expense of sick people. If you’ll recall, last summer he raised the price for a drug used by HIV patients by more than 5,000% for no reason except greed. Thankfully, he failed in his attempt to do the same thing in November with a drug to fight another parasitic – this time hoping to garner a price a thousand times higher than today’s cost.
And who could have argued the Laggard label when he was indicted in December for defrauding investors in his hedge fund Ponzi scheme at MSMB Capital [mis]Management and pillaging the Retrophin coffers to cover his tracks.
That’s right, Shkreli owns the only copy of the latest Wu-Tang Clan album, and is threatening to erase Dennis Coles’ (aka Ghostface Killah) contribution to the recording because he didn’t like Coles’ criticism of the drug profiteering.
If Shkreli didn’t like what Coles had to say, he probably wouldn’t be happy about me calling him a spoiled, 5th grade bully who clearly doesn’t care who gets hurt – financially and physically – along the way, as long as it’s all about Martin Shkreli. As if I care about his happiness.
He’s classic Laggard who, thankfully, finds himself without a leadership position to screw up this month.
We’re going to give a short well-done to Archer Daniels Midland (ADM) for their handling of their internet troll employee who made an ass of himself on Christmas Eve.
Full disclosure: ADM is a client of ours.
ADM quickly concluded that Brad Shultz’s bigotry was eclipsed by his stupidity in linking his views to his employer on social media, and directed Brad to the nearest unemployment line.
ADM said, “…these remarks are unacceptable and do not reflect ADM’s values.” Works for us.
This is a culture issue, and leadership owns the culture. You don’t need toxic influences in your organization; when you discover them, get rid of them… immediately.
Reminds me of a T-shirt I wore a few years ago: “Dads Against Daughters Dating…Shoot the first one; word will spread.”
Nice shootin’, ADM. Word will spread. You’re this month’s Leadership Leader.
Leadership Milquetoast
It’s only been a couple of months since Twitter’s SVP of Engineering, Alex Roetter, was our Leadership Milquetoast for his empty rhetoric about diversity and his subsequent non-apology for being a crappy communicator. Not picking on Twitter, but it looks like they’ve missed another opportunity in the diversity department.
The diversity most important to an organization is diversity of thought. You need teams that can strategize, plan and approach problems from different perspectives. You get that from people with diverse backgrounds and experiences, independent of the color of their skin.
Diversity isn’t about affirmative action; it’s about making something great out of an often strange collection of people inspired to make something greater than themselves successful. And that takes leadership.
And so, Twitter missed the opportunity to make a bold statement about diversity when they brought in an old white guy as their new vice president for diversity and inclusion. While Jeffery Siminoff may be qualified for the job – some of us old white guys are actually all for diversity of thought – his hiring did nothing to close the disparity gap between the company and its users.
It shouldn’t matter that almost three quarters of Twitter’s leadership positions are held by whites, but obviously it does to their diversity critics. What should matter to Twitter is that their detractors seem to equate diversity with racial parity, and they seem to think that it would make things better if their employee demographics mirrored that of their users. If Twitter thinks they’re raising the bar on diversity and inclusion, they’re not listening.
Twitter missed a golden opportunity to do more than talk a good game. For that, they get this month’s nod for the Leadership Milquetoast.
Leadership Laggard
Something must be amiss in McDonald’s marketing machine. They just spent a pile-o-cash with at least seven ad agencies to update packaging for its “fun and modern brand.” Matt Biespiel, senior director of global marketing described it as “a progressive way to turn our packaging into art.”
As they sat around the McTable brainstorming, didn’t a single person think, “if we made better and more healthy food, would more people would buy it?” If so, why didn’t they bring it up? Even acknowledging the importance of employee loyalty, this is a classic case of group-think, and that’s a leadership failure.
We don’t deny McDonald’s made some good menu choices recently; they needed to – and not just to attract millennials. And hopefully their planned restaurant upgrade means the seats aren’t ergonomically designed to be uncomfortable.
But really… no one cares about the brown bag it comes in. That’s just the lipstick on the pig. The bags end up in the back floorboard of the car or on the side of the road, anyway.
McDonald’s says the new packaging reflects the leadership of new CEO Steve Easterbrook – simple yet bold. Describe it anyway you want, we think Biespiel and his yes-men saw a way to impress his boss, and his boss let them.
Easterbrook is new – and arguably doing a pretty good job. This month’s Leadership Laggard is Matt Biespiel for letting his team waste so much McMoney and McTime on something customers don’t care about in the first place.
