Friday, September 15, 2006


It's Good To Fire The King!

No act of downsizing can improve a corporation's stock more dramatically than the removal of a bad CEO. A recent article in Slate reported that recent CEO firings at companies such as Ford, Viacom, Hewlett-Packard and Bristol-Meyers not only did not adversely affect the stock price - in half the cases, the stock price actually rose. According to the article, "bad CEOs act as multibillion-dollar drags...the market has determined that Ford Motor Co. is worth $2.2 billion more (now) than it was with a Ford as CEO". Last month, James Cramer of the TV show Mad Money gleefully produced a list of companies whose stock would jump 15 to 25 percent if their CEOs were canned. These included Bristol-Meyers, Marsh & McLennan, Avon, Bausch & Lomb and Home Depot.

It is heartening to note that, while investors traditionally abhor the kind of instability introduced by a change in management, they embraced the recent firings with an optimistic confidence in the future. This is despite the fact that the future for these companies is scarcely guaranteed. The new head of Ford, for instance, has no auto industry experience, and there has yet been no replacement for Bristol-Meyers' Peter Dolan - whom James Cramer called "the absolute single worst CEO in America today". Apparently, even an unknown harvest promises to be more bountiful with the biggest of the bad apples thrown out of the basket.

Now that the genie of downsizing has been unleashed upon the world, we can expect its application to be ubiquitous and protean from now on. It is our sincerest hope at the White Collar Warrior that it will be applied as ruthlessly to the guys who invented it as it has been to everyone else.

"Dump That CEO, Today!Your stock price will rise." from Slate

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