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February 7, 2007
The Art of Failing Upward
Why do so many incompetent senior execs fail so successfully upward? While there are a bunch of recent public examples, I've seen a few private ones lately too:The phenomenon is most common in the business world, where the typical scenario plays out like this: A high-paid CEO does a poor job running a company, takes an enormous severance, and lands on his feet with a better job at a bigger corporation.[via ABC News]
Recently, there have been several high-profile examples, from Home Depot's Robert Nardelli to NBC's Jeff Zucker.
Last month, Home Depot handed Nardelli a $210 million severance package after the company's stock slid nearly 8 percent during his six-year reign. And the company didn't look too far to find his replacement: It tapped Nardelli's chief strategist, Frank Blake, at a salary that could total $8.9 million.
And this week, NBC's Zucker, who ran the TV network while it sank from No. 1 to No. 4 in the ratings, was promoted to chief executive of the NBC Universal media conglomerate.
While Zucker has been lauded for his success securing the dominance of the "Today" show, he's come under fire from shareholders who feel that the network's ratings slide helped bring down corporate parent General Electric Co.'s stock.
"They're spinning it as a meteoric rise, but they gloss over going from No. 1 to No. 4 and I calculated the stock has gone down 11 percent since Zucker took over," said Peter Cohan, a venture capitalist who's owned stock in GE for decades and blames the conglomerate's CEO Jeffrey Immelt for promoting Zucker.
"I mean [GE's previous chairman] Jack Welch has come out and said that he would have fired Zucker. That's how he did things: If somebody wasn't doing their job, he'd get rid of them," Cohan said.
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I don't see there being any decent labour market for CEOs. There really does not seem to be the downside to being a CEO. Imagine if the severance terms (not the amount just the terms) where part of all employees packages, managers would go into a spin.
Possible fixes? Make all CEO and CxO salary packages public and have voted on by the shareholders. Also allow shareholders to vote to fire and CEO. Don't always leave it up to the board.