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Cover Story
 
BOARD-CEO RELATIONS: IMPACT ON PERFORMANCE
Looking for the chatterboxes
Why CEOs require more than commitment to shareholders’ wealth and employment to hold on to their thrones
Issue Date - 02/02/2012
 
It’s strange, but true. You might add your bit of shareholder value, and even generate employment worth a place in the Ark, but you might still meet your comeuppance due to one main reason. Lack of communication skills, especially with your board being the wife you never thought you needed to maintain. Think about it; if simply adding shareholders’ wealth and jobs to the economy was supposed to guarantee your seat in Super Bowl, then you still have to learn that your lack of communication with your board – and in turn, stomping of their egos – will make you come face to face with a divorce settlement worse that what McCartney had ever dreamt in his nightmares.

The way Yahoo’!s board acted, especially in its handling and firing of former CEO Carol Bartz, left many wondering what the board was up to. Bartz’s firing was all the more intriguing because she was not a complete non-performer like her predecessors Terry Semel and co-founder Jerry Yang were. In fact, during her tenure, she had managed to lift Yahoo’s stock prices from around $11 at the beginning of 2009 to $18.43 by the time it was May 2011. Of course, around August 2011, Yahoo!’s stock reached $11.74, its lowest, due to takeover rumours. But to her credit, the stock had clawed back to around $14 by September 2011. Then why was she kicked out quite unceremoniously on September 5, 2011?

Yahoo chairman Roy Bostock actually fired her over a telephone call. Worse, all it took were nine board members to vote her out. Daniel Loeb, whose hedge fund Third Point owns 5.1% of Yahoo!, blasted the board in a strong complaint to the Chairman, “We fail to understand why this decision was so long in coming... During this period [her tenure], Ms Bartz’s poor decision-making and communication skills publicly alienated the company’s highly respected Asian partners, as well as its shareholders...”

This one is called HP’s pretexting scandal. In September 2006, HP chairwoman Patricia Dunn hired security experts (who used the ‘pretexting’ technique; similar to phishing, but on sms) to investigate board members to find out who was the source of information leaks from the board. Board members found out – and Patricia was made to resign at the end of that very month, handing over to Mark Hurd the Chairman’s position. Bad communication did her in. It was the same reason the late Steve Jobs got kicked out from his own company years ago. So when, in August 2010, the board forced Mark Hurd to resign from the corporation by accusing him of inappropriate behaviour in sexual harassment investigations, Hurd’s friend Larry Ellison of Oracle wrote to The New York Times, “The HP Board just made the worst personnel decision since the idiots on the Apple Board fired Steve Jobs many years ago.” Larry forgot that in February 2005, the HP board had publicly fired Carly Fiorina in a similar manner (“Directors were concerned about the board’s inability to work constructively with [Fiorina],” an insider had revealed to BusinessWeek then). Oh yes, dear Apotheker was perhaps the first CEO at HP to be fired for the right reasons. He walloped shareholders’ wealth by more than 40% in the 11 odd months he was there.

Seeing the chart (left), it’s very clear that the CEOs who are ‘resigning’, ‘stepping down’ or ‘ousted’, all belong to the same category – of those CEOs who failed to be chatterboxes. End lesson – do focus on shareholders’ wealth for whatever it’s worth; but don’t forget to talk to the witch regularly (we said ‘witch’, dammit, not...!)!

 

          

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