Ego, Executions and all that…

Some people have large egos. CEO‘s are among the worst!
And here’s a story on executionOptionetics Articles


By Peter D. Henig,
8/16/2004 5:00:00 AM

There’s a fine line, often, between ego and insecurity. Just ask Carly Fiorina, the CEO of Hewlett-Packard (HPQ) who fought tooth and nail to convince shareholders that an HP-Compaq merger, completed in May 2002, was absolutely essential for the future survival of both companies. Never mind that each company was described as “deteriorating” in separate internal memos, or that mergers and acquisitions have notoriously been recipes for disaster within the tech industry. For Carly, an HP-Compaq merger would be different – the “synergies” created by combining the two companies would make one plus one equal three; the favored math of all ambitiously insecure CEOs

As expected, though, the merger’s results two years later have been lumpy at best, lousy at worst. Capping off its struggles, the company announced last Thursday that its earnings would be far lower than analysts expected and that its computer server and storage unit was to blame, losing $208 million on revenue of $3.4 billion. (By comparison, HP’s major competitor, Dell Inc. (DELL), said revenue in its enterprise group, including servers and storage systems, rose 26 percent in its most recent quarter.

Never one to take responsibility for what was conceivably her own much larger error in strategic judgment, Fiorina labeled the group’s performance as “unacceptable” and subsequently canned three of its top executives. That type of management style will carry her only so far. Wall Street is already questioning the wisdom of the merger she so famously championed, with some analysts suggesting the company again be broken apart. HP’s stock price, Fiorina’s ultimate measure of success, was already down 17 percent for the week and is now off 9.4 percent for the two years since the deal was consummated. (Over the same time period, the S&P technology index was up 5.2 percent.)

It’s clearly a “we told you so” scenario.

Though shareholders and analysts will always look at earnings and revenue numbers for evidence of Ms. Fiorina’s success or failure, I’d suggest that anecdotal evidence of her outsized ego alone would have been enough to have torpedoed the deal from the start. Weren’t shareholders familiar with the one, albeit secondhand, rumor that upon taking the job at HP, Fiorina quickly had the pictures of the two founders hanging in the lobby replaced by her own? Or of her demands that a corporate jet be fueled and ready to go 24 hours a day, 7 days a week, solely for her own use? Often, CEOs with egos needing that much reassurance often end up making business decisions more in line with their own self-interests than with those of their shareholders and employees.

Granted, though large egos and outsized perks often come with the territory among Fortune 500 CEOs, in the case of Ms. Fiorina – a first time CEO with grand ambitions of making her own mark – the whole package came at the expense of a company with a rich tradition of humility on the part of its founders, and one of loyalty and unconditional love toward their employees. As a result, for years, HP had enjoyed success and growth matched by few other high tech firms; allowing the company to become the ultimate corporate citizen.

Now, HP neither has the soul – nor the cushion of success – to be the technology innovator it once was. Nor does it have the undying loyalty or entrepreneurial zeal of its engineers to turn its core businesses up a notch in the face of ever increasing competition. What Fiorina did was turn a great company – even one suffering the pangs of its own maturity – into one needlessly on the rocks. This quarter’s disappointment not only shows the folly of poor CEO decision making, it also reveals just how much damage can be done when ego and insecurity usurp all that makes good common sense.

Peter D. Henig
Contributing Writer and Trading Strategist ~ Your Options Education Site