Start-up founders looking to avoid being labelled a bad chief executive should heed the advice of US university professor Sydney Finkelstein, who has compiled a list of the worst CEOs of 2012.
Finkelstein, a business professor at Dartmouth College, is the author of 11 books, including Why Smart Executives Fail and Think Again: Why Good Leaders Make Bad Decisions.
For the last few years, Finkelstein has compiled a list of who he believes were the worst CEOs of the year. StartupSmart has highlighted five lessons you can learn from the 2012 list.
1. Don’t be overconfident
Finkelstein said there were two prominent CEOs that almost made this year’s list. They are Facebook founder Mark Zuckerberg and Groupon founder Andrew Mason.
“These twenty-something internet entrepreneurs saw their stock price collapse not long after going public, an embarrassing way to begin ‘grownup’ life,” Finkelstein wrote in his blog.
Finkelstein said Zuckerberg has created a dictatorship at Facebook, accusing him of having a “massive ego”, while Mason is yet to determine how to turn a profit at Groupon.
Finkelstein was also unimpressed by Zuckerberg’s dress sense, namely his fondness of hooded jumpers.
2. Don’t spread yourself too thin
Mark Pincus, who heads up online games empire Zynga, was Finkelstein’s number four pick for the worst CEO of 2012.
According to Finkelstein, Pincus saw an “incredible exodus” of top executive talent leave the company last year as a result of “imperial ways and unclear strategic direction”.
“The year included bad acquisitions (already written down by 50%), a decrease in paying customers, and a total collapse in stock price,” he said.
Finkelstein also accused Pincus of aligning his company too closely to Facebook, which Zynga relies on for a substantial chunk of its revenue.
“The maker of Farmville is in deep trouble, and CEO Pincus deserves full responsibility,” he said.
3. Don’t screw people over
Taking out the fifth spot on the 2012 list is Rodrigo Rato, the former CEO of Spanish banking giant Bankia.
“Formed via merger of seven failing banks, Rato’s job was to right the ship,” Finkelstein said.
“Instead, he touted the stock to hundreds of thousands of hapless small investors while overseeing what became a surprise three billion euro loss.
“He’s now under investigation for fraud, and resigned in disgrace.”
4. Don’t take advantage of your situation
Aubrey McClendon, CEO of Chesapeake Energy, earned second spot on the list for questionable activities, which Finkelstein described as an “obvious conflict of interest”.
According to Reuters, he borrowed up to $1.1 billion over three years in undisclosed loans against his stake in thousands of company wells and ran a $200 million oil and gas hedge fund on the side.
He also used the company jet for personal purposes and did a corporate sponsorship deal for Oklahoma City Thunder, despite being an owner of the basketball team.
5. Don’t get cosy with the staff
In first place on the list is Brian Dunn, who resigned as chief executive of Best Buy following allegations he had an inappropriate relationship with a much younger employee.
An audit committee said Dunn “violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment”.