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The worst CEO screw-ups of 2016

Forbes logo Forbes 12/27/2016 Jeff Kauflin, Forbes Staff


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Along with the power and glory of being a CEO comes the risk that you’ll screw up and face public shame. This year, a death threat against Donald Trump, an extramarital affair and a secret relationship with a large corporate customer were among the biggest CEO errors. 

For help with this list, I spoke with Bruce Kogut, professor of leadership and ethics at Columbia Business School; Jeffrey Sonnenfeld, management professor at the Yale School of Management; Harry Kraemer, strategy professor at the Kellogg School of Management; and a handful of my Forbes colleagues.

Click ahead to see the worst CEO screw-ups of 2016.

Roger Ailes (Fox News)

   © Stephen Lovekin/Getty Images    The phrase “screw-up” doesn’t do justice to Ailes’ despicable alleged actions, but we thought the list would be incomplete without him. The scandal started on July 6 when, two weeks after leaving Fox News, former anchor Gretchen Carlson filed a lawsuit against the CEO, saying he sabotaged her career after she declined his sexual advances. Journalist Gabriel Sherman soon spoke with six additional women who said they had been harassed by Ailes. Two of them went on the record.

Ailes denies Carlson’s accusations, but in September, Fox News settled the lawsuit and paid Gretchen Carlson a reported $20 million. Months later, Megyn Kelly would publish a memoir in which she says Ailes sexually harassed her, a claim he also denies. On July 21 Rupert Murdoch, co-chairman of 21st Century Fox, announced that Ailes was out and took over as chairman and acting CEO of Fox News.

Heather Bresch (Mylan)

   © Victor J. Blue/Bloomberg/Getty Images    Mylan drew the wrath of the country in 2016. The pharmaceutical company’s EpiPen product, an injected medicine for people with life-threatening allergies, was priced at $124 in 2009. By May 2016 EpiPen cost nearly $609, leaving parents who needed it for their children in a tight financial spot . In a congressional hearing focused on the price hikes, Mylan CEO Heather Bresch said EpiPen was priced fairly and blamed increased costs on high-deductible health plans. House representatives weren’t convinced. “I am sickened by what I’ve heard,” said Rep. John Duncan (R., Tenn.).

During the hearing, Bresch also falsely stated that Mylan made only $100 in profit on each EpiPen two-pack sold. Days later, Mylan said the correct number was much higher at $166. The company had sold about four million two-packs over the past year. In October Mylan agreed to pay a fine of $465 million to settle accusations that it overcharged the government for EpiPen products. The settlement didn’t include an admission of wrongdoing. Bresch remains CEO and earned nearly $19 million in total compensation in 2015. Now several U.S. states are suing Mylan and other generic drug makers for allegedly colluding to fix prices for two common generic medications, a charge Mylan denies.

Parker Conrad (Zenefits)

   © David Paul Morris/Bloomberg    Zenefits is a Silicon Valley startup that moved fast, pursued growth at all costs and then crashed. This past February, a BuzzFeed article reported that Zenefits was employing insurance salespeople who didn’t have legitimate state licenses. A few days later, Zenefits COO David Sacks sent an internal email that read, “the fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.”

Other media reports accused CEO Parker Conrad of building a software tool that let insurance salespeople cheat on an online training course that’s required to receive state certification, and of presiding over a corporate culture characterized by drinking and sex in office stairwells . Zenefits didn’t comment publicly on these allegations, but a spokesman for the company said, “As Zenefits’ new CEO has made clear, it is time to turn the page at Zenefits and embrace a new set of corporate values and culture.”

Matt Harrigan (PacketSled)

Matt Harrigan (PacketSled):    © David Brooks/ZUMA Press/Newscom    We don’t often hear about CEOs threatening to kill a future president, but that’s exactly what happened at PacketSled, a San Diego-based, 25-person cybersecurity startup. After the election, an intoxicated Matt Harrigan said on Facebook that he was going to kill Donald Trump. Then he added, “Getting a sniper rifle and perching myself where it counts. Find a bedroom in the White House that suits you…. I’ll find you.” He apologized profusely afterward. “What I said was incredibly dumb, perhaps the dumbest thing I have ever said. I really only have myself to blame for this.” Harrigan resigned Nov. 16.

Elizabeth Holmes (Theranos)

© picture alliance/ Jeff Chiu Elizabeth Holmes’ biggest screw-ups came before 2016, when Theranos didn’t disclose that it was processing many blood tests with other companies’ more traditional machines instead of its own technology. Holmes made the list again this year because of the way she has managed the crisis. She promised to release data on the effectiveness of Theranos’ tests. In April she was scheduled to speak at a medical conference that led many physician-attendees to believe she’d be revealing data on the original technology . Instead, she focused on its newer product, miniLab, a microwave-sized device designed to analyze small samples of blood. Conference-goers called it a bait and switch .

More recently, Theranos fired 43% of its staff and exited the lab business to focus on miniLab. But the lawsuits keep pouring in. Several investors have filed suit — one of which is seeking class-action status — along with Walgreens, which claims Theranos repeatedly misled the retail pharmacy chain. Walgreens says it initially found out that Theranos had voided 31,000 blood tests given to Walgreens customers through media reports, not directly from Theranos. In a press release Theranos said, “We will respond vigorously to Walgreens’ unfounded allegations, and will seek to hold Walgreens responsible for the damage it has caused to Theranos and its investors.”

This year Forbes revised its estimate of Holmes’ net worth to $0 .

Darren Huston (Priceline)

Darren Huston (Priceline):    © 2014 Bloomberg Finance LP    A tip from a whistleblower led Priceline’s board to open up an investigation into CEO Darren Huston. It accused Huston of having an extramarital affair with a female Priceline staffer. Huston had led Priceline’s stock to rise 30% since he became CEO in 2013, but when the board verified the affair allegations, it fired Huston, saying he had acted “contrary to the company’s code of conduct and had engaged in activities inconsistent with the board’s expectations for executive conduct, which Mr. Huston acknowledged and for which he expressed regret.” Huston declined to comment publicly on the matter. He had to give up stock grants worth about $13 million.

Renaud Laplanche (Lending Club)

   © Richard Drew/AP Photo    Online lending platform Lending Club was once a bright spot in the fintech industry. But its CEO’s problems cast a shadow on the company this year. In the spring Lending Club’s board discovered that Laplanche had a personal investment in Cirrix Capital, but he failed to disclose it before he urged Lending Club to invest $10 million in the company. An investigation also revealed that a Lending Club engineer had falsified information to make some loans look like they had met a loan buyer’s requirements when, in fact, they hadn’t. After Laplanche discussed this incident with the board, it determined the CEO hadn’t disclosed everything he knew. 

The board reportedly told Laplanche he could step down within 24 hours, or he would be fired. The company announced his resignation on May 9. In a statement to the Wall Street Journal, Laplanche said, “I recognize that events occurred on my watch where we failed to meet our high standards. While there are disagreements as to the characterization of facts, I accept that the Board acted in good faith and did what it believed was right for the Company.” On the day Laplanche resigned, Lending Club’s stock dropped 35%, from $7.10 to $4.62. Now trading slightly above $5, it has yet to recover.

Mike Pearson (Valeant)

Leadership In Flux:    © 2015 Bloomberg Finance LP   

Mike Pearson went from a billionaire and Wall Street darling to a disgraced chief executive. The trouble began in August 2015, when Sen. Bernie Sanders and Congressman Elijah Cummings questioned why Valeant had steeply raised the prices of heart drugs. More controversy ensued when Valeant disclosed an unusually cozy relationship with Philidor, the mail-order pharmacy that bought many Valeant products.

Valeant’s share price continued to tumble and tanked again this March, on the day that Pearson came back from his three-month medical leave. The CEO had cut Valeant’s 2016 forecast and said the firm might default on its debt. Less than a week later, the board fired Pearson. Now Pearson is reportedly the subject of a criminal probe by U.S. prosecutors, who allege accounting fraud related to Valeant’s ties to Philidor. Valeant said it’s cooperating with authorities but declined to comment on the matter, as did Pearson’s lawyer. This year Valeant’s stock has dropped 86% to about $14.

John Stumpf (Wells Fargo)

   © REUTERS/Gary Cameron    Wells Fargo’s big woes this year were based on events occurring prior to 2016, but CEO Stumpf’s heads-down approach to managing the crisis appeared to make matters worse. The scandal arose in September, when Wells Fargo announced it would pay $185 million to regulators because its employees had been opening new accounts for customers without their knowledge to meet quotas. At a federal hearing, Senator Elizabeth Warren lit into Stumpf, who took responsibility but also seemed to place much blame on the 5,300 low-level employees who had already been fired. Warren accused him of “gutless leadership.”

At a second hearing, Stumpf took “full responsibility” for the illicit activity, but refused to say it was a consequence of management’s failings or the bank’s corporate culture. The House lawmakers scoffed. If the bank fired 5,300 employees for these offenses, it seems hard to believe that management was blame-free and there wasn’t a problem with the corporate culture. The pressure kept mounting until Stumpf stepped down in October.

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