There's a good side and a bad side to being a celebrity CEO. When the world loves you, you can do no wrong, no matter how badly you're behaving. When you're out of favor, though, you can do no right. Witness the differing ways the world treated celebrity chief executive officers Jack Welch of General Electric and Carly Fiorina of Hewlett-Packard last week. Welch did something uncharacteristically tacky, and no one cared. Fiorina proposed something that may make sense, but got clobbered.
Welch first, because it's easier. Welch, of course, is the prototypical celebrity CEO. Last week he departed GE's employ to huzzahs, honors and slobbering news coverage. This despite the fact that Welch's last deal, the proposed purchase of Honeywell, collapsed. And that he's taking goodbye goodies from GE that would have gotten almost any other CEO flayed alive: lifetime financial planning, lifetime use of GE corporate limos and jets, lifetime golf-club membership. For heaven's sake, Welch is a billionaire--and rightly so. When you're worth that much money and you've got $16,000-a-day consulting gigs lined up from here to the moon, you ought to buy your own limo, and pay for your own club memberships and financial advice. Taking them from GE is tacky. It's not what you expect from someone as deft as Welch. But when you're hot, you're hot. (Neither Welch nor GE would talk, so I can't give you their side.)
If Welch is the alpha celebrity CEO, Fiorina is the omega. She became an instant star when she left a big job at Lucent Technologies in 1999 to become the first outsider to run iconic HP and the first woman to run one of the 30 companies that make up the Dow Jones industrial average. She got a $100 million sign-up package to compensate her for what she left behind at Lucent--which would now be worth almost nothing, given that Lucent stock was above $70 when she left and is now about $6.
These days, though, Fiorina can't do anything right. The waves of adulation have long since crested; as HP missed projected earnings and revenue numbers time after time, its computer business began losing money and Fiorina failed to act decisively. Her belated solution--which, as the world now knows, was having HP buy struggling Compaq Computer--was treated with total contempt by Wall Street. Despite a small Friday gain, HP stock ended the week down 22 percent, and Compaq, which had made a deal to sell out at a 19 percent premium, ended the week with a 14 percent drop.
HP's problem, which is clear now--and should have been clear long ago to Fiorina, because CEOs are paid big bucks to have foresight--is that the computer business has become "commoditized." Which is to say that manufacturers compete mostly on price, which isn't HP's forte. HP's big profit center is printers and, especially, replacement ink cartridges. If HP abandoned the computer business, it might cut sales of HP printers, endangering future cartridge sales. That could be why Fiorina, who wouldn't talk to me, chose at this late date to get HP more deeply into computers instead of dropping out.
Had Fiorina decided to buy Compaq 18 months ago, when she was still riding high, the deal would have probably gone through to Wall Street cheers. With the Street down on her now, shareholder approval is iffy, even if the deal gets the necessary regulatory approvals. On paper, combining the companies saves so much in expenses that it's a no-brainer--if you believe Fiorina can successfully run the combined company. At best, a real big if.
In hindsight, Fiorina squandered her celebrity status at HP. One of her first acts was to put herself into HP's advertising campaign. She appeared on endless magazine covers and did great rah-rah shows, promising high-growth numbers she later had to retract. Contrast this with Mike Armstrong, who rode into struggling AT&T in 1997 the same way that Fiorina rode into struggling HP two years later. He quickly diagnosed the problem--that AT&T's long-distance business was rotting out far faster than the world realized--and promptly came up with a strategy to replace it, using AT&T stock as currency to buy cable-TV systems and fiber networks to deliver broadband services to customers. I think Armstrong messed up the execution--which AT&T denies--but at least he came up with a plan well before his company's problems became obvious, and he used his celebrity effectively. Fiorina didn't.
The key to being a successful celebrity CEO is getting the stock price up. Welch did, Fiorina hasn't. It's not that he's a Jack, not a Jacqueline, or that she's a Carly, not a Carl. It's all about money.