Boy, was this a bad year for CEOs or what?
CEOs now earn an average salary of $10.5 million, up nearly 10% over the prior year.
Yet the riches didn’t stop a handful of them from saying incredibly stupid things.
As I’ll reveal today, when a CEO delivers a mea culpa, it should be treated as the ultimate “Sell” indicator.
With that in mind, here’s my list of the DUMBEST CEO apologies of the year.
I also underscore the subsequent price underperformance of each.
DUMBEST APOLOGY #1: Mt. Gox CEO, Mark Karpeles
On February 17, 2014, Karpeles offered the following apology to Bitcoin traders whose accounts had been frozen by the exchange…
“We sincerely apologize for this incident and understand your concern… [funds] should be able to resume withdrawals soon.”
Two weeks after his apology, the entire exchange collapsed.
Hackers made off with over $460 million in Bitcoins.
Since that day, Bitcoin has underperformed the S&P 500 by 54.29%.
(A new threat to Bitcoin and the U.S. dollar just emerged from the shadows. Full story.)
DUMBEST APOLOGY #2: AOL CEO, Tim Armstrong
Also in February – right after AOL Inc. (AOL) announced its best earnings in a decade, the company’s CEO made a huge healthcare blunder that had employees in an uproar.
Armstrong was explaining why the company was delaying contributions to retirement accounts when he brought up the fact that two employees “had distressed babies… [And] we paid $1 million each to make sure those babies were okay in general.”
Unsurprisingly, employees didn’t appreciate that he was blaming sickly newborns on corporate policy changes.
Armstrong reversed the policy in the face of the backlash and apologized for his comments:
“We heard you on this topic… On a personal note, I made a mistake, and I apologize.”
Right after the baby-blaming comments, AOL’s stock dropped more than 10 points.
DUMBEST APOLOGY #3: General Motors CEO, Mary Barra
There are bad CEO apologies, and then there’s the apology from General Motors (GM) CEO, Mary Barra.
Barra had finally addressed the public after 13 people died due to faulty ignition switches – a tragedy investigators say was preventable. In fact, a Congressional investigation revealed that GM had rejected a proposed fix all the way back in 2005 because – you guessed it – the repair was too costly and time-consuming.
Worse yet, records show that GM first found out about the ignition switch problem 13 years ago, in 2001.
GM’s official statement in March says that it “deeply regrets the events that led to the recall.”
Shareholders certainly weren’t impressed. Since then, shares have underperformed the S&P 500 by 15.68%.
DUMBEST APOLOGY #4: T-Mobile CEO, John Legere
At an event in Seattle on June 18, Legere announced T-Mobile’s (TMUS) test-drive program. But he also called out the other mobile carriers for their outrageous data plans.
Not only did he call them “greedy bastards,” but he went as far as saying that the industry is “raping” its customers. Seriously.
He quickly apologized for the indiscretion the following day on Twitter…
“The drawback to having no filter when I speak… sometimes I need a filter. Genuinely apologize to those offended last night.”
Since then, shares have underperformed the S&P 500 by 20.09%.
DUMBEST APOLOGY #5: Microsoft CEO, Satya Nadella
Microsoft (MSFT) CEO Satya Nadella couldn’t have chosen a worse time to voice this pig-headed comment.
On October 9, Nadella joined Microsoft board member Maria Klawe on stage at the Grace Hopper Celebration of Women in Computing.
Here’s what he said to Klawe (who also happens to be President of Harvey Mudd College and a computer scientist) on the subject of equal pay for men and women and how women should ask for raises:
“It’s not really about asking for a raise, but knowing and having faith that the system will give you the right raise. That might be one of the initial ‘superpowers’ that women [who] don’t ask for a raise have. It’s good karma. It will come back.”
Keep in mind, the “system” is one where women are paid 78% as much as men. It’s even worse in Silicon Valley, where men with graduate degrees earn 73% more than women with the same qualifications, and men with bachelor’s degrees make 40% more.
Amid the ensuing commotion, Nadella quickly backtracked:
“I answered that question completely wrong. Without a doubt, I wholeheartedly support programs at Microsoft and the industry that bring more women into technology and close the pay gap. If you think you deserve a raise, you should just ask.”
Talk about a flip-flop.
If Microsoft’s share price is any indication, investors are distinctly unimpressed with the new CEO’s politically incorrect faux pas. The stock has underperformed the S&P 500 by almost 3% since his comments.
Onward and Upward,
Founder, Wall Street Daily