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10 Great Leadership Blunders of 2006

More than ever before, in the wake of highly publicized corporate scandals, people are looking for leaders whose stated values match their own, and for ongoing evidence that their leaders are living by those values. But some people lack the credibility required to be values-based leaders. Here are ten prime examples of integrity-busting behavior from the past year.

1. Home Depot's absent board. Shareholders attending Home Depot's annual meeting on May 25 had some tough questions for the company's board of directors; specifically, they wanted to know why the board paid CEO Bob Nardelli more than $123 million over a five-year period during which time the retailer's stock dropped 9 percent. Unfortunately, only one director showed up and that was board chair Nardelli, who refused to answer shareholder questions. "Arrogance will kill this company," said one prophetic shareholder.

2. The other spy story. Although not nearly as dramatic as news of a Russian secret agent silenced by a lethal dose of polonium, Hewlett-Packard's board chair poisoned her company's come-back effort by spying on her fellow directors. Patricia Dunn hired private investigators to find out which board member was leaking information to the media. The snoops used an unsavory tactic called "pretexting" which involved impersonating board members to obtain their personal phone records. Filing criminal charges against Dunn and her cohorts, California Attorney General Bill Lockyer called it a "colossally stupid" thing to do.

3. John Kerry forgets about "us." Campaigning on behalf of California Democratic gubernatorial challenger Phil Angelides, Kerry told an audience at Pasadena City College to stay in school and get smart, adding, "If you don't, you get stuck in Iraq." Kerry insists he botched an insult aimed at President Bush, meaning to say instead, "you get us stuck in Iraq." Whatever he intended to say, he offended Americans from both political parties. Then Kerry did what too many leaders do: he refused to apologize for his gaffe. Democratic candidates wisely kicked him off the campaign trail.

4. Ford and GM in ill-timed spitting match. While the two carmakers were eliminating tens of thousands of jobs, closing dozens of factories, and accumulating billions of dollars in red ink, they found time to feud over which has the top-selling brand in the country. GM's Chevrolet division ran ads proclaiming itself America's best-selling car for 2005. Ford disputed that claim, citing industry market research indicating it sold more cars in 2005 than Chevy. Clearly, Ford and GM are too busy dodging bankruptcy to notice the obvious: Toyota is number one! (NOTE: My post suggesting a GM/Ford merger received the highest number of hits on the Vital Integrities Blog this year.)

5. A new epidemic. Just when it seemed that corporate scandals were settling down, we learned of a new form of corruption: business leaders manipulating corporate stock options for personal gains by altering grant dates. Nearly 200 companies disclosed Federal or internal probes during the year and already dozens of senior officials have lost their jobs over backdating. In one fantastic case, Comverse Technology's CEO Kobi Alexander fled to Namibia to avoid prosecution. Well-known companies affected include Apple Computer, Cablevision, Monster.com, UnitedHealth Group, and Home Depot.

6. Blaming the victim. When Helen Green told her bosses at Deutsche Bank that her coworkers were bullying her, she hoped they would take action against her tormentors. Instead, they responded by sending her for stress counseling. When the bullying continued, they sent her to assertiveness training. And after she suffered multiple nervous breakdowns, they let her go. Not surprising then was Deutsche Bank's response to Green’s ensuing lawsuit: rather than admitting in court that bullying took place, they portrayed Green as predisposed to mental illness. The London High Court ordered the bank to pay Green more than 800,000 pounds ($1.5 million) in damages.

7. Check-out time. For over twenty years, Ritz-Carlton has epitomized excellent customer service; organizations in every industry have idealized their "Gold Standards" approach. Ritz workers adhered to a set of values known as the "Twenty Basics." But this year the company replaced those values with a list of relaxed service guidelines intended to satisfy the modern traveler. For instance, rather than rushing to take a hotel guest's luggage, employees are now "empowered" to determine if the guest wants to relinquish a suitcase. Employees who enlisted with Ritz-Carlton because they shared its customer service values must be wondering if those values still exist.

8. You think your boss treats you like a child. Janet Orlando quit her job at Alarm One, less than a year after joining the Fresno, California home-security company, after her boss spanked her. Alarm One used competition between sales teams to motivate its sales force. At weekly sales meetings, supervisors spanked losing team members as coworkers cheered and shouted lewd comments. Salespeople who arrived late for a meeting, or who talked out of turn, were also subject to a spanking. Orlando sued and the jury spanked Alarm One with a $1.7 million judgment in her favor.

9. Weasel words. When delivering bad news, many leaders rely on euphemisms to soften the blow. When Verizon Communications announced plans to close four of its call centers, company spokesperson Bill Kula said, "We're adjusting to the dynamics of the telecommunications industry as it exists today and focusing our attention and employment support in the areas of growth and de-emphasizing the areas of depletion of the customer base." Translation: we're putting 1,600 people out of work. Do officials think learning that their company is de-emphasizing the areas of depletion of its customer base makes employees feel any safer about mass firings?

10. "The granddaddy of all corporate fraud cases." Although the Enron scandal occurred before 2006, Enron employees and stockholders finally got justice when a jury convicted Kenneth Lay and Jeffrey Skilling of securities fraud. Under Lay and Skilling, Enron became the modern-day symbol of corporate greed and its collapse wiped out billions of dollars in shareholder wealth--including the life savings of many of its employees whose retirement plans held company stock--and tens of thousands of jobs. Lay died before sentencing, forcing the judge to vacate his conviction; but on December 13, Skilling reported to a Federal prison in Minnesota to serve twenty-four years and four months.

This post is part of the Group Writing Project at ProBlogger.net.

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Thank you for the thorough--if not depressing--review of corporate catastrophes. We had more than a few neighbors who lost their homes and had their lives completely disrupted because of Enron. That's when I started to get interested in blogs like yours.

Nice entry to Darren's project. You can see mine by clicking here.

I think that many corporations in the US are headed in the wrong direction. Hopefully that can be changed in 2007.

All the best in 2007 and beyond,

Great list! I didn't know about that case with Deutshe bank and I'm glad to hear she won the case... what did you think about the "email firing" that Radio shack sent out? No calls, no "come in to my office"... just an email saying... "sorry - we've got to let you go... bye!"

:) I enjoyed reading this. Thank you.

I found you on the Problogger Predictions and Reviews Participant List and thought I'd stop over and say hello.


Writing Aspirations

Great stuff. As someone who writes about business culture you have listed some fabulous nuggets that I will be linking to in the upcoming days.
I had read about the "spanking" incident before and for whatever reason failed to post on it. I will do it soon with a link. And the Home Depot meeting is a classic.

I will be visiting often. I did find you by participating in Darrin's problogger project.


Some of the things you said was really good.I will apply it on my office soon.Thx for sahring it.

I also got entry in darrens project.

And i am feeding your blog.There wont be another chance to meet so many bloggers

Merry Christmas

Great post, well researched, I hadn't seen a few of those before. You could also add the closure of TechCrunch UK - don't send someone a sacking ultimatum in an email. Some times you should talk to someone over the phone!

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