The Bad and the Good

The Bad and the Good

The Bad and the Good

Moneybox
Commentary about business and finance.
July 9 1998 8:14 PM

The Bad and the Good

THE BAD:

Advertisement

In the middle of his legal troubles in the late 1980s, junk-bond king Michael Milken paid for hundreds--hell, maybe it was even thousands--of kids to go to ballgames in what everyone in America saw as a heavy-handed attempt to win public sympathy. Deposed Sunbeam CEO Al Dunlap hasn't yet shepherded little children to Yankee Stadium, but don't be too surprised if there's some such scheme in his future plans. After weeks of public battering (some of it right here), Dunlap broke his silence yesterday, giving a tearful interview to the Wall Street Journal and turning in a stiff-upper-lip performance on CNN that brought to mind nothing so much as Bill Clinton looking into the camera and saying, "I did not have sexual relations with that woman, Miss Lewinsky." It's The Redemption of Al Dunlap, Act I.

The problem is that heading back into the public arena in so completely orchestrated a fashion is hardly the best way to dispel the perception that Dunlap is a conniving, self-interested executive who never cared about anything but his press clippings and the size of his contract. Dunlap's hired a PR firm to represent him, and presumably will be making the rounds of newspapers and magazines soon enough. But at this point it's hard to imagine what he could do to humanize himself. The problem is that Dunlap's public persona was fundamentally a creation of the media, which loved his "Mean Business" shtick and his penchant for slamming other CEOs. So his attempts to defend himself necessarily come across as attempts to reinvigorate that persona. He's like an aging nightclub singer playing the Sands 10 years too late.

In his CNN appearance, Dunlap was convincing in his denials of any accounting malfeasance, insisting that the earnings numbers Sunbeam had released for previous quarters were good (the company has publicly questioned them) and that he played no games with the numbers at all. But Dunlap didn't say anything about negotiating an expensive three-year contract before news of the company's earnings shortfall came out. And in any case, if Dunlap wasn't guilty of accounting shenanigans, then he was guilty of incredibly poor management. Either way, it's hard to see how he wins.

The same can be said of Dunlap's insistence (both to the Journal and Lou Dobbs of CNN) that Coleman Brands--one of the three companies that Sunbeam overpaid for just before everything fell apart--was in far worse shape than he could have imagined. In the first place, Dunlap is clearly slamming Coleman because Ron Perelman, who owned the company, appears to have played a role in Dunlap's ouster, and because Dunlap's successor at Sunbeam was a former Coleman exec. More important, spending $2.1 billion to acquire a company without doing enough due diligence to realize what a mess it was hardly inspires confidence in Dunlap's managerial ability. Perhaps a better PR firm is in order.

THE GOOD: Jack Welch, on the other hand, continues to live up to his reputation as the world's greatest CEO. In the midst of an earnings season that's already shaping up as one of the weakest in memory--DuPont announced today that it would fall short of estimates--GE once again met estimates and turned in earnings growth of close to 15 percent at a time when the global economic environment could be, shall we say, better. More than enough has been written about Welch's magical leadership abilities, but the most important thing about his career has been his remarkable capacity to reinvent GE even when reinvention seemed unnecessary. He pushed through massive job cuts in the early 1980s--earning the nickname "Neutron Jack"--that ended up boosting GE's productivity immensely. Then he switched tacks to emphasize decentralization and bottom-up empowerment, and now is pushing a Six Sigma quality effort that, if it works, will make GE among the most efficient companies on the planet. If Dunlap is American business at its sloppiest and most unattractive, Welch is American business not at its prettiest, but at its most rigorous.

Still, it's important to remember that Welch's performance is hardly unique among GE execs. In fact, as Jim Collins and Jerry Porras point out in their book Built to Last, in terms of average return on equity Welch actually ranks fifth among the seven CEOs GE has had in this century. That speaks both to GE's tremendous institutional continuity and to the perils of what you might call the "CEO as demigod" school of business journalism.