After
Carly Fiorina’s second fantastic debate performance, many are now seeing her as
a serious candidate for the presidency. So, of course, the Left’s libelers and
slanderers have pulled out the long knives against her. These attacks are not
new, but they will grow sharper as her campaign advances. Below I address one aspect
of these attacks: Fiorina’s experience as CEO of Hewlett-Packard (HP). Others, including Bloomberg and the campaign itself, have also begun responding forcefully to these attacks. See http://bv.ms/1OGwSHV, http://bloom.bg/1QTTu7b,
Carly
Fiorina led one of the 20 largest companies (by revenue) in the US. http://bit.ly/1iqo1gW.
Even if one were to concede that she “didn’t have a great run as CEO of
Hewlett-Packard," http://for.tn/1QmCSnB,
there’s plenty of evidence that she at least had a decent run leading a Fortune
20 company that had $80 billion in annual revenue and 150k employees at the
time she left it. http://bit.ly/1OjrCe2.
I
am not attempting here to mount a complete defense of her business record. Further,
I’ve never met her and am not sure she’s my preferred pick to be our next
president. But some of the attacks on her record are false and misleading and so must be addressed.
These attacks are based on three undisputed facts, namely, that she was fired
from HP, that HP stock price dropped during her tenure, and that she laid off
30,000 HP employees. But her opponents
(including politicians, media members, and citizen-activists) use these facts
out of context to allege that she was a terrible failure at HP. She was not.
Third Attack: She laid off 30,000 HP employees.
Before
we get to the analysis, here’s the punch line: Fiorina apparently did at least an okay job leading a mammoth company through very difficult economic
conditions. Is an “okay” job as CEO of HP sufficient qualification for the presidency?
Yes, provided the candidate also has some broader knowledge of the affairs that concern a president. Carly Fiorina handled immense responsibility during those years as CEO. Further, she has demonstrated an immense ability to learn and
grow, so I have no doubt that she learned many lessons that she will apply in
her next stint as an executive. And while Fiorina may not be a
visionary like Steve Jobs, it is worth noting that he, too, was forced out of a
leadership role. http://abcn.ws/ShJvPU.
As he later acknowledged, he grew as a result of the experience, and his second
stint as Apple CEO was likely more successful than the first.
Further,
in a presidential election we are limited to the available alternatives; Lincoln, Reagan, and Jobs are not available. I have
no doubt that Fiorina would bring a more well-developed management approach to
the Oval Office than have any of our recent presidents, and her management
experience compares favorably with that of any other candidate, Democrat or
Republican.
While
she was ousted as Chief Executive
Officer of Hewlett-Packard, she held that job from July 1999-February 2005,
which is about 5.6 years. Her longevity doesn’t prove she was great at her job,
but it says something since our society has very little patience with leaders who fail to impress. For
example, consider how quickly people want to see head coaches fired in major
professional and college sports. In fact, those 5.6 years are a full year longer than
the average tenure for a Fortune 500 CEO (4.6 years). http://bit.ly/1iBSGZo.
Consider also HP’s ongoing pattern of changing CEOs since she was fired:
Robert Wayman (interim CEO, one month, through March 2005)
Mark Hurd (approximately 5.4 years, through August 2010)
Cathie Lesjak (interim, one month, through September 2010)
Leo Apotheker (less than 1 year, through September 2011)
Meg Whitman (current tenure, 4 years)
Source:
http://bit.ly/1LCsLrf.
Add
to this the fact that Tom Perkins, a former HP board member who served with Fiorina
for years and was instrumental in her ultimate firing, recently vouched for her
credentials in a full-page ad in the New
York Times. http://bit.ly/1JBOGxf.
Concerning Fiorina’s exit, he writes: “Critics often claim was fired at HP
because she was unsuccessful. As a member of the board, I can tell you this is
not true. In truth, it was the Board I was a part of that was ineffective and
dysfunctional . . . . In order to restore peace to the board I voted to fire
her. That was a mistake.” His whole memo is worth reading, but this excerpt
alone shows that Carly Fiorina’s firing may not have been based purely on
performance.
In
sum, Carly Fiorina impressed enough Board members to hold onto her job for
quite awhile—longer, in fact, than any subsequent CEO at HP, and longer than
the average Fortune 500 CEO—and at least one HP board member who voted to fire
her calls her ouster a mistake.
HP
stock price certainly didn’t climb during her tenure, but the price drop isn’t
nearly as bad as is being portrayed by those who want to submarine Fiorina’s
campaign. To illustrate this, the below stock charts show adjusted closing
prices on a quarterly basis between June 1, 1999 and March 1, 2005—bookending Fiorina’s
tenure at HP by about a month. “Adjusted closing price” is adapted from a stock’s
raw closing price, http://bit.ly/1yqG75S,
and it’s commonly used for historical analysis. http://bit.ly/1V0BZYF. In some charts, I’ve
set a baseline $100 share price to make comparison easier (a technique that
does not confuse the results). All prices are sourced from http://finance.yahoo.com.
Taken
in isolation, HP’s stock performance during Fiorina’s tenure looks bad:
But
you’ve heard of Microsoft, right? It’s genius-founder, Bill Gates, has been the
world’s wealthiest person for about the last 20 years. Bill Gates was CEO of
Microsoft when Fiorina took over at HP. When he subsequently handed the reigns
of Microsoft to his friend Steve Ballmer (now a billionaire himself), he
remained on as Chairman of the Board and Chief Software Architect. Pretty
effective business leader, right? Here’s a side-by-side comparison of Microsoft
and HP stock prices during that period.
So
HP stock did about as well as Microsoft stock? Yes, although neither did well in
absolute terms.
Continuing
this analysis, HP’s performance during this time period compares favorably with
that of three other widely known technology companies: AT&T, Sprint, and Verizon.
Moving
beyond these telecommunications providers that are well known to consumers, we
see a similar result when HP is compared to Cisco, a massive provider of the
networking equipment that powers the internet.
Clearly,
HP was not alone in its struggles during the timeframe when Fiorina was CEO.
This
is not to say that HP stock was a stellar performer, as the below chart shows
it did not perform as well as two other technology companies with which I’m
sure you’re familiar: IBM and Intel.
But the Bloomberg chart illustrates that HP stock actually did better than IBM stock when you consider it five years out. Another
clear takeaway from these charts is that technology stocks overall took a
beating during the timeframe at issue, especially from 2000-2002.
Indeed,
the survival of HP as a company was no sure thing, as several HP competitors
from the early 2000s, such as Sun Microsystems and Gateway Computer, have
ceased to exist as independent companies. http://bit.ly/1Lm3hT2; http://bit.ly/1ODJEa6.
Another once-fierce competitor, Compaq, was struggling mightily before HP
acquired it in 2002. (That merger, which has been criticized by some, was
announced only shortly before the 9-11 terrorists attacks that rocked the
nation’s economy. http://nyti.ms/1MkB79N.)
In
sum, HP’s performance under Fiorina is neither outstanding nor disastrous when compared
with all the aforementioned entities, along with the index of the
technology-heavy NASDAQ stock exchange itself:
She
did lay off at least 30,000 employees over the course of several years. Having
been laid off myself once (when my wife was pregnant with our first child), I know
that layoffs stink. Unfortunately, they are also an unavoidable part of a
capitalist system--a system I support. (As I found out, layoffs are also an opportunity to learn and
grow.) Indeed, the obligation of anyone leading a corporation is to maximize the value of the company to its owners, and this sometimes requires layoffs. And employees laid off from technology companies are more likely (though
not guaranteed) to have skills that enable them to find new, quality
employment.
But
let’s give that 30,000 number some context, in light of the poor state of the
economy at the time. In addition to the general economic headwinds (dot-com
bubble bursting, 9-11 attacks) of the new millenium, 2001 “was a
historical year for the PC. Historically bad, that is. Sales took a prolonged
dip for the first time since 1986.” http://abcn.ws/1V0fumJ.
Below
is a list of nearly 20 companies that had 20,000 or more combined layoffs in 2001-2003, with
parenthetical indication of entities that had 30,000 or more layoffs. Most of
the companies in the following list, like HP, are in the technology sector.
Companies in the airline industry are intentionally left off the following
lists, given the cataclysmic effect that the 9-11 attacks had on that industry.
Here’s the list:
Alcatel (over 30,000 combined layoffs)
Ames Department Stores
ATT Wireless (over 30,000)
Chrysler
Dana
Delphi Automotive
Ford (over 30,000)
IBM
JDS Uniphase
K-Mart (over 30,000)
Lucent
Montgomery Ward
Motorola (over 30,000)
Nortel (over 30,000)
SBC Communications
Solectron (over 30,000)
Worldcom
Indeed,
contemporaneous with Fiorina’s tenure at HP, at least the following five companies
had a SINGLE ROUND of layoffs in excess of 20,000 employees (HP never did so
under Fiorina):
Ford (35,000 layoffs announced at once)
K-Mart (35,000)
Chrysler (26,000)
Lucent (24,000) (Fiorina worked with Lucent, but these layoffs occurred two years after she left)
Ames Department Stores (22,000)
Source:
http://wapo.st/1YhHdhT.
Here’s
a partial list of 15 additional companies with at least 10,000 combined layoffs in
the years 2001-2003:
Agilent
Alcoa
AT&T
Cisco
Compaq (before it was acquired by HP)
Ericsson
FedEx
Fujitsu
Hitachi
Honeywell
Kodak
Qwest
Sprint
Starwood Hotels
Tyco
Also,
Gateway Computer, a major HP competitor that managed to stay off these lists, did
exceed 10k layoffs when you include layoffs in 2004. http://bit.ly/1Mvgw5D.
Regrettably,
large layoffs continue today. For example, Microsoft recently laid off 18,000
people and just announced another 2,000 layoffs. http://for.tn/1DbdI4o. HP also has
laid off tens of thousands in the past four years and just announced up to
33,000 more layoffs http://bayareane.ws/1QgBnaG. (These more recent layoffs cannot be blamed on Fiorina,
who left the company more than 10 years ago. If anything, they point to
longstanding problems with HP that may have adversely affected her as well as
HP’s current leadership.)
The bottom line is that the layoffs at HP under Fiorina, though
unfortunate, do not show her to be incompetent or heartless as a chief executive.
