In today's Wall Street Journal, Herb Greenberg picks Circuit City Stores' (NYSE: CC) CEO Philip Schoonover as the worst of 2008. He also includes Sears Holdings (NYSE: SHLD) CEO Aylwin Lewis in that mix.
It's an interesting coincidence to me. On Monday I appeared on CNBC to discuss my picks for the three best and worst CEOs of 2007. Two of my worst CEOs were Schoonover and Eddie Lampert of Sears. I agreed with Greenberg's pick of Lampert as the worst CEO of 2007 and even though Lampert -- who reportedly gets deeply involved in operational decisions -- is not a CEO, but chairman. Lampert underinvested in Sears' stores -- he spent $1.33 a square foot, which is 20% of what its peers spend -- and its stock fell 39% in the last 52 weeks.
But in my mind Schoonover is significantly worse. His 3,400 person headcount cut in March 2007 actually helped out Circuit City's competitor in a very direct way. That's because customers who buy electronics value the expertise of the sales staff. And in canning those highly paid sales people through what Schoonover called "transformation work," he freed those salespeople and their customers to take their business to Best Buy (NYSE: BBY). As I pointed out, in my post, this "transformation work" helped Circuit City's sales decline by 3.1% while Best Buy beat revenue and profit growth expectations.
I think Greenberg's pick for worst CEO of 2007 was very good, but Schoonover -- who oversaw an 80% decline in Circuit City stock over the past 52 weeks -- would have been an even better one.
With competitors like Schoonover, who needs friends?
Update: Herb Greenberg contacted me and let me know that he had listed Schoonover as a runner up in his worst CEO of 2007 article.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 1)
1-09-2008 @ 11:55PM
Eric said...
Just got word today (Wed. Jan. 9) via internal DPS E-mail system that CEO Phil Schoonover will be stepping down effective Thurs. Jan. 31, 2008. Apparently his resignation was called for at a recent board meeting after stockholders hounded the board to find a replacement. The memo also says interim CEO will be George D. (Danny) Clark, Jr. (Executive Vice President, Multi-Channel Sales) until a replacement for Schoonover is found. A press release will most likely follow in the next few days
Mikael Salovaara, the lead Board Director, was the first to call for Schoonover's resignation. With his background at Goldman, Sachs he most likely isn't buying into Schoonover's transitioning plans.
Although the change is needed, this probably means bad news for the company because the road to recovery is a long and treacherous one for electronics retailers. Tweeter and CompUSA are the perfect examples and unfortunately Circuit City may not be far behind.
1-12-2008 @ 4:10PM
JOSH said...
As a circuit city manager now it is clear to see how much Phil Schoonover has distroyed the company. From a store level we've all been waiting for him to get fired or step down. I must say, a lot of us have contemplated the possibility of Phil still being employed by Best Buy under the table and driving Circuit City into the ground. While this might not be entirly true- that would be quite a feat for our major competitor to do!
1-13-2008 @ 11:58AM
Frank said...
The name Schoonover should be changed to Screw-u-over, since that is basically what he is doing to the loyal Circuit City employees. Why should he care if Circuit City goes down or not, since the man still owns big stock in Best Buy, so he wins no matter what! If he completely ruins Circuit City, then Best Buy flourishes, and his stocks go up, and his wallet is padded a little thicker anyway! He is in a no-lose situation, and apparently he has no heart when it comes to the employees who are depending on keeping jobs, and doing their best to keep Circuit City's head above water! What comfort zone do they get to have, when the "big man" still has ties with the enemy. Dump Screw-u-over, and get somebody more loyal to the company, and to the people who deserve better leadership!
1-24-2008 @ 1:13PM
The Tech Trap said...
Interesting Retail "Strategy"...typically retailers simply anger the best people by disrespecting their value. When an employee's starting pay is X, new hires get X + .10. Seniors/managers complain that they deserve a raise to X + .20, and management responds with X + .05, or by raising the new hire rate a bit more (which happened to me). A Manager earning less than his new-hire will not stay, and churn saves money because that's one less person collecting benefits. Repeat until stores are empty. "Schoonover" sounds like a wrecked ship, so a sarcastic "bravo" to him for thinking out of the box.
1-29-2008 @ 2:17PM
LEE said...
I feel the same. I believe that Schoonover had to have purposely , in part, destroyed Circuit City considering the short time it took. What a bunch of idiots to have left him where he is for so long.
There may indeed not be a road to recovery for Circuit City.